Koza Ltd v Mustafa Akcil
| Jurisdiction | England & Wales |
| Judge | Lord Justice Floyd,Lord Justice Peter Jackson,Lord Justice Patten |
| Judgment Date | 23 May 2019 |
| Neutral Citation | [2019] EWCA Civ 891 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | Case Nos: A3 2018 0190 A3 2018 1620 |
| Date | 23 May 2019 |
[2019] EWCA Civ 891
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Mr Richard Spearman QC; The Hon Mr Justice Morgan
[2017] EWHC 2889 (Ch); [2018] EWHC 1612 (Ch)
Royal Courts of Justice
Strand, London, WC2A 2LL
Lord Justice Patten
Lord Justice Floyd
and
Lord Justice Peter Jackson
Case Nos: A3 2018 0190 A3 2018 1620
Lord Falconer of Thoroton, Vernon Flynn QC, Siward Atkins and Andrew Scott (instructed by Gibson Dunn and Crutcher UK LLP) for the Appellant
Jonathan Crow QC and David Caplan (instructed by Mishcon de Reya LLP) for the Respondent
Hearing dates: 9–10 April 2019
Approved Judgment
There are two appeals before the court, both arising out of undertakings given to the court by the appellant, Koza Ltd, that it would not “ dispose of, deal with or diminish the value of any funds belonging to [it] or held to [its] order other than in the ordinary and proper course of its business”. The first, which I will call “the ICSID funding appeal”, is from the order of Mr Richard Spearman QC, sitting as a deputy High Court Judge in the Chancery Division, sealed on 21 December 2017. By his order, Mr Spearman declared that Koza Ltd's proposed provision of funding to Ipek Investment Limited (“IIL”) to finance fees, disbursements and a possible adverse costs order in an arbitration to be launched by IIL against the Republic of Turkey before the International Centre for the Settlement of Investment Disputes (“ICSID”) would not be in the ordinary and proper course of the business of Koza Ltd. The second, which I will call the “extradition expenses appeal”, is from the order of Morgan J, sealed on 21 June 2018. By that order, Morgan J declared that proposed payments to solicitors for fees incurred in relation to legal advice, assistance and representation provided to the second defendant and sole director of Koza Ltd, Mr Hamdi Ipek, in connection with the Republic of Turkey's request that Mr Ipek be extradited to Turkey, would not be in the ordinary and proper course of the business of Koza Ltd.
The parties are engaged in a hard-fought dispute in the Chancery Division over the control of Koza Ltd. I explained the background to the dispute in my judgment, with which Flaux LJ agreed, in a previous appeal to this court in these proceedings, Koza Ltd and another v Akcil and others [2017] EWCA Civ 1609. In brief summary, Mr Ipek is a director of Koza Ltd and a member of the family (“the Ipek family”) which owns the corporate group to which Koza Ltd belongs (“the Koza Group”). The Koza Group is a large Turkish-based media and mining conglomerate. Koza Ltd was incorporated in this jurisdiction in March 2014 and capitalised with £60 million provided by the respondent (“Koza Altin”) to undertake mining operations outside Turkey, including ventures with other established international mining companies. Koza Altin is another member of the Koza Group and Koza Ltd is its wholly owned subsidiary.
The claimants allege in these proceedings that the state authorities in Turkey are engaged in an attempt to take control of the Koza Group from the Ipek family, alleging that the group is involved in criminal activities; the family alleges that the attempt is politically motivated. At all events, following a raid on the headquarters of the group in Ankara in September 2015, the boards of various companies in the group were replaced by state-appointed trustees. The trustees have taken various steps to attempt to recover the £60 million held by Koza Ltd, but have been unsuccessful.
In July and August 2016, Koza Altin purportedly served notices under the Companies Act requisitioning a general meeting of Koza Ltd to pass resolutions replacing its directors with the first to third defendants. The meeting was not called, Koza Ltd contending that any meeting that was called could not validly pass the resolutions because of the weighted voting rights of Mr Ipek and his brother. Koza Ltd also challenges the authority of the first to fifth defendants to act on behalf of Koza Altin. On 16 August 2016 the claimants commenced these proceedings, seeking declarations that the Companies Act notices were ineffective and an injunction restraining the defendants from holding any meeting of Koza Ltd pursuant to the notices. On the same day Snowden J granted an injunction, without notice to the defendants, preventing any meeting of Koza Ltd from taking place for the purpose of passing the resolutions. On the initial return date of the without notice injunction, the injunction was continued on undertakings given by the claimants not to dispose of, deal with or diminish the value of any funds belonging to Koza Ltd, substantially in the form subsequently given to the court in December 2016, to which I shall come.
A host of applications came before Asplin J (as she then was) in December 2016. Foremost amongst these was the application by the defendants to challenge the exclusive jurisdiction of the English court to determine the claimants' claim. Asplin J dismissed the defendants' jurisdiction challenge, but it is important to record that the challenge is still on foot, and nothing done by the defendants is to be treated as a submission to the jurisdiction of the English court. An appeal to the Supreme Court from this court's judgment upholding Asplin J on the jurisdiction issue remains pending. That appeal was argued in the Supreme Court in March 2019, but the Supreme Court's judgment is not yet available.
Asplin J continued the injunction concerning the holding of company meetings and the passing of resolutions. The first schedule to Asplin J's order contained the following undertaking:
“2. …
(1) [Koza Ltd, defined in the order as “the Company”] will not dispose of, deal with or diminish the value of any funds belonging to the Company or held to the Company's order other than in the ordinary and proper course of its business.
…”
Paragraph 2 of the first schedule went on to provide for the giving of advance notice of any payment of more than £25,000 or any transaction which would create a liability of over £25,000, “ apart from any payment of or incurring of liability in respect of legal fees in connection with this litigation”. Paragraph 3 of the first schedule is also of importance:
“3. These undertakings shall not prohibit the Company from spending a reasonable sum on legal advice and representation, provided that the funds spent on liabilities incurred in this connection properly relate to legal advice and representation for the Company's benefit.”
The ICSID funding appeal
By an application notice dated 20 June 2017, Koza Ltd applied for orders relating to four classes of expenditure. The only class of expenditure which remains relevant is expenditure of up to £1.5 million over an 18 month period, and £1.5 million to be held on account against an adverse costs order, to enable an Investment Treaty arbitration to be pursued by IIL (“the ICSID expenditure”). The application was argued on the twin bases (i) that the ICSID expenditure fell within the scope of the undertaking, or, if not, (ii) that the undertaking should be varied so as to permit the ICSID expenditure. Koza Ltd no longer seeks a variation.
IIL is a company incorporated in England and Wales and is said by Koza Ltd to have become the ultimate holding company of the whole of the Koza Group pursuant to a share purchase agreement dated 7 June 2015 (“the SPA”). The SPA is said to have been made between (1) the Ipek family, as sellers of their shares in Koza-Ipek Holding A.S. (“Koza Holding”) the ultimate holding company of the Koza Group as at 7 June 2015, (2) IIL as purchaser of those shares in consideration for issuing shares to the Ipek family in IIL, and (3) Koza Holding. The SPA recites that Koza Holding had agreed to obtain a board resolution to register IIL as the new owner of the shares in Koza Holding. The purported effect of the transaction was to place IIL, an English company, into the corporate hierarchy below the Ipek family and above Koza Holding, by exchanging the family's shares in Koza Holding for shares in IIL, and registering IIL as the owner of the shares in Koza Holding
On 6 March 2017, IIL issued a notice to the Government of Turkey under the terms of the Bilateral Investment Treaty between the Governments of the United Kingdom and Turkey (“the BIT”). On 5 April 2017, IIL requested Koza Ltd to assist it with funding for the arbitration and Koza Ltd agreed. Koza Ltd explained that the takeover of Koza Altin and the other companies in the Koza Group had cut off Koza Ltd's sources of funding for larger scale mining projects. The ICSID proceedings would be of great importance to Koza Ltd in establishing (a) that Koza Ltd and the Koza Group have been the subject of a politically motivated takeover and (b) that the allegations of criminality made against the Koza Group are baseless and politically motivated. The ICSID arbitration had the potential to add significantly to the ability of Koza Ltd to regain its sources of funding from the Koza Group and to engage constructively with current and potential investors in the company. Koza Ltd also contended that the arbitration would prevent the enforcement of a seizure order granted by the Turkish courts of funds belonging to Koza Ltd and held in the client account of its then solicitors, Morgan Lewis. It was on this basis that Koza Ltd contended before the judge that the ICSID expenditure would be in the ordinary and proper course of Koza Ltd's business.
The respondent argued that the ICSID expenditure was prohibited by the...
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