Kuddusi Can IL (also known as K Jan IL) v Abdurrezzak Yesilkaya (also known as Abit Yesilkaya)
| Jurisdiction | England & Wales |
| Judge | Prentis |
| Judgment Date | 09 July 2021 |
| Neutral Citation | [2021] EWHC 1695 (Ch) |
| Docket Number | Case Nos: CR-2019-000853 |
| Court | Chancery Division |
[2021] EWHC 1695 (Ch)
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
INSOLVENCY AND COMPANIES COURT (ChD)
RE: HAZ INTERNATIONAL LTD (No.02476286)
AND RE: THE COMPANIES ACT 2006
AND RE: THE INSOLVENCY ACT 1986
The Rolls Building, 7 Rolls Buildings,
Fetter Lane, London EC4A 1NL
ICC JUDGE Prentis
Case Nos: CR-2019-000853
CR-2019-004394
Christopher Buckley (instructed by Collyer Bristow LLP) for the Petitioner/Defendant
Matthew Morrison and Gregor Hogan (instructed by RadcliffesLeBrasseur LLP) for the Respondents/Claimant
Hearing dates: 25–29 January, 1–5 February, 12 March 2021
Introduction
A little over a fortnight after the meeting which finally recognised the disintegration of their business and personal relationship, on 23 February 2016 Abdurrezzak Yesilkaya (“Mr Yesilkaya”) emailed Kuddusi Can Il (“Mr Il”), copying in his solicitor:
“Since we have decided that we cannot continue our partnership I always hoped we can keep a friendly relation… I told you this, and now I am giving you this in writing. I am very much interested for a smoot transition. But it seems to be you prefer to fight, I don't want to fight. But if necessary and if I am forced too, God help, you will see how I can fight”.
In hindsight, that quotation illustrates many things. Its idiomatic English (which unless sense is lost I have preserved in all quotations, whether they are the parties' own, or that of translators) gives some idea of the strong character of Mr Yesilkaya, and rightly implies an equally strong character in Mr Il; it reflects their once deep friendship, and partnership, and the bitterness of its loss; one can hear as well the voices of Mr Yesilkaya as patriarch, magnanimous so far as can be, fearsome if crossed; and here is the threatening of the bloody battle which this has become.
Mr Il had joined Haz International Ltd (the “Company”) in 1990. It was wholly owned by Mr Yesilkaya, who was also its sole director. Mr Il was appointed director on 23 April 1993, and received 5,400 shares in two equal tranches: on 24 March 1995 following an issue which took the issued share capital to 18,002, and on 31 January 2007 by transfer from Mr Yesilkaya (a single further share was transferred in 2011, but that is immaterial). From 1 September 2011 Mr Il and Mr Yesilkaya were joined as shareholders by Mr Yesilkaya's sons, Akin and Deniz, to whom their father also transferred 2,700 shares each. From then Mr Il has continued to hold his 30% of the shares, Mr Yesilkaya his 40%, and the sons their 15% each.
On 17 May 2017 Zakir Arslan was appointed as third director at a general meeting. On 23 May 2018 Mr Il was suspended, and on 16 July 2018, following a disciplinary hearing before Mr Arslan, his employment was terminated for gross misconduct. He was removed as director by general meeting held on 15 October 2018.
On 1 February 2019 Mr Il presented a petition, primarily under section 124 of the Insolvency Act 1986 (the “ IA86”) seeking the just and equitable winding up of the Company, but in the alternative, pursuant to section 994 of the Companies Act 2006 (the “CA06”) on the ground of unfair prejudice, relief by an order that Mr Yesilkaya purchase his shares at fair value (the “Petition”). The Respondents to the Petition are Mr Yesilkaya and the Company.
On 16 April 2019 the Company issued a claim against Mr Il as former director for breach of the duties owed it under the CA06, largely coinciding with the basis on which he was removed (the “Claim”).
This judgment follows the trial of the Petition and the Claim. The taking of evidence was confined to 10 days, a period which doubled the parties' earlier estimate as, after repeated agreed adjournments for exchange of witness statements, it was only early in the new year that the parties realised that there was considerably more evidence than anticipated; the trial was to be held remotely, which inevitably increased length; many of the witnesses' first language was Turkish; and many were located outside the jurisdiction. The parties are to be commended for thereupon liaising with Ms Prosser, the listing officer, which enabled additional convenient days to be found and the trial to proceed; so, too, for the immense trouble taken by the respective counsel and those behind them in presenting their client's case: combined, the closing submissions weighed in at around 250 pages.
It is Mr Il's case that since March 1995, when he first received shares, but anyway since before 2003, when he says the second tranche was promised him, the Company was operated as a quasi-partnership between himself and Mr Yesilkaya. Mr Yesilkaya denies that, but says that were there such a relationship then it must have been terminated either in September 2011, when he gave shares to his sons, or on 8 February 2016, when it was agreed that Mr Il would leave the Company and his shares bought out. So, although Mr Yesilkaya agrees that trust and confidence has broken down between them, he denies that Mr Il is entitled to any relief thereby.
Mr Il has also pleaded a “Fundamental Understanding”, arising between the same dates, and which he says has been breached by Mr Yesilkaya, that:
9.1 he would be “free to run the Company without interference” from Mr Yesilkaya;
9.2 he “would remain employed by the Company” (in closing Mr Buckley acknowledges that this should be extended by a proviso, “unless guilty of gross misconduct”); and
9.3 “if [he] kept his salary low and the Company prospered he would be rewarded” by Mr Yesilkaya.
Finally, Mr Il relies upon two breaches of duty by Mr Yesilkaya as director of the Company, which derive from the Company's role within the Haz Group.
10.1 He says that Mr Yesilkaya wrongly diverted UK sales of metal manufactured by Haz Metal Sanayi ve Ticaret A.S. (“Haz Metal Turkey” or “HMT”) from the Company to Haz Metal Fixing Systems UK Limited (“HMUK”). This is denied, although Mr Il is said to have agreed it anyway.
10.2 He says that Mr Yesilkaya wrongly caused the “Disputed Debts” to be included in the Company's accounts for the period to 30 September 2017 filed on 28 June 2018, in that they were overstated with a view to decreasing the value of his shareholding; were in favour of other Haz Group companies which he or his family controlled; and were wrong, the true debts being those at Annex B to his petition. These debts, which were first demanded by letter from Mr Yesilkaya's solicitors of 5 December 2016 (and which is also therefore said to be improper), are said to be $1,313,074 due to HMT; $240,711 due to Haz Mermer Sanayi ve Ticaret A.S. (“Haz Mermer”); and €43,187 due to Haz Metal Deutschland GmbH (“GmbH”). Mr Yesilkaya says that the debts are indeed due, or at least that Mr Il is unable to discharge the burden on him to show that they are not.
The Company has its own case against Mr Il, which is also submitted as a reason why it would be unjust or inequitable to grant him either ground of relief on his petition. He is said to have breached his duties as its director in:
11.1 failing to report adequately to Mr Yesilkaya and/ or Mr Arslan on the Company's financial affairs, whether following requests for information or not;
11.2 on 28 February 2017 filing without authority, and having signed them purportedly but wrongly on behalf of the board, the Company's annual accounts to 31 March 2016 (which did not include the Disputed Debts);
11.3 failing to provide full and true accounts for monies paid from the Company to his own account or otherwise, being £74,998 between September 2016 and September 2017; £59,090 within the accounting year end 2017; and $1,217,689 by six payments made between 11 February and 12 November 2015;
11.4 in the financial year to 2017, and without consultation, increasing his own and his son's salary;
11.5 causing payments to be made of the Company's money but not to its benefit to Collyer Bristow and Kinas, solicitors' firms; and to his girlfriend, Ms Ozlem Morgan;
11.6 disclosing information confidential to the Company to a competitor, Is Yapi Ve Yapi Malzemeleri Sanayi Ve Ticaret A.S. (“Is Yapi”);
11.7 failing to account for profits assumed to have been made by the Company on the Oslo Project, being $1.29m, and on the Pakistan 1 Project, the Yemen Project, and the London Project, being $735,000;
11.8 diverting to International Construction Contracting Limited (“ICC”) from the Company the Pakistan Phase 2 Project, the Seychelles Project, and the Kosovo Project; and Company staff; and
11.9 misappropriating valuable stock held at the Company premises including tools and fixing systems, personal computers and the documents accessible through them.
There is then a separate claim by the Company for recognition of its beneficial ownership of Willow Tree Cottage, registered since purchase in Mr Il's name only.
Except that he acknowledges a duty to provide an account in the event that the Court is not satisfied that a full account has yet been given, all these claims are denied by Mr Il.
Finally by way of introduction, in email exchanges between 3 and 7 February 2015 the parties provided some of their own historical background, beginning with Mr Yesilkaya.
“1. When you joined Haz Marble [ie the Company] in 1990 you had ‘0’ (zero) idea of marble installation.
2. You completed Canary Wharf with full support of Haz Jeddah.
3. Your next projects was run by Engineers, Architects and Stonemason trained by Haz Marble and sent to you, as always best of the best.
4. 90% of your staff today (office and/ or field) are sent to you by ‘mother company’.
5. We have sent you (and...
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