The Supreme Court held that a company given permission to appeal cannot be required to pay the judgment sum into court if that condition would probably stop the appeal. The company must show, on the balance of probabilities, that its owner or another closely associated person would not make the necessary funds available to it; the court must not ask merely whether that person could pay, and need not find exceptional circumstances. Because Patten LJ had applied the wrong approach in dismissing Onur Air’s appeal for non-payment, the Supreme Court allowed the appeal and remitted the applications to him.
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The judgment sum and the condition
Goldtrail, a UK holiday company in liquidation, had been wholly owned by Mr Aydin. Onur Air, a Turkish airline largely owned by Mr Bagana, wanted Goldtrail to buy seats on flights between the UK and Turkey. On 22 May 2014 Rose J gave judgment for Goldtrail against Onur for £3.64 million plus interest. She found that the £3.64 million Onur had paid to another company owned by Mr Aydin was consideration for Goldtrail’s agreement to buy the seats; that Mr Aydin had diverted that receipt from Goldtrail in breach of his fiduciary duty; and that Onur had dishonestly assisted him. Onur was ordered to pay damages in that sum.
Floyd LJ gave Onur permission to appeal. Goldtrail then sought security because Onur had stopped flying to the UK and might have no assets here against which it could enforce its judgment. Onur resisted paying the judgment sum into court, although it did not substantially oppose security for costs.
Although willing to assume a respectable commercial explanation for the end of the flights, Floyd LJ found a compelling reason for the condition. On 11 June 2015 he required Onur, if it continued the appeal, to pay £3.64 million into court or otherwise secure it by 9 July 2015. Onur did not pay. It first asked to pay by seven monthly instalments, then said that the condition breached the European Convention on Human Rights and would not be met. Only on 7 December 2015 did it apply to discharge the condition, saying that it could not comply and that dismissing the appeal would stifle it. On 21 January 2016 Patten LJ refused that application and dismissed the appeal for non-compliance. Goldtrail had relied in particular on Onur’s financial relationship with Mr Bagana.
When a condition stifles an appeal
Lord Wilson, with whom Lord Neuberger and Lord Hodge agreed, explained that to stifle an appeal is to prevent the appellant from bringing or continuing it. Where permission has been given, a condition which has that effect is a wrongful exercise of discretion. Article 6 of the European Convention, which confers its rights on companies as well as individuals, leads to the same conclusion. A state need not provide an appeal, but if it does, a litigant permitted to appeal must have a fair hearing of it.
Payment into court of the sum already awarded is qualitatively different from security for future costs. If the appeal fails, the judgment sum is immediately available to the successful party, without any need to enforce the order. A court should keep that extra advantage in mind. Either order can nevertheless stifle continued participation.
If the condition is otherwise appropriate, the appellant must establish on the balance of probabilities that it would stifle the appeal. The respondent cannot be expected to prove the appellant’s financial position. If stifling is established, the condition should not, for all practical purposes, be imposed. An appellant with no realisable assets of its own is not stifled if it can raise the money, including from friends, business associates or relatives.
Whether the company can raise the money
Where the appellant is a company and the respondent says that a controlling shareholder can provide the funds, the court must be cautious. The shareholder’s separate legal personality must be respected, save where that distinction has been abused. The question is never whether the shareholder can raise the money. It is always whether the company can.
In Hammond Suddard Solicitors v Agrichem International Holdings Ltd, the Court of Appeal had properly concluded that there was no convincing evidence that the company lacked resources, or access to resources, enabling it to pay. Lord Wilson accepted that conclusion. He held that later remarks in that case were wrong in asking whether the wealthy owners could themselves pay if minded to do so, and in saying that the trust which owned the company must procure payment. In Société Générale SA v Saad Trading, the Court of Appeal had confined that approach to exceptional circumstances. The Supreme Court rejected that additional test. The question is whether the company has established, on the balance of probabilities, that no funds would be made available to it, by its owner or another closely associated person, which would enable it to meet the condition.
The court should not take an emphatic denial by the company or its owner at face value. It should judge the probable availability of funds from the company’s real financial position and from every aspect of its relationship with the owner, including how far he directs its affairs and has supported it financially. The issue is whether the funds would be provided, not merely whether the third party could provide them.
Why the majority ordered the applications to be reheard
Mr Bagana controlled Onur’s finances and had kept the business trading through substantial loans. Onur’s finance officer said he would lend more only for exceptional commercial payments needed to keep it in business. Patten LJ considered that, with this support, Onur could have paid. The issue was what inference to draw about the money actually being available.
Lord Wilson thought a conclusion under the correct test might have been open, and that the second-hand account of Mr Bagana’s intentions required careful scrutiny. He held, however, that Patten LJ had not used that test. After relying on Société Générale, Patten LJ treated the circumstances as exceptional and asked, in effect, whether Mr Bagana probably could advance the funds, irrespective of whether he probably would. The appeal therefore had to be allowed and both applications remitted, so that the application to discharge the condition could be decided correctly. Goldtrail had also advanced an alternative argument against discharge. Patten LJ had not needed to decide it, but might now have to do so.
Lord Clarke and Lord Carnwath dissented. They accepted that earlier statements asking whether an owner could pay had gone too far, but did not consider any misstatement material to the result. They would have decided the matter themselves rather than add delay and expense. There was no direct evidence from Mr Bagana. Onur had raised stifling only at a very late stage, after a series of inconsistent explanations, and the evidence fell short of proving that the condition would in fact prevent the appeal. They would have upheld Patten LJ’s orders and dismissed the appeal.
Verdict: By three votes to two, the Court allowed Onur’s appeal and remitted both applications to Patten LJ. He had to decide whether the condition would in fact stifle the appeal. The Supreme Court neither discharged the condition outright nor decided Onur’s challenge to the underlying judgment.
Source: Goldtrail Travel Limited v Onur Air Taşimacilik AŞ [2017] UKSC 57
