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It is well settled that a party who wishes so to contend must show that he has explored all means of providing the necessary security. Ratio |
Floyd LJ added that the appellants had a right to renew the application orally and that he would consider any further evidence that became available. Ratio |
Floyd LJ added in para 15 of his judgment on 21 October that he had hoped to make it clear by that set of reasons that the appellants appeared to be what he called shuffling around to a position where they were saying that the payment of the sums of money placed unacceptable strains on their ability to conduct business... |
They did not however take that step. Ratio |
In para 17 Floyd LJ said that on 19 October, which was two days earlier, the appellants did not deal with the previous history but served a witness statement with only one paragraph as follows: Board of Onur Air is of the opinion that this decision, [which Floyd LJ assumed was a reference to his order that the judgment... |
Therefore, the foresaid sum will not be paid. Ratio |
The striking feature of that statement is that Onur was not even then saying that payment of 3.4m (or the provision of security in lieu) would or might stifle the appeal. Ratio |
Reliance upon Onurs human rights was a wholly new point on the part of Onur. Ratio |
For various reasons which are not material to this appeal Floyd LJ said in para 20 that the whole history of the appeal was very unsatisfactory but that he was very reluctant to strike out an appeal for which permission has been given without giving the appellants one final chance of explaining the position. Ratio |
He added: If it is now their position that they are so inhibited by the order for payment of the judgment sum that it is stifling their ability to appeal, then they should say so. Ratio |
I appreciate that is not something which they have so far said. Ratio |
They have had ample opportunity, it might be said, to put forward every argument, but stifling of the appeal is one matter which they have thus far declined to put forward. Ratio |
It may be that they are embarrassed by what was apparently said to Rose J about the fact, as Mr Gurbuz said in evidence, that the company was of such a size that 5m was not a large sum of money. Ratio |
Whatever the reason for their silence, it seems to me that they ought to come forward with their evidence now. Ratio |
In order to give Onur one last chance Floyd LJ directed that any application for a final order on the appeal should be made on notice to the appellants and that appropriate opportunity should be given to both sides to file evidence in relation to it. Ratio |
He added that it may be that not much further evidence was required from the respondents but that he was very anxious that the appeal should not be disposed of without a proper application on notice for the precise order which Goldtrail now sought. Ratio |
The matter then came before Patten LJ, who gave judgment on 21 January 2016. Ratio |
There were before Patten LJ an application on the part of Goldtrail for an order dismissing the appeal and for orders for payment of the judgment sum and interest. Ratio |
That would of course involve a removal of the stay. Ratio |
Onur opposed those applications and issued a new application under CPR 3.1(7) for the variation of the 11 June order by removal of the condition requiring payment into court of the judgment sum. Ratio |
It did so, as Patten LJ put it in para 15, for the first time on the ground that the payment of that sum was now beyond the means of the company and its payment would stifle the appeal. Ratio |
Patten LJ considered first the application under CPR 3.1(7). Ratio |
I will do the same. Ratio |
Patten LJ considered the position in some detail between paras 16 et seq and concludes in para 21 that Onurs Chief Financial Officer said in a statement dated 8 January 2016 that there had been a net increase in current liabilities of US$10m and that the net forecast for 2015 was between US$15 and US$16.5 m, that Onurs... |
Patten LJ summarised the position thus in para 22: Ms Erguven says that Onur has been unable to negotiate extended finance from banks and that existing lenders have either frozen or closed existing facilities. Ratio |
In these circumstances, the company has no means to pay the judgment debt. Ratio |
One would expect that, in these circumstances, Onur would have been forced to cease trading but this is obviously not the case and the evidence indicates that the airline continues to operate in Europe and has entered into new contracts, for example, with Bulgarian Air. Ratio |
An analysis of the financial information carried out by the liquidators of Goldtrail and set out in the witness statement of Mr Oakley-Smith recognises the difficulties faced by Onurs business in the present climate but identifies a continuing source of funding from Mr Hamit Cankut Bagana who is the Chairman of Onur an... |
According to Ms Erguvens most recent witness statement, Mr Bagana has a direct shareholding of 3.67% of Onur but owns 81.19% of a company called Ten Tour Turizm Endustri ve Ticaret Anonim Sirket which in turn owns 92% of the shares in Onur. Ratio |
Patten LJ continued as follows: 23. Ratio |
The analysis carried out by Mr Oakley-Smith of the 2013 and 2014 accounts suggests that Mr Bagana is the primary source of funding for the company. Ratio |
His evidence at the trial before Rose J was that he paid 1m to Mr Aydin as part of the agreement with Onur. Ratio |
He lent the company $28m in 2013. Ratio |
In the 2014 accounts this is shown as having increased to $68m. Ratio |
As part of these arrangements, it appears that Onur has given guarantees to Mr Bagana in respect of debts due to him from one of the other shareholders although the reasons for this are not explained. Ratio |
Of more significance is that in the period from 2008 to 2011 substantial dividends were paid by Onur to Mr Bagana and then loaned back to the company and secured against its assets in subsequent years. Ratio |
Mr Bagana therefore appears to have removed equity from the company and to have used the money to establish himself as a secured creditor. Ratio |
His position as the companys largest single (and secured) creditor has put him into the position where he can effectively decide which of the unsecured debts should be paid and when. Ratio |
This is confirmed by Ms Erguven in her second witness statement where she says that: I can confirm that Mr Bagana is fully aware of the position that Onur Air finds itself in in relation to the payment of the Judgment Sum into court as a condition of the continuation of the Appeal. Ratio |
He has made it clear that he would only contemplate considering the possibility of advancing further amounts to Onur Air in the most exceptional circumstances if they were commercial payments strictly and immediately necessary in order to keep Onur Air in business due to the already significant indebtedness of the comp... |
Mr Bagana has made it clear to the management of Onur Air that he believes that if the court were to strike out the appeal on the grounds that he, as a shareholder, had failed to lend money to Onur Air to enable it to pay the Judgment Sum into court, that would be a breach of his and Onur Airs rights under the European... |
24. Ratio |
The liquidators evidence is that Mr Bagana is an extremely wealthy man who said to Rose J in his evidence that he did not regard 5m as a significant outlay for himself personally. Ratio |
Ms Erguvens response to this is that she is unable to comment on his alleged wealth and business activities. Ratio |
25. Ratio |
Some of the argument has centred on whether the financial information produced by Onur justifies its alleged belief that it is unable to pay the 3.64m and that, to be made to do so, would lead to the stifling of the appeal. Ratio |
Mr Gibbon cautioned me against attempting to second guess the assessment of the financial state and prospects of the company made by its own directors and officers and I am obviously alive to those difficulties. Ratio |
But even taking Ms Erguvens assessment at face value, it is apparent that a decision has been taken that Onur is able to continue to trade with the support of Mr Bagana and that it could, with that financial support, have made the 3.64m payment even if it would have been in difficulties in generating sufficient cash fo... |
It seems clear to me that Mr Bagana has decided not to fund the payment by the company and if I can take his financial position into account in assessing Onurs ability to satisfy the condition either prior to 9 July 2015 or thereafter then the CPR 3.1 (7) application to vary cannot succeed. Ratio |
There is no evidential basis for concluding that the condition could not have been complied with or that, if complied with, it would stifle the appeal. Ratio |
26. Ratio |
Mr Gibbon submitted that it could only be in exceptional circumstances that the court would take into account on this kind of application the financial position of a third party such as Mr Bagana. Ratio |
To do so risks blurring the distinction between a company and its shareholders or other funders which the law habitually respects. Ratio |
But it is clear as a matter of authority that the ability of third parties to fund the company may be relevant in appropriate cases and that there is no jurisdictional bar to the court taking their position into account in determining whether an allegation of stifling has been made out. Ratio |
There is, I think, an obvious distinction between whether such a third party can be said to be under any sort of obligation as a result of an order made against the company and whether, in considering the likelihood of the company being able to make a potential payment, its access to third party funding should be taken... |
Patten LJ then referred to Socit Gnrale SA v Saad Trading, Contracting and Financial Services Co [2011] EWCA Civ 695 and to a decision of the Court of Appeal in Hammond Suddard Solicitors v Agrichem International Holdings Ltd [2001] EWCA Civ 2065; [2002] CP Rep 21, where I gave the judgment of the court, which comprise... |
In the light of the submissions in this case, I recognise that my formulation of the principles is not entirely accurate. Ratio |
The basic principle is that stated by Brandon LJ with the approval of Lord Diplock in M V Yorke Motors v Edwards [1982] 1 WLR 444 at 449H (as quoted by Lord Wilson): The fact that the man has no capital of his own does not mean that he cannot raise any capital; he may have friends, he may have business associates, he m... |
The cases show that in a case such as this the burden is on the person (or entity concerned) to show that he cannot find relevant capital to support him. Ratio |
Wilson in his para 21: In Hammond Suddard I tried to make that clear in para 41(3) quoted by Lord There is no convincing evidence that the appellant does not either have the resources or have access to resources which would enable it to pay the judgment debt and costs as ordered. Ratio |
I adhere to that principle. Ratio |
So the question here is whether Onur either has the resources or access to resources to pay the sum of 3.64m. Ratio |
The statements of principle which I recognise went too far are those referred to in my paras 41(4) and 43 as identified by Lord Wilson in his para 22 above. Ratio |
In para 41(4) I added, of the appellant: It has wealthy owners and there is no evidence that, if they were minded to do so, they could not pay the judgment debt, including the outstanding orders for costs. Ratio |
In similar vein I said this in para 43: Thus we see nothing unjust in providing the trust which owns the appellant with a choice. Ratio |
If it is in the interests of the appellant for the appeal to continue, the trust must procure the payment of the current orders. Ratio |
I am also of the view that, in so far as the Court of Appeal went further in Socit Gnrale SA v Saad Trading, Contracting and Financial Services Co [2012] EWCA Civ 695, it went too far. Ratio |
In short, where the relevant company does not have appropriate resources of its own and the question is whether it has access to the resources of others, the question is whether the company would (not could) have had access to the resources. Ratio |
The onus that it would not is on the company concerned. Ratio |
On the facts of this case, the question is whether Onur has shown on the balance of probabilities that it did not have access to the relevant resources. Ratio |
On the basis that the only resources available to Onur were through Mr Bagana, the question is whether, on the balance of probabilities he would have provided the funds. Ratio |
As I see it, the strength of Goldtrails case is this. RPC |
Onur at no stage focused on this precise point. RPC |
As Lord Carnwath puts it in para 48, there was no direct evidence from Mr Bagana on the point. RPC |
In short, he does not address the question whether he would have declined to provide funds to Onur. RPC |
Again, as Lord Carnwath puts it, the only relevant evidence on the point was that of Onurs Chief Financial Officer that Mr Bagana would contemplate making further loans to Onur but only in exceptional circumstances [to enable it to make] commercial payments necessary to keep [it] in business. RPC |
I agree with Lord Carnwath that the evidence falls far short of establishing that the condition would in fact stifle the appeal. RPC |
I would only add that there has been no suggestion until very recently that the condition would stifle the appeal and that the new aspect of Onurs case is not so I would dismiss the appeal. RPC |
much that the appeal would be stifled as reliance on its human rights, which is not explained and is far-fetched in the extreme. RPC |
I gratefully adopt Lord Wilsons exposition of the facts and of the law, which was in effect common ground by the end of the hearing. Ratio |
Although Patten LJ (faithfully applying the authorities binding on him) may have misstated the law in some respects, I agree with Lord Clarke that these were not ultimately material to his determination. Ratio |
In any event, where an error such as this may have occurred, particularly one resulting from previous case law binding on the lower courts, the interests of justice require us in my view to avoid adding unnecessarily to the delay and expense borne by the parties. Ratio |
Our rules do not require us to remit the case to the lower court if we are in as good a position to decide it ourselves. Ratio |
This in my view is such a case. Ratio |
All the evidence is before us. Ratio |
I strongly agree with Lord Wilson that the court should not take even an emphatic refutation by the company or the owner at face value. Ratio |
As he says: it should judge the probable availability of the funds by reference to the underlying realities of the companys financial position; and by reference to all aspects of its relationship with its owner. Ratio |
Applying that approach to the present case, particularly against the background described by Lord Clarke, I have no doubt that Patten LJ would have arrived at the same conclusion, and I would do the same. Ratio |
There was no direct evidence from Mr Bagana himself. Ratio |
Although Patten LJ accepted that he had decided not to fund the payment by Onur, I take that to be no more than his inference from its opposition to the order. Ratio |
There is no direct evidence of such a decision. Ratio |
The only relevant evidence was that of Onurs Chief Financial Officer that Mr Bagana would contemplate making further loans to Onur, but only in exceptional circumstances [to enable it to make] commercial payments necessary to keep [it] in business, and that he regarded the courts requirement of such support as infringi... |
The latter suggestion is of course nonsense, since there is no doubt as to his ability to fund the company if he wishes. Ratio |
As to why he does not regard the present case as sufficiently exceptional, there is no explanation. Ratio |
This in my view falls far short of proving, on the balance of probabilities, that the condition would in fact stifle the appeal. Ratio |
Lord Wilson does not suggest otherwise. Ratio |
In these circumstances, no other reason having been given for remitting the case, I would uphold Patten LJs order and dismiss the appeal. RPC |
This is a test case brought against the Commissioners for Her Majestys Revenue and Customs (HMRC) by the Prudential Assurance Co Ltd (PAC). FAC |
PAC is a typical United Kingdom-resident recipient of dividends on portfolio investments overseas, representing less (usually much less) than 10% of the relevant overseas companies share capital. FAC |
The issues originate from two features of the UK tax position in the period 1990 to 1 July 2009. FAC |
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