Goldtrail Travel Ltd v Aydin & Ors [2015] EWCA Civ 926

A3/2014/2468 (A)[2015] EWCA Civ 926
IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
(ROSE J)
Venue Royal Courts of JusticeDate Thursday, 11th June 2015
Strand
London, WC2
B E F O R E:
LORD JUSTICE FLOYD
Between
GOLDTRAIL TRAVEL LIMITEDApplicant-v-
Between
AYDIN & ORSRespondent
(Digital Audio Transcript ofWordWave International LimitedA Merrill Communications Company165 Fleet Street, London EC4A 2DYTel No: 020 7404 1400 Fax No: 020 7831 8838Official Shorthand Writers to the Court)
Mr M Gibbon QC & Ms H Ilett (instructed by Druces Solicitors) appeared for Ms H StonefrostMs H Stonefrost (instructed by Field Fisher) appeared for Respondent
J U D G M E N T (Approved)
[1]On 22nd May 2014 Rose J gave judgment in this action against six defendants. This application only concerns the third defendant, Onur Air Tasimacilik AS ("Onur Air"). Onur Air is a Turkish company with its headquarters in Istanbul. Onur Air was found liable by Rose J for dishonest assistance in the misapplication of the claimant, Goldtrail Travel Ltd ("Goldtrail"), as money. By consequent order Rose J required Onur to pay £3,640,000 with interest, to make an interim payment on account of costs of £450,000 and a further payment of £150,000 representing half the costs of an ATE insurance policy. She refused permission to appeal. She ordered without, as I understand it, resistance from Goldtrail, a stay of execution of the judgment sum pending any application for permission to appeal and thereafter if permission was granted. The other financial elements of her order, that is to say the interim payment on account of costs and the payment on account of the ATE insurance policy were not stayed and were payable shortly thereafter.[2]I gave permission to Onur Air to appeal on the 15th December 2014. Included in the respondent's notice was an application under CPR 52.9 that it be made a condition of the continuation of the appeal that the appellant pay £600,626 plus interest of 8% from the 19th June 2014 being sums due from the appellant to the respondent pursuant to paragraphs 9(c) and (d) of the order of Rose J of 22nd May 2014 and (ii) paying the following sums into court(a) £150,000 being security for the respondent's costs and(b) £3,640,000 being the principal damages due from the appellant to the respondent pursuant to paragraph 9(a) of the order plus interest at 8% thereon from the 19th June 2014.[3]The reason given in the respondent's notice for the imposition of such a term was that:
“the appellant has failed to satisfy the interim costs award ordered by Rose J, the appellant ceased flying to the UK. The respondent is concerned that if the appellant is allowed to continue with the appeal and fails the respondent will be unable to pay any damages award.”
[4]In his witness statement in support of the application Mr Christopher Jarvis, who is the solicitor with the conduct of the matter on behalf of Goldtrail, relied primarily on the provisions of the rules which enable a court to make an order for security for her costs. At paragraph 14 he said this: "In December 2014, the Liquidators were made aware that Onur had ceased flying its aircraft to the UK. In view of this, and Onur's continued failure to satisfy the interim costs order, on 19 December 2014 my firm put Onur's solicitors on notice that the Liquidators intended to make an application for security for costs if Onur obtained permission to appeal (which, at that point, was still pending as far as the Liquidators and my firm were aware: it was not until the Court of Appeal's letter of 5 January 2015 was received ... that my firm became aware that Onur had obtained permission from the Court of Appeal). We also indicated that the Liquidators would seek an order that Onur should pay the outstanding judgment debt into an escrow account. In Onur's solicitors' response later that day, they did not comment on whether or not Onur was able and/or willing to satisfy the outstanding interim costs order...".[5]Then in paragraph 16, he says:
"On 23 December 2014, Onur solicitors confirmed that 'Onur Air ceased operating to the UK following the end of the holiday season for operational reasons. Onur Air continues to fly to other destinations in Europe'. They also stated that: 'Pressure on [Onur's] cash flow have made it unable to make the interim payment on account of costs.'"
[6]On 10th March 2015 Goldtrail served a skeleton argument in support of their application for security for costs. The skeleton referred to a number of cases in which the payment of the judgment debt was made a condition of continuation with an appeal. It relied heavily on the cessation of flying for operational reasons.[7]In paragraph 69 of that skeleton are set out the factors relied on as amounting to compelling reasons for imposition of conditions in this case:
"(1) Onur is incorporated in Turkey and runs its operations from Istanbul. Onur has stated in correspondence that it ceased to fly to this jurisdiction in October 2014 and is not, at present, flying to jurisdiction for 'operational reasons'. Onur has not provided any explanation in evidence to this Court for this decision. Other than the planes that used to fly here, the Liquidators believe that Onur has no other assets in this jurisdiction. (2) The mechanisms of normal enforcement are unlikely to be available. Onur is incorporated in Turkey. Goldtrail, an insolvent company with no funds, would be faced with having to bring enforcement proceedings in Turkey. Alternatively, if Onur is still flying to other Brussels Convention/Lugano countries when the appeal process has ended, Goldtrail could attempt to enforce payment against a plane owned by a Turkish company in one of those states. (3) Onur, given its conduct (as demonstrated by its dealings with Goldtrail, in particular the acts of dishonest assistance set out above and the position taken by Onur in correspondence since the trial), is not likely to pay or co-operate with the enforcement process. (4) Onur has the resources to pay. Mr Hasancebi's evidence is clear on that point. Onur has not adduced any evidence in the Application, as might have been expected, to support the assertions made in correspondence that it does not have the resources meeting the conditions were they to be ordered. The Court of Appeal can conclude that Onur has not made payment of the costs it has been ordered to pay not because it cannot do so but chosen not to do so. (5) Onur has not provided any evidence concerning its financial affairs to Goldtrail or to the Court of Appeal. (6) Given what Mr Hasancebi has told the Court at trial, and the absence any evidence as to Onur's financial position, the Court of Appeal can reasonably conclude that Onur's appeal not be stifled..."
[8]Onur served no evidence in answer to the application. But in its skeleton of 10th March 2015 it stated that it expected to be in a position to pay the £600,000 interim costs and after the event insurance amount by 13th March, some three days later, and £150,000 security for costs sought by Goldtrail by the same date. It stated that this was on a voluntary basis. Not surprisingly, it devoted the bulk of its skeleton argument to the judgment sum application which it characterised as an appeal from the stay of that order by Rose LJ. It thus resisted the admission of Mr Jarvis's evidence as new evidence on appeal. Quite apart from that, it was submitted that there was no compelling reason to grant the judgment sum application.[9]Onur summarised its position in paragraph 12 by saying:(a) Rose J ordered there be a stay of execution of judgment. As set out above it is Onur's submission this should not be disturbed on appeal.(b) It would be an unusual case where an order imposing a requirement to pay the judgment sum into court were made. This is not an unusual case.(c) There is no suggestion on the part of Goldtrail that Onur has taken or would take steps to render it judgment proof.(d) Goldtrail correctly asserts that Onur has stopped flying to the UK. This may, which is not admitted, make execution more difficult as the cases above demonstrate. The key question is not whether it will be difficult to execute but whether an appellant had taken steps to defeat the judgment.(e) £3.64 million would be a very significant amount to remove from a trading business and(f) Onur will pay the interim costs money and security for costs.[10]In a supplementary skeleton Goldtrail placed some reliance of what it called Onur's volte face on its ability to pay the interim costs order.[11]On 7th April 2015 I considered all these matters on the papers in the first instance. I ordered that continuation of the appeal be made conditional on Onur Air paying the sum of £600,626 into an escrow account. Secondly, I ordered that they pay the sum of £150,000 into court as security. Thirdly I ordered that they pay the judgment sum into court by 30th April 2015. I subsequently stayed that order in order to allow Onur to make this oral renewal applications.[12]In my order I said:
"My reasons for so directing are (a) Onur does not resist the making of he orders (1) and (2); (b) as to (3) I am exercising a discretion to impose conditions on the grant of permission, not hearing an appeal as Onur contends; (b) Onur has not explained its decision to stop flying to the UK, which is a legitimate cause of concern for Goldtrail's ultimate ability to enforce its judgment in the event the appeal fails; (c) the unexplained cessation of flights has happened since the hearing by Rose J and therefore represents a change of circumstances since Goldtrail agreed to a stay;(d) the orders I am making do not put the sums of money at the disposal of the liquidators: they merely ensure that those sums are available to satisfy judgment if necessary; (e) there is no evidence suggesting Onur is not able to pay the judgment sum."
[13]This is therefore an application for an oral rehearing of that decision pursuant to CPR 52.16. CPR 52.9 provides that:
"(1) The appeal court may – (c) impose or vary conditions upon which an appeal may be brought. (2) The court will only exercise its powers under paragraph (1) where there is a compelling reason for doing so."
[14]Since I took the decision on the papers Onur has served a witness statement of Nedim Gurbuz, which addresses the question of whether the decision to cease flying to the UK was taken in order to obstruct enforcement of the judgment. It is not necessary to rehearse in detail what he says. In short he says the decision was taken because in late 2014 there was not sufficient demand in the UK for package holiday flights. Onur contend that the cessation of flights should not have been a surprise to Goldtrail because it was foreseeable that Onur Air might cease to fly in the UK due to fluctuation in demand.[15]Two questions arise. The first is whether there is in the instant case a compelling reason for making continued prosecution of the appeal conditional upon the payment into court of the judgment debt or that debt alternatively being secured in some satisfactory way within the United Kingdom. The second question is whether the court should exercise its discretion to make the order.[16]Mr Gibbon QC, who appeared for the appellant with Ms Hannah Ilett, accepts that if the first question is satisfied in this case then the second question is much better characterised as to how rather than whether the payment or security should be provided. The crucial issue is therefore the first one, whether there exists a compelling reason.[17]On this issue Ms Stonefrost, who appears for Goldtrail, draws attention to Hammond Suddard Solicitors v Agrichem International Holdings Limited [2001] EWCA Civ 2065. At paragraph 41 in that case Anthony Clarke LJ (as he then was) set out six elements in that particular case which persuaded the court that there was a compelling reason within CPR 52.9(2). Of course, every case must be decided on its own facts but one can detect from that case that the court felt the following to be material. Firstly, whether the appellant was an entity against whom it will exercise "the normal mechanisms of enforcement" and whether there therefore was a real risk if the appeal fails the respondents would be unable to recover the judgment sum. Secondly, the fact that the appellant clearly had the resources not only to fund the costs of the appeal but also to pay the judgment debt and costs was thought to be material. Thirdly, whether the appellant had been in breach of a court order to pay the judgment debt. Fourthly, whether the defendant had been forthcoming about its financial affairs and fifthly, whether the appeal would be stifled if the order was made.[18]There is an obvious danger in making lists of relevant factors, which will be taken as check lists in future cases authorising or prohibiting the finding of compelling reasons. Nevertheless, those factors are indications which may be material in a particular case.[19]Mr Gibbon, on the other hand, submitted initially that the circumstances must be such that the court is compelled to act. If by this he meant there was no alternative but to act I think it puts the case too highly. The existence of a discretion, once the court has found a compelling reason, rather suggests that the test is lower. He submitted in the alternative that what is meant is that the court concludes that something should be done. I am prepared to proceed on that basis. I accept that the discretion to impose conditions should be exercised cautiously. In Dumford Trading AG v OAO Atlantrybflot [2004] EWCA Civ 1265, the Court of Appeal, again including Anthony Clarke LJ say at paragraph 9:
"In my view it will be an unusual, and perhaps rare, case in which it will be appropriate to make such an order, especially an order imposing as a condition the payment of the whole judgment sum into court. As I accepted in paragraph 48 when giving the judgment of the court in Hammond Suddards, it is appropriate to adopt a cautious approach to CPR 52.9. Subsequent cases, notably the CIBC Mellon Trust case, have perhaps emphasised the need for such caution."
[20]In that case it appears that an actual intention on the part of the appellant to take steps to denude itself of assets in anticipation of the judgment was in issue.[21]What then are the factors in the present case? Ms Stonefrost relies on the following. Firstly, she submits that the substantially unexplained cessation for flights to the UK means that it will now be significantly harder than could have been foreseen at the date of judgment to enforce the judgment. It does mean therefore that the normal mechanisms of enforcement of a judgment against assets in the jurisdiction will not be available. She points to the fact, as is now apparently clear, that Onur have been flying to this country since 1992, without cessation of flights. This is therefore a change which would not have been foreseeable by anyone at the date of the judgment. Secondly, she draws attention to the fact that the defendant's have not shown themselves to be co-operative in obeying court orders. She accepts that, unlike Hammond Suddards she cannot rely on the defendant's failure to pay the judgment sum thus far as the order has been stayed. Nevertheless the interim costs order and premium were only paid very recently and agreement to pay them was only secured under the spotlight of this application. Thirdly, she draws attention to the fact that in response to the insistence on payment of these sums in correspondence the appellant stated in a letter of 20th June 2014 that Onur was not in a position the pay £600,000. It asked to pay by instalments. Thus Onur Air was making different statements about their ability to pay depending on the circumstances. They now say when it is sought to impose a condition on them as to payment of a far larger sum that they have that sum in addition to the necessary resources to continue with the appeal.[22]Thus far Ms Stonefrost does not impugn the defendant's motives. She says she does not have to. However, she draws attention to, firstly, the fact that Onur Air was found by the judge to have acted dishonestly in a number of respects and that her findings of dishonesty are not the subject of appeal. Secondly the evidence now put forward as to the reasons for the cessation of flights came from a witness whose evidence the judge had said should be "treated with caution."[23]In his very helpful written statement for the purposes of this hearing Mr Gibbon makes the following points. The change in flights to the UK was foreseeable. The fluctuation in economic demand for package charter flights was something which meant that the security afforded by Onur aeroplanes being in the UK was inevitably subject to fluctuations.[24]Secondly, Onur has apologised for the late payment of the £600,000. Moreover there is not such a stark difference between pleas of poverty in correspondence and Onur's actual financial position. Ability to pay is not a binary question and Onur has had cash flow difficulties which made its position consistent.[25]In my judgment, there is a sufficiently compelling reason to make an order in this case for the payment of the judgment debt. I do not regard it as an essential component of the exercise of the jurisdiction that the appellant should be taking active steps to remove assets or part with ownership of them. The claimants are not able to take advantage of the Judgments Regulations to enforce their debt. At the time of the trial they could reasonably have supposed that Onur would continue to have occasion to bring assets into jurisdiction in the form of aircraft, and they will continue to have a commercial reason to have a presence here albeit a fluctuating one. Whatever the motive, the change since the judge made her order has a significant impact on the ability of the respondents to enforce their judgment by normal means. It is therefore not necessary to consider how much reliance should be placed on Mr Gurbuz's witness statement. I proceed on the basis that there is a commercial explanation for the change in circumstances.[26]I think Ms Stonefrost is also right that the court cannot expect Onur to be co-operative in relation to payment of the judgment debt. Although they have now paid the sums which they were ordered to pay, that was under the pressure of this application. It was late and significantly so and the court has had no proper explanation of why it could not be paid when it fell due, despite Onur having had every opportunity to explain the difficulties it claimed to be experiencing. I am unable to assume on this basis that the defendant will not be at least as unco-operative and possibly more so in the payment of the judgment sum in the event that the appeal fails.[27]In another case these factors might not amount to a compelling reason. Thus it is noteworthy that the list of factors in Hammond Suddards included those which indicate that there would be no real prejudice to the defendants in the running of the appeal and no evidence that the appeal would be stifled.[28]Mr Gibbon characterised those reasons as reasons for not declining the order rather than as a compelling reason for granting them. But I do not agree. Here there will be no prejudice at all beyond such losses are caused by placing money in court or the provision of security.[29]Given that a compelling reason exists, I consider that this is a proper case in which to exercise my discretion to grant the order sought. There would be real injustice if the additional delay induced by this appeal meant that Onur was in a significantly better position to resist enforcement of the judgment. It is for those reasons that I indicated this morning I would impose the condition. Ms Stonefrost sought to improve her position by asking for the sums to be paid into court to include interest. I think the order I have made is sufficient to ensure that her clients are fairly protected in this case and are not therefore prepared to vary the order in that respect.

Cited in 1 later judgment