Koza Ltd & Anor v Akçil & Ors [2017] EWHC 2889 (Ch)

“The principle by reference to which it is to be determined whether a subsequently created interest is held free of a floating charge is clear … where it is provided that the charge is a floating charge, or where the intention that it be such appears from the terms of the charge … or where it is the intention of the parties that the company continue to deal with the charged asset as part of a continuing business … the company will be entitled, while the charge continues to float, to deal with such assets free of it. The test conventionally adopted for determining whether what the company has done is within this principle is: was it done by the company in the ordinary course of business? … within this principle, ‘ordinary’ is not to be confined to what is in fact ordinarily done in the course of the particular business of the company. Transactions will be within this principle, even though they be, in relation to the company, exceptional or unprecedented.”

“On the other hand, it may be helpful to summarise briefly the following conclusions that I have reached from the decided cases that I have reviewed: (1) The question whether a particular transaction is within the ordinary course of a company’s business in the context of a floating charge is a mixed question of fact and law; (2) it is convenient to approach the matter in a two-stage process; (3) first, to ascertain, as a matter of fact, whether an objective observer, with knowledge of the company, its memorandum of association and its business, would view the transaction as having taken place in the ordinary course of its business; and, if so (4) secondly, to consider whether, on the proper interpretation of the document creating the floating charge, applying standard techniques of interpretation, the parties nonetheless did not intend that the transaction should be regarded as being in the ordinary course of the company’s business for the purpose of the charge; (5) subject to any such special considerations resulting from the proper interpretation of the charge document, there is no reason why an unprecedented or exceptional transaction cannot, in appropriate circumstances, be regarded as in the ordinary course of the company’s business; (6) subject to any such special considerations, the mere fact that a transaction would, in a liquidation, be liable to be avoided as a fraudulent or otherwise wrongful preference of one creditor over others, does not, of itself, necessarily preclude the transaction from being in the ordinary course of the company’s business; (7) nor does the mere fact that a transaction was made in breach of fiduciary duty by one or more directors of the company; (8) such matters in (6) and (7) may, however, where appropriate and in all the circumstances, be among the factors leading to the conclusion that the transaction was not in the ordinary course of the company’s business;(9) transactions which are intended to bring to an end, or have the effect of bringing to an end, the company’s business are not transactions in the ordinary course of its business.”

“There has been a long history of Mareva injunctions, changes in Mareva injunctions and so on, in this action and associated actions. The first defendant has been an arms dealer. He comes from Nigeria. He is on any view an entrepreneur. He has made inadequate disclosure of what his assets are outside the jurisdiction. That has been found by at least two of the Commercial Court judges. But the situation which was reached in front of Bingham J was that it was said that there was a desperate need for funds to enable legal representation to continue. There was affidavit evidence that the two Mrs. Thompsons and their 19 children were in dire straits in London because all the funds available to them were drying up.”

“18. In cases of what may be called ordinary business expenses the court does not usually consider whether the business venture is reasonable, or indeed whether particular business expenses are reasonable. Nor does it balance the defendant’s case that he should be permitted to spend such monies against the strength of the claimant’s case, or indeed take into consideration the fact that any monies spent by the defendants will not be available to the claimant if it obtains judgment. As I see it, that is because the purpose of a freezing injunction is not to interfere with the defendant’s ordinary business or his ordinary way of life. 19. In the fourth edition of Mareva Injunctions and Anton Pillar Relief, Gee says at page 318: “The court will always be concerned to ensure that a Mareva injunction does not operate oppressively and that a defendant will not be hampered in his ordinary business dealings any more than is absolutely necessary to protect the plaintiff from the risk of improper dissipation of assets. Since the plaintiff is not in the position of a secured creditor, and has no proprietary claim to the assets subject to the injunction, there can be no objection in principle to the defendant’s dealing in the ordinary way with his business and with his other creditors, even if the effect of such dealings is to render the injunction of no practical value.” 20. In my judgment, the relevant principles are correctly stated in that passage … 23. … In my opinion, the correct approach would have been to hold that the appellant was in principle entitled to incur reasonable expenses in connection with the Brown action and that the freezing injunction should be varied accordingly. A freezing injunction should not in principle prevent such expenditure, given that it was bona fide legal expenditure in connection with an action which had a reasonable prospect of success and which was on foot when the injunction was granted.” “The court will always be concerned to ensure that a Mareva injunction does not operate oppressively and that a defendant will not be hampered in his ordinary business dealings any more than is absolutely necessary to protect the plaintiff from the risk of improper dissipation of assets. Since the plaintiff is not in the position of a secured creditor, and has no proprietary claim to the assets subject to the injunction, there can be no objection in principle to the defendant’s dealing in the ordinary way with his business and with his other creditors, even if the effect of such dealings is to render the injunction of no practical value.”

“(i) The essential test is whether it is in the interests of justice to make the variation sought; (ii) Since the court has already determined that, in the absence of a freezing order, there is a real risk of dissipation sufficient to justify the making of an order it is for the applicant to satisfy the court that it is appropriate to make the variation sought and to adduce any evidence that is necessary to persuade the court that that is so; (iii) In determining whether or not to allow the variation proposed the Court is concerned to examine whether to do so would be consistent with the policy that underpins the jurisdiction, namely that a defendant should be restrained from evading justice by disposing of assets otherwise than in the ordinary course of business with the result that any judgment goes unsatisfied; Gangway Ltd v Caledonian Park Investments (Jersey) Ltd [2001] 2 Lloyd's Rep 715; TTMI Ltd of England v ASM Shipping Ltd of India [2005] EWHC 2666 (Comm). (iv) The correct test is “to consider objectively the overall justice of allowing the payment to be made including the likely consequence of permitting it on the prospects of a future judgment being left unsatisfied, and bearing in mind that the assets belong to the defendant and that the injunction is not intended to provide the claimant with security for his claim or to create an untouchable pot which will be available to satisfy an eventual judgement”: Gee, para 20.054; (v) If the question is whether or not the Mareva should be varied so as to allow frozen monies to be used to fund a defence it may be necessary to show that there are no other funds or sources of payment which should as a matter of objective fairness be used for that purpose in preference to the frozen funds. The same principle must apply if what is sought is to fund the giving of a recognizance in favour of another. (vi) Because the court has already been satisfied of a risk of dissipation judges are entitled, on an application to vary, to have a healthy scepticism about assertions made by the applicant particularly where the applicant, or those to whom his evidence or contentions relate, have been less than frank in dealing with the court or the claimant.”

“In exercising the discretion whether or not to grant an application to vary an injunction the court acts in accordance with what is ‘just and convenient’. This is the test laid down in s.37(1) of the Supreme Court Act 1981. On an application for a variation, the claimant has already established a real risk of dissipation and a good arguable case. The principles which apply in considering whether to grant a variation are the same as those which apply when considering whether or not to grant Mareva relief. … The correct test is to consider objectively the overall justice of allowing the payment to be made including the likely consequences of permitting it on the prospects of a future judgment being left unsatisfied, and bearing in mind that the assets belong to the defendant and that the injunction is not intended to provide the claimant with security for his claim or to create an untouchable pot which will be available to satisfy an eventual judgment.”

“The phrase “good cause” was used in Pet Plan Limited by Nicholls LJ at p.41. Nicholls LJ said that what are “good grounds” will depend upon all the circumstances of the case; see p.40. Although Buckley LJ in Chanel v Woolworth had not put the matter as broadly as this, instead saying (at p.492-3) that there had to be a significant change of circumstances or the discovery of some new facts which could not reasonably have been known about when the undertaking was given, I accept, following Pet Plan Limited, that what is “good cause” will depend upon all the circumstances of the case, though typically a change of circumstances or the discovery of some new fact will be required. In Secretary of State for Trade and Industry v Bell Davies Trading [2005] 1 AER 324 at paragraph 104 the Court of Appeal put the matter this way: “The normal procedure would be for the party, who had given the undertaking, to apply to the court, to which he had given the undertaking, on a specific ground, usually changed circumstances making the continuation of the undertaking unnecessary, oppressive or unjust.”” “The normal procedure would be for the party, who had given the undertaking, to apply to the court, to which he had given the undertaking, on a specific ground, usually changed circumstances making the continuation of the undertaking unnecessary, oppressive or unjust.””

“The chairman noted that the Arbitration is extremely important to the Company because in order to continue and to progress its mining business the Company has to explain to its current and potential partners the true nature of the events that have taken place, and that those events represent an unlawful politically-motivated expropriation of assets. The chairman further noted that the Arbitration will demonstrate the credibility and substance of the Company’s position, a position that would be vindicated were the Arbitration to succeed.” “The chairman further noted that Company will also be able to point to the Arbitration as providing an assurance that steps are being taken to ensure that it continues to operate as an effective mining business, free from the interference and control of the Turkish state.”

“A copy of the SPA is attached to this letter”

“In order to move the headquarters of the group to England and to establish a parent company for this purpose over [Koza Holding], it was decided to establish a company in England and to transfer the shares of the shareholder family members in [Koza Holding] to this company to be established in England. Finally, it was decided to establish [IIL] with the same partnership structure and the same partnership share rates of [Koza Holding] in order to move the headquarters of the group to England and to conduct the business activities of the group from England, and for this purpose the law firm was authorised by all family members for establishing the company and … articles of association of the company was signed by all family members one by one.”

“It cannot possibly be expropriated by any foreign government. Nor does it have any assets or operations in Turkey. Indeed, it was set up specifically to operate outside of Turkey.”

“The vast majority of my assets are in Turkey and out of my reach; indeed they have been seized by the Erdoğan Regime … My available assets are very substantially less than $10 million, and certainly insufficient to finance the ICSID arbitration”

“The evidence indeed shows that the Claimant made an “investment” not for the purpose of engaging in economic activity but for the sole purpose of bringing international litigation against the Czech Republic. This alleged investment was not made in order to engage in national economic activity, it was made solely for the purpose of getting involved with international legal activity. The unique goal of the “investment” was to transform a pre-existing domestic dispute into an international dispute subject to ICSID arbitration under a bilateral investment treaty. This kind of transaction is not a bona fide transaction and cannot be a protected investment under the ICSID system.”

“Each Contracting Party shall encourage and create favourable conditions for the investments of nationals or companies of the other Contracting Party in its territory”

“The share swap was between shareholders of GRI and the shareholders of Gold Reserve Corpn. I accept that the shareholders of GRI transferred some benefit to the shareholders in return for obtaining shares in Gold Reserve Corpn, namely, their own shares in GRI. But to describe this as a transfer of benefit by GRI fails to distinguish between the legal personality of GRI and the legal personality of its shareholders. They are separate and distinct. There is no evidence that GRI made any payment or transferred anything of value to Gold Reserve Corpn in return for becoming the indirect owner or controller of the shares in CAB or of the Brisas Project. It may be that there was some “action” by the directors of GRI at the time of the company re-organisation but I was not referred to any evidence of such action, none was in evidence and it would not be right for me to speculate as to what that action might have been. Whilst GRI undoubtedly became the indirect owner or controller of the shares in CAB and of the Brisas Project I must conclude that it did not at that time make an investment in the assets in respect of which the protection of the BIT was sought.”

“The chairman noted that the Company has no internal or external relations resource but the company requires such a function so it can establish its position in a competitive market, protect its reputation and attract and retain joint venture partners.”

“Koza Ltd has no internal public relations resource, and no spokesperson to respond to media enquiries. … Whilst you have experience of the Turkish media environment, the primary area of your operations has been Turkey, and you have relatively little experience of working with the UK media.”

“When a company which owns such a project is considering Koza Ltd as a long-term business partner that will not be making an immediate significant financial contribution, it inevitably scrutinises every other aspect of Koza Ltd and its business. This means that negative perception in the mining industry of Mr Ipek or the Koza brand assumes increased importance, and becomes a real obstacle to accessing potentially valuable projects.”