Rose J judgment in the first claim

The court held that the sole director and shareholder, Mr Abdulkadir Aydin, misapplied Goldtrail's funds and breached his fiduciary duties, including the duty under section 175 of the Companies Act 2006, by diverting to himself (via a Seychelles vehicle, Morning Light Ltd) sums paid by Viking and Onur Air which should have benefited Goldtrail. The judge found that the deposits and certain accelerated payments by Goldtrail were not genuine deposits or advances in Goldtrail's interests but were used to fund payments to Aydin. Viking/Black Pearl and Onur Air knowingly entered into sham brokerage agreements with Morning Light and dishonestly assisted Aydin's breaches.

Key legal principles applied included the fiduciary duty of directors (including the duty to avoid conflicts under section 175), the availability of accessory liability for dishonest assistance of breaches of fiduciary duty, and equitable remedies (accounting or equitable compensation). The court distinguished and applied authorities on attribution and remedies (notably Bilta and Manson) and held that sole-shareholder status did not permit ratification of conduct prejudicial to creditors once the company was insolvent or in doubt.

Factual and procedural background.

Goldtrail was a UK tour operator which, in 2010, entered into two separate multi-document commercial packages with parties associated with Viking (the 'Black Pearl Deal') and with Onur Air (the 'Onur Air Deal'). Those packages involved (i) share purchase documentation on the face of it providing for purchase of 50% of Goldtrail shares and (ii) parallel "brokerage" agreements between Viking/Onur Air and Morning Light (a Seychelles vehicle controlled by Aydin) under which substantial sums were paid to Morning Light as purported commission for securing long-term seat‑purchase commitments from Goldtrail.

Goldtrail went into administration in July 2010 and later liquidation. The liquidators sued, alleging (a) that Aydin misapplied company money (including deposits and accelerated payments) and breached his fiduciary duties (including s.175 CA 2006 by diverting opportunities/consideration to himself), and (b) that the other defendants (Black Pearl, individual Black Pearl directors, Viking and Onur Air) dishonestly assisted those breaches.

Issues framed by the court.

• Whether Aydin misapplied Goldtrail's money by causing payments to be made that were in truth for his personal benefit via Morning Light.
• Whether long‑term seat‑purchase commitments (the Viking five‑year and Onur Air four‑year commitments) existed and, if so, whether the consideration for them was diverted from Goldtrail to Aydin in breach of s.175.
• Whether the Second to Sixth Defendants dishonestly assisted Aydin's breaches.
• What remedies were appropriate: account of profits or equitable compensation, and whether set‑off or insolvency rules reduced recoverable sums.

Court's reasoning and findings.

• The court found Morning Light to be an instrument of Aydin and that the Viking "brokerage" and Onur Air "brokerage" agreements were sham in respect of the brokerage services (no services were provided) and were used to route consideration to Aydin. The court found that the purported deposits and certain "extra"/accelerated payments (aggregate figures identified in judgment) were regarded by the deal principals as funding Aydin payments rather than genuine refundable deposits.
• On the Black Pearl/Viking Deal the court found that a genuine five‑year seat commitment existed and that the £1.4m said to be paid to Morning Light was consideration for that commitment which Aydin diverted to himself. On the Onur Air Deal the court found a four‑year commitment existed and that Onur Air paid sums which were diverted to Aydin.
• The Individual Black Pearl witnesses' credibility was heavily questioned; contemporaneous emails were treated as reliable evidence of intent and cash‑flow planning showing the deposits were to be used to fund payments to Aydin.
• The court held that a sole director/shareholder cannot ratify conduct that prejudices creditors once the company is insolvent or of doubtful solvency; section 239 CA 2006 and authorities (including Vivendi and Bilta) informed that conclusion.
• The judge accepted that accessory liability for dishonest assistance extends to breaches of fiduciary duty (not only traditional trusts) and applied the combined (objective/substantial subjective) test of dishonesty derived from Twinsectra and Royal Brunei and subsequent authority.
• On remedies, the court rejected a contention that the defendants could set off sums by reason of on‑going commercial dealings (relying on Manson and related reasoning): equitable compensation was awarded for the sums misapplied or, alternatively, for the diverted commissions.

The claimant's case succeeded. The court found that Mr Aydin breached his fiduciary duties (including misapplication of company funds and breach of section 175) by diverting sums to Morning Light and that Viking/Black Pearl and Onur Air (and the individual Black Pearl directors) dishonestly assisted those breaches. The judge relied on contemporaneous documents and credibility findings, applied the combined test of dishonesty and equitable principles on remedies, and held that sole‑shareholder status did not permit ratification in circumstances affecting creditors. Equitable compensation (or alternative account) was awarded in the sums identified in the judgment.