Goldtrail Travel Ltd v Aydin & Ors

A director’s duty to avoid conflicts of interest under the Companies Act 2006 covers diversion of a company opportunity, whether or not the company could have exploited it. An accessory is liable for dishonest assistance where, knowing the fiduciary relationship and the broad design, it participates in diverting company money or an opportunity.

Equitable compensation reflects loss caused. A company cannot recover as loss a payment it recouped before insolvency. Payments presented as ordinary deposits may still be misapplications if their real purpose was to fund a fiduciary’s diversion. A pleading alleging misapplication to enable specified payments may encompass an allegation that the deposits were not genuine. Fresh evidence is excluded where it could reasonably have been obtained at trial and would not affect the outcome.

Goldtrail Travel Limited, later in liquidation, brought claims against its former owner and others for dishonest assistance in breaches of fiduciary duty. Mrs Justice Rose found that Black Pearl Investments Limited and three individual defendants had assisted Abdulkadir Aydin in diverting a company opportunity and misapplying company money.

The appeal concerned the Black Pearl transaction. The appellants challenged the factual findings, the treatment of deposits and an advance payment, the adequacy of the pleadings, the refusal to admit further evidence, the findings of knowledge and dishonesty, the valuation of the diverted opportunity, and the remedies. The central issues were whether the appellants were liable for dishonest assistance and what loss Goldtrail had suffered.

Lord Justice Vos gave the leading judgment, with Lord Justices Kitchin and Longmore agreeing.

1. Disposition. The appeal was dismissed save that the award for dishonest assistance in the misapplication claim was reduced from £1.25 million to £750,000. The separate £1.4 million award for dishonest assistance in the breach of section 175 of the Companies Act 2006 remained effective.
2. Corporate opportunity. The judge was entitled to find that the five-year seat commitment was genuine and commercially meaningful. The right to offer that commitment was property or an opportunity belonging to Goldtrail within section 175(2). Whether Goldtrail could itself have exploited it was immaterial to the director’s breach. The agreed division of £500,000 for the shares and £1.4 million for the commitment supported the compensation award. The court did not require a discount for hypothetical chances in this case, although it left the broader valuation question open. A dictum in Aerostar Maintenance International Limited v Wilson & others [2010] EWHC 2032 (Ch) appeared to point in the opposite direction.
3. Dishonest assistance. An accessory need not know every detail of the primary wrongdoer’s plan, but must know its broad terms and act dishonestly in relation to the assisted breach. The appellants knew Aydin’s fiduciary position and were intimately involved in the arrangement diverting Goldtrail’s money, property and opportunity. The tax fraud and deception of the Civil Aviation Authority were not the only relevant dishonesty. There was no double recovery because Viking had paid Aydin’s nominee, not Goldtrail.
4. Misapplication and evidence. The pleading that Goldtrail’s money had been misapplied to enable payments to Aydin’s nominee sufficiently put in issue the genuineness and repayment of the purported deposits. The judge was entitled to permit the contention, although express pleading would have been preferable. Further evidence was rightly refused under the principles in Ladd v Marshall [1954] 1 WLR 1489, since it could have been obtained for trial with reasonable diligence and would not have affected the outcome.
5. Recouped payment. The extra Viking £500,000 was recovered by Goldtrail before insolvency and therefore caused no significant ultimate loss. Manson v Smith (liquidator of Thomas Christy Ltd) [1997] 2 BCLC 161 concerned the different question of insolvency set-off and did not justify compensation for a sum already recovered. The remedies were otherwise proportionate and equitable.

1. Court of Appeal (Civil Division): In [2016] EWCA Civ 371, the appeal was dismissed save for the reduction of equitable compensation for the misapplication claim from £1.25 million to £750,000.
2. High Court of Justice, Chancery Division: Mrs Justice Rose found the appellants jointly and severally liable for £1.4 million for dishonest assistance in Aydin’s breach of section 175 and £1.25 million for dishonest assistance in the misapplication of Goldtrail’s money.