Koza Ltd v Akçil

The claim concerned competing applications arising from disputes about the authority of persons purporting to act for Koza Altin (a foreign shareholder) and the validity of notices served under sections 303 and 305 of the Companies Act 2006 to requisition and call a general meeting of Koza Ltd. The court held that the entirety of the proceedings, including the so-called "Authority Claim" (that the trustees lacked authority to cause Koza Altin to serve those notices), fell within Article 24(2) of the Recast Judgments Regulation because the principal subject matter was the validity of the constitution and the decisions of the organs of an English company and therefore within the exclusive jurisdiction of the courts of the State where the company has its seat.

The court further held that Koza Altin had submitted to the jurisdiction in relation to claims going beyond the Company Law Claim by filing a counterclaim seeking declarations as to the validity of prior board resolutions and allotments; that counterclaim was an unequivocal procedural step amounting to submission to the jurisdiction. The claimant’s separate strike out application seeking to strike out documents filed purportedly on behalf of Koza Altin (for want of authority) was not an appropriate preliminary to be heard separately because the question of authority is intrinsic to the main proceedings. Finally the court dismissed the application by Koza Altin seeking to restrain Koza Ltd from transferring its funds to Hanson Asset Management: the proposed cash-management arrangement fell within the undertakings given by Koza Ltd and was in the ordinary and proper course of its business.

Background and parties: Koza Ltd (an English private company) and Mr Hamdi Ipek (director and A shareholder) brought a range of applications after trustees were appointed in Turkey to manage Koza Altin and other Koza Group companies following Turkish criminal process and later SDIF appointments. Defendants included five individuals described as trustees/appointees and Koza Altin itself. The immediate disputes concerned notices purporting to be served on behalf of Koza Altin under section 303 and section 305 Companies Act 2006 to replace Koza Ltd’s directors, and competing procedural applications in England.

Nature of the main claim and relief sought: The Claimants sought declarations that the s.303 and s.305 notices were ineffective, and injunctions restraining the Defendants from holding meetings or acting as having authority for Koza Altin (the Company Law Claim and the Authority Claim). The Claimants also sought to strike out documents filed for Koza Altin for want of authority and brought other procedural applications, including to determine jurisdiction. Separately Koza Altin (acting through those who purported to represent it) filed a counterclaim seeking declarations about the validity of earlier amendments to Koza Ltd’s articles and allotments.

Issues framed:

• Whether the English court had jurisdiction over the Company Law Claim and the Authority Claim under Article 24(2) of the Recast Judgments Regulation (exclusive jurisdiction for disputes about the validity of company decisions and constitution);
• whether the Defendants (including Koza Altin) had submitted to the English court’s jurisdiction by steps taken (notably by filing a counterclaim);
• whether the Claimants’ strike out application should be treated as a freestanding preliminary issue or resolved within the main hearing; and
• whether Koza Ltd’s proposed transfer of circa £60m to Hanson Asset Management complied with undertakings given to the court and fell within the "ordinary and proper course of [its] business".

Court’s reasoning and conclusions: The court concluded that both the Company Law Claim and the Authority Claim were inward-looking disputes concerned with the validity of the constitution and decisions of the organs of an English company and therefore fell within Article 24(2) when construed strictly and in light of its objectives. The court explained that it is artificial to separate the validity of notices under the Companies Act from the question whether the shareholder and those purporting to act for it had capacity and authority; resolving the notices’ validity requires determination of those questions.

The court found that Koza Altin, by filing a counterclaim seeking declarations about the validity of prior board resolutions and allotments, had taken a procedural step consistent only with acceptance of the English court’s rules and had thereby submitted to the jurisdiction as to claims going beyond the Company Law Claim. By contrast the court held that other procedural steps taken to enforce undertakings (the Hanson issue) did not amount to submission to jurisdiction.

On case management and the strike out application, the judge held that the competence/authority issue was at the heart of the proceedings and that it would be disproportionate and contrary to the overriding objective to determine that issue as a separate preliminary strike out hearing; the authority issues should be addressed within the main proceedings and case management devised accordingly.

On the Hanson application, the court determined that the proposed arrangements to place Koza Ltd's funds with Hanson (with Credo and Pershing as platform/custodian) would, on the evidence, invest the funds in highly liquid, low risk instruments and therefore fell within the undertaking not to dispose of or diminish the value of funds other than in the ordinary and proper course of the company’s business. Koza Altin’s application to restrain that transfer was dismissed.

First instance: The court determined that it has exclusive jurisdiction under Article 24(2) of the Recast Judgments Regulation over the whole claim, including the Authority Claim, because the principal subject matter concerns the validity of the constitution and the decisions of the organs of an English company. Koza Altin, by filing a counterclaim seeking declarations about prior board resolutions and allotments, had submitted to the English court’s jurisdiction for those matters. The Claimants’ Strike Out Application should not be heard as a separate preliminary issue because the authority issue is intrinsic to the proceedings. The application by Koza Altin to restrain Koza Ltd from transferring its funds to Hanson was dismissed because that arrangement fell within the undertaking not to dispose of funds other than in the ordinary and proper course of the company’s business.