Koza Ltd v Akçil

The Court of Appeal dismissed the appellants' challenge to Asplin J's decision that the proceedings fell within Article 24(2) of Regulation (EU) No 1215/2012 (the Recast Judgements Regulation). The court held that, making an overall classification, the proceedings were principally concerned with the validity of decisions of the organs of Koza Limited because both the English company law challenge (under the company's articles and the Companies Act 2006) and the so-called "authority" challenge to the power of foreign trustees to cause the shareholder to act were inextricably linked and were preconditions to any valid shareholder decision.

The court also considered whether the corporate defendant had submitted to the jurisdiction by counterclaim and concluded that a counterclaim which expressly preserved a jurisdictional challenge did not amount to a wholly unequivocal submission; on that point the Court of Appeal would not have reached the same conclusion as the judge. Finally, the court upheld Asplin J's case management decision to stand over a strike out application on authority to trial as not being an error of law or an abuse of the court's case management powers.

Background and parties:

• The dispute arose between members of the Koza Group over control of Koza Limited, an English company whose shares are owned by Koza Altin (a Turkish group company). Following Turkish criminal process which resulted in trustees being appointed to manage Koza Altin, notices under sections 303 and 305 of the Companies Act 2006 were purportedly served to requisition a general meeting of Koza Limited to replace its board. The claimants (including a director and A shareholder) sought declarations and injunctions preventing those notices being effective.

Nature of the claim and relief sought:

• The claimants sought (i) declarations that the section 303 and section 305 notices were ineffective, (ii) interim and final injunctions to prevent any meeting convened pursuant to those notices, and (iii) injunctions restraining certain defendants (former trustees and Koza Altin) from acting as shareholder or representing Koza Altin in respect of Koza Limited. The pleaded case rested on two grounds: an "English company law" claim that the company's articles (article 26) and the Companies Act precluded the proposed actions, and an "authority" claim that the trustees' authority (derived from Turkish orders) should not be recognised by the English court.

Procedural history:

• An injunction was granted without notice by Snowden J. Asplin J later held that the English courts had jurisdiction under Article 24(2) of the Recast Judgements Regulation and refused to strike out the defendants' acknowledgement of service and defence; that order was appealed.

Issues before the Court of Appeal:

1. Whether the judge was correct to hold that the proceedings fell within Article 24(2) of the Recast Judgements Regulation (the jurisdiction issue);
2. Whether Koza Altin had in any event submitted to the jurisdiction by counterclaim (the submission issue);
3. Whether the judge's refusal to dismiss the strike out application was wrong (the strike out / case management issue).

Court's reasoning:

• On Article 24(2), the court applied the EU and domestic authorities requiring an overall classification of proceedings to see whether they are "principally concerned" with the validity of decisions of a company's organs. The court concluded that the English company law and authority issues in the proceedings were inextricably linked and both went to the preconditions for the validity of any shareholder decision; consequently the whole of the claim against Koza Altin was principally concerned with the validity of decisions of Koza Limited's organs and fell within Article 24(2).
• On the submission point, the court emphasised the need for a "wholly unequivocal" act amounting to submission. Because Koza Altin's counterclaim expressly preserved its jurisdictional challenge and its defence avoided the authority issue, the court would not have held there was a wholly unequivocal submission to jurisdiction on the authority point.
• On the strike out application, the court treated the decision to stand the application over for trial as a discretionary case management decision. In view of how the matter had been argued below (the strike out point not fully argued on merits), it was not appropriate for the Court of Appeal to decide the substantive merits of the strike out application for the first time; the judge's course was not a reversible error.

Appeal dismissed. The Court of Appeal upheld Asplin J’s classification of the proceedings against Koza Altin as principally concerned with the validity of decisions of the organs of Koza Limited within Article 24(2) of the Recast Judgements Regulation; it would not, however, have concluded that Koza Altin had unequivocally submitted to the jurisdiction by counterclaim. The judge’s case management decision to stand over the strike out application to trial was not disturbed.

Appeal from the High Court of Justice, Chancery Division (Asplin J) [2016] EWHC 3358 (Ch). An earlier interlocutory injunction had been granted by Snowden J. The Court of Appeal (Floyd LJ and Flaux LJ) gave judgment on 18 October 2017 [2017] EWCA Civ 1609 (this decision).