Goldtrail Travel Limited v Onur Air Taşimacilik AŞ

A court must not impose or maintain a condition on an appeal if the condition would probably prevent the appellant from pursuing it. The appellant bears the burden of establishing that consequence on the balance of probabilities.

Where a corporate appellant lacks its own resources, the question is whether it can raise the required sum. If funding from an owner or closely associated person is suggested, the company must establish that the funds would not be made available. The test concerns what the third party would do, rather than what the third party could afford to do. No additional requirement of exceptional circumstances applies. The court should assess the underlying financial realities and the whole relationship between the company and the potential funder.

Goldtrail Travel Limited, acting through its liquidator, obtained judgment against Onur Air Taşimacilik AŞ for £3.64m after Rose J found that Onur had dishonestly assisted a breach of fiduciary duty: [2015] 1 BCLC 89.

After permission to appeal had been granted, the Court of Appeal made continuation of Onur’s appeal conditional upon payment or security of the judgment sum. Onur did not comply. Patten LJ rejected its later application to discharge the condition on the ground that it would stifle the appeal, and dismissed the appeal: [2016] EWCA Civ 20.

The Supreme Court had to determine the correct approach where a corporate appellant without sufficient assets asserts that a payment condition would stifle its appeal, but the respondent contends that funds could be obtained from a wealthy controlling shareholder or another closely associated person.

1. By a majority of three to two, the appeal was allowed. Lord Wilson, with whom Lord Neuberger and Lord Hodge agreed, remitted Onur’s application to discharge the condition and Goldtrail’s consequential application to Patten LJ for determination under the correct criterion.

2. Once permission to appeal has been granted, it is a wrongful exercise of discretion to impose a condition which prevents the appellant from bringing or continuing the appeal. The same conclusion follows from Article 6 of the European Convention on Human Rights. The appellant must establish on the balance of probabilities that the proposed condition would stifle the appeal. If that consequence is established, the condition should not be imposed or maintained.

3. An appellant’s lack of realisable assets does not establish stifling if it can raise the required sum. In the case of a company, the distinct legal personality of its shareholder must remain central, consistently with Prest v Prest [2013] UKSC 34. The question is whether the company can raise the money, not whether the shareholder can do so.

4. Where funding by an owner or another closely associated person is suggested, the criterion is whether the appellant company has established on the balance of probabilities that the required funds would not be made available to it. The criterion concerns whether the third party would provide the funds, not merely whether that person could do so. The court should not take a denial of funding at face value. It should examine the underlying financial realities, including the potential funder’s control of the company and past and present financial support.

5. The statement in Hammond Suddard Solicitors v Agrichem International Holdings Ltd [2001] EWCA Civ 2065 that the appellant had not shown a lack of resources or access to resources was approved. Its additional reasoning framed by reference to whether wealthy owners could themselves pay, or must procure payment, was disapproved. The “exceptional circumstances” qualification developed in Société Générale SA v Saad Trading, Contracting and Financial Services Co [2012] EWCA Civ 695 was also rejected.

6. Patten LJ appeared to have proceeded on the mistaken basis that exceptional circumstances permitted consideration of whether Mr Bagana could advance the money irrespective of whether he probably would do so. The majority could not therefore treat the application as having been decided under the correct criterion.

7. Lord Clarke and Lord Carnwath dissented. They accepted the majority’s formulation of the governing test but considered the earlier misstatements immaterial. In their view, Onur’s evidence fell short of proving that the funds would not have been provided, so they would have dismissed the appeal.

1. United Kingdom Supreme Court: In Goldtrail Travel Limited v Onur Air Taşimacilik AŞ [2017] UKSC 57, the court allowed Onur’s appeal by a three-to-two majority and remitted both applications to Patten LJ for determination under the correct criterion.

2. Court of Appeal: In [2016] EWCA Civ 20, Patten LJ dismissed Onur’s application to discharge the payment condition and, because Onur had not complied with it, granted Goldtrail’s application to dismiss the appeal.

3. High Court: Rose J gave judgment for Goldtrail against Onur for £3.64m plus interest: [2015] 1 BCLC 89.