Supreme Court overturns dismissal of appeal because of failure to pay judgment sum into court

Supreme Court: narrow majority

A Court of Appeal judge was wrong to end an appeal because the appellant company had not complied with a condition to pay the judgment sum into court first and he thought its wealthy owner could have paid instead, the Supreme Court has ruled.

In a 3:2 decision, the court said the key question was whether a third party would, rather than could, pay the money.

In Goldtrail Travel Limited (in liquidation) (Respondent) v Onur Air Taşimacilik AŞ (Appellant) [2017] UKSC 57, the respondent was awarded damages of £3.64m at trial. The appellant sought to appeal, but Lord Justice Floyd agreed with the respondent’s request for a condition that the appellant should first pay the judgment sum into court on the basis that it was likely to have no assets in England and Wales.

The appellant disputed the condition but did not claim that it would stifle the appeal.

The money was not paid, and the respondent applied for the appeal to be dismissed, while the appellant applied for discharge of the condition on the ground that payment of that sum was now beyond its means and its continuation would stifle its appeal.

Patten LJ held that the appeal should be dismissed on the grounds that, in exceptional circumstances, the ability of a third party to provide funds –the appellant’s wealthy owner, Mr Bagana – could be taken into account in assessing the likelihood that a company could make a payment into court.

Patten LJ said that “Mr Bagana has decided not to fund the payment by the company” and concluded that the appellant had not established that the condition for payment would stifle its appeal.

Giving the majority judgment, Lord Wilson – with whom Lord Neuberger and Lord Hodge agreed – said: “If an appellant has permission to bring an appeal, it is wrong to impose a condition which has the effect of preventing him from bringing it or continuing it.”

Article 6 of the European Convention on Human Rights was also engaged, he continued: “There will seldom be a ‘fair hearing’ within article 6 if a court which has permitted a litigant to bring an appeal then, by indirect means, does not permit him to bring it.”

While a condition for payment would not stifle an appellant’s appeal if it could raise the required sum from a third party, Lord Wilson said, the court needed to be “cautious” about a respondent’s suggestion that the appellant’s controlling shareholder could provide it.

“The shareholder’s distinct legal personality… must remain in the forefront of its analysis. The question should never be: can the shareholder raise the money? The question should always be: can the company raise the money?”

He criticised a comment by the Court of Appeal in Hammond Suddard Solicitors v Agrichem International Holdings Ltd [2011] EWCA Civ 2065, in which Lord Justice Clarke (as he then was) said: “[The appellant] has wealthy owners and there is no evidence that, if they were minded to do so, they could not pay the judgment debt including the outstanding orders for costs.”

Lord Wilson said the criterion which should be applied was: “Has the appellant company established on the balance of probabilities that no such funds would be made available to it, whether by its owner or by some other closely associated person, as would enable it to satisfy the requested condition?”

He acknowledged that a court could expect to receive an “emphatic refutation” from a company and its owner in such a situation.

“The court should therefore not take the refutation at face value. It should judge the probable availability of the funds by reference to the underlying realities of the company’s financial position; and by reference to all aspects of its relationship with its owner, including, obviously, the extent to which he is directing (and has directed) its affairs and is supporting (and has supported) it in financial terms.”

Lord Wilson concluded that Patten LJ had not applied the correct criterion and instead followed the “misconception” in the Hammond Suddards case that in exceptional circumstances an order for a payment into court could be justified by whether another person probably could advance the necessary funds, irrespective of whether he probably would do so.

He remitted the case back to Patten LJ to consider the applications again by reference to the correct criterion.

Lords Clarke and Carnwath dissented, with the latter saying that even if Patten LJ, in applying the authorities, may have misstated the law in some respects, “these were not ultimately material to his determination”.

“There was no direct evidence from Mr Bagana himself…. The only relevant evidence was that of Onur’s Chief Financial Officer that Mr Bagana would contemplate making further loans to Onur, but only ‘in… exceptional circumstances [to enable it to make] commercial payments… necessary… to keep [it] in business’, and that he regarded the court’s requirement of such support as infringing his human rights.

“The latter suggestion is of course nonsense, since there is no doubt as to his ability to fund the company if he wishes. As to why he does not regard the present case as sufficiently ‘exceptional’, there is no explanation. This in my view falls far short of proving, on the balance of probabilities, that the condition would in fact stifle the appeal. Lord Wilson does not suggest otherwise.”

Lord Clarke agreed, although acknowledged that in Hammond Suddards, his “formulation of the principles is not entirely accurate”.

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