When can a court take into account the wealth of a corporate appellant’s owner in deciding whether imposing a condition for payment of the judgment sum would stifle an appeal? The Supreme Court’s judgment in Goldtrail Travel v Onur Air means that there will be a significant evidential burden to overcome to establish that, on the balance of probabilities, funds would not be available from a related third party to comply with such a condition: Goldtrail Travel Ltd (in liquidation) v Onur Air Tasimacilik AS [2017] UKSC 57, [2017] All ER (D) 09
Onerous condition on airline wanting to appeal
This was an appeal by a Turkish airline against a Court of Appeal ruling that it was not allowed to continue to appeal a court decision against it unless it paid the full judgment sum into court. The airline argued that it could not pay and that the condition therefore stifled its appeal. The Court of Appeal had refused to remove the condition due to the close financial relationship between the airline and its ‘extremely wealthy’ controlling shareholder who could have provided the necessary funds.
Legal context
When a party has permission to appeal, the courts should not impose a condition that prevents the party from bringing that appeal. Imposing such a condition breaches both common law and the right to a fair trial under Article 6 of the European Convention on Human Rights. There would not be a fair hearing, or indeed a hearing at all, if a court permitted an appeal but then imposed an onerous condition that prevented the appeal from being brought. To successfully resist such a condition, appellants must establish on the balance of probabilities that the condition would stifle continuation of the appeal.
Supreme Court - would, not could
The Supreme Court said that the question was not whether the appellant’s controlling shareholder could have helped it to meet the condition, but whether he would have. The Supreme Court found (by a majority of three to two) that the Court of Appeal had applied the wrong principles, namely those in Hammond Suddard Solicitors v Agrichem International Holdings Ltd [2001] EWCA Civ 2065, [2001] All ER (D) 258 (Dec) and Societe Generale SA v Saad Trading, Contracting and Financial Services Co [2012] EWCA Civ 695, [2012] All ER (D) 04 (Jun). In these cases, which the Supreme Court criticised, it was held that whether a third party could (not would) provide funds to meet another party’s condition of payment could be taken into account in exceptional circumstances.
Availability of funds from a controlling shareholder
The Supreme Court noted that, even if an appellant had no assets, a condition for payment would not necessarily stifle its appeal if it could raise the money from a third party, such as a controlling shareholder.
The relevant question is: "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…?”
The courts must proceed carefully where there is a suggestion that a controlling shareholder could raise the necessary funds. The Supreme Court noted that a shareholder’s distinct legal personality should be respected and that courts must consider whether the appellant – not a related third party – could raise the money. Evidence from the appellant and the third party that funds would not have been made available should not be taken at face value. Courts should judge the likely availability of funds by reference to the company’s financial position and all aspects of its relationship with the third party.
Comment: An appellant seeking to challenge an appeal condition will have a significant evidential burden to overcome to establish that, on the balance of probabilities, funds would not be made available to enable the appellant to comply with a condition. In the present case, for example, both dissenting judges thought that the appellant’s evidence failed to establish that the condition would stifle its appeal.
Courts may also expect to see evidence from the relevant third party, despite the Supreme Court’s statement that such evidence should not be taken at face value. The lack of evidence from the controlling shareholder in this case was described as ‘odd’, and evidence from the appellant’s chief financial officer on the controlling shareholder’s behalf was said to require ‘careful scrutiny’. Ultimately, the strength of the appellant’s evidence was not the reason for remittal – the Supreme Court’s decision was based on the Court of Appeal having applied the wrong principle – it should be a ‘would’ not a ‘could’ question.
