Introduction

The case of Koza Ltd & Anor v. Akcil & Ors [2019] EWCA Civ 891 revolves around complex legal disputes pertaining to the management and control of Koza Ltd, a subsidiary within the Koza Group—a significant Turkish-based media and mining conglomerate. Central to the litigation are two appeals concerning court undertakings that restrict Koza Ltd from disposing of its funds outside the norms of its business operations. The appellants, Koza Ltd, sought to obtain court declarations allowing specific expenditures deemed crucial for the company's survival and strategic interests, while the respondents opposed these applications, arguing that such expenditures deviated from the ordinary and proper course of business.

Summary of the Judgment

The Court of Appeal addressed two primary appeals:

• ICSID Funding Appeal: Koza Ltd sought permission to fund an arbitration proceeding at the International Centre for the Settlement of Investment Disputes (ICSID). The initial High Court ruling denied this, citing concerns over the authenticity of the Share Purchase Agreement (SPA) underpinning the arbitration application.
• Extradition Expenses Appeal: Koza Ltd aimed to fund legal expenses related to the extradition request of its director, Mr. Hamdi Ipek, arguing that such expenditures were within the company's ordinary course of business.

The Court upheld the extradition expenses appeal, allowing Koza Ltd to make the necessary legal payments. However, regarding the ICSID funding appeal, the court discharged the negative declaration but did not replace it with a positive declaration due to ongoing doubts about the SPA's authenticity. Consequently, Koza Ltd may proceed with ICSID funding at its own risk.

Analysis

Precedents Cited

The judgment extensively referenced several key cases to interpret the meaning of "ordinary and proper course of business":

• Countrywide Banking Corporation Ltd v Dean [1998] AC 338: Emphasized an objective assessment of transactions in their factual context without a universally applicable test.
• Ashborder BV v Green Gas Power Ltd [2004] EWHC 1517 (Ch); [2005] 1 BCLC 623: Discussed the interpretation of "ordinary course of business" in the context of charge documents.
• Michael Wilson & Partners Ltd v Emmott [2015] EWCA Civ 1028: Clarified that "ordinary" and "proper" are separate, cumulative requirements that are highly fact-sensitive.
• Halifax v Chandler [2001] EWCA Civ 1750: Illustrated that the ordinary course of business should not consider the reasonableness of the business venture or balance the defendant's case against the claimant's strength.

Legal Reasoning

The core legal debate centered on interpreting whether specific expenditures by Koza Ltd fell within the "ordinary and proper course of business" as stipulated by the court's undertaking. The judges analyzed both factual circumstances and legal principles to determine the propriety of the expenditures.

For the ICSID funding appeal, the court grappled with the SPA's authenticity and its implications on the arbitration's jurisdiction. The doubts surrounding the SPA's legitimacy made it untenable to grant a positive declaration affirming the expenditure as ordinary and proper.

In contrast, for the extradition expenses appeal, the court found that funding Mr. Ipek's legal defense was intrinsically linked to Koza Ltd's core business interests. The expenditure aimed to protect the company's strategic assets, thus aligning with the ordinary and proper course of business despite being unprecedented.

Impact

This judgment sets a critical precedent in how courts interpret undertakings regarding a company's expenditure. It delineates the boundaries of what constitutes "ordinary and proper" expenditures, especially in contexts where strategic corporate survival is at stake. Future cases involving similar undertakings will likely reference this decision to assess the legitimacy of discretionary expenditures under judicial restrictions.

Complex Concepts Simplified

Conclusion

The Koza Ltd & Anor v. Akcil & Ors [2019] EWCA Civ 891 judgment offers a nuanced interpretation of what constitutes "ordinary and proper course of business" within the framework of judicial undertakings. By upholding the extradition expenses appeal while partially discharging the ICSID funding appeal, the court underscored the importance of aligning company expenditures with core business objectives and legal commitments. This decision reinforces the judiciary's role in scrutinizing corporate actions to ensure they remain within established legal and operational boundaries, thereby providing clarity for future disputes of a similar nature.

In essence, the case highlights the delicate balance courts must maintain between allowing businesses the flexibility to navigate complex challenges and ensuring that judicial commitments are respected and upheld to maintain legal integrity.