Court of Appeal: financial condition did not stifle company's ability to appeal

Earlier this year, the Supreme Court ruled that Lord Justice Patten had applied the incorrect legal test when he found that the financial position of Onur Air's wealthy owner should be taken into account when deciding that the appeal had not been stifled. A majority of three judges to two ruled that the correct test was not whether the owner, Mr Bagana, had the means to make the payment, but rather whether the company was likely to be able to raise that money from the owner in this particular instance.

Lord Justice Patten has now again refused to lift the condition, after applying the correct test as determined by the Supreme Court. He did so on the basis that Bagana had "made a very substantial investment in this company and it is unrealistic to suppose that he will put that investment at risk by allowing the appeal to be dismissed for want of a sum which, on the evidence, he can easily pay resulting in an enforceable judgment and possibly the liquidation of the company".

"The burden is fairly and squarely on Onur to satisfy the court that the retention of the condition will stifle the appeal and I am not persuaded that it has done so," he said in his judgment.

He added that the opponent's legal representation "may well be right to say that, looked at against the whole history of this matter, this is an exercise in delay brinkmanship by Onur but in any event they have not discharged the burden which the Supreme Court has confirmed rests upon them in this case".

The judge said that he was able to come to the conclusion that he did regardless of the fact that Bagana had never given any direct evidence to the court, and had not yet paid the money needed to satisfy the condition into the court. He added that the fact that Onur had not alleged that its appeal would be stifled until "very late in the day", when it was threatened with an order dismissing its appeal, was also relevant.

"The fact that the Court of Appeal judge, having had the matter remitted to him, has arrived at precisely the same conclusion as he did previously serves to underline again that it will be an uphill struggle for a company, which has been habitually supported by a wealthy individual sitting behind it and with significant control over its financial affairs, to satisfy a court that that individual will not continue to provide the necessary support to enable the company to progress a potentially valuable appeal," said corporate litigation expert Jonathan Fortnam of Pinsent Masons, the law firm behind Out-Law.com. "This is the more so in circumstances where the individual was not prepared to put details of his finances before the court."

"The warning to individuals who use companies as their limited liability alter egos that the courts will be astute in their scrutiny of such arrangements therefore remains," he said.

To 'stifle' an appeal refers to imposing a condition which prevents the party from bringing it or continuing it. Doing so where a party has permission to bring an appeal is likely to be a breach of that party's right to a fair hearing under the European Convention on Human Rights.

The court had originally decided to impose the payment condition on Onur as it had already stopped operating flights into the UK at the time of the court action, and therefore had no readily identifiable assets in the UK which could be used to satisfy the judgment in the event that its appeal was to fail. The court heard that the company could not continue to trade without the financial support of Bagana, who is its chair and controlling shareholder.

Lord Justice Patten originally ruled that there was "no evidential basis for concluding that the condition could not have been complied with or that, if complied with, it would stifle the appeal". He did so based on the "exceptional circumstances" of this case, and on the basis that the company was "able to continue to trade with the support of Mr Bagana and that it could, with that financial support, have made the £3.64m payment even if it would have been in difficulties in generating sufficient cash for that purpose from its trading activities".