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Cite as: [2016] EWCA Civ 371

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Neutral Citation Number: [2016] EWCA Civ 371
CASE No: HC12D02320

IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
THE HONOURABLE MRS JUSTICE ROSE DBE
CASE No: HC12D02320

Royal Courts of Justice
Strand, London, WC2A 2LL
13/04/2016

B e f o r e :

LORD JUSTICE LONGMORE
LORD JUSTICE KITCHIN
and
LORD JUSTICE VOS

____________________

Between:
Goldtrail Travel Limited
(in liquidation)


Claimant/
Respondent
- and -


(1) Abdulkadir Aydin
(2) Black Pearl Investments Limited
(3) Onur Air Tasimaclik AS
(4) Magnus Stephensen
(5) Halldor Sigurdarson
(6) Philip Wyatt


Defendants/Appellants (2nd, and 4th to 6th)

____________________

Mr David Eaton Turner (instructed by Adams & Remers LLP) Limited) for the 2nd, 4th, 5th and 6th Defendants/Appellants
Ms Hilary Stonefrost (instructed by Fieldfisher LLP) for the Claimant/Respondent
Hearing dates: 16th and 17th March 2016

____________________

HTML VERSION OF JUDGMENT
____________________

Crown Copyright ©

    Lord Justice Vos:

    Introduction

  1. This is for the most part an appeal against the judge's findings of fact. But the factual circumstances are convoluted, so that the case appears more complicated than it really is. The underlying transactions that gave rise to the claim concerned an attempt by the primary (first disappeared and now believed to be deceased) wrongdoer, Mr Abdulkadir Aydin ("Mr Aydin"), the 100% owner and sole director of Goldtrail Travel Limited ("Goldtrail"), to sell 50% of his shares in Goldtrail to each of a Hong Kong company, Black Pearl Investments Ltd ("Black Pearl"), and Onur Air Tasimaclik AS ("Onur Air") without the one knowing about the other.
  2. This appeal concerns only the sale to Black Pearl, because the appeal by Onur Air was dismissed by Patten LJ for procedural reasons on 16th January 2016. Goldtrail went into administration and subsequently liquidation very shortly after these events leaving large numbers of customers stranded overseas in Turkey and Greece, and owing some 20 million to the Air Travel Trust which had to pay for their repatriation. Goldtrail acts in these proceedings through its liquidators (the "liquidators").
  3. Only two aspects of the decision of Mrs Justice Rose are appealed. First, the judge's finding that the appellants had dishonestly assisted Mr Aydin to breach his duties to Goldtrail under section 175 of the Companies Act 2006 ("section 175") by diverting to himself, via a Seychelles company he owned called Morning Light Limited ("MLL"), 1.4 million which would otherwise have been due to Goldtrail (the "section 175 claim"). That money would in the absence of the breaches, according to the judge, certainly have been paid to Goldtrail as payment for an opportunity, namely entering into a 5 year commitment to buy certain airline seats from a Swedish company, Viking Airlines AB ("Viking"), which was indirectly owned as to 40% by Black Pearl.
  4. The second aspect of the judge's decision that is appealed is her finding that the appellants had dishonestly assisted Mr Aydin in misapplying 1.25 million of Goldtrail's money (the "misapplication claim"). The 1.25 million was made up of two sums. The first sum of 750,000 was the total of the deposits made ostensibly for airline seats by Goldtrail to Viking (250,000) and to another operator, Flight Options Aviation Ltd ("FOAL"), for flights on Saga Airlines (500,000). The 750,000 was paid to the same broker or charter agent, acting for both Viking and FOAL, namely Meridian Aviation UK Ltd ("Meridian"), and found its way from Meridian to MLL. The other sum was 500,000 which was paid by Goldtrail to Viking without a contractual requirement as what was described as an "accelerated advance flight payment" or the "extra Viking 500,000". It similarly found its way to MLL.
  5. These two claims overlap so that the appellants need to succeed in both parts of their appeal to avoid liability altogether, whilst the liquidators only need to succeed on one or other aspect to preserve the appellants' substantive liability.
  6. Mr David Eaton Turner, counsel for the appellants, put the second claim first, perhaps because he wished to emphasise what he contends to have been the unfairness of the judge's approach. He submitted that the judge allowed the liquidators to pursue an unpleaded case that the appellants never intended to repay the 750,000 of deposits paid by Goldtrail, and that the appellants were thereby unfairly disadvantaged. The consequence was that the appellants say they were deprived of the opportunity of adducing evidence about the normal practices of these parties and in the airline industry of paying and repaying deposits for airline seats. The appellants have argued before us that new evidence to this effect should now be admitted. In particular the new evidence of Mr Halldor Sigurdarson ("Mr Sigurdarson") suggests that there would have been an inflow of money at the end of the 2010 flying season from deposits paid to aircraft owners, from which Goldtrail's deposits would have been repaid.
  7. I intend first to summarise the main elements of the judge's judgment before considering the arguments advanced by the appellants. Before doing so, however, I should say something about the appellants and provide a brief overview of what the judge described as the entire "Black Pearl deal".
  8. The appellants

  9. The 1st appellant was the 2nd defendant, Black Pearl, which, as I have said, owned 40% of Viking. The balance of Viking was owned by a Mr Christian Tadjeran ("Mr Tadjeran"). Though criticised, the judge's finding that Black Pearl effectively controlled Viking was not appealed. Black Pearl contracted to buy 50% of the shares in Goldtrail from Mr Aydin. Mr Philip Wyatt ("Mr Wyatt"), the 4th appellant and also the 6th defendant, wanted to make Black Pearl the holding company for what he described to the judge as a "vertically integrated travel group" incorporating Goldtrail, Meridian (then owned by his family members), and Viking. The 2nd appellant was the 4th defendant, Mr Magnus Stephensen ("Mr Stephensen"), a director of Black Pearl. The 3rd appellant, Mr Sigurdarson, was the 5th defendant, and a director of an English subsidiary of Black Pearl, BPI UK Ltd. I shall describe the four appellants together as the "appellants" and the three individual appellants as the "individual appellants".
  10. The Black Pearl deal

  11. Goldtrail was a tour operator specialising in Turkish and Greek holidays. When these events occurred, it had been trading apparently successfully for some 15 years. The Black Pearl deal, anyway according to the liquidators, comprised 5 main agreements, the second and third of which the appellants claimed were a complete sham. They were as follows:-
  12. i) The Black Pearl Sale and Purchase Agreement dated 19th February 2010 (the "BPSPA") between Black Pearl and Mr Aydin by which Mr Aydin agreed to sell 50% of the shares in Goldtrail to Black Pearl for 500,000 payable by instalments between 19th February 2010 and 1st July 2010.

    ii) The BPSPA recited in its schedule 2 a further agreement saying that "[Black Pearl] and [Mr Aydin] have agreed the following commercial agreement between [Goldtrail] and Viking" whereby Goldtrail had (a) "committed to purchasing a minimum of 100,000 seats per year from Viking via [Meridian] at market rates" from 1st May 2010 to 1st May 2015, and (b) granted to Viking "the first right of refusal to sell to [Goldtrail], all seats required by [Goldtrail], in excess of the 100,000 seats" previously specified (the "Viking 5 Year Seat Commitment").

    iii) An agreement between MLL (Mr Aydin's company) and Viking called the "Viking Brokerage Agreement" also dated 19th February 2010 whereby Viking was to pay MLL, described as the "Broker", 1.4 million in "commission" for successfully introducing the commercial commitments in the VSSA (see below) (by instalments between 22nd February 2010 and 7th June 2010). It was and is common ground that MLL provided no brokerage or other services and that the Viking Brokerage Agreement was designed to allow Mr Aydin to receive a further 1.4 million in a "tax efficient manner". In short, it was accepted to have been a tax fraud.

    iv) The Viking Seat Sale Agreement (the "VSSA") dated 15th February 2010 between Viking and Goldtrail provided for the sale of seats on Viking flights to and from Greece over the 2010 summer season setting out all the flights and prices, and recording an advanced payment or deposit of 250,000 due from Goldtrail to Viking no later than 31st March 2010, which would be refunded by Viking half on 15th October and half on 1st November 2010. Other payments for flights were to be made the week before the flights themselves.

    v) On 9th February 2010, Goldtrail entered into another seat sale agreement with FOAL (the "FOAL SSA") for the sale of seats on Saga Airlines for the 2010 summer season on similar terms to the VSSA, save that Goldtrail was to make two deposits of 250,000 each by 19th and 28th February 2010 respectively, such deposits being repayable by 4 instalments between 15th August and 30th September 2010.

  13. All the payments to be made to the airlines under the VSSA and the FOAL SSA were to be made via Meridian, which was, as I have said, a company associated with the appellants.
  14. The judgment below

  15. I emphasise that what follows is a summary of the main elements of a lengthy and careful judgment. It is not a substitute for a consideration of the whole of that judgment.
  16. The judge began the substantive part of her judgment by explaining why she had concluded that the evidence of each of Messrs Stephensen, Sigurdarson and Wyatt was to be treated with considerable caution and was largely unreliable. She reasoned first that their defence depended on establishing that contracts which they negotiated, prepared and approved were sham documents designed to enable Mr Aydin and Black Pearl to benefit by disguising from The Commissioners for Her Majesty's Revenue and Customs ("HMRC") the price that Mr Aydin was receiving for his shares in Goldtrail. Secondly, Mr Stephensen and Mr Wyatt were unfazed in recounting how they had fabricated the reason they had given to Mr Aydin for the delay in making a payment due under the Black Pearl deal. Thirdly, they had created false documents for submission to the Civil Aviation Authority (the "CAA"), namely copies of the VSSA and the FOAL SSA, excluding all reference to the deposits supposedly payable thereunder. Fourthly, the individual appellants had been willing to deceive the CAA by creating a trust to disguise the fact that Mr Aydin was selling his shares to Goldtrail.
  17. The judge then explained the Black Pearl deal and the payments made in respect of it, which I shall not repeat here. She recorded that it was Goldtrail's case that the deposits payable under the VSSA and the FOAL SSA were never intended to be repaid, but were always intended to be used to pay the sums due to MLL under the Viking Brokerage Agreement, and that it was the appellants' case that these deposits were genuine and a common feature of seat sale agreements.
  18. Having dealt in detail with the Onur Air deal, the judge returned to deal with the pleaded case against Mr Aydin and the appellants. Since the appellants place so much reliance on the deficiencies in Goldtrail's pleadings relating to the dishonest assistance in Mr Aydin's misapplication of Goldtrail's money, it is useful to set out the judge's approach to the appellants' criticisms in a little more detail. The judge said this at paragraph 62:-
  19. "Some criticism was levelled at the pleading by Mr Eaton Turner [He] said that what was pleaded was a misapplication of the monies whereas the case pursued at trial was that the payments had been made for an improper purpose. I do not accept this criticism of the pleading. It is perfectly clear what is being alleged. The Amended Particulars set out in detail the documents which it is alleged comprise the arrangement made by Mr Aydin with Viking to transfer the sums set out in the Viking Brokerage Agreement from Goldtrail to [MLL] via Viking it is alleged that some, if not all, of the monies paid to [MLL] by Viking had originated with Goldtrail and had been misapplied by Mr Aydin in breach of his fiduciary duties with the dishonest assistance of the other Defendants. That is what the trial of the action addressed. The Defendants submitted that what was really being alleged was payments made for an improper purpose and that was different from a misapplication of Goldtrail's money. I disagree. When considering a particular payment made by a company to an individual it is impossible to tell whether the payment is legitimate or not just on its face, without looking at the purpose for which it purports to be made - simply seeing that the company has paid someone 300,000 does not tell you anything about whether it is a legitimate payment until you consider the purpose for which the payment was made. To that extent, any allegation that money has been misapplied has to examine the purpose for which the payment was made Goldtrail accepts that [the ordinary payments for flight seats made by Goldtrail under the seat sale agreements with Viking and FOAL] are normal payments under binding agreements. The fact that there might have been some ulterior motive for entering into those contractual obligations does not mean that those monies have been misapplied by Mr Aydin. The payments that are attacked as misapplications of Goldtrail's funds are only those payments which are alleged by Goldtrail to be illegitimate payments either because Goldtrail was under no contractual obligation to make them (the Extra Viking 500,000 ) or because, though dressed up as deposits under the [VSSA] and [FOAL SSA], they were not genuine deposits but in effect ex gratia payments by Goldtrail".
  20. The judge then dealt extensively with the question of whether Mr Aydin was in breach of fiduciary duty by misapplying Goldtrail's money in relation to the deposits paid pursuant to the VSAA and the FOAL SSA, and reached a number of conclusions as follows:-
  21. i) Having rejected Goldtrail's unpleaded suggestion that the deposits were inflated, she assumed that the deposits were "within the range of values that are usually provided under contracts of this type and that the seats were sold at market rates".

    ii) She accepted that it would not be right to look at the VSSA and the FOAL SSA in isolation from the rest of the Black Pearl deal and to conclude that, because they looked like ordinary transactions, they could not constitute a misapplication of Goldtrail's money. There was no doubt that they were part and parcel of the Black Pearl deal, having been negotiated, drafted and signed at the same time as the other parts of that deal. In negotiating on behalf of Goldtrail, Mr Aydin was influenced by the role that the deposits would play in ensuring that the payments to him and MLL could be made. It was impossible to say that if they had been negotiated separately the same terms would have been agreed.

    iii) The judge rejected the individual appellants' evidence that deposits are almost always included in seat sales agreements, because there were no deposits provided for in the agreement with Onur Air or in the 2009 agreement between Goldtrail and Saga Airlines, and because the bogus versions of the VSSA and the FOAL SSA excluded the deposits.

    iv) The judge then considered in detail the three reasons why Goldtrail contended that the deposits were not genuine. She concluded that the contemporaneous emails demonstrated that the timing of the deposits was intended to enable them to be used to pay Mr Aydin. She placed particular reliance on Mr Stephensen's 26th January 2010 email to Messrs Sigurdarson and Mr Wyatt including a statement that "[Mr Aydin had] accepted that we pay him only 250k on feb 7th (ie turning his deposit round two days after he pays it to us)", and calculating the net cash outflow by deducting the deposits. The way in which the payments themselves were made demonstrated that everyone recognised that the deposits were linked to the payments to Mr Aydin.

    v) The judge considered the evidence in the round before concluding at paragraph 86 that the parties to the Black Pearl deal did not intend that the deposits would be returned at the end of the summer season. They were simply a mechanism to fund the payments to Mr Aydin and MLL.

  22. Likewise, the judge concluded that the extra Viking 500,000 was, on the evidence, not an advance on flight payments and not in Goldtrail's interests, but was made purely to ensure that Mr Aydin was paid (through MLL) under the Viking Brokerage Agreement.
  23. The judge then turned to consider whether Mr Aydin's interests in obtaining money through MLL conflicted, contrary to section 175, with Goldtrail's interests in obtaining the best deals from flight providers in return for its commitment to buy seats over future seasons. This depended on whether the appellants were right to contend that no Viking 5 Year Seat Commitment existed. She described the question of what the 1.4 million was paid for under the Viking Brokerage Agreement as "perhaps the key issue in the case". Her conclusion was specifically to reject the individual appellants' evidence on the point and to find that the contemporaneous evidence demonstrated that the Viking 5 Year Seat Commitment was genuine and commercially sensible. There was here a read across between the Onur Air deal and the Black Pearl deal. Onur Air had also wanted such a commitment (though it was for only 4 years in that case). In response to the letter before action, the appellants had not contended that the commitment was a sham. The consideration for it was, so the judge found, an opportunity wrongfully diverted by Mr Aydin from Goldtrail to MLL in breach of his duties under section 175.
  24. The judge then considered a number of legal points arising from Mr Aydin's position as sole shareholder and director of Goldtrail. I need not deal with them in detail, because none of her holdings is contested on appeal. She then considered the three aspects of the law on dishonest assistance which she said were relevant to both Goldtrail's claims. Two remain relevant, namely what amounts to "assistance" and what amounts to "dishonesty". The appellants' criticisms are not as to the judge's general treatment of these points, so I need not repeat that treatment here.
  25. The judge then concluded at paragraph 131 that there could not be any doubt that Viking's conduct had crossed the line so that it had assisted Mr Aydin to misapply Goldtrail's money and to divert the opportunity to earn consideration for entering into a long term seat purchase commitment from Goldtrail. Mr Stephensen helped Mr Aydin set up MLL in the Seychelles. Viking entered into a sham brokerage agreement with MLL, knowing that no brokerage services were going to be provided, in order to facilitate payments to Mr Aydin. Viking received money from Goldtrail knowing that Mr Aydin had caused Goldtrail to pay that money (the deposits and the advance payment) to encourage and facilitate the payments to himself. Viking accepted the commitment from Goldtrail to buy seats in future seasons but contracted with MLL to pay the consideration for that commitment to MLL rather than to Goldtrail. Mr Aydin's breaches of duty could only have occurred as a result of Viking's activities. Mr Stephensen had actually suggested splitting the deal into the BPSPA and the Viking Brokerage Agreement to avoid tax.
  26. In the next section of her judgment, the judge concluded that the assistance given by Viking was in fact given by the appellants. This conclusion is not challenged on appeal.
  27. In relation to the dishonesty of the appellants, the judge concluded at paragraph 146 that there was abundant evidence that they were fully aware that they were involved in a transaction that was "thoroughly dishonest". They knew they were signing the numerous fictitious documents already mentioned, and they knew that they were doing so to allow Mr Aydin to avoid paying tax.
  28. The judge then considered what connection was necessary between the accessory's dishonesty and the breach of trust assisted by him. She did not think such a close relationship was needed. The appellants knew that Mr Aydin was a fiduciary to Goldtrail, and that the money received was paid by Goldtrail at Mr Aydin's behest. They knew that the Black Pearl deal was unorthodox which was why they did not tell Ernst & Young about it, and did not tell their solicitors when they responded to the letter before action. She found that the appellants were all fully aware that the Black Pearl deal was dishonest and a breach by Mr Aydin of his fiduciary duties.
  29. In relation to remedies, the judge held at paragraph 159 that the dishonest assisters were only liable to compensate Goldtrail for the loss that it suffered, rather than for the profit that Mr Aydin made, but she rejected the contention that Goldtrail's equitable compensation should be reduced by the extra Viking 500,000 advanced payment that was in fact recouped when it was later allocated to flights that Goldtrail used for its customers. She gave two reasons: first, that the loss of 500,000 was actually caused to Goldtrail at the relevant time, and secondly that the dishonest assisters could not set off what Goldtrail recouped against Goldtrail under Insolvency Rule 4.90, because the payments that Goldtrail made were not to be treated as "dealings" between them and Goldtrail for the purposes of Rule 4.90 (see Manson v. Smith (liquidator of Thomas Christy Ltd) [1997] 2 BCLC 161). The accelerated advanced flight payment was not part of any normal business dealings, but part of a deal to advance Mr Aydin's interests at Goldtrail's expense. This was so regardless of whether the purported set off had already occurred at the date of insolvency. Goldtrail did not receive a windfall. In these circumstances, the appellants were liable for the full amount of 1.25 million which was the sum lost by Goldtrail as a result of Mr Aydin's actions dishonestly assisted by them.
  30. Finally, the judge decided that the equitable compensation payable by the appellants for dishonestly assisting Mr Aydin's breach of section 175 was 1.4 million. Viking would have been "equally happy" to pay Goldtrail rather than MLL for the seat commitments. Goldtrail had a 100% chance of obtaining that commission had Mr Aydin not asked for it to be paid to MLL instead of to Goldtrail in exchange for the Viking 5 year Seat Commitment. The appellants could not complain if the court adopted the split that they were prepared to agree as reflecting the true value of the shares in Goldtrail on the one hand (500,000) and the commitment on the other (1.4 million).
  31. The grounds of appeal

  32. The appellants argue 10 main grounds of appeal. I will retain the original numbers even though they are no longer consecutive. The first 5 grounds concern the alleged dishonest assistance in Mr Aydin's breach of section 175; the next 4 concern the alleged dishonest assistance in Mr Aydin's breach of fiduciary duty in paying the deposits and the extra Viking 500,000; the last concerns both claims:-
  33. Section 175 claim

    i) Ground 2: The judge wrongly concluded on the evidence that there was an opportunity of which Goldtrail was deprived by Mr Aydin.

    ii) Ground 3: Even if there was an opportunity of which Goldtrail was deprived by Mr Aydin, the judge was wrong to conclude that it was worth 1.4 million.

    iii) Ground 4: Even if there was a lost opportunity that was of potential value to Goldtrail, the loss suffered by Goldtrail was only the chance of obtaining such an opportunity, which was significantly less than 100% of its value.

    iv) Ground 5: On the judge's findings, the Black Pearl appellants should not have been found to be dishonest assisters, as they had insufficient knowledge of legally relevant matters concerning the section 175 claim against Mr Aydin, and were not dishonest regarding such matters.

    v) Ground 6: Even if there was a valuable opportunity of which Goldtrail was deprived, the judge was wrong to make the appellants liable as accessories where Goldtrail's alleged opportunity was constituted by the very property the appellants had already lost by making their own payments to Mr Aydin.

    Misapplication claim

    vi) Ground 8: The judge was wrong to allow Goldtrail to advance the unpleaded contention that the appellants had intended not to repay the deposits paid under the VSSA and the FOAL SSA, and in any event wrong to make a finding to that effect.

    vii) Ground 9: The judge was wrong to treat the extra Viking 500,000 paid by Goldtrail as void or effectively void.

    viii) Ground 10: The judge was wrong to decide that the extra Viking 500,000 had not been, or could not be, repaid by being set off against payments due for flights under the VSSA.

    ix) Ground 11: On the judge's findings, the appellants should not have been found to be dishonest assisters as they had insufficient knowledge of legally relevant matters concerning the misapplication claim against Mr Aydin and were not dishonest regarding such matters.

    Both claims

    x) Ground 12: the judge was wrong not to conclude that objectively the remedies awarded to Goldtrail were disproportionate and inequitable.

  34. The appellants were keen, as I have said, to start by attacking the judge's decision on the deposits because they contended that this highlighted the unfairness of the trial. In my judgment, however, the logical place to start is with the grounds of appeal that concern the larger claim for 1.4 million for dishonest assistance in Mr Aydin's alleged breach of section 175.
  35. Section 175

  36. The terms of section 175 itself are important to a number of issues raised by the appellants. The section is headed "[d]uty to avoid conflicts of interest" and provides as follows:-
  37. "(1) A director of a company must avoid a situation in which he has, or can have, a direct or indirect interest that conflicts, or possibly may conflict, with the interests of the company.
    (2) This applies in particular to the exploitation of any property, information or opportunity (and it is immaterial whether the company could take advantage of the property, information or opportunity).
    (3) This duty does not apply to a conflict of interest arising in relation to a transaction or arrangement with the company.
    (4) This duty is not infringed
    (a) if the situation cannot reasonably be regarded as likely to give rise to a conflict of interest; or
    (b) if the matter has been authorised by the directors.
    (5) Authorisation may be given by the directors
    (a) where the company is a private company and nothing in the company's constitution invalidates such authorisation, by the matter being proposed to and authorised by the directors;
    (6) The authorisation is effective only if
    (a) any requirement as to the quorum at the meeting at which the matter is considered is met without counting the director in question or any other interested director, and
    (b) the matter was agreed to without their voting or would have been agreed to if their votes had not been counted.
    (7) Any reference in this section to a conflict of interest includes a conflict of interest and duty and a conflict of duties".
  38. Before dealing with the appellants' grounds of appeal in turn, I should mention the prevailing theme of Mr Eaton Turner's submissions on behalf of the appellants.
  39. Common sense v. Conspiracy

  40. When he opened the appellants' appeal, we permitted Mr Eaton Turner to submit a further document (in addition to his 40-page skeleton argument submitted only 2 weeks before) entitled "Common sense v. Conspiracy". The thrust of this document and Mr Eaton Turner's oral submissions was the alleged uncommerciality of the approach that the judge adopted. He sought to explain the events that had occurred by reference to his clients' lengthy experience in the travel business and the evidence they had given as to what they would or would not have agreed to in negotiations to acquire an interest in Goldtrail. On this aspect of the appellants' submissions, it seemed to me that the problem they faced was the heavy reliance that Mr Eaton Turner placed on aspects of the appellants' own witness statements on numerous issues. He seemed to overlook that the judge had, having seen them cross-examined, regarded each of the individual appellants as unreliable witnesses. It is difficult for an appellate court to revisit such findings save on the strongest grounds of perversity that were not advanced here.
  41. Mr Eaton Tuner submitted that the whole thrust of the Black Pearl deal was to pay something of the order of 2 million for Mr Aydin's 50% of Goldtrail. It made no commercial sense for that, in reality, to be reduced to 500,000. Accordingly, the judge ought to have disregarded the tax evasion "window dressing" that led to the conclusion of the BPSPA and the Viking Brokerage Agreement. It was simply unreal to assume that only 500,000 was paid for the shares, when Mr Aydin was demanding 2 million all along. This submission underlies much of the appellants' argument, and was dependent on the appellants' repeated submission that neither they nor anyone else would have paid a substantial sum of money for the Viking 5 year Seat Commitment. That was an argument, however, that was itself dependent on the credibility of the appellants' evidence.
  42. Mr Eaton-Turner's next theme was to contend that the judge had wrongly regarded certain aspects of the Black Pearl deal as obviously fraudulent. He criticised the judge for regarding "funding" and "cash-flow" as automatically improper, when, he submitted, there was in truth nothing wrong with funding or cash-flow payments. I find this argument difficult to accept, because, as it seems to me, the propriety of funding and cash-flow payments will depend entirely on the circumstances. If the questioned payments were made only for an improper purpose to facilitate an improper or illegal arrangement, it would not avail the appellants to argue that they might have been made properly in other circumstances. The thrust of Mr Eaton Turner's argument seemed to be that, if there was even the scintilla of genuineness about the purpose of a payment, it could not be impugned. I do not agree. Matters of this kind are not as black and white as was submitted. Most fraudulent arrangements are deliberately constructed so that they have the appearance of propriety. It is a question for the judge in each such case to decide where the reality lies. I turn now to consider whether this judge's approach can be challenged on the specific grounds advanced.
  43. The section 175 claim

    Ground 2: The judge wrongly concluded on the evidence that there was an opportunity of which Goldtrail was deprived by Mr Aydin

  44. As the "Common Sense v Conspiracy" document made clear, this is the central focus of the appellants' appeal. The thrust of the appellants' argument under this ground is that it was uncommercial to regard Goldtrail as having had a free standing opportunity to recover a significant payment for the Viking 5 year Seat Commitment. It is worth making clear that this is a purely factual argument.
  45. The appellants point to the detailed course of negotiations and the fact, already alluded to, that Mr Aydin always wanted 2 million for 50% of his shares in Goldtrail. They say that, although "the deal was subsequently dressed up as a combined share sale and 'commercial' agreement", its essential character remained that of a share sale throughout. There was, the appellants submit, no meaningful evidence to suggest that the overall deal was divisible. The judge failed to consider why, if there was a free standing long-term flying commitment, the appellants would want to buy Mr Aydin's shares. Mr Wyatt had said in evidence that he did not want to pay twice for anything. In any event, there was a total failure of the consideration paid for the Viking 5 year Seat Commitment. The appellants asked us to engage on an analysis of some of the emails relied upon by the judge, in order to show that it was never intended to pay 1.4 million or any sum for a 5 year seat commitment.
  46. I do not intend to revisit the details of the evidence in this judgment. Suffice it to say that I find the reasoning in paragraphs 94-108 of the judge's judgment entirely convincing. It is enough to point to one or two of the key points upon which the judge relied. First, she unequivocally rejected the evidence of each of the individual appellants about the non-existence of the Viking 5 year Seat Commitment. She pointed to a number of contemporaneous documents to support the existence of this commitment. These included documents emanating from early on in the negotiations in late 2008, through documents in mid-2009, to Mr Stephensen's email of 26th January 2010 to his two colleagues, Messrs Sigurdarson and Wyatt, saying that the 1.4 million was paid by Viking "in form of seat rate commission (for a 5 year seat sale agreement)". I was not persuaded by the appellants' submission that the words "in form of" detracted from the obvious significance of this document, sent as it was only amongst the appellants. Mr Stephensen again reported to his colleagues in his aptly named "Project Pirate" presentation that "Viking will be secured with a 5 year seat sale agreement".
  47. The judge, however, relied most heavily on two post-administration events that seemed to prove beyond real doubt that there was a 5 year seat commitment. The first of these was the minutes of Viking's board on 22nd July 2010 recording that it was of concern that it had lost "the long term commercial agreement with the owner of Goldtrail which secures a substantial long-term capacity" (just after Goldtrail's insolvency). The second event relied upon by the judge was the appellants' solicitors' response dated 31st May 2011 to the liquidators' letter before action, which itself referred without demur to the "Long Term Seat Commitment Agreement" that Viking and Goldtrail had concluded, pursuant to which the VSSA had been entered into. Mr Eaton Turner's explanations for these documents turned on the unconvincing evidence of his clients which the judge had wholly rejected. In essence, he said that no seat commitment was needed when his clients would own 50% of Goldtrail. The problem is that the appellants seemed to value the seat commitment at the time, even if with hindsight they wished to disown it. Most importantly, Viking actually signed up to schedule 2 of the Viking Brokerage Agreement which included the terms of the Viking 5 year Seat Commitment. Mr Eaton Turner's submission that the agreement lacked details rings hollow when one sees that the VSSA was actually entered into pursuant to it, as the appellants own solicitors' contended. This point also defeats the contention that there was a total failure of consideration.
  48. In my judgment, the judge was entitled to extract from the bogus agreements that the appellants and Mr Aydin had created their essential genuine elements. That she did. There can be no suggestion that her findings were perverse. Once she had determined that the Viking 5 year Seat Commitment was genuine, the rest of her findings followed inexorably. The right to offer that commitment was either property belonging to Goldtrail or an opportunity that Goldtrail was entitled to exploit within section 175(2). It is irrelevant under that sub-section whether Goldtrail could actually have exploited the property or the opportunity. The appellants' arguments are all directed at showing that Goldtrail would never have been able to do so without the share sale. The short point is that Mr Aydin was paid for that opportunity in breach of his duty to Goldtrail and the appellants knew full well that that was what was happening. They cannot re-write the history they so carefully crafted in the first place in order to avoid liability for what was an obvious fraud on both HMRC and Goldtrail. In my judgment, the judge was right to conclude on the evidence that there was an opportunity of which Goldtrail was deprived by Mr Aydin. I would reject this ground of appeal.
  49. Ground 3: Even if there was an opportunity of which Goldtrail was deprived by Mr Aydin, the judge was wrong to conclude that it was worth 1.4 million

  50. Once again, this is an entirely factual argument which depends on the appellants' assertion that the judge's finding ignores commercial common sense. The appellants fasten on the judge's conclusion that Viking and the appellants would have been 'equally happy' to pay the 1.4 million to Goldtrail for the Viking 5 year seat commitment, to submit that this finding was against the weight of the evidence.
  51. I do not agree that the judge's finding ignores commercial common sense. The appellants point, as I have said, to the evidence that they gave about how nobody would have paid 1.4 million for a 5 year seat commitment they did not need. But the judge rejected that evidence and rejected the suggestion that they had not agreed to pay the 1.4 million for the Viking 5 year Seat Commitment.
  52. The question then arises as to whether the judge was justified in concluding that the Viking 5 year Seat Commitment was "worth" 1.4 million. It is first worth noting that I am not sure that the judge did actually conclude that the commitment was worth, in the sense of having an actual value of, 1.4 million. Rather, I think the judge decided that Goldtrail had lost commission of 1.4 million for which the appellants were liable to compensate it. The basis on which she reached that conclusion was that the appellants could not complain if the court adopted the split that they were prepared to agree as reflecting payments of 500,000 for the shares in Goldtrail and 1.4 million for the commitment.
  53. I think the judge would anyway have been justified in concluding that the Viking 5 year Seat Commitment was worth 1.4 million for a number of reasons. First, I do not accept that the liquidators failed to prove the value of the commitment as was submitted by the appellants. The liquidators alleged that the 1.4 million had been paid for the Viking 5 year Seat Commitment. That was sufficient to establish what it was worth. There was no evidential lacuna, albeit that the judge was right to point out that the evidence as to how the split was concluded was rather sketchy. Secondly, the appellants had themselves told Ernst & Young that Black Pearl was paying 500,000 for 50% of Goldtrail's shares. Ernst & Young did not suggest that the shares were undervalued. Thirdly, the contemporaneous documents do indeed suggest, as Ms Hilary Stonefrost, counsel for the liquidators, demonstrated, that the appellants intended to pay the 1.4 million for the Viking 5 year Seat Commitment, which they regarded as being of significant importance to Viking and Black Pearl. It is true, as the judge acknowledged, that the split may have been partially motivated by the imperative of evading tax. But I cannot see how it lies in the mouths of the appellants, in circumstances where they devised and participated in a transaction intended to defraud HMRC, to contend that they should be given the benefit of any doubt as to what the commitment was actually worth. This will, however, need to be considered again under ground 4 below. It is also worth noting in this connection that Black Pearl paid 500,000 for the shares it bought, whilst Viking (a different entity) paid the 1.4 million under the Viking Brokerage Agreement. It was Viking that directly benefited from the Viking 5 year Seat Commitment which was the only direct benefit it received for its 1.4 million as part of the Black Pearl deal.
  54. I would reject this ground of appeal.
  55. Ground 4: Even if there was a lost opportunity that was of potential value to Goldtrail, the loss suffered by Goldtrail was only the chance of obtaining such an opportunity, which was significantly less than 100% of its value

  56. The appellants repeat under this head all their complaints about the judge's uncommercial view of the Viking 5 year Seat Commitment. I have already dealt with those complaints and shall not repeat what I have said.
  57. It is important, however, in this context to note that section 175(2) expressly provides that it is immaterial whether the company could have taken advantage of the property or the opportunity. Thus, when considering whether the director is in breach of duty, it is irrelevant to consider whether the company could in fact have benefitted from its own property or taken advantage of its own opportunity. It may not matter for the purposes of this case, but I would have thought that, in those circumstances, if one were considering the compensation that the company was entitled to recover from the director, one would ignore the question of whether or not the company could in fact have availed itself of the opportunity that the director diverted to himself.
  58. The relevant question in this case is the different one of what compensation the company should recover for the dishonest assistance rendered by the appellants to the director which enabled him to breach his section 175 duties to the company. For my part, I doubt whether, even on this question, it is relevant to enquire whether or not the company could in fact have availed itself of the opportunity that the director diverted to himself. That is because Goldtrail in this case is to be compensated for what it has lost as a result of the assistance rendered by the appellants to Mr Aydin. Once it is determined that Mr Aydin diverted to himself an opportunity or property belonging to Goldtrail for which the appellants were prepared to pay 1.4 million, it follows that Goldtrail has been deprived of that sum. The appellants' dishonest assistance caused that loss. For my part, therefore, I do not think that an evaluation of the chances that Goldtrail would have been able to secure 1.4 million for the seat commitment was appropriate. I have noted in this regard the dictum of Morgan J in Aerostar Maintenance International Limited v. Wilson & others [2010] EWHC 2032 (Ch) at paragraph 216, which appears to be to the contrary effect (and which the judge cited at paragraph 174 of her judgment). In the light of the fact that I do not regard the question as central to the issues we have to decide, I would not wish to be taken as finally deciding the matter. We did not receive full argument on the point and the matter can await a case where it arises specifically for decision.
  59. In my judgment, the judge was entitled to find, in assessing the appropriate equitable compensation for dishonest assistance in Mr Aydin's breach of duty under section 175 that the appellants were hoist with their own petard, having agreed the value of Goldtrail's shares at 500,000. In those circumstances the remainder of the consideration could only properly be for the Viking 5 year Seat Commitment and that is what the judge found. Such a finding was, I think, fully open to her. I would reject this ground of appeal.
  60. Ground 5: On the judge's findings, the appellants should not have been found to be dishonest assisters, as they had insufficient knowledge of legally relevant matters concerning the section 175 claim against Mr Aydin, and were not dishonest regarding such matters

  61. The point made under this ground is that the judge failed to consider properly the required connection between the alleged dishonesty and the alleged assistance. The fraud alleged needed to be strictly proved. On the facts, the appellants contend that their dishonesty cannot have been directed at Mr Aydin's actions in defrauding Goldtrail. The appellants place reliance on the well-known decision of Lewison J (as he then was) in Ultraframe (UK) Ltd v. Guy Fielding and others [2005] EWHC 1638 (Ch), where he approved at paragraphs 1500-1 what Mance J (as he then was) had said in Grupo Torras SA v. Al-Sabah [1999] CLC 1469 at pages 1665-66 to the effect that: "for dishonest assistance, the defendant's dishonesty must have been towards the plaintiff in relation to the property held or potentially held on trust or constructive trust ". Lewison J continued at paragraph 1506 by saying that "[a]lthough it is not necessary for the dishonest assistant to know all the details of the whole design, he must, I think, know in broad terms what the design is".
  62. The appellants, therefore, submit that the judge was wrong to hold that the appellants knew that an identifiable and separate part of the Black Pearl deal was in fact a free standing flight commitment and that the 1.4 million should have been paid to Goldtrail. Much of the dishonesty relied upon by the judge was irrelevant in particular the tax evasion and the deception practised on the CAA.
  63. I regard this ground of appeal as hopeless. This is not a case, like many of the authorities relied upon, where the dishonest assister lacked vital pieces of information known only to the primary fraudster. This is a case where the appellants knew everything about Mr Aydin's plan save for one fact that is not relevant to this issue: namely, that he was also selling 50% of Goldtrail to Onur Air. Otherwise, the appellants were fully and intimately involved in constructing and executing the deal. There was no relevant fact they did not know.
  64. It is true that the judge was unimpressed with the scale of the appellants' dishonesty in relation to peripheral matters such as the tax fraud and the deception of the CAA, but she did not confuse these matters with the question of whether the dishonesty in relation to the assistance provided to Mr Aydin was sufficient to give rise to liability. It obviously was, because the appellants designed the fraud themselves knowing that Mr Aydin was a fiduciary to Goldtrail.
  65. It sounds attractive for the appellants to ask rhetorically why they would defraud Goldtrail when they were buying half its shares and they did not know of its imminent insolvency. But in my judgment, even that argument misses the point. The fact is that the appellants did assist Mr Aydin to divert Goldtrail's money, property and opportunities. In effect, Goldtrail was paying Mr Aydin for his shares in Goldtrail, although that was not the substance of the allegation made. The appellants' eyes were open. They knew all that occurred and they assisted in it. Their relevant dishonesty was in allowing Mr Aydin to divert Goldtrail's opportunity and Goldtrail's property to himself via MLL. There was no lack of nexus between the dishonesty and the assistance they gave. I would reject this ground of appeal.
  66. Ground 6: Even if there was a valuable opportunity of which Goldtrail was deprived, the judge was wrong to make the Black Pearl appellants liable as accessories where Goldtrail's alleged opportunity was constituted by the very property the Black Pearl appellants had already lost by making their own payments to Mr Aydin

  67. The appellants submit that where the opportunity that is diverted is to receive a payment from the dishonest assister himself, it is inequitable to require that assister to compensate the company by making the same payment again. The dishonest assistant is not liable for profits made by the fiduciary (see Aerostar supra at paragraph 206 per Morgan J, and Ultraframe supra at paragraph 1600).
  68. There is, in my judgment, a simple answer to this point. Whilst it is true that Viking paid the 1.4 million that should have been paid to Goldtrail for the Viking 5 year Seat Commitment, it did not make that payment to Goldtrail. It made it to MLL for Mr Aydin. Viking cannot, therefore, make the argument that it is paying twice. The first time, it paid Mr Aydin for Goldtrail's opportunity. Now, the appellants must compensate Goldtrail for the loss it sustained. It is to be noted once again that it was Viking, not Black Pearl, that entered into the Viking Brokerage Agreement. Black Pearl cannot rely on Viking having paid MLL for a commitment that Goldtrail was entering into and that Goldtrail should have been paid for.
  69. The misapplication claim

  70. Since I would dismiss the appeal against the judgment for equitable compensation in the sum of 1.4 million on the basis of the grounds advanced in relation to the section 172 claim, the following grounds (save for ground 12 with which as will appear I have already effectively dealt) are of less importance than would otherwise be the case. I will, therefore, deal with them briefly.
  71. Ground 8: The judge was wrong to allow Goldtrail to advance the unpleaded contention that the appellants had intended not to repay the deposits paid under the VSSA and the FOAL SSA, and in any event wrong to make a finding to that effect

  72. The substance of this ground is that the judge ought not to have allowed Goldtrail to allege at the trial that it was never intended that the deposits should be repaid. This is advanced on the foundation that the judge misunderstood the pleadings that had alleged initially a proprietary claim in relation to the deposits. The Amended Particulars of Claim alleged as follows:-
  73. "10. These claims relate to the substantial transfers of the [Goldtrail's] monies to [MLL] for the benefit of [Mr Aydin]
    11. Certain monies that were paid pursuant to the [VSSA] were [Goldtrail's] monies that were misapplied to enable Viking to make the payments to [MLL] for the benefit of [Mr Aydin].
    12. The claims against [Mr Aydin] in relation to the transfer of [Goldtrail's] monies are for breaches of fiduciary duty and/or other duty and/or misfeasance as the sole director of [Goldtrail] "
  74. Paragraph 26 of the Amended Particulars of Claim then recited various documents that tended to show that the various deposits went "hand in hand" with the payments that Viking was making to MLL. Paragraph 27 then referred to a schedule of money transfers that illustrated that point.
  75. The appellants contend, however, that the allegation at trial was the different one that the deposit payments made by Goldtrail under the VSSA and the FOAL SSA had been made for an improper purpose, namely to fund Viking to pay MLL for Mr Aydin's shares. It is hard to see how it can be said that this is not precisely what the pleading alleges when it says in paragraph 11 that "certain monies that were paid pursuant to the [VSSA] were [Goldtrail's] monies that were misapplied to enable Viking to make the payments to [MLL] for the benefit of [Mr Aydin]".
  76. The appellants then assert that it "was never suggested that the SSAs were anything other than flying agreements entered into in the ordinary course of business". But that is precisely what was alleged. It was alleged as the judge found that the agreements had all to be read together, and that whilst the seat buying aspects of the VSSA and the FOAL SSA were ordinary commercial transactions, the deposits were not. The appellants' defence pleaded and therefore put in issue the genuineness of the seat sale agreements.
  77. In these circumstances, it seems to me that the unpleaded allegation that there was never any intention to repay the deposits was superfluous. It was enough to find as the judge did that the deposits were agreed and paid in order to allow Viking to be able to fund the payments to MLL which was a breach of Mr Aydin's fiduciary duty in which the appellants dishonestly assisted. The bogus nature of the deposits was, as the judge found, that they would not have been paid in the first place if it were not for the imperative that the payments to MLL demanded that they should be.
  78. In these circumstances, there is, in my judgment, no basis to allow the appellants to rely on the further witness statements that they seek to adduce from Mr Wyatt and two associates. That evidence does not satisfy the tests in Ladd v. Marshall [1954] 1 WLR 1489. Each of the new statements sought be adduced could with reasonable diligence have been obtained for use at trial, and there is no reason to suppose that they would have had any influence on the outcome of the trial or would have any influence on the outcome of this appeal. In these circumstances, I do not need to deal with Ms Stonefrost's submission that, in any event, the evidence advanced is not, in some respects at least, on its face credible.
  79. I should not leave this ground of appeal without commenting that I do, in fact, think the judge was justified in allowing the liquidators to assert in the course of the trial that the deposits were not truly intended by the parties to the VSSA and the FOAL SSA to be repayable. It would, of course, have been better if that allegation had been expressly pleaded, but it was also part and parcel of the pleaded allegation that Goldtrail's money had been misapplied to enable Viking to make the payments to MLL under the Viking Brokerage Agreement. If the monies were misapplied as alleged, it follows that it was alleged that they were not truly deposits, and would not be repaid. The reality was that the judge found, as she was fully entitled to do on the evidence, that the deposits were not a genuine part of the seat sale agreements. That was plainly put in issue by the pleadings.
  80. I would, therefore, conclude that the judge was justified in allowing the liquidators to advance the contention that the appellants had never intended to repay the deposits under the VSSA and the FOAL SSA, and that she was right to make a finding to that effect for the reasons she gave.
  81. Grounds 9 and 10: The judge was wrong to treat the extra Viking 500,000 paid by Goldtrail as void or effectively void. The judge was wrong to decide that the extra Viking 500,000 had not been, or could not be, repaid by being set off against payments due for flights under the VSSA

  82. I shall deal with these grounds together. What is suggested is that the judge was wrong to award equitable compensation for the extra Viking advance of 500,000, when that was recouped by Goldtrail as payment for seats flown before Goldtrail's insolvency. Ms Stonefrost acknowledged that she could not contest the judge's finding that the extra Viking 500,000 had indeed been recouped by Goldtrail before its administration.
  83. The judge dealt first with Millett LJ's decision in Manson supra. He had held that a miscreant director held liable to an insolvent company for sums improperly paid by the company to him could not set off against those claims the sums properly owed to him before insolvency on a director's loan account. For those loans, he could only prove in the liquidation, because there was no mutual "dealing" between the director and company under Insolvency Rule 4.90, and anyway that rule only applied to debts existing at the time of the winding up. The judge then concluded at paragraph 167 of her judgment as follows:-
  84. "I consider that the reasoning and the principle expounded in Manson applies regardless of whether the purported set off has already occurred by the date of the insolvency. It is true that if the [appellants] now have to compensate Goldtrail for the loss caused by the misapplication of its funds, then they have been seriously disadvantaged by their decision to allow Goldtrail not to pay them for the flights after they had in effect transferred the Goldtrail funds to Mr Aydin. They would now have to attempt to prove in the liquidation for such sums as Goldtrail owes them, just as Mr Manson had to prove in the liquidation for his loan account debt. That in my judgment, is a risk that they took when, having dishonestly assisted Mr Aydin in the misapplication of Goldtrail's funds, they then allowed Goldtrail to deduct sums from the monies otherwise due for flights. [This "windfall"] is not a reason to allow a dishonest assistor in effect to obtain pound for pound reimbursement".

  85. I would question the judge's reasoning in this paragraph, because I think she was addressing her mind to the wrong question. The question was whether the appellants as dishonest assisters of Mr Aydin in the misapplication of Goldtrail's monies should be required to compensate Goldtrail for the loss of the extra Viking 500,000 that Goldtrail had in fact recovered. Mr Aydin's misapplication of Goldtrail's 500,000 did not cause Goldtrail any loss (save perhaps a few weeks' interest) because the 500,000 was repaid before Goldtrail's insolvency. The question in Manson was a quite different one, namely whether a defendant to a claim made by a liquidator could use Insolvency Rule 4.90 to set off pre-insolvency debts owed by the company against that claim. He could not.
  86. In my judgment, therefore, the judge was wrong to hold that the appellants should be required to compensate Goldtrail for the extra Viking 500,000. Goldtrail recovered that money from Viking. It suffered no ultimate loss, and more importantly, the dishonest assistance of Mr Aydin's misapplication of company funds did not cause any significant loss to Goldtrail certainly not the sum of 500,000 that the judge awarded in respect of it.
  87. The appellants are, therefore, entitled to succeed under this heading in reducing the award of equitable compensation for their dishonest assistance in the misapplication of Goldtrail's monies from 1.25 million to 750,000.
  88. Ground 11: On the judge's findings, the appellants should not have been found to be dishonest assisters as they had insufficient knowledge of legally relevant matters concerning the misapplication claim against Mr Aydin and were not dishonest regarding such matters

  89. This ground was not, in the event, advanced as a free standing ground of appeal. It is, however, quite clear from what I have said already that the appellants were fully aware that Goldtrail's money, in the form of the deposits, was being used to pay MLL under the Viking Brokerage Agreement. The dishonesty was directly related to the assistance they gave to Mr Aydin to breach his duties to Goldtrail. The judge was right for the reasons she gave to find that the appellants dishonestly assisted Mr Aydin in breaching his duties to Goldtrail by paying out the bogus deposits for the purpose of allowing Viking to pay MLL.
  90. Ground 12: The judge was wrong not to conclude that objectively the remedies awarded to Goldtrail were disproportionate and inequitable

  91. Little time was devoted by Mr Eaton Turner to this ground of appeal. In my judgment, there was nothing disproportionate or inequitable about the remedies that the judge ordered (save in respect of the extra Viking 500,000 for the reasons I have given). The appellants entered into a dishonest deal, knowing that it was dishonest. They did not merely intend to defraud HMRC and to deceive the CAA as has been suggested, they knew and must be taken to have intended that Goldtrail would be defrauded by Mr Aydin and for his benefit. The fact that they were buying 50% of Goldtrail does not make it disproportionate that they should compensate Goldtrail for their wrongdoing. Nor does the fact that they were themselves victims of Mr Aydin's frauds make it inequitable that they should pay compensation for what Goldtrail has lost. I would reject this ground of appeal.
  92. Conclusions

  93. I have concluded, therefore, that each of the appellants' grounds of appeal fails, with the exception of the ground concerning the assessment of equitable compensation for the dishonest assistance that the appellants provided to Mr Aydin in relation to the misapplication of the extra Viking 500,000. In that regard, the judge ought to have held that, whilst the appellants were liable to Goldtrail for the dishonest assistance they gave, there should be no equitable compensation for the loss of the 500,000, Goldtrail having recouped that sum before its insolvency. It may be noted that the liquidators never sought to substitute a small claim for lost interest on the money for the few weeks it was not in Goldtrail's hands.
  94. The appellants repeatedly suggested that the judge had behaved unfairly in the conduct of the trial. I should say, in conclusion, that I see no basis for that submission. The judge plainly took a dim view of the appellants' fraud, but that did not lead her to conduct the trial unfairly or in any respect inappropriately. Moreover, I think she was entirely justified in adopting the censorious view that she took of the appellants' conduct in this unhappy matter.
  95. Disposal

  96. In the result, I would dismiss this appeal, save that I would reverse the judge's conclusion that the appellants were liable to compensate Goldtrail for the extra Viking 500,000 as part of the misapplication claim. The effect of this minor aspect of the appeal is to amend paragraph 5(a) of the judge's order to read as follows:-
  97. "As against the [appellants] it is declared that:
    a. Their joint and several liability for equitable compensation for dishonest assistance of [Mr Aydin] in the misapplication of Goldtrail's money is 750,000 "
  98. This adjustment has no overall economic effect on the appellants because the declaration in paragraph 5(b) of the judge's order stands. It provides that the appellants' "joint and several liability for equitable compensation for dishonest assistance of [Mr Aydin's] breach of section 175 of the Companies Act 2006 is 1,400,000".
  99. Lord Justice Kitchin:

  100. I agree.
  101. Lord Justice Longmore:

  102. I also agree.


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