Summary

The court was entitled to refuse an airline's application to vary an order to continue its appeal against the payment of equitable compensation conditional on payment into court of £3.64 million to settle a judgment debt in a tour operator's favour and it was entitled to require the airline's chairman to settle the debt. The circumstances were exceptional as the airline's chairman was its single largest creditor and had secured loans, and the airline had failed to establish that it could not have satisfied the debt itself or that doing so would have stifled its appeal.

Facts

The third defendant airline appealed against an order requiring it to pay the claimant tour operator equitable compensation and applied for the variation of order which made continuation of its appeal conditional on a payment into court.

The airline and second defendant had dishonestly assisted the operator's first defendant director to breach his fiduciary duties and the director had misapplied the operator's money. The operator's claim was successful and the airline was ordered to pay £3.64 million in compensation. The judge stayed execution of the judgments against the airline and the second defendant pending applications for permission to appeal. Both were granted permission to appeal. The operator successfully challenged the airline's appeal, and the judge ordered that continuation of the appeal was conditional on it paying £3.64 million into court. On the airline's request, the judge extended the time for compliance with that order. Two days before the deadline, the airline informally applied to vary the order asking for a further 10 days to comply, stating that it would make a substantial part payment in two days' time. The judge requested a formal application with supporting and explanatory evidence. The airline did not make the promised payment, explaining that it had not received an expected payment, and formally requested permission to make monthly payments of £500,000 to clear the balance. The judge refused, holding that the airline did not intend to comply and that the evidence did not explain what had happened to the expected payment. The airline withdrew its application to vary and refused to make the payment. Consequently, the operator applied to dismiss the appeal, and for payment of the judgment sum. The airline applied again to vary the order, requesting removal of conditional payment. It gave evidence that it had no means to pay the judgment debt. Analysis of the airline's financial information by the operator's liquidators identified that the chairman, who was also the single largest creditor and had security for his loans, was the airline's primary source of funding and had loaned it millions of pounds.

The airline submitted that (1) the conditional payment requirement should be removed from the order as it would stifle its appeal; (2) in the event that its application failed, its appeal should be stayed pending the outcome of the second defendant's appeal, which raised many of the same issues its appeal raised.

Held

(1) The instant case was a clear example of an exceptional circumstance where the court could require a third party to pay into court a judgment debt or part of it, Societe Generale SA v Saad Trading, Contracting and Financial Services Co [2012] EWCA Civ 695 followed. The chairman had put himself in a position where he was the single largest creditor with security for his loans. He had a closer than usual relationship with the airline and effectively controlled its financial affairs. The airline had failed to establish that it could not have satisfied the judgment debt and that satisfying the judgment debt would stifle its appeal (see paras 25, 27-30 of judgment).

(2) Taking into account the chairman's position the court had to dismiss the appeal. The court could not allow the airline to choose not to comply with the payment conditions imposed with a view to avoiding them entirely if the second defendant's appeal succeeded. The interests of justice required the court to give effect to its previous orders by dismissing the appeal and lifting the stay of execution (para.34).

Appeal dismissed, application refused