Claim No: CR-2024-004856 - [2025] EWHC 2304 (Ch)

COLLATERAL PURPOSE

In his Points of Defence, Mr Ipek argues that the Petition should be struck out or dismissed on the basis that it is brought for improper collateral purposes, namely to persecute Mr Ipek for his perceived political affiliation and/or to unlawfully expropriate his assets and/or remove the Company’s assets from his control; and/or that Koza Altin has unclean hands.

It is argued that Koza Altin’s objective therefore is “not related or connected with [its] shareholding” (as was found to be a reason to dismiss a position in: Taylor v Whitehall Partnership Ltd [2023] EWHC 596 (Ch) at [37]).

Clearly, a winding-up petition may be dismissed where the petitioner does not genuinely seek the relief pleaded but is seeking to exert pressure for a collateral purpose (see e.g. Re Bellador Silk [1965] 1 All E.R. 667). Counsel for Mr Ipek argue that, even if it accepted that Koza Altin is genuinely seeking to wind the Company, that is not an end of the matter: in petitions such as this the court will look further.

In support of this proposition, they cite firstly Re JE Cade & Son Ltd [1991] B.C.C. 360, where the petition was dismissed because, although the petitioner clearly did want the winding-up order sought, there was a “fatal flaw”, namely that he was seeking to protect his interests in a capacity unrelated to his interests as a shareholder. In this case the petitioner had an ulterior motive – putting the company into winding-up would bring into operation provisions of the Agricultural Holdings Act which would allow him to obtain possession of a farm leased to the relevant company of which the petitioner was the freeholder. His interest in obtaining the farm was separate to his interests as a member of the company and was not a purpose that could support a just and equitable winding-up petition.

I find it difficult to see the relevance of this case to the case before me. There is no equivalent collateral advantage that Koza Altin is looking to achieve through the winding-up.

Secondly, counsel for Mr Ipek cite Maud v Aabar Block Sarl [2015] EWHC 1626 (Ch);[2015] BPIR 845. In this case a statutory demand was bought by a creditor against an individual. The debtor alleged that the creditor had served a statutory demand in pursuance of a purpose that was collateral to the collection of the debt through bringing about a bankruptcy of the debtor. The collateral purpose alleged was that if that individual became bankrupt certain pre-emption rights affecting shares in a company held by the debtor would be triggered in favour of the creditor, who was the other shareholder in the company.

Mr Ipek’s counsel refer me to the judgment of Rose J in this case at [29]. Having cited various authorities Rose J concluded that:

“ … the pursuit of insolvency proceedings in respect of a debt which is otherwise undisputed will amount to an abuse in two situations. The first is where the petitioner does not really want to obtain the liquidation or bankruptcy of the company or individual at all, but issues or threatens to issue the proceedings to put pressure on the target to take some other action which the target is otherwise unwilling to take. The second is where the petitioner does want to achieve the relief sought but he is not acting in the interests of the class of creditors of which he is one or where the success of his petition will operate to the disadvantage of the body of creditors.”

Mr Ipek’s counsel argue that Koza Altin’s Petition is an abuse of this second type because the aim of the Petition is to put political pressure on Mr Ipek and his family and to divest them of their assets. They note that Mr Ipek will also say that the Petition falls under the second limb of the Maud analysis because Koza Altin is not acting in the interests of Koza Ltd’s shareholders and liquidating Koza will disadvantage the body of contributories (including for the reasons addressed in the next section). They argue further that these points are inherently fact-specific questions incapable of summary determination.

I find this argument wholly unconvincing. It is worthwhile noting that Rose J in Maud dismissed the collateral purpose argument. The quotation above from [29] in her judgment is only part of that paragraph. He went on to say:

“It is also clear from those authorities, and as a matter of common sense, that the jurisdiction of the court to dismiss a petition based on an undisputed debt on the grounds of collateral purpose must be exercised sparingly. Bankruptcy proceedings cannot be allowed to become the forum for a detailed investigation into past and present relationships or an exploration of what the petitioner hopes to gain from the insolvency of the company or individual, in financial or personal terms and a consideration of whether those hopes are legitimate or not.”

Insofar as the improper purpose argument is relying on a motive to put political pressure on Mr Ipek and his family and to divest them of their assets, this is denied by Koza Altin, but in any case the question of motive is irrelevant, as is indicated from the passage from the judgment of Rose J that I have set out immediately above, and as has also been held by the Court of Appeal in Broxton v McClelland [1995] EMLR 485. As Simon Brown LJ put this (at 497):

“[M]otive and intention as such are irrelevant … : the fact that a party who asserts a legal right is actuated by feelings of personal animosity, vindictiveness or general antagonism towards his opponent is nothing to the point…

Accordingly the institution of proceedings with an ulterior motive is not of itself enough to constitute an abuse: an action is only that if the Court's processes are being misused to achieve something not properly available to the plaintiff in the course of properly conducted proceedings.”

Similarly Teare J in JSC BTA Bank v Ablyazov (No 6) [2011] 1 WLR 2996 at found at [22(ii)] of his judgment that:

“a purpose will not be regarded as illegitimate if it is no more than the natural consequence of the action succeeding.”

He went on to find that where there are “mixed” purposes, if one of them is legitimate then there will be no abuse, even if another is illegitimate (see at [22(iv)(a)]).

These principles apply also to winding up petitions. In Bryanston Finance Ltd v De Vries (No 2) [1976] 1 Ch 63, Buckley LJ rejected an allegation that a minority shareholders’ winding up petition would be an abuse of process because it was actuated by malice, finding (at D on page 75):

“Mr. Bateson says that the defendant's object is simply to wreck the plaintiff company and that his only motive is enmity against Mr. Smith. The judge, rightly in my opinion, thought that a petition could not be an abuse simply because the petitioner was actuated by malice. If a petitioner has a sufficient ground for petitioning, the fact that his motive for presenting a petition, or one of his motives, may be antagonism to some person or persons cannot, it seems to me, render that ground less sufficient.”

This point was reinforced by Lord Wilson on behalf of the Privy Council in Ebbvale Ltd v Hosking [2013] 2 BCLC 204 at [28]:

“I am not concerned with his motives or with the past conduct of the company, which was here deplorable or worse and which may have led the petitioner to have justifiable dislike for and a desire to see the downfall of some person such as the main protagonist in the company … the only proper purpose for which a petition can be presented is for the proper administration of the company’s assets for the benefit of all in the relevant class.”

Accordingly, I consider that it is fanciful that an argument based on abuse of process could be deployed to resist a just and equitable winding up in this case if it were otherwise justified. Even if, which is denied, the directors of Koza Altin have some personal animus against Mr Ipek or are trying to disadvantage him (presumably by causing his A ordinary share to lose whatever value it currently has) for political reasons, that only goes to the question of motive, not to the question of what they are trying to achieve. What they are trying to achieve is a winding-up. If the natural consequence of that is that Mr Ipek is disadvantaged (for example because any saleable value of his A ordinary share is lost) that does not render Koza Altin’s petition an abuse of process.

As for the question whether they are acting in the interest of their class of member, that point can hardly be in question when they hold all the shares in that class.

I agree with counsel for Koza Altin that an order of this court winding up a company, or a petition seeking the same, could be regarded as an “expropriation” of any kind is patently wrong. It would be lawful by definition – the liquidation of assets and the distribution of their proceeds is the ordinary legal consequence of a lawful order to wind up a company. Koza Ltd’s assets are not Mr Ipek’s assets, and the supposed “expropriation” would be that a distribution would be made to Koza Ltd’s 100% ordinary shareholder, which is not an “expropriation” at all. The removal of Koza Ltd’s assets from Mr Ipek’s control is a necessary consequence of a winding up order. It cannot be a collateral purpose to desire such a consequence, let alone an improper one.