Court Of Appeal Approves Payment Of Legal Fees For Extradition By Frozen Company

05 Jun 2019, 06 mins ago

In complex commercial litigation it is common practice for claimants to seek freezing orders in order to preserve valuable assets in the event of a successful claim. When faced with such orders it is common that defendants will need to release some funds in order to fund ongoing business, legal and personal expenses. Freezing orders will typically be drafted with such considerations in mind.

An interesting situation arose in the recent Court of Appeal case of Koza Ltd and Ipek v Akcil & others (2019). Mr Ipek is the sole director of Koza Ltd. During the course of the civil litigation an arrest warrant was issued against Mr Ipek under the Extradition Act 2003 for the purposes of securing his return to Turkey. Mr Ipek was arrested by voluntary attendance and, at a preliminary hearing at Westminster Magistrates Court on 23 May 2018, he was granted bail.

A request was made by Mr Ipek for a payment to be made by Koza Ltd to his extradition solicitors for legal advice to be provided to Mr Ipek in connection with the extradition proceedings. His opponents in the civil litigation objected to the payment claiming that Mr Ipek could fund his extradition defence himself and that the payment was not part of their ordinary course of business.

In allowing the payment the Court of Appeal determined that Mr Ipek was a vital asset for Koza Ltd. The fact that he would pay his own expenses if the company did not was not a sufficient reason for regarding their payment by the appellant as outside the proper course of its business. The payment would also fall within the exception to the undertaking for “legal advice or representation for the company’s benefit”. The payments were designed to secure the retention of his services as a director.

The case highlights the difficulties defendants can face in funding their cases particularly in circumstances where there are parallel civil proceedings and associated freezing orders but it is reassuring that the Court of Appeal adopted a realistic and pragmatic approach to the problem.


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©Gherson 2019