Russian Commercial Bank (Cyprus) Ltd v Khoroshilov

On a return date for without-notice injunctions restraining enforcement of consent judgments and an arbitration award, the court must consider the usual threshold for interim relief, the applicant’s duty of full and fair disclosure, the balance of convenience and, where relevant, delay.

Material non-disclosure may justify discharge and refusal to renew an injunction. The court retains a single discretion to continue or re-grant relief, but that jurisdiction should be exercised sparingly and proportionately. Where a challenge to an arbitration award is out of time, extension depends on the relevant delay factors, including the length and explanation of the delay, prejudice, the strength of the challenge and overall fairness.

The applicants sought to restrain Russian Commercial Bank (Cyprus) Ltd from enforcing two English consent judgments and an LCIA arbitration award. The judgments and award followed settlement of commercial litigation and arbitration concerning unpaid loans. The applicants alleged that the settlement had been procured by fraudulent misrepresentation concerning refinancing arrangements.

Without-notice injunctions had been granted on 27 April 2011, shortly before the agreed stay of execution expired. The return hearing concerned whether those injunctions should continue, whether time should be extended to challenge the arbitration award under the Arbitration Act 1996, and whether the applicants had established delay, material non-disclosure, a serious issue to be tried and a favourable balance of convenience.

1. Interim relief. The applicants crossed the relatively low threshold of showing a serious question to be tried. Their underlying fraud claim was weak, particularly because the documentary evidence did not support it strongly and the Protocol did not record the alleged refinancing representation, but the court could not resolve the disputed evidence at the interlocutory stage.
2. Disclosure. An applicant seeking without-notice injunctive relief must show utmost good faith and disclose the case and evidence fully and fairly, including matters reasonably capable of affecting the decision. The principles stated in Siporex Trade SA v Comdel Commodities Ltd [1986] 2 Lloyd's Rep 428 applied. The applicants materially failed to draw attention to the Protocol and presented the Pancia issue misleadingly. The Protocol was a central document and should have been specifically identified as potentially supporting the respondent’s case.
3. Effect of non-disclosure. The principles summarised in Arena Corp Ltd v Schroeder [2003] EWHC 1089 (Ch) applied. The general rule is discharge and refusal to renew, although the court retains a single discretion. The seriousness and significance of the non-disclosure, the applicants’ culpability, the public interest in full disclosure, proportionality and all other circumstances had to be considered.
4. Balance of convenience. The bank was a judgment creditor following a settlement reached after trial had begun. The applicants had not shown that the bank was fully secured. Continued restraint would cause continuing financial loss and risk disrupting Russian insolvency proceedings, including the realisation of assets and preservation of oil-field licences. The balance of convenience therefore favoured allowing enforcement. The injunctions were not renewed, either in their original or proposed varied form.
5. Extension of time. The delay in challenging the award was substantial and insufficiently explained, but denying an extension would prevent determination of a fraud challenge materially identical to the claim concerning the consent judgments. Applying the considerations identified in Kalmneft JSC v Glencore International AG [2001] 2 All ER (Comm) 577, the court extended time under the Arbitration Act 1996.

The injunctions were granted without notice by Nicola Davies J on 27 April 2011. On the return date, Blair J declined to renew them but extended time to challenge the arbitration award.