JSC BTA Bank v Usarel Investments Ltd

A litigation receiver appointed with power to defend proceedings does not, without express wording, have power to appeal from the first-instance decision or bring contribution proceedings. An appeal is a new proceeding and is not ordinarily part of the defence of the original action. The court will not imply such an extended power unless the established principles for implying contractual terms are satisfied. A later receivership order cannot alter the proper construction of an earlier order. Where court-appointed receivers have authority over the company, they must ensure that the company objectively considers, on proper legal advice, whether an appeal is in its interests. The fact that receivers were nominated by a party does not, without more, establish apparent bias.

Mr Rubin had been appointed as litigation receiver for Usarel under an order made by Teare J on 8 October 2012. His powers included defending the underlying Commercial Court action in Usarel’s name. After judgment was given against Usarel, he sought a ruling that his appointment already authorised him to pursue an appeal, including an application for permission to appeal, and to bring contribution proceedings. Alternatively, he sought an extension of his appointment.

By the time of the application, a later order had appointed Alvarez & Marsal receivers and managers of Usarel and had suspended the directors’ powers, while preserving Mr Rubin’s existing powers. The issues were the proper construction of the 2012 order, the effect of the later order, and whether the newly appointed receivers or directors could consider an appeal.

1. Construction of the 2012 order. Mr Rubin’s authority was confined to defending the specified Commercial Court action. The wording of the order focused on the defence of that action and did not extend to an appeal from Teare J’s decision or to contribution proceedings. An appeal had a new Court of Appeal case reference and constituted a new proceeding for the purposes of the order.
2. The proposed extension could not be implied. It was not an ordinary use of language to treat an appeal as part of the defence of the action. Nor did the proposed term satisfy the conventional principles for implication, including the officious bystander or business efficacy tests. The contextual construction of the order did not establish the wider power.
3. The 2010 order did not assist in construing the 2013 order. The 2013 order had materially different effects, including the appointment of receivers and managers over Usarel. The terms of the 2013 order, made several months later, could not affect the true construction of the 2012 order.
4. The A&M Receivers and Managers could authorise Usarel’s directors to consider and pursue an appeal, provided that doing so did not conflict with Mr Rubin’s appointment. If an inconsistency arose, directions would have to be sought from the court. The receivers had a duty to ensure that the merits and Usarel’s interests were properly and objectively considered on legal advice.
5. There was no actual bias alleged and no justified perception of bias. Court-appointed receivers were officers of the court, and the fact that they had been nominated by an applicant did not itself make their consideration of litigation against that applicant inappropriate. Interested persons remained able to challenge action or inaction by an office-holder.
6. Mr Rubin’s applications to construe or extend his powers to pursue an appeal or bring contribution proceedings were refused. The court declined to extend his powers, while leaving open consideration of a further extension of time for appealing or seeking permission to appeal.

This was a first-instance application connected with the claim determined by Mr Justice Teare in the Queen’s Bench Division Commercial Court on 19 March 2013. Mr Justice Warren refused the requested ruling and extension of powers.