Polegoshko & Ors v Ibragimov & Ors

The defendants applied to vary earlier interim relief so as to restrain the claimants from taking or prosecuting any steps in multiple Lithuanian proceedings concerning Fingood LLP without direction from this court. The deputy judge refused the application. Key legal principles applied were (i) under the Brussels/Civil Jurisdiction regime an injunction restraining parties from pursuing proceedings in another Contracting State is incompatible with the Convention as explained in Turner v Grovit; (ii) the Lithuanian Civil Code (Articles 137 and 164) provides procedural mechanisms to determine who may represent the company and to suspend proceedings; (iii) the balance of convenience strongly disfavoured a one-sided order that would prevent only the claimants from participating in Lithuanian litigation; and (iv) the application amounted to abuse of process both as a collateral attack and as pursuing an improper ulterior purpose. The absence of any offer of cross-undertaking in damages and the availability of alternative interim measures (for example by application under section 37 of the Senior Courts Act to appoint a receiver) were additional reasons for refusal.

Background and nature of the proceedings: The claim concerns competing allegations of beneficial ownership of Fingood LLP. The claimants sought declarations that Westa Holding Ltd and Holding Associates Ltd were designated members of Fingood and consequential orders under company law (including an order under section 1096 of the Companies Act 2006 to remove entries from the register maintained under section 1080). After interim orders in England (including an interim declaration by Floyd J on 11 July 2012) multiple related proceedings were commenced in Lithuania, some brought in the name of Fingood and variously advanced by each side. The defendants applied to vary the English order so that none of the claimants could take any steps in foreign (Lithuanian) proceedings involving Fingood without direction from the English court.

Procedural posture: This was a first-instance application before Deputy Judge Jeremy Cousins QC to vary earlier interim relief. The Lithuanian courts were already seised of several cases (including stays in at least one instance) and had begun determining representation and other issues.

Issues framed by the court:

• Whether this court had jurisdiction to grant the relief sought, given the Brussels/Convention principles as expounded in Turner v Grovit and related authorities;
• Whether the balance of convenience favoured granting a restraint that would, in practical effect, be one-sided;
• Whether the application constituted an abuse of process by way of collateral attack on Lithuanian proceedings or by pursuing an improper ulterior purpose; and
• Whether the absence of a cross-undertaking in damages or availability of alternative remedies affected the grant of relief.

Court's reasoning and conclusions: The court accepted that it had jurisdiction to consider the issue but concluded the grant of the relief would be incompatible with the mutual-trust principles underlying the Convention, as set out in Turner v Grovit, because it would effectively interfere with the jurisdiction of the Lithuanian courts which were already seised of the matters. The court noted that the Lithuanian Civil Code contained express procedures (Article 137 on acceptance and authority to bring actions; Article 164 on suspension of proceedings) enabling Lithuanian courts to resolve representation and stay issues. The proposed order would have the manifestly one-sided effect of preventing only the claimants from participating in Lithuania while leaving the defendants free to act there; that imbalance weighed heavily against the grant of relief. The application was also an abuse of process: it would amount to a collateral attack on decisions and to pursuing an ulterior litigation advantage. No cross-undertaking in damages had been offered. The deputy judge observed that, if protection of assets was required, the appropriate mechanism would have been an application for interim protective relief in England (for example appointment of a receiver under section 37 of the Senior Courts Act) rather than the order sought. On these grounds the application was refused.

The application of the First to Fourth and Sixth Defendants to vary the terms of the prior order so as to restrain the claimants from taking or prosecuting steps in the Lithuanian proceedings was dismissed. The judge held that (i) injunction-type relief interfering with foreign courts would be incompatible with the Convention principles in Turner v Grovit; (ii) the Lithuanian Civil Code provided adequate means for the Lithuanian courts to determine representation and to suspend proceedings; (iii) the proposed order would be unduly one-sided and the balance of convenience favoured refusal; (iv) the application constituted an abuse of process (collateral attack and improper purpose); and (v) no cross-undertaking in damages was offered and alternative remedies in England (for example a receiver under section 37 Senior Courts Act) would have been more appropriate.