Jsc Commercial Bank "Private Bank" v Kolomoisky & Ors

The ordinary and proper course of business exception in a freezing injunction is assessed by reference to the company’s actual commercial activity. A company must have more than merely corporate or regulatory arrangements needed to preserve its existence, together with some course of commercial activity. Whether a transaction is ordinary and proper is a question of fact and degree. A limited business, including business arising from a single agency arrangement, may qualify.

The exception may apply to the business of a controlled non-trading company. It does not ordinarily extend to an individual’s management of investments conducted through corporate vehicles where the individual has no separate personal business. Appellate intervention in such factual assessments should be rare.

The applicant bank pursued claims under Ukrainian law exceeding US$1.9 billion against Mr Kolomoisky and other defendants. A worldwide freezing injunction made by Nugee J on 19 December 2017 regulated dealings with assets held or controlled by Mr Kolomoisky, while permitting dealings in the ordinary and proper course of business subject to notice requirements.

Fancourt J held that interest payments by A Co and payments by Goiania fell within that exception, but that payments made by Mr Kolomoisky towards legal fees in treaty arbitration proceedings did not. The bank appealed the first findings, and Mr Kolomoisky cross-appealed the latter. The central issue was whether the payments required consent or permission, or were permitted by the exception.

Appeals dismissed. The bank’s appeals concerning payments by A Co and Goiania were dismissed, as was Mr Kolomoisky’s cross-appeal concerning payments towards legal fees.

1. The ordinary and proper course of business exception was not confined to Mr Kolomoisky’s personal business. In relation to non-trading companies owned or controlled by him, the relevant business could be the business of the company itself, subject to the order’s notice requirement.
2. A company must have commercial activity beyond corporate or regulatory arrangements merely required to keep it in existence. There must also be some course of commercial activity. Whether a particular payment falls within the ordinary and proper course is a question of fact and degree. The guidance that the exception should be narrowly construed, referred to in JSC BTA Bank v Ablyazov (No 3) [2010] EWCA Civ 1141, was consistent with that approach.
3. Fancourt J was entitled to find that A Co had an established, though limited, business of funding, acquiring and holding a shareholding and performing its contractual obligations. The interest payments were made in that business. He was also entitled to find that Goiania’s aircraft-leasing and agency activities constituted its business, notwithstanding that the agency activity concerned one particular case.
4. Mr Kolomoisky chose to conduct his affairs through corporate vehicles which had businesses, but he did not himself have a business. His management of investments, including calling in a loan to fund legal fees, was therefore not in the ordinary course of business in the context of the injunction. The first-instance conclusion was open on the evidence and should not be disturbed.

Policing freezing injunctions is primarily a matter for the first-instance court. Appeals on the ordinary-course issue should be rare and even more rarely allowed.

• Court of Appeal (Civil Division): dismissed the bank’s appeals and Mr Kolomoisky’s cross-appeal, upholding Fancourt J’s conclusions: [2018] EWCA Civ 3040.
• Chancery Division: Fancourt J decided that payments by A Co and Goiania were within the ordinary and proper course of business, but that Mr Kolomoisky’s payments towards legal fees were not. The judgment’s citation is not stated in the judgment.