PJSC Commercial Bank Privatbank v Kolomoisky & Ors

The ordinary and proper course of business exception to a freezing order is fact-sensitive and cumulative. A payment must be both in the ordinary course of the relevant business and in its proper course. A non-trading company may have a business where it conducts continuing commercial activities, such as financing an investment or providing services, but passive asset-holding alone is insufficient. Bona fide performance of pre-existing contractual obligations and exercise of pre-existing contractual rights may fall within the exception. Personal management of investments through corporate vehicles does not ordinarily constitute the respondent’s own business for this purpose.

The claimant sought declarations concerning payments made by or through companies controlled by the first defendant, under a worldwide freezing order made in related proceedings. The payments included loan interest and drawdowns, aircraft operating expenses, and sums directed to lawyers for the first defendant and a related company in investment treaty arbitration proceedings.

The central issue was whether the payments required the claimant’s consent or the court’s permission, or were permitted by the exception for dealings in the ordinary and proper course of business. The claimant bore the legal burden and had to prove the relevant facts on the balance of probabilities.

1. Purpose and governing approach. A freezing order is intended to prevent improper dissipation, not to provide security for a claim. The ordinary and proper course of business exception preserves bona fide business activity that would ordinarily have been carried on before judgment. The requirements of “ordinary” and “proper” are separate and cumulative, and depend on the business carried on by the relevant respondent or company: [1986] 2 Lloyd’s Rep 236; [2010] EWCA Civ 1141; [2015] EWCA Civ 1028.
2. Non-trading companies. “Business” is not confined to trading for profit. A non-trading company may have an ordinary course of business where it conducts continuing commercial activity. It must do more than passively hold property or investments. A Co.’s financing, acquisition and holding of a shareholding, together with servicing its documented debt, constituted an established business. Its interest payments and drawdowns under genuine pre-existing agreements were therefore in the ordinary and proper course.
3. Commercial agency. Goiania’s business included acting as commercial agent for related companies under a commercial agreement. The fact that the agency activity concerned one transaction did not prevent it forming part of Goiania’s business. Payments made under the agreement, including payments funded by Goiania where this served its commercial interest, fell within the exception. The declarations concerning those payments were refused.
4. Personal investment management. The first defendant’s organisation of funding and management of investments through controlled companies did not amount to his own business in the relevant context. Treating it as such would substantially deprive the freezing order of effect. The reasoning in JSC BTA Bank v Ablyazov (No. 3) was applied.
5. Stalmag repayment. Although Stalmag was a trading company, the first defendant failed to prove that an early partial repayment of his loan was intended to benefit Stalmag rather than himself. The payment, directed to discharge his own and B Co.’s legal fees, was not in the proper course of Stalmag’s business or the first defendant’s business. A declaration was made in respect of past and future payments made by or at his direction.