Russian Commercial Bank (Cyprus) Ltd v Khoroshilov

An application to reopen an order made in a party’s absence requires prompt action, a good reason for non-attendance and a reasonable prospect of success. Lack of knowledge of the application does not itself establish a good reason, particularly where the applicant made himself difficult to contact.

A freezing order is construed strictly, but disposal of an identified asset for nominal consideration may breach the order even where the asset is mortgaged and its net value is disputed. In Hague Convention cases, alternative service requires good reason amounting to special circumstances. That test differs from the exceptional-circumstances test for dispensing with service altogether.

Russian Commercial Bank sought to uphold a finding that Fedor Khoroshilov had been in contempt of court for transferring the yacht Giant 1 in breach of a worldwide freezing order. Khoroshilov applied, several years later, to set aside the committal order and the earlier order permitting alternative service.

He relied on his alleged lack of knowledge of the committal proceedings, challenged the finding that the yacht was an asset within the freezing order, and argued that service should have proceeded under the Hague Convention. The court had to determine whether the applications were made promptly, whether there was a good reason for non-attendance, whether the contempt finding had a realistic prospect of being overturned, and whether alternative service had been properly ordered.

1. Reopening the committal order. The court treated CPR Rule 23.11(2) as the applicable procedural provision, while accepting that its criteria were effectively identical to CPR Rule 39.3(5): prompt action after learning of the order, a good reason for non-attendance, and a reasonable prospect of success. The applicant’s lack of promptness was not automatically fatal, but required explanation.
2. Khoroshilov had not established a good reason for failing to attend. His applications were inadequately evidenced, his statements of truth were non-compliant, and the evidence indicated that he had not taken steps to remain contactable. Mere lack of knowledge of an application would not, without more, constitute a good reason. The approach in Ivanhoe Mines Ltd v Gardner [2019] EWHC 3142 (Comm) was applied.
3. There was no reasonable prospect of overturning the contempt finding. Giant 1 had been identified by Khoroshilov as his asset and had been transferred for US$1. The mortgage figure of US$19.8 million did not represent the amount outstanding at the time of sale; on the evidence, approximately US$4.2 million remained due. The yacht therefore had value, and its transfer breached the freezing order. Strict construction of freezing orders did not alter that conclusion.
4. The challenge to the Service Order also failed. Alternative service in committal proceedings is governed by the ordinary rules for alternative service, although the seriousness of committal is relevant. Dispensing with service under CPR Rule 6.16, which requires exceptional circumstances, is conceptually different from ordering alternative service under CPR Rule 6.15.
5. Where the Hague Convention is relevant, the requirement of good reason under CPR Rule 6.15 is satisfied only in special circumstances. Such circumstances existed here because previous attempts to locate and serve Khoroshilov had failed, Russian court communications had gone unanswered, an arrest warrant made attendance risky, and service through solicitors still on the record offered a good prospect of bringing the proceedings to his attention. Both applications were dismissed.