Koldyreva v Motylev & Ors

A worldwide freezing order may be granted where there is a good arguable case for recognition of a foreign bankruptcy and a real risk of dissipation. Dishonesty alone is insufficient, but the overall pattern of conduct may establish that risk, particularly where specific conduct demonstrates both ability and willingness to dissipate assets. Delay does not automatically defeat relief; the court must assess its significance in the circumstances. A passport surrender order may be made where it is reasonable and necessary to preserve the effectiveness of disclosure and related relief, and must last no longer than necessary. Norwich Pharmacal relief requires a good arguable case of wrongdoing, involvement by the respondent beyond that of a mere bystander, and possession of information or documents likely to assist.

An intended Russian bankruptcy manager applied without notice for interim relief in anticipated proceedings concerning recognition of a Russian bankruptcy and the recovery of assets. The applications included a worldwide freezing order, a passport surrender order and Norwich Pharmacal orders against a bank, investment and payment-service companies, and an individual connected with companies used by the intended defendant.

The court considered whether there was an arguable basis for common-law recognition of the Russian bankruptcy, a real risk of dissipation, whether delay was material, and whether the requirements for passport surrender and Norwich Pharmacal relief were met.

1. Worldwide freezing order. The intended claimant established a good arguable case for common-law recognition of the Russian bankruptcy. The intended defendant had participated through representatives in the hearing at which the bankruptcy order was made and had initiated an unsuccessful appeal, giving rise to an arguable submission to the Russian jurisdiction. Recognition could permit the foreign manager to sue in her own name for the bankrupt’s debts, although common-law recognition would not confer the statutory powers available under the Insolvency Act 1986. The court therefore did not need to rely on the alternative statutory or concurrent-bankruptcy bases.
2. A mere allegation of dishonesty does not establish a risk of dissipation. However, the overall pattern of conduct may do so, and here three particular matters demonstrated ability and willingness to dissipate assets: breach of Russian banking regulations by holding two offices, departure from Russia shortly before the collapse of a bank, and rapid transactions before withdrawal of its banking licence. The delay while earlier managers acted slowly was not held against the current manager, whose preparations had been timely and professional.
3. The absence of a damages claim did not prevent a freezing order: Koza Ltd v Koza Altin Isletmeleri AS [2020] EWCA Civ 1018 was applied. A cross-undertaking in damages was required, with fortification reserved for the return date.
4. Passport surrender order. Applying the principles identified from Corbiere Ltd v Xu [2018] EWHC 112, the court weighed the harm to the defendant, the substantial risk to the claimant if he left the jurisdiction, necessity and reasonableness, the order’s ancillary function, and its limited duration. The order was appropriate until the return date and disclosure had been secured.
5. Norwich Pharmacal orders. The requirements stated in Norwich Pharmacal Co & Others v Customs and Excise Commissioners [1974] AC 133 were satisfied. Each respondent was arguably mixed up in wrongdoing, had facilitated it beyond being a mere bystander, and was likely to possess relevant information or documents. Evidence of uncertain provenance was admitted in the court’s discretion, applying Kuruma v The Queen [1955] AC 197. The orders were granted in principle, but documents concerning Fomonsur were excluded because the evidence was too weak.