LYUBOV KIREEVA v GEORGY BEDZHAMOV

Where the jurisdictional conditions for security for costs are met, the court may order security against a foreign trustee in bankruptcy if, having regard to all the circumstances, it is just to do so. The remedy remains exceptional, but exceptionality is fact-sensitive. A real risk of non-enforcement, or a real risk of additional enforcement burdens, may justify security. The order should be tailored to the relevant risk. Where there is a real risk of non-enforcement, security will generally cover the defendant’s costs of the relevant proceedings. The court should avoid examining merits at an interlocutory security application unless a high degree of probability of success or failure is clearly demonstrated.

The applicant, a Russian bankruptcy trustee, sought recognition in England and Wales of Mr Bedzhamov’s Russian bankruptcy. The Court of Appeal had set aside an earlier recognition order and remitted issues concerning alleged forgery, alleged fraud in obtaining the Russian bankruptcy judgment, and whether recognition should be denied for fraud.

Mr Bedzhamov applied for security for the costs of the remitted proceedings. The trustee was resident outside the jurisdiction and outside a state bound by the 2005 Hague Convention. The central issues were whether security was just in all the circumstances and, if so, its proper scope.

1. Application granted. The threshold condition in CPR 25.13(2)(a) was satisfied because the trustee was resident out of the jurisdiction and outside a Convention state. The court therefore had a discretion under CPR 25.13(1)(a) to order security if just in all the circumstances.
2. The discretion had to be exercised consistently with articles 6 and 14 of the Convention. The relevant risks were non-enforcement and additional burdens of enforcement. Mere difficulty of enforcement was insufficient unless it created such a risk or resulted in additional cost. Security should be tailored to the risk.
3. There was a real risk that a costs order could not be enforced in Russia. Relevant matters included the acknowledged risk of treatment contrary to Articles 3, 5 and 6 of the ECHR if Mr Bedzhamov were returned to Russia, the developing sanctions position, the involvement of sanctioned or state-connected entities, and uncertainty concerning the funder’s ownership and control.
4. Security against a trustee in bankruptcy was exceptional, but this was an exceptional case. The trustee had no assets in the jurisdiction, no adequate assurance that her funder would meet an adverse costs order, and a close connection with related proceedings in which substantial security had been provided.
5. The court did not undertake a merits assessment. The evidence concerning the alleged forgery had not been tested, the allegation was denied, and expert evidence was contemplated. A high degree of probability of success or failure had not been shown.
6. Security was ordered for the entirety of Mr Bedzhamov’s costs of the remittal at first instance. It did not cover costs reserved by the Court of Appeal or time spent considering the appellate judgment.

The judgment records that the Court of Appeal, by order dated 21 January 2022, set aside Snowden J’s recognition order dated 25 August 2021 and remitted specified issues for determination. This judgment concerned security for costs in the remitted proceedings.