Lybov Kireeva v Georgy Bedzhamov

A foreign bankruptcy judgment may be denied recognition for fraud only where the fraud was operative in obtaining that judgment. The relevant question is whether, without the fraud, the judgment would not have been made or there was a real possibility that it would not have been made.

A document is not rendered void by every false element. The falsity must go to its substance or essence. In determining whether a guarantee was forged, the court may assess the documentary evidence, expert evidence and inherent probabilities cumulatively. Internal forms that do not materially bear on the foreign court’s decision will not establish operative fraud.

The applicant, the Russian bankruptcy trustee of the respondent, sought recognition in England and Wales of the respondent’s Russian bankruptcy. The Court of Appeal remitted three issues for determination: whether the guarantee supporting the bankruptcy petition was forged; whether the relevant Russian bankruptcy judgment was procured by fraud; and whether recognition should therefore be denied.

The respondent alleged that the guarantee was forged. The court considered documentary, witness, notarial and expert evidence concerning transactions in 2007, 2013 and 2015.

1. The Remittal Issues were resolved in the Trustee’s favour. The respondent failed to establish that the guarantee was forged. It followed that he failed to establish that the Russian bankruptcy judgment had been procured by fraud, and recognition was not to be denied on that basis.
2. The burden of proving forgery rested on the respondent. The court assessed the evidence as a whole, including the earlier loan transactions, powers of attorney, notarial records, emails, witness evidence, expert evidence and inherent probabilities. The expert evidence concerning the disputed signatures was inconclusive and did not establish forgery.
3. A guarantee in addition to a mortgage was commercially and factually plausible. The 2007 and 2013 documents provided for guarantees, and the 2013 powers of attorney and notarial records materially supported the conclusion that the respondent had agreed to provide one. It was inherently unlikely that the bank would abandon an existing guarantee when the loan was refinanced in 2015.
4. Under Lombard Finance v Brookplain [1991] 1 WLR 271, a false element renders a document void only where the falsity goes to the substance or essence of the instrument. The absence of the respondent’s signature on the application form and distressed-asset letter did not invalidate the guarantee.
5. The fraud exception to recognition required operative fraud. Applying the test stated in Gelley v Shepherd [2013] EWCA Civ 1172, the court held that the application form and distressed-asset letter were not material or operative documents in the Russian proceedings. The decisive issue was whether the respondent had executed the guarantee.
6. The third Remittal Issue was confined to the alleged fraud identified in the remittal. It did not permit a wider reconsideration of whether recognition should be refused in the exercise of discretion, that issue having already been determined.

• Court of Appeal: By order dated 21 January 2022, the appeal concerning recognition was allowed on the ground that the forgery allegation had been rejected without prior cross-examination. The relevant issues were remitted to the High Court.
• High Court: The remitted issues were determined in the Trustee’s favour.