Vneshprombank LLC v Georgy Ivanovich Bedzhamov

Where a court has granted permission in principle for a transaction, a later application to give effect to that permission should not ordinarily be treated as a blank-slate application. The court should assess whether the proposed transaction remains within the scope of the earlier order and whether there has been a material change of circumstances. Changes in costs, financing arrangements or economic outcomes do not necessarily alter the transaction’s essential nature. Where delay creates a real and substantial risk of loss of value, the court may permit a disposal while preserving the proceeds pending further directions. A party seeking to prevent the disposal of property by relying on its own proprietary claim should ordinarily seek an injunction and offer the usual cross-undertaking in damages.

Mr Bedzhamov applied to vary a worldwide freezing order so that he could sell and develop his interests in property at Belgrave Square. Falk J had previously granted permission in principle for a transaction of that nature in the May 2022 judgment, embodied in an order dated 9 June 2022.

The bankruptcy trustee opposed the proposed sale. She argued that the earlier order had lapsed, that the current proposal was materially different, and that circumstances had changed. She also relied on the pending Supreme Court appeal concerning recognition of the Russian bankruptcy and assistance in relation to the property. The central issues were whether the earlier order remained effective, whether the current proposal fell within its scope, and whether the sale should now be approved in light of the evidence concerning value and delay.

1. Earlier order. The order of 9 June 2022 had not lapsed. It granted permission in principle without a time limit and contemplated a later application supported by fuller evidence. The subsequent orders also proceeded on the basis that it remained effective.
2. Scope of permission. The current proposal remained along the lines of the proposal considered in the May 2022 judgment. Increased professional fees, higher financing costs, the use of senior and mezzanine finance, and revised profit-sharing arrangements did not materially alter the nature of the proposed sale and development.
3. Material change. The trustee had not shown a material change of circumstances justifying departure from the earlier order. The recognition of the bankruptcy, the pending Supreme Court appeal, the proceeds application and the new claims concerning CGL were matters known to, or already considered by, Falk J. The court explained the limited significance of Kea Investments Ltd v Watson [2020] EWHC 472 (Ch): it did not establish a general entitlement to invite the court to disregard an earlier order without an application to vary or discharge it.
4. Discretion and preservation of value. The evidence established a real and substantial risk that delay would cause serious loss of value. The value depended critically on the freeholder’s willingness to grant a long lease. The proposed transaction secured that willingness, whereas a later receiver might face fresh negotiations, a substantial premium, forfeiture risk and lower market value.
5. Cross-undertaking and pending appeal. The trustee was effectively seeking the benefit of an injunction without offering a cross-undertaking in damages. The sale would not render the Supreme Court appeal nugatory. The appropriate course was to permit the sale while preserving all proceeds under the court’s supervision.
6. Order. The worldwide freezing order was varied to permit the proposed sale and development. Questions concerning distribution of the proceeds were reserved for a further hearing.

• High Court: Snowden J’s recognition decision was appealed. The Court of Appeal allowed Mr Bedzhamov’s appeal and remitted the recognition issue, while dismissing the trustee’s appeal concerning assistance over the property: [2022] EWCA Civ 35.
• High Court: Falk J subsequently dismissed the fraud allegations and ordered recognition of the Russian bankruptcy order and the trustee’s appointment. A Supreme Court appeal concerning assistance in relation to the property remained pending.
• High Court (Business List): The present court varied the worldwide freezing order and permitted the proposed sale and development.