JSC Commercial Bank Privatbank v Kolomoisky & Ors

On an application to vary a freezing order, the applicant must satisfy the court that the proposed transaction is in the interests of justice. The court must assess objectively the overall justice of permitting the transaction, having regard to the policy of preserving assets for enforcement. Where the disposal is outside the ordinary course of business, the applicant must provide sufficient evidence that it is a bona fide transaction with a third party and that the attributed value falls within a reasonable range. Because a freezing order follows a finding of dissipation risk, the court may approach the applicant’s evidence with healthy scepticism. Independent marketing evidence may be insufficient where the sales process may have been influenced by a pre-existing target price.

The claimant bank opposed the First Defendant’s application for permission to sell seven grounded aircraft held in Ukraine, despite restrictions imposed by worldwide freezing orders. The proposed purchaser offered US$40 million. The applicant relied on marketing undertaken by an independent aircraft broker and argued that the aircraft’s market value was what buyers were prepared to pay. The bank relied on substantially higher earlier valuations, the absence of a fresh independent valuation, concerns about the purchaser’s independence and concerns about the marketing process. The central issue was whether the evidence established a proper transaction at a value within a reasonable range, such that the balance of justice favoured varying the freezing orders.

1. Application refused. The court was not prepared, on the evidence and without the bank’s consent, to authorise the proposed sale for US$40 million. The First Defendant was permitted to return with a proper independent valuation or a higher figure.
2. Following the principles summarised from Compagnie Noga d'Importation et d'Exportation SA v ANZ Banking Group [2006] EWHC 602 (Comm), the essential question was whether the variation was in the interests of justice. The applicant bore the evidential burden. The court had to consider whether the transaction was consistent with the freezing order’s purpose of preventing disposal of assets in a manner that could leave a judgment unsatisfied, and had to assess objectively the overall justice of the proposed payment.
3. The court rejected the submission that the bank had to show that the sale was manifestly at an undervalue. The proper question was whether there was sufficient evidence of a bona fide transaction with a third party, at a value within a reasonable range.
4. The court had significant concerns about the purchaser’s independence. The purchaser had no apparent experience in acquiring aircraft parts, was unknown to the broker in this market, had been introduced by an entity associated with the Defendants, and had apparently agreed to contract without inspecting the aircraft or undertaking detailed analysis.
5. The broker’s marketing exercise did not overcome those concerns. The broker knew of the existing US$35–40 million offer before beginning its process, and aspects of its communications suggested that market participants understood that US$40 million was the target. The court therefore could not give the exercise sufficient weight to establish the true market value.
6. The aircraft’s location in a warzone, depreciation and vulnerability were relevant, but did not outweigh the evidential concerns. The court was also unpersuaded that the purchaser would necessarily withdraw or that no further market interest existed.