Kireeva v Bedzhamov

At common law, the immovables rule prevents a foreign bankruptcy law or order from affecting any right to or interest in land situated in England and Wales. The rule extends beyond legal title. It prevents recognition of the land as part of the foreign bankruptcy estate and leaves the foreign trustee without an interest capable of supporting receivership or other assistance.

Modified universalism remains subject to local substantive law and cannot overcome that result. Statutory regimes may disapply the rule, but courts cannot extend those regimes by analogy. Any further exception permitting the realisation of English land for a foreign bankruptcy estate requires legislation.

A Russian court declared the respondent bankrupt and appointed the appellant as his financial manager, a position equivalent to an English trustee in bankruptcy. Russian law treated his leasehold interests in a London property as part of the bankruptcy estate.

Snowden J recognised the Russian bankruptcy and the appellant’s appointment but refused common-law assistance concerning the property: [2021] EWHC 2281 (Ch). The Court of Appeal, by a majority, upheld that refusal: [2022] EWCA Civ 35.

The central issue was whether the immovables rule prevented the English court from appointing a receiver with power to sell the English property and remit the proceeds to the foreign trustee. Neither section 426 of the Insolvency Act 1986 nor the Cross-Border Insolvency Regulations 2006 applied.

1. The appeal was dismissed unanimously. Lord Lloyd-Jones and Lord Richards delivered the judgment, with which Lord Reed, Lord Briggs and Lady Rose agreed.

2. The immovables rule is a substantive rule of English law founded on territorial sovereignty. It is not confined to the automatic vesting of legal title. At common law, no recognition is given to a foreign law or judicial order purporting to affect any legal, equitable or beneficial right to or interest in land situated in England and Wales.

3. The respondent’s interests in the London property were therefore unaffected by the Russian bankruptcy order. English law did not recognise the property as part of the Russian bankruptcy estate or recognise the appellant as having any right or interest in it. There was consequently no basis for appointing a receiver with power to sell the property or for granting comparable assistance.

4. The principle of modified universalism could not alter that conclusion. It remains subject to local law, local public policy and the limits of the court’s existing powers. A common-law power of assistance cannot be used inconsistently with the immovables rule.

5. In re Kooperman (1928) 13 B&CR 49 was wrongly decided. The dictum in Cambridge Gas Transportation Corporation v Official Committee of Unsecured Creditors of Navigator Holdings Plc [2006] UKPC 26 suggesting a common-law discretion to assist a foreign trustee concerning English immovables was also incorrect.

6. The relevant character of property is determined at the date of the foreign bankruptcy order. Subsequent proceeds of sale remain subject to the immovables rule. A receiver could not generally be appointed over rents and profits either, except possibly over identified receipts properly characterised as movable property arising from rights existing at the date of bankruptcy.

7. Section 426 of the Insolvency Act 1986 and the Cross-Border Insolvency Regulations 2006 create defined statutory exceptions, but neither applied to this Russian bankruptcy. A wider exception would be a substantial departure from settled law and its underlying public policy. Its creation was a matter for Parliament.

1. United Kingdom Supreme Court: The appeal from [2022] EWCA Civ 35 was dismissed unanimously. The dismissal of the application to set aside the charge over the property consequently stood.
2. Court of Appeal: By a majority, Newey and Stuart-Smith LJJ upheld the refusal of assistance concerning the English property; Arnold LJ dissented: [2022] EWCA Civ 35.
3. High Court, Chancery Division: Snowden J recognised the Russian bankruptcy and the appellant’s appointment but dismissed the requests for assistance concerning English immovables and to set aside the charge: [2021] EWHC 2281 (Ch).