Lyubov Andreevna Kireeva (as bankruptcy trustee of Georgy Ivanovich Bedzhamov) & Anor v Clement Glory Limited & Ors

The court held that recognition of a foreign bankruptcy trustee in England is limited to the trustee's rights in respect of the bankrupt's movable property situated within England and Wales and does not confer authority to pursue ownership or title to foreign movables. Applying the ordinary conflict rules on situs of shares (as drawn from Macmillan and Akers and the Dicey analysis), the situs of company shares is where, under the law of incorporation, they can be effectively dealt with between the owner and the company, usually the place of the principal share register. The Trustee failed to establish a serious issue to be tried that the shares in the British Virgin Islands company, Clement Glory Limited, were sited in England or that a share register was kept here. Because the Trustee could not show a sufficient territorial basis for the claim under the recognition order or the jurisdictional gateways relied on, there was no serious issue to be tried and permission to serve out of the jurisdiction was set aside; service on CGL and EG was set aside and the claim against MG (ancillary to the trust claim) was struck out.

Background and parties:

• The claim arose from extensive litigation connected to allegations that Mr Georgy Bedzhamov defrauded Vneshprombank LLC (VPB) and others. VPB (the Bank) and the Trustee (Ms Kireeva), appointed in Russia as GB’s receiver/trustee in bankruptcy, were claimants; defendants included Clement Glory Limited (a BVI company), its sole director/shareholder Edward Golodnitsky, and Maxim Golodnitsky.
• The Trustee had previously been recognised at common law in these proceedings but, following a Supreme Court decision on the immovables rule, accepted she could not pursue claims over English immovable property (17 Belgrave Square) or its proceeds.

Nature of the claim/application:

• The second CGL claim originally sought declarations that GB was the beneficial owner of CGL, that EG and/or MG were nominees holding the sole share on trust, and also advanced sham and section 423 (Insolvency Act 1986) claims. After the Supreme Court decision the pleaded case was amended to pursue only declaratory relief that the shares in CGL were held on trust for GB, and the Trustee sought permission to serve the claim out of the jurisdiction.

Issues framed by the court:

1. Whether recognition of the Russian bankruptcy trustee entitled the Trustee to pursue claims over movables located outside England and Wales.
2. Where the shares in CGL are sited for conflict of laws purposes and, in particular, whether there was a serious issue to be tried that the share register (or other effective situs) was in England such that the Trustee’s claim fell within the territorial scope of the recognition and supported service out of the jurisdiction under Practice Direction 6B gateways.
3. Whether the Trustee satisfied the burden of establishing a serious issue to be tried to justify service out of the jurisdiction; ancillary consequence for the claim against MG.

Court’s reasoning:

• The court reiterated that recognition of a foreign trustee gives the trustee rights in respect of movables situated in England and Wales but does not extend to immovables. The Trustee accepted that limitation.
• The situs of an interest under a trust follows the situs of the trust property; the situs of shares is determined by where they can be effectively dealt with between owner and company, which is ordinarily the place of the principal register as determined by the company’s law of incorporation (Macmillan; Akers; Dicey analysis).
• The constitutional documents of CGL (a BVI company) required a register of members to be kept at the registered agent’s office in the BVI (Harneys) unless changed by resolution; the contemporary evidence showed Harneys as registered agent in Tortola and no director’s resolution to move the register; correspondence addressed to London did not establish a share register in England.
• The Trustee advanced only speculation that a register might be in England and failed to plead or adduce factual evidence to establish a serious issue to be tried that the shares were sited in England. The claimant bears the burden when seeking permission to serve out of the jurisdiction.
• Accordingly the Trustee failed to show a serious issue to be tried on the trust claim; it was unnecessary to decide further gateway or embargoed-document issues. The application for service out failed, service was set aside, and the ancillary claim against MG was struck out.

The claim is dismissed. The court held that recognition of the Russian trustee extends only to movables within England and Wales; the Trustee failed to establish a serious issue to be tried that the shares in the BVI company Clement Glory Limited were sited in England (no evidence of a share register in England), so there was no jurisdictional foundation under the recognition order or the pleaded gateways for service out. Permission to serve out was set aside, service on CGL and EG was set aside, and the claim against MG (ancillary to the trust claim) was struck out.