Case Nos: CA-2024-002667 and CA-2025-000223 - [2025] EWCA Civ 951

Conclusion

I would therefore dismiss Mr Vesnin’s appeal against the Morgan Judgment.

Q&M’s appeal against the Standing Judgment

The central feature of Chief ICC Judge Briggs’s decision that Q&M had no standing to oppose recognition of the Russian bankruptcy of Mr Ananiev and Mr Vesnin’s appointment as his bankruptcy trustee, was the judge’s consideration of the decision of the Supreme Court in Brake v The Chedington Court Estate Ltd [2023] UKSC 29 (“Brake”). As the judge held, at paragraph 46,

“Consistent with the approach taken by the Supreme Court in Brake this court should permit only those who have a legitimate interest in the bankruptcy, to have standing for the purpose of opposing a common law recognition application. Such persons will include creditors but not a party who is a defendant in proceedings where a foreign representative seeks to be claimant (or the other way around). I accept that such a person will have a commercial interest in the outcome, but they have no legitimate interest in the bankruptcy.”

In Brake, a liquidator had been appointed to an insolvent partnership and both partners had been made bankrupt. The liquidator and their trustee in bankruptcy each agreed to sell two pieces of adjoining property to a third party, rejecting bids made by the bankrupt partners. They had made the bids in their capacity as trustees of a family trust, and brought two sets of proceedings under sections 168(5) and 303(1) of the Insolvency Act 1986 seeking to challenge the sales by the liquidator and the trustee in bankruptcy. They claimed to be “persons aggrieved” by the acts and decision of the liquidator within the meaning of section 168(5) and “persons dissatisfied” by the acts and decision of the trustee in bankruptcy within the meaning of section 303(1). The applications were struck out by the High Court, but the Court of Appeal reinstated the application under section 303(1).

The Supreme Court allowed the appeal and struck out the application under section 303(1). Giving a judgment with which the other members of the Supreme Court agreed, Lord Richards indicated at paragraph 8 that neither section 168(5) nor section 303(1) is intended to provide a means of redress to a party with no connection to the bankruptcy or liquidation. He summarised his conclusions at paragraph 99,

“The principles underlying the standing of applicants under section 303(1) and section 168(5) of the IA 1986 can be summarised as follows. Creditors have standing where their application concerns their interests as creditors, because the bankrupt’s estate or the assets of the company in liquidation are administered under the terms of the statutory trust for their benefit as creditors. Likewise, where there is or there is likely to be a surplus, the bankrupt or contributories are also persons for whose benefit the estate or assets are being administered and they have standing in respect of their interests in the surplus. Beyond that, there is a limited class of cases where creditors, the bankrupt, contributories or others will have standing, but only in respect of matters directly affecting their rights or interests and arising from powers conferred on trustees or liquidators which are peculiar to the statutory bankruptcy or liquidation regime. Engel v Peri and In re Hans Place Ltd provide good examples of cases within this category.”

In Engel v Peri [2002] BPIR 961, mentioned by Lord Richards, a bankrupt who had applied to annul his bankruptcy was held to have standing to challenge the level of the trustee in bankruptcy’s remuneration and legal fees under section 303(1) because, although there would be no surplus, he would have to discharge such remuneration and fees to obtain an annulment. In In re Hans Place Ltd [1993] BCLC 768, a landlord was held to be entitled to object to the disclaimer of a lease by a liquidator on the basis that it would release a guarantee given to the landlord by a third party. At paragraph 28 of Brake, Lord Richards endorsed the explanation given by Peter Gibson LJ in Mahomed v Morris [2000] 2 BCLC 536 at paragraph 26, namely that section 168(5) could be used by “someone, like the landlord in In re Hans Place Ltd . . . who is directly affected by the exercise of a power given specifically to liquidators, and who would not otherwise have any right to challenge the exercise of that power”.

The context of Brake and the authorities to which it refers is that of a person seeking to challenge acts done by insolvency officeholders in the administration of the estate under their control. In that context, it is readily understandable that persons in Lord Richards’ first two categories (i.e. creditors who stand to receive a distribution from an insolvent estate, and contributories or the bankrupt if there is likely to be a surplus) should have standing to complain in their capacity as such, because in that capacity they have a direct financial interest in the proper administration of the estate.

But Lord Richards did not limit standing to such persons. He expressly acknowledged the existence of a third category of persons who would have standing to complain in a different capacity – namely third parties who are directly affected by the exercise of powers peculiar to the insolvency. Brake is therefore not authority for the proposition that standing in such cases is limited to persons having an economic interest in the insolvency and who are acting in that capacity. Indeed, in a disclaimer case such as In re Hans Place, it is apparent that in challenging the disclaimer, the landlord would be seeking to advance its own interests in such a way that, ex hypothesi, would be contrary to the interests of creditors as a whole which would be better served by the reduction of liabilities by the disclaimer.

In any event, I do not consider that the approach outlined in Brake is readily applicable to a recognition application. Brake concerned a challenge to acts done by officeholders in the administration of an insolvency estate. The issue in a recognition application is whether the Court will recognise a foreign proceeding and in particular whether the foreign officeholder should be recognised in England and Wales as entitled to assert property rights in, or to exercise control or management of, any assets (including rights of action) of the individual or company which is the subject of the foreign proceeding.

In such a case, in addition to creditors, it would seem logical that the individual or company (by its directors) ought to have the right to be heard on the question of recognition, irrespective of the question of whether there would be a surplus in the foreign insolvency. That is because they would inevitably be affected by the displacement of their property rights, or rights of control or management of their assets, that recognition would entail. Restricting their rights to be heard to cases in which there is likely to be a surplus in the foreign proceeding would beg the question of whether the foreign proceeding should be recognised in the first place.

The fact that the approach to standing in international recognition cases might be different to cases where there was a challenge to the conduct of a domestic insolvency process was acknowledged by Chief ICC Judge Briggs in his earlier decision in Sturgeon. In that case, the judge was confronted with the question of whether the winding up of a solvent company in Bermuda on the “just and equitable” grounds should continue to be recognised in England under the CBIR. Continued recognition was opposed by one of the directors of the company, a Mr Carter, who was plainly concerned that he would be the target of an application by the liquidators to be examined on oath under section 236 of the 1986 Act. He applied under Article 17(4) of Schedule 1 to the CBIR, which permits “a person affected by recognition” to apply to the court for the modification or termination of recognition granted under the CBIR.

The liquidators ran a preliminary argument that Mr Carter had no standing to apply under Article 17(4) because, as an ex-director, he had no economic or other legitimate interest in the winding up of the company. Counsel for the liquidators relied on the same run of authorities dealing with challenges to the acts or decisions of officeholders as were subsequently considered by the Supreme Court in Brake and contended that, as a director, Mr Carter did not have a recognisable economic interest in the estate of the company.

Chief ICC Judge Briggs rejected that argument. He said, at paragraph 52,

In my judgment the authorities concerning the Insolvency Act 1986, challenging decisions made by officeholders or seeking to remove officeholders who administer an insolvent estate, are to be distinguished from a decision to challenge recognition in a cross-border insolvency. The test is different and set out in Article 17(4) …, namely that the applicant must be “a person affected by recognition”. The starting point, in my view, is to have regard to the effect of an order recognising a foreign main proceeding (as in this case). Some consequences flow automatically. First, the debtor’s power to deal with assets is suspended. Secondly there is a basic stay of proceedings and execution. Thirdly the court may provide for the examination of witnesses: Article 21(1)(d). This includes enabling a foreign officeholder to obtain orders for examination pursuant to section 236 of the Insolvency Act 1986: Article 21(1)(g). Fourthly, English law transaction-avoidance provisions may be employed by a foreign representative. These are powers that would not have been available but for recognition (absent any application under section 426 of the Insolvency Act 1986 or request for recognition and assistance at common law). Other consequences flow because the foreign main proceeding is treated as a local insolvency proceeding.”

Although Chief ICC Judge Briggs was plainly right in Sturgeon to note that the CBIR contains a specific legislative test of standing – a “person affected by recognition” – and can therefore be distinguished from applications for recognition at common law, in my judgment the underlying points that he made about the potential consequences of recognition under the CBIR for persons who might be the targets of applications for further relief are equally valid in the context of recognition at common law. So, for example, if recognition was sought as a precursor to an application for a stay of proceedings or a stay of execution against the debtor or his assets, the third party conducting those proceedings or execution against the debtor should plainly be entitled to be heard on the question of recognition.

In passing in that regard, I would add that I do not regard it as significant that Article 17(4) of the CBIR specifically envisages that persons affected by recognition should be entitled to apply for recognition to be modified or terminated. If it is known to the applicant that recognition will be opposed, that should be made known to the Court in accordance with the applicant’s duty of full and frank disclosure: see Nordic Trustee v OGX Petroleo e Gas [2016] EWHC 25 (Ch). The Court might well then take the view, as a matter of case management, that it would be more efficient for a party opposing recognition to appear at a single hearing to determine the question of recognition rather than to have two sequential hearings.

Such an approach is consistent with cases in which a claimant asserts that it is the assignee (whether under English law or a foreign law) of a cause of action which entitles it to bring proceedings in its own name against a defendant. In such a case, the Court will have to determine whether the claimant, as assignee, is entitled to sue in place of the assignor, and the defendant would plainly be entitled to be heard on the question of whether the assignment should be recognised as giving the claimant title to sue: see e.g. Macaulay v Guaranty Trust Co of New York (1927) 44 TLR 99. There would be no purpose in the Court hearing the claimant’s arguments on the point ex parte, because any order it made would not bind the defendant.

The position taken by Mr Vesnin in the instant case is in essence no different. The issue raised by paragraph 1 of the Bankruptcy Application is whether the English Courts should recognise Mr Vesnin as the person who is entitled to assert rights and collect in property in this jurisdiction as successor in title to Mr Ananiev. Or, to use Mr Vesnin’s own words, the question is whether he should be recognised as the person entitled to “stand in [Mr Ananiev’s] shoes for the purpose of managing and realising his assets”. The only basis for Mr Vesnin claiming such entitlement was his appointment under Russian bankruptcy law and the particular effects of that law.

Moreover, as the Bankruptcy Application itself made clear, recognition in paragraph 1 was not sought as an end in itself, but only as a necessary precursor to obtaining assistance from the English courts in accordance with the claims for the various forms of relief set out in paragraph 2. That relief was plainly directed at Q&M and included, in particular, orders for them to deliver up the Replacement Eurasia Share Certificates and/or restraining them from dealing with the Eurasia Shares. In short, recognition was not sought in a vacuum but was designed to enable Mr Vesnin to seek relief in England which would directly affect Q&M.

It was also for that reason that Q&M were named as respondents to the Bankruptcy Application and Mr Vesnin sought leave to serve the application on them out of the jurisdiction. Leave to serve out was sought on the basis that there was a serious issue to be determined as between Mr Vesnin and Q&M in relation to property within the jurisdiction under paragraph 3.1(11) of CPR PD6B and no distinction was made between paragraphs 1 and 2 of the Application in that respect. Mr Vesnin did not, for example, seek recognition under paragraph 1 before asking for leave to serve the remainder of the application out of the jurisdiction.

The fact that Q&M were served with the entirety of the Bankruptcy Application in this way also reinforces the conclusion that they were sufficiently affected by it to have standing to appear and challenge any part of the relief sought in it. Furthermore, the fact that no distinction was made between paragraphs 1 and 2 of the Bankruptcy Application correctly reflected that, in order to bind Q&M to a decision to recognise Mr Vesnin’s appointment and his right to stand in Mr Ananiev’s shoes, they needed to be parties to it.

Accordingly, I consider that Chief ICC Judge Briggs was wrong to hold that the decision in Brake led to the conclusion that Q&M had no standing to oppose Mr Vesnin’s application for recognition. I would therefore allow Q&M’s appeal and remit paragraph 1 of the Bankruptcy Application to the High Court for a rehearing at which Q&M should be entitled to appear and object to recognition.

For the avoidance of doubt, I would make it clear that nothing I have said is intended to express any view on the merits or demerits of any arguments that Q&M might raise in opposition to recognition, or as to the procedure that the Court hearing the application should employ to decide those issues.

The consequential appeals

It must follow from the success of Q&M’s appeal against the determination that they had no standing to challenge recognition, that their appeals against the dismissal of the application for security for costs and against the Costs Judgment must also be allowed and those matters remitted to the judge who rehears the application under paragraph 1 of the Bankruptcy Application.

I would also allow the appeal against the dismissal of the Jurisdiction Challenge. If Q&M were to fail in opposing recognition of Mr Vesnin under paragraph 1 of the Bankruptcy Application, I do not think that it follows that their Jurisdiction Challenge to paragraph 2(a) necessarily fails as a consequence. The issues are very different. That matter must also be restored to be heard by the High Court in due course.

Consequential matters

Subject to any representations that might be made by the parties following the handing down of this judgment, I would be minded to direct that the Undertaking remains in place until after the High Court has had the opportunity to give further directions in relation to the rehearing of the Bankruptcy Application and Part 7 Claim consequent upon this judgment, and also to provide Mr Vesnin with a final opportunity to apply, if so advised, for interim relief in relation to the Eurasia Shares.

Lady Justice Falk:

I agree.

Lord Justice Coulson:

I also agree.