Re OJSC Ank Yugraneft Millhouse Capital UK LTD and Another V Sibir Energy PLC and Others (2009) 1 BCLC 298

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298 Butterworths Company Law Cases [2009] 1 BCLC
a
Re OJSC Ank Yugraneft
Millhouse Capital UK Ltd and another
v Sibir Energy plc and others b
[2008] EWHC 2614 (Ch)
CHANCERY DIVISION (COMPANIES COURT) c

CHRISTOPHER CLARKE J
9–11, 14–18, 21, 22 JULY, 29 OCTOBER 2008
Winding up – Foreign company – Russian oil corporation – Company in

liquidation in Russia – Company wishing to bring action for fraud in d
England – Application to appoint liquidator in England – Whether fraud
action constituting sufficient connection with England – Whether
appointment of English liquidator would benefit claimants in fraud action –
Whether court having jurisdiction over claimants as persons interested in
distribution of company’s assets.
e
Liquidator – Provisional liquidator – Appointment on without notice
application – Duty of applicant to make full disclosure to court – Failure to
make full disclosure – Whether appointment of provisional liquidator
would be set aside for non-disclosure of material facts – Insolvency
Act 1986, s 220.
f
The claimant, Yugraneft, was a Russian oil corporation which held licences
for the development of certain oil fields in Russia. Yugraneft’s parent
company was Sibir, an English company which carried on business in
Russia, where its assets and management were located. The two defendants
were A, a Russian citizen, and Millhouse, an English company. A was the g
beneficial owner of at least a large part of another Russian oil company,
Sibneft, and was also said to control Millhouse. In 2001 Yugraneft sold its
licences to Sibneft-Yugra, a new company established as a joint venture
under a co-operation agreement between Sibir and Sibneft. Yugraneft and
Sibneft each had a 50% shareholding in the new company and at Sibneft’s
behest M, a senior vice-president of Sibneft, was appointed general director h
of both Sibneft-Yugra and Yugraneft. In that capacity he gave powers of
attorney to D, who was a senior business adviser to Sibneft and the
Moscow representative of Millhouse. In 2002 and 2003 at two
extraordinary general meetings of Sibneft-Yugra held in Russia Yugraneft’s
shareholding was diluted from 50% to less than 1% while two BVI
companies and a Panamanian company (the off-shore companies) which i
were investment vehicles for A were each allotted a 16.34% shareholding in
return for additional capital said to have been provided to Sibneft-Yugra.
The only persons present at the meetings were a Sibneft representative, D
(acting under his powers of attorney), and Russian directors of the three
[2009] 1 BCLC 298
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Ch D Re OJSC Ank Yugraneft 299
a off-shore companies. On 14 December 2004 Yugraneft, acting by M,

declared that it was unable to meet its liabilities and petitioned the Moscow
Arbitrazh Court (the Moscow court) for bankruptcy. The Moscow court
suspended the Yugraneft board and on 12 January 2005 appointed K as
interim bankruptcy administrator of the company. Sibir claimed that
Yugraneft had not been given notice of the extraordinary general meetings
b and that they were the victims of a massive fraud directed by A and
Millhouse, as A’s agent, to reduce Yugraneft’s interest in the Sibneft-Yugra
joint venture to less than 1%, as a result of which they had suffered a loss
of $2bn. In 2004 and 2005 they unsuccessfully instituted proceedings first
in Russia challenging the lawfulness of the two extraordinary general
meetings of Sibneft-Yugra and then in the Britsh Virgin Islands against
c
Sibneft, A and the off-shore companies alleging that A had instigated and
Sibneft had committed the fraud and it had been carried out by M and D
using the offshore companies. On 28 May 2007 the Moscow court declared
Yugraneft insolvent, and appointed K as bankruptcy administrator. On
12 November 2007 the petitioners, Sibir and MOGC, a Sibir shareholder
d and/or subsidiary, filed a petition in the Companies Court seeking the
winding up of Yugraneft in England, as an unregistered company for the
purposes of s 220 of the Insolvency Act 1986, and the appointment of a
provisional liquidator. Two days later, on 14 November Sibir commenced
proceedings in the Commercial Court against the defendants claiming
damages for fraud and on the same day a judge made an order in the
e Companies Court appointing a provisional liquidator of Yugraneft. K, the
Russian bankruptcy administrator, consented to and supported both sets of
proceedings, which were funded by Sibir. The defendants applied to the
Commercial Court to have the action dismissed on the grounds that A was
resident out of the jurisdiction, Yugraneft did not have a good arguable case
and Russia was the appropriate forum for the determination of the dispute.
f The defendants also applied to the Companies Court to have the
appointment of the provisional liquidator set aside and the winding-up
petition dismissed, contending that it was not necessary for the court to
exercise its insolvency jurisdiction in relation to Yugraneft, that the
requirements for the winding up of Yugraneft as an unregistered company
had not been satisfied, and that the appointment of the provisional
g
liquidator had been procured by materially misleading statements by the
petitioners and a failure to disclose relevant matters to the court. The
applications were heard together. The Commercial Court action was
dismissed and the court went on to consider the Companies Court
application.
h
Held – (1) The court had power to wind up Yugraneft because it was an
‘unregistered company’ for the purposes of s 220 of the 1986 Act, it was
carrying on business only for the purpose of winding up its affairs and it
was unable to pay its debts, within s 221(5) of the Act. However, the
apparently unlimited discretion to wind up an unregistered company
i conferred by s 221(1) was only exercisable if three core requirements were
satisfied, namely (i) that there was a sufficient connection with England and
Wales, possibly but not necessarily in the form of assets within the
jurisdiction, (ii) that there was a reasonable possibility that a winding-up
order would benefit those applying for it, and (iii) that the court could
[2009] 1 BCLC 298

exercise jurisdiction over one or more persons interested in the distribution a

of the company’s assets. The third requirement was satisfied by one of the
petitioners (Sibir) being incorporated in England and the other petitioner
(MOGC) submitting to the jurisdiction for the purpose of the winding up.
The first requirement was satisfied by the fact that the defendants to
Yugraneft’s claim in the Commercial Court were an English company
(Millhouse) and a party (A) who would be subject to the jurisdiction of the b
English court because he was either resident in England or a necessary or
proper party to the claim against Millhouse, and in those circumstances the
chose in action constituted by the Commercial Court claim for $2bn
damages was an asset within the jurisdiction that provided a sufficient
connection with England. As to the second requirement, K, as the liquidator
c
empowered by Russian insolvency law to act on behalf of Yugraneft, was
entitled to act on the company’s behalf in England and under art 9 of the
UNCITRAL Model Law he could have given instructions for a claim to be
started in the Commercial Court by Yugraneft without having to resort to
the English court’s winding-up jurisdiction. However, the petitioners would
benefit from the appointment of an English liquidator because the d
Commercial Court proceedings would then be under the supervision of a
licensed insolvency practitioner who was not only conversant with large
and complex English litigation but also an officer of, accountable to, and
subject to the direction of, the English court which meant that the
petitioners would be protected if, for any reason, K’s appointment as
liquidator of Yugraneft was terminated or not renewed or he was unable to e
continue in office. It followed that the petitioners had established the
second requirement for the exercise of the court’s winding-up jurisdiction
was satisfied. (See [9]–[10], [15], [20], [25]–[26], [57], [59]–[66], below.)
Dicta of Knox J in Re Real Estate Development Co [1991] BCLC 210 at
217 applied. Re Cia Merabello San Nicholas SA [1972] 3 All ER 448 and
Re Latreefers Inc, Stocznia Gdanska SA v Latreefers Inc [1999] 1 BCLC f
271 considered.
(2) The obligation to make full disclosure when applying for ex parte
relief was an obligation owed to the court itself and existed in order to
secure the integrity of the court’s process and to protect the interests of
those potentially affected by whatever order the court was invited to make.
g
The court’s ability to set aside its order and to refuse to renew it was the
sanction by which that obligation was enforced and others were deterred
from breaking it, particularly in the case of freezing and seizure orders.
Such was the importance of the duty of full disclosure that in the event of
any substantial breach the court strongly inclined towards setting aside its
order and not renewing it, so as to deprive the defaulting party of any h
advantage that the order might have given him. The overriding principle in
determining whether the order should be set aside when there was an
absence of full and fair disclosure, and if so, whether it should be renewed
either in the same or in an altered form, was that the issue was
pre-eminently a matter for the court’s discretion. The court would take into
account all relevant circumstances, whether the non-disclosure was i
innocent, and whether an injunction or other order could properly have
been granted if the relevant facts had been disclosed. The court would look
back at what had happened and examine whether and why it was not fully
informed, and the extent to which it was not, in order to decide what
[2009] 1 BCLC 298

Ch D Re OJSC Ank Yugraneft 301
a sanction to impose in consequence, and would also look forward to see

whether, in the light of all the material available after the non-disclosure
had become apparent, there was still a case for continuing or re-granting
the relief sought. Since there had been a substantial failure of the petitioners
to disclose material facts to the judge, albeit the failure was not intentional,
the order appointing a provisional liquidator would have been set aside and
b the claim dismissed if the claim had not already been struck out in the
Commercial Court. (See [94]–[96], [100]–[108], below.) Dicta of
Bingham LJ in Siporex Trade SA v Comdel Commodities Ltd [1986] 2
Lloyd’s Rep 428 at 437, of Mummery LJ in Memory Corp v Sidhu (No 2)
[2000] 1 WLR 1443 at 1459–1460 and of Ralph Gibson LJ in Brink’s
Mat Ltd v Elcombe [1988] 3 All ER 188 at 192 applied.
c
Cases referred to in judgment

African Farms Ltd, Re 1906 TS 373, Transvaal SC.
Allobrogia Steamship Corp, Re [1978] 3 All ER 423.
d Arena Corp Ltd v Schroeder [2003] EWHC 1089 (Ch), [2003] All ER (D)
199 (May).
Banque des Marchands de Moscou (Koupetschesky) (in liq) v Kindersley
[1950] 2 All ER 549, [1951] Ch 112, CA; affg [1950] 2 All ER 105.
Banque Indosuez SA v Ferromet Resources Inc [1993] BCLC 112.
Brink’s Mat Ltd v Elcombe [1988] 3 All ER 188, [1988] 1 WLR 1350, CA.
e
Cambridge Gas Transport Corp v Navigator Holdings plc Creditors’
Committee [2006] UKPC 26, [2007] 2 BCLC 141, [2006] 3 All ER 829,
[2007] 1 AC 508, [2006] 3 WLR 689, PC.
Cia Merabello San Nicholas SA, Re [1972] 3 All ER 448, [1973] Ch 75,
[1972] 3 WLR 471.
f City Vintners Ltd, Re (10 December 2001, unreported), Ch D.
Crigglestone Coal Co Ltd, Re [1906] 2 Ch 327, CA.
Dallhold Estates (UK) Pty Ltd, Re [1992] BCLC 621.
Drax Holdings Ltd, Re [2003] EWHC 2743 (Ch), [2004] 1 BCLC 10,
[2004] 1 All ER 903, [2004] 1 WLR 1049.
g Gamlestaden Fastigheter AB v Baltic Partners Ltd [2008] 1 BCLC 468, HL.
Ghafoor v Cliff [2006] EWHC 825 (Ch), [2006] 2 All ER 1079, [2006]
1 WLR 3020.
International Westminster Bank plc v Okeanos Maritime Corp [1987]
BCLC 450, [1987] 3 All ER 137, sub nom Re a Company (No 00359 of
1987) [1988] Ch 210, [1987] 3 WLR 339.
h Latreefers Inc, Re, Stocznia Gdanska SA v Latreefers Inc [1999] 1 BCLC
271, Ch D; affd sub nom Stocznia Gdanska v Latreefers Inc (No 2)
[2001] 2 BCLC 116, CA.
Memory Corp v Sidhu (No 2) [2000] 1 WLR 1443, CA.
R v Kensington Income Tax Comrs, ex p Princess Edmond de Polignac
i [1917] 1 KB 486, CA.
Real Estate Development Co, Re [1991] BCLC 210.
Siporex Trade SA v Comdel Commodities Ltd [1986] 2 Lloyd’s Rep
428, CA.
Wallace Smith Group Ltd, Re [1992] BCLC 989.
[2009] 1 BCLC 298

Application a
The applicants, Millhouse Capital UK Ltd and Roman Arkadievich
Abramovich, applied for an order that the appointment of the third
respondent, Stephen Cork, as provisional liquidator of OJSC Ank Yugraneft
(Yugraneft), a Russian corporation, be set aside, a declaration that the court
decline to exercise its insolvency jurisdiction over Yugraneft, and an order
that the petition presented by the first respondent, Sibir Energy plc, the b
second respondent, OAO Moscow Oil & Gas Co, and the third respondent
for the winding up of Yugraneft in England be dismissed. The facts are set
out in the judgment and in the judgment of Clarke J in a Commercial Court
action (Yugraneft v Abramovich, Millhouse and Berezovsky [2008] EWHC
2613 (Comm)) delivered immediately prior to the judgment in the instant
c
case.
Alan Boyle QC and Richard Walford (instructed by Skadden, Arps, Slate,

Meagher & Flom (UK)) for the applicants.
Robin Dicker QC, Michael Swainston QC, Mark Arnold and Robert
D’Cruz (instructed by Clyde & Co LLP) for the respondents. d
Cur adv vult
29 October 2008. The following judgment was delivered.
CHRISTOPHER CLARKE J. e
[1] Millhouse and Mr Abramovich (the applicants) seek an order that the
appointment of Mr Cork as provisional liquidator, made by Evans-Lombe J
on 14 November 2007, be set aside, a declaration that the court declines to
exercise its insolvency jurisdiction over Yugraneft and an order that the
petition to wind up Yugraneft, which is also before me, should be dismissed. f
[2] I have already decided (in [2008] EWHC 2613 (Comm)) that the
proceedings against the applicants should be dismissed and declined to give
Yugraneft permission to serve Mr Abramovich out of the jurisdiction. In
those circumstances the petitioners accept that the petition should be
dismissed (subject to any question of appeal), whereupon the appointment
of the provisional liquidator will also terminate automatically; see r 4.31(2) g
of the Insolvency Rules 1986. However, the application is a free-standing
application and I deal with it accordingly. I do so on the assumption that,
contrary to my earlier judgment, the applicants are not entitled to succeed
in their reverse summary judgment application.
[3] In essence the applicants contend: (a) that there is not, and has never
been, any need for the court to exercise its insolvency jurisdiction in relation h
to Yugraneft; (b) that the requirements for the winding up of Yugraneft as
an unregistered company are not met; and (c) that the appointment of the
provisional liquidator was procured by materially misleading statements
and by a failure to disclose matters of relevance and importance to the
court.
[4] The petitioners contend that, on the assumption that the defendants i
fail in their Commercial Court applications, the court has jurisdiction under
s 221 of the Insolvency Act 1986 (the Act) to wind up Yugraneft and should
do so. They further submit that, if the court were to dismiss the petition or
set aside the appointment of the provisional liquidator, the Commercial
[2009] 1 BCLC 298

Ch D Re OJSC Ank Yugraneft (Christopher Clarke J) 303
a Court proceedings would nevertheless remain on foot because: (a) The acts
of the provisional liquidator are valid notwithstanding any defects that
there may have been in his appointment (s 232 of the 1986 Act). (b) Even if
the provisional liquidator had never been appointed, the Commercial Court
proceedings would still have been properly commenced. Mr Kotov, the
Russian liquidator, had authority to cause Yugraneft to commence them. He
b did in fact authorise their commencement and has ratified them: as appears
from para 38 of his second witness statement and para 24 of his third. It is
common ground that his authority to do so will be recognised by the
English court without the need for any separate application or order of this
court.
c
IS THERE A NEED TO EXERCISE THE COURT’S INSOLVENCY JURISDICTION?
[5] The jurisdiction of the Companies Court to wind up a company is
markedly different from that of the Commercial Court to resolve disputes.
Liquidation, as Lord Scott observed in Gamlestaden Fastigheter AB v Baltic
Partners Ltd [2008] 1 BCLC 468 at 478, is—
d
‘although from a financial point of view carried out for the benefit of
the creditors, … a public act or process in which the public has an
interest.’
The purpose of the proceedings is to ensure that all creditors recover in
accordance with the statutory order of priorities and that all of them rank
e pari passu within their class.
[6] Buckley LJ expressed matters thus in Re Crigglestone Coal Co Ltd
[1906] 2 Ch 327 at 331–333:
‘… the order which the petitioner seeks is not an order for his benefit,
but an order for the benefit of a class of which he is a member. The
f right … is not his individual right, but his representative right … The
Court has often refused a [winding-up] order … because the Court does
not make an order when no benefit can result. If the order will be useful
(not necessarily fruitful) there is jurisdiction to make it … The only real
danger is lest petitions should be presented simply for the purpose of
making costs where there is really nothing to wind up—a danger
g against which the Court is strong enough to defend itself.’
[7] In the Court of Appeal Collins MR said ([1906] 2 Ch 327 at
337–338):
‘If there is a reasonable probability, or even a reasonable possibility …
h that the unsecured creditors will derive any advantage from a
winding-up, the order ought to be made …’
[8] Yugraneft is currently being wound up in Russia. On 14 December
2004 Yugraneft, by its general director, declared that it was unable to meet
its liabilities and applied for the appointment of a temporary administrator.
On 20 December 2004 it petitioned the Moscow Arbitrazh Court (the
i Moscow court) for its own bankruptcy. On 22 December 2004 the Moscow
court ordered the suspension of the powers of Yugraneft’s board and the
imposition of a supervision procedure under art 62 of the Federal Law on
Insolvency. On 12 January 2005 Mr Kotov was appointed interim
administrator of the company. On 19 April 2005 the Moscow court ordered
[2009] 1 BCLC 298

that there should be external management of Yugraneft for 18 months and a

appointed Mr Kotov as external manager. On 23 October 2006 the
Moscow court extended the term of the external management of the
company. On 28 May 2007 the Moscow court reviewed the administration,
declared Yugraneft insolvent, and appointed Mr Kotov as bankruptcy
administrator for a year. On 23 June 2008 that appointment was extended
for another year. b
[9] Yugraneft is an ‘unregistered company’ within the meaning of s 220 of
the Act. Sections 221(1) and (5) of the Act provide that such a company
may be wound up in the following circumstances:
‘(a) if the company is dissolved, or has ceased to carry on business, or
is carrying on business only for the purpose of winding up its affairs; (b) c
if the company is unable to pay its debts; (c) if the court is of opinion
that it is just and equitable that the company should be wound up.’
[10] Yugraneft is carrying on business only for the purpose of winding up
its affairs and is unable to pay its debts. The court therefore has the power
to wind it up. d
[11] The apparently unlimited discretion conferred by s 221(1) and its
predecessors has been the subject of considerable definition by the court. In
Banque des Marchands de Moscou (Koupetschesky) (in liq) v Kindersley
[1950] 2 All ER 549 at 556, [1951] Ch 112 at 125–126 Evershed MR said:
‘As a matter of general principle, our courts would not assume, and e
Parliament should not be taken to have intended to confer, jurisdiction
over matters which naturally and properly lie within the competence of
the courts of other countries. There must be assets here to administer
and persons subject, or at least submitting, to the jurisdiction who are
concerned or interested in the proper distribution of the assets. And
when these conditions are present the exercise of the jurisdiction f
remains discretionary. Prima facie if the local law of the dissolved
foreign corporation provided for the due administration of all the
property and assets of the corporation wherever situate among the
persons properly entitled to participate therein, the case would not be
one for interference by the machinery of the English courts.’ (My
emphasis.) g
[12] As Lawrence Collins J explained in Re Drax Holdings Ltd [2003]

EWHC 2743 (Ch), [2004] 1 BCLC 10 at para [24], [2004] 1 WLR 1049:
‘The English court will not wind up a foreign company where it has
no legitimate interest to do so, for that would be to exercise an h
exorbitant jurisdiction contrary to international comity …’
[13] In Re Cia Merabello San Nicholas SA [1972] 3 All ER 448 at 460,
[1973] Ch 75 at 91–92 Megarry J summarised the essentials:
‘(1) There is no need to establish that the company ever had a place of
business here. (2) There is no need to establish that the company ever i
carried on business here, unless perhaps the petition is based on the
company carrying on or having carried on business. (3) A proper
connection with the jurisdiction must be established by sufficient
evidence to show (a) that the company has some asset or assets within
[2009] 1 BCLC 298

a the jurisdiction, and (b) that there are one or more persons concerned in
the proper distribution of the assets over whom the jurisdiction is
exercisable. (4) It suffices if the assets of the company within the
jurisdiction are of any nature; they need not be “commercial” assets, or
assets which indicate that the company formerly carried on business
here. (5) The assets need not be assets which will be distributable to
b creditors by the liquidator in the winding-up: it suffices if by the making
of the winding-up order they will be of benefit to a creditor or creditors
in some other way. (6) If it is shown that there is no reasonable
possibility of benefit accruing to creditors from making the winding-up
order, the jurisdiction is excluded.’ (My emphasis.)
c [14] In International Westminster Bank plc v Okeanos Maritime Corp
[1987] BCLC 450, [1988] Ch 210 Peter Gibson J held that the existence of
a potential claim in respect of fraudulent or wrongful trading under ss 213
and 214 of the Act against officers of the company did not constitute an
asset within the jurisdiction because that was a question which had to be
tested at the moment when the petition was presented. But he also held that
d the existence of an asset within the jurisdiction was not necessary to found
jurisdiction and that a winding up could be ordered provided a sufficient
connection with the jurisdiction was shown and there was a reasonable
possibility of benefit for the creditors from the winding up.
[15] In Re Real Estate Development Co [1991] BCLC 210 at 217 Knox J
summarised the three core requirements as these:
e
‘(1) that there must be a sufficient connection with England and
Wales which may, but does not necessarily have to, consist of assets
within the jurisdiction; (2) that there must be a reasonable possibility if
a winding-up order is made, of benefit to those applying for the
winding-up order; (3) one or more persons interested in the distribution
f of assets of the company must be persons over whom the court can
exercise a jurisdiction.1’
[16] In relation to the first requirement Knox J sought to define ‘sufficient
connection’ as follows (at 217):
g ‘The proposition that there has to be a sufficient connection with this

jurisdiction prompts the question, sufficient for what? The perhaps
rather circular answer I would give to that question is, sufficient to
justify the court setting in motion its winding-up procedures over a
body which prima facie is beyond the limits of territoriality. That has
two significant consequences in the context of the present case. First, it
h seems to me to be necessary, where there is no asset within the
jurisdiction at the presentation of a petition, to establish a link of
genuine substance between the company and this country.’ (My
emphasis.)
[17] In Re Latreefers Inc, Stocznia Gdanska SA v Latreefers Inc [1999]
i 1 BCLC 271 at 277 Lloyd J pointed out that the formulation of Megarry J’s
principles has changed over time and that the presence of assets within the
1 There is no doubt that this last requirement is satisfied. Sibir is incorporated in England
& Wales. OAO Moscow Oil & Gas Co (MOGC) has submitted to the jurisdiction for
the purpose of the winding up.
[2009] 1 BCLC 298

jurisdiction was no longer essential and, having cited the three requirements a
specified by Knox J in Real Estate Development, he said ([1999] 1 BCLC
271 at 278):
‘[Counsel for the petitioning creditor] accepts that there are
connections with other jurisdictions (though almost none with the
jurisdiction of incorporation) but he says that this is not the question. It b
seems to me that it may be relevant to consider what connections there
may be with other jurisdictions in order to answer the rather ill-defined
question as to the sufficiency of the connection with this jurisdiction. If
there is a clear and substantial connection with some other jurisdiction,
it may be that more is needed by way of a connection with England and
Wales for it to suffice as the foundation of the exercise of c
extra-territorial jurisdiction. Thus, in the Okeanos case [1987] BCLC
450 at 464, [1988] Ch 210 at 226–227 Peter Gibson J considered, in
this context, whether there was any more appropriate jurisdiction to
wind up the company.2’ (My emphasis.)
[18] In Re Cia Merabello [1972] 3 All ER 448, [1973] Ch 75 (and in Re d
Allobrogia Steamship Corp [1978] 3 All ER 423) the only asset and
connection with the UK was an insurance claim by, respectively, a dormant
Panamanian and a dissolved Liberian corporation against (in each case) an
English P & I Club. In each case the claims were causes of action situated in
England and there was no prospect of the companies being wound up in
their countries of incorporation, a matter which Megarry J treated as a e
relevant consideration. In Latreefers the company was a Liberian company
with an English bank account and the case involved an English judgment in
relation to contracts with an English choice of law clause.
[19] In Stocznia Gdanska SA v Latreefers Inc (No 2) [2001] 2 BCLC 116
at para [31] (affirming Re Latreefers Inc, Stocznia Gdanska SA v
Latreefers Inc [1999] 1 BCLC 271) Morritt LJ said: f
‘As Megarry, Nourse and Peter Gibson JJ have all observed, the court
must have good reason to make the winding-up order, and the existence
of assets here will constitute good reason in the normal course.’
[20] In that case the Court of Appeal declined to decide whether the three g
core requirements were preconditions for the existence of the statutory
jurisdiction or principles to be observed in considering its exercise on the
ground that there was no reason to do so. In Re Drax Holdings Ltd [2003]
EWHC 2743 (Ch), [2004] 1 BCLC 10, [2004] 1 WLR 1049 Lawrence
Collins J treated them as going to the discretion of the court. I respectfully
agree. The jurisdiction of the court is that conferred by the statute. If the h
discretion which the statute confers is to be exercised the three core
requirements must be satisfied.
THE APPLICANTS’ SUBMISSIONS

[21] Mr Alan Boyle QC, who appeared before me with Mr Richard
Walford, submits that the need to establish a link of genuine substance i
between the company and England & Wales is not excluded merely because
2 The same point is made in Re Wallace Smith Group Ltd [1992] BCLC 989 at 1007
(Edward Nugee QC sitting as a deputy judge).
[2009] 1 BCLC 298

a there is an asset in this country, and that if there is a clear and substantial
connection with another jurisdiction a stronger link with England and
Wales is required as the foundation of the exercise of extra territorial
jurisdiction. In this respect it is material whether or not there is a likelihood
of the company’s asset or assets being administered by the courts of any
other jurisdiction. If the asset is a cause of action with a reasonable prospect
b of success and there is no prospect of the company being wound up in its
country of incorporation the court may be willing to make a winding-up
order but it is a matter of the court’s discretion depending on all the
circumstances. Even if the other factors are established, if there is no
reasonable possibility of benefit accruing to creditors from the making of a
winding-up order, the jurisdiction will not be exercised.
c
[22] He submits that, even if the court had declined to grant the
applicants’ reverse summary judgment applications, it would still be
inappropriate for the court to exercise its winding-up jurisdiction because:
(a) there is no need for it; (b) there is no prospect of any benefit whatsoever
being derived from a winding-up order; (c) there is a much clearer and more
d substantial connection with Russia and a stronger link with England and
Wales is not shown; (d) it is not the case that there is no prospect of
Yugraneft being wound up in Russia.
e NO NEED
[23] Mr Kotov has powers equivalent to those of an English liquidator of
an English company. In those circumstances he was entitled at common law
to be recognised in England. In Cambridge Gas Transport Corp v
Navigator Holdings plc Creditors’ Committee [2006] UKPC 26, [2007]
2 BCLC 141 at [20], [2007] 1 AC 508 the Privy Council said:
f
‘[20] Corporate insolvency is different in that, even in the case of
moveables, there is no question of recognising a vesting of the
company’s assets in some other person. They remain the assets of the
company. But the underlying principle of universality is of equal
application and this is given effect by recognising the person who is
g empowered under the foreign bankruptcy law to act on behalf of the
insolvent company as entitled to do so in England. In addition, as
Innes CJ said in the Transvaal case of Re African Farms Ltd 1906
TS 373 at 377, in which an English company with assets in the
Transvaal had been voluntarily wound up in England, “recognition
carries with it the active assistance of the court”. He went on to say that
h active assistance could include: “A declaration, in effect, that the
liquidator is entitled to deal with the Transvaal assets in the same way
as if they were within the jurisdiction of the English courts, subject only
to such conditions as the court may impose for the protection of local
creditors, or in recognition of the requirements of our local laws”.’
i [24] Lord Hoffmann said (at [22]):
‘… the domestic court must at least be able to provide assistance by
doing whatever it could have done in the case of a domestic insolvency.
The purpose of recognition is to enable the foreign office-holder or the
creditors to avoid having to start parallel insolvency proceedings and to
[2009] 1 BCLC 298

give them the remedies to which they would have been entitled if the a
equivalent proceedings had taken place in the domestic forum.’
[25] Accordingly, Mr Kotov was entitled to be recognised as liquidator
empowered by the insolvency law of Russia to act on behalf of Yugraneft
and enabled to act on the company’s behalf in England without having to
start English insolvency proceedings. b
[26] Further, under art 9 of the UNCITRAL Model Law (set out as Sch 1
to the Cross-Border Insolvency Regulations 2006, SI 2006/1030), which has
the force of law in Great Britain:
‘A foreign representative is entitled to apply directly to a court in
Great Britain.’
c
Mr Kotov could, therefore, have given instructions for a claim to be
started in the Commercial Court by Yugraneft without the need to resort to
the court’s winding-up jurisdiction.
NO PROSPECT OF BENEFIT
[27] The applicants do not submit that it is necessary to show that a d
winding-up order is essential if the petitioners are to benefit, i e that winding
up will only be ordered as a matter of necessity; but that they must at least
show a real possibility of benefit to them from the making of the order and
that the making of the order will serve some useful purpose. Since
Mr Kotov could, if necessary, authorise the commencement of proceedings e
by Yugraneft himself and has said that, if necessary, he will do so, no useful
purpose is served by an order.
ABSENCE OF CONNECTION WITH THE JURISDICTION

[28] The applicants also submit that there is, in any event, insufficient
connection with England & Wales. Yugraneft has no connection with f
England, being a Russian company, now being wound up in Russia with a
Russian liquidator empowered to deal with all matters arising out of the
liquidation. Yugraneft has never carried on any business in England and,
apart from this claim, has no assets in England.
THE REASONS GIVEN BY THE PETITIONERS g

The petition
[29] Paragraph 12 of the petition contended that an order to wind up the
company would benefit Sibir as a creditor and MOGC as a contributory in
that it would enable the liquidator to pursue the claims available to the
company, whose estimated value exceeded the total amount of the debts h
owed to its creditors.
The skeleton argument

[30] In the skeleton argument filed in support of the application for the
appointment of a provisional liquidator no further explanation was given as
to why a winding-up order was needed. Two reasons were given for the i
appointment of a provisional liquidator. The first was that there was no
good reason to delay the commencement of the Commercial Court action
until after a winding-up order had been made (the petition was not due to
be heard until 12 March 2008) when the primary purpose of the petition
[2009] 1 BCLC 298

a was to procure the winding up of Yugraneft in order that it might pursue

the Commercial Court action. The applicants submit that that was not a
good reason for having a provisional liquidator since Mr Kotov could have
commenced the proceedings at once by instructing English solicitors in
reliance on art 9 of the UNCITRAL Model Law or on the position at
common law. If he had felt it necessary to obtain recognition before starting
b the claim he could have availed himself of the straightforward procedure
laid down in arts 11 and 24.
[31] The second reason was that any delay would increase the risk that
Mr Abramovich would become aware of the petition, and of its purpose,
and take steps designed to obstruct the pursuit of the claim. This, the
applicants submit, is nothing more than the giving of a reason as to why
c
delay was undesirable. But, since Yugraneft did not have to wait until the
appointment of a provisional liquidator in order, through Mr Kotov, to start
a claim, this reason had no better validity than the first.
[32] The applicants also submit that the assertion that Mr Abramovich
might, if he became aware of the petition, do something to obstruct the
d pursuit of the claim, was without evidential support. Further, if
Mr Abramovich had become aware of the petition it would not have told
him what assets Yugraneft was said to have in England and he could not
have known that the only asserted asset of Yugraneft was the claim against
him and Millhouse. He could not, therefore, have learnt that the purpose of
the winding-up petition was to bring a claim against him. The asserted risk
e that he might flee was illusory.
THE WITNESS STATEMENTS
Mr Kotov
[33] In his first witness statement Mr Kotov said that he could have
sought recognition as a foreign representative under the Cross-Border
f Insolvency Regulations 2006 and pursued the Commercial Court
proceedings thereafter. He explains that he did not do so for two reasons.
The first was that English is not his first language and that he was not
familiar with English court procedure. The second was that it would be
better for the interests of Yugraneft in this country to be represented by an
independent professional ‘who is properly authorised to act here and will
g do so as an officer of the High Court and who will inevitably be more
familiar with these matters than I’.
[34] The applicants submit that neither of these reasons is convincing.
Foreign litigants can and have for centuries instructed English solicitors and
counsel. There is no need for a second independent professional to be
h interposed between Mr Kotov and English lawyers. Mr Kotov can instruct
them himself. Whether the claim is brought through Mr Kotov or an
English liquidator it will be handled by independent professional lawyers
instructed in England. Neither the language barrier nor a desire for an
intermediary between Mr Kotov and his English solicitors has anything to
do with whether it is appropriate to wind Yugraneft up in England. There is
i no relief which a provisional liquidator, or a liquidator, could obtain for
Yugraneft which Mr Kotov could not himself obtain.
Mr Friedman
[35] In his second affirmation Mr Friedman contended that there was a
reasonable prospect of benefit to Yugraneft if it were to be wound up in
[2009] 1 BCLC 298

England in the form of the intended Commercial Court proceedings. The a

applicants contend that, while it is true that Yugraneft and its creditors
stand to benefit from a successful conclusion of the Commercial Court
proceedings, that is a benefit which would be derived from the Commercial
Court proceedings whether or not there was a winding-up order. Counsel
submitted to Evans Lombe J that ‘one critical issue is whether or not there
is an asset within the jurisdiction giving rise to a reasonable possibility of b
benefit’. That is, however, an incorrect test. The question is whether
Yugraneft will derive benefit from the making of the winding-up order,
which it would not derive in its absence.
Mr Cork c
[36] The points made in the previous paragraphs were made in the first
witness statement of Karyl Nairn. Thereafter Mr Cork gave one, and
Mr Kotov gave two, further statements. In his witness statement Mr Cork
stated that the principal purpose of his appointment was to facilitate the
commencement by Yugraneft of proceedings in the Commercial Court and
that he had carefully considered the claim in draft, authorised its d
commencement once he had been appointed, followed the progress of the
action and kept the position under constant review.
Mr Kotov
[37] In his second witness statement Mr Kotov largely referred back to his
first witness statement to explain why he supported the appointment of a e
provisional liquidator and the commencement of the Commercial Court
action and why he did not initiate the Commercial Court proceedings
himself. In the final sentence of his para 17 he expressed the view that it
would be in the best interest of ‘the case, the creditors, Yugraneft and
society’ for Yugraneft’s bankruptcy proceedings in the UK and the f
Commercial Court proceedings to be managed by an English liquidator
based in London.
[38] In his fourth witness statement Mr Kotov said that if it ever became
necessary for him to do so he would be ‘willing and able to take the
necessary steps to … assume conduct of the Commercial Court proceedings’
and stated his belief that an English liquidator would be best qualified to g
supervise proceedings in England. He also said that he was in fear for his
personal safety because of three anonymous telephone calls made to his
mobile telephone in December 2005 followed by an intimidating meeting
with a representative of a bank’s security service acting on behalf of
unspecified clients, who suggested that Mr Kotov should ‘not take any
inappropriate action’ in filing lawsuits on behalf of Yugraneft. As a result h
he asked Sibir to provide him, as they have, via a security firm, with armed
bodyguards when he is in Russia.
[39] The applicants submit that on this evidence there is no real
possibility of benefit arising out of the winding-up proceedings and there is
therefore no need for the court to exercise its insolvency jurisdiction. This is
not a case where there is no prospect that Yugraneft’s domestic court will i
act to wind it up. Further there is no sufficiently strong connection with
England to justify the making of a winding-up order. Yugraneft’s registered
office, staff, and place of business are in Russia. The transaction said to give
rise to the alleged cause of action, i e the issue of the participation interests
[2009] 1 BCLC 298

a occurred in Russia and those interests are Russian interests.
THE PETITIONERS’ SUBMISSIONS

[40] Mr Robin Dicker QC for the petitioners submits that sufficient
connection with the jurisdiction is satisfied if, as for these purposes I
assume, Yugraneft has an arguable claim against Millhouse and
b
Mr Abramovich. As a matter of policy it would be highly undesirable if the
presence of assets were not sufficient; Re Cia Merabello [1972] 3 All ER
448 at 455, 456 and 457, [1973] Ch 75 at 86, and 88 per Megarry J (‘As
Harman J observed at first instance in the Banque des Marchands case
[1950] 2 All ER 105 at 109 it would be most unfortunate if the existence of
c assets did not confer jurisdiction.’).
[41] In Stocznia Gdanska SA v Latreefers Inc (No 2) [2001] 2 BCLC 116
Morritt, LJ said that the existence of assets within the jurisdiction would in
the normal course constitute good reason for making the order. Given the
existence of an asset of substance within the jurisdiction, such as a
potentially valuable chose in action, it is not necessary to look for some
d further or better connection with the jurisdiction. He draws attention to the
formulation of the first requirement in 7(4) Halsbury’s Laws (4th edn)
para 1157 (‘may be wound up … if it has assets in England, or if a
sufficient connection with England can be shown …’ (my emphasis)).
[42] As to the second requirement, a reasonable possibility of benefit is
established if the petitioners can show that the Commercial Court action
e has a reasonable possibility of success. In relying on Megarry J’s
formulation in Re Cia Merabello [1972] 3 All ER 448 at 460, [1973] Ch 75
at 92 (‘If it is shown that there is no reasonable possibility of benefit
accruing to creditors from making the winding-up order, the jurisdiction is
excluded’) the defendants have misconstrued the point which Megarry J
f was making.
[43] In Re Cia Merabello the petitioner claimed that it was for those
opposing the petition to show that no possible benefit could come from
making a winding-up order ([1972] 3 All ER 448 at 457, [1973] Ch 75 at
89). The insurer contended that the company’s only asset (its claim against
the insurer) would be taken out of the winding up and vested in the
g petitioners under the Third Party (Rights Against Insurers) Act 1930.
Megarry J drew a distinction between the winding-up process and the
winding-up order (see [1972] 3 All ER 448 at 458, [1973] Ch 75 at 90). He
noted that it could be said that the petitioner did not really want to bring
about the winding-up process and only wanted the order so as to secure a
personal benefit. But he held that this did not exclude jurisdiction (see
h [1972] 3 All ER 448 at 458–459, [1973] Ch 75 at 90). A personal benefit
flowing to the petitioner would be sufficient, even if it was not one which
would flow to him through the medium of the winding-up process but only
from the making of the winding-up order (see [1972] 3 All ER 448 at 459,
[1973] Ch 75 at 90). A winding-up order would be made even though, once
the order was made, nothing further would be required to be done in the
i liquidation.
[44] Mr Dicker went on to submit that any suggestion that it is essential
that the winding up achieves something which would not otherwise be
achievable is contrary to principle and authority. No such requirement
exists in a domestic context, where, as between it and the company, a
[2009] 1 BCLC 298

creditor is entitled to a winding-up order ex debito justitiae. Nor is there a

any support for the existence of such a requirement in relation to a foreign
company. No doubt there must be something of utility for a liquidator to do
(alternatively, following Re Cia Merabello, at least some utility from the
order). But the petitioner does not have to show that what the liquidator is
to do, cannot be achieved in any other way.
[45] Nor, Mr Dicker submitted, is there any requirement that there should b
be no prospect of the company being wound up in its place of
incorporation. The correct position is stated in 7(4) Halsbury’s Laws (4th
edn) para 1159 (‘… the jurisdiction of the court to make a winding-up
order is unaffected by the fact that a liquidation has already commenced in
the country of incorporation’). There are numerous examples in the
c
authorities of situations in which the English court has made a winding-up
order in respect of a foreign company despite the fact that it is in
liquidation in its place of incorporation.
DISCRETION d
[46] Mr Dicker submitted that the court should use its discretion to wind
up Yugraneft for a number of reasons. Firstly, the court will pay heed to the
wishes of the relevant classes, namely creditors and contributories. Sibir and
associated companies represent more than 75% of the claims admitted in
the Russian liquidation.
[47] Secondly the petition is supported by the Russian liquidator, who e
was appointed to act in the best interests of the creditors as a whole. It
cannot be contrary to comity to make a winding-up order in those
circumstances. On the contrary a refusal to do so would be more likely to
be contrary to comity, which requires not only that the English courts
should refrain from interference in circumstances where it would be
inappropriate to do so but also that it should lend assistance when needed. f
[48] A number of authorities emphasise the need to provide assistance:
see, for example, Banque Indosuez SA v Ferromet Resources Inc [1993]
BCLC 112 at 117–118 per Hoffmann J (as he then was) (‘This court … will
do its utmost to co-operate with the United States Bankruptcy Court and
avoid any action which might disturb the orderly administration of Inc in g
Texas under ch 11’). Cambridge Gas Transport Corp v Navigator
Holdings plc Creditors’ Committee [2006] UKPC 26, [2007] 2 BCLC 141,
[2006] 3 All ER 829, [2007] 1 AC 508 is another example; see the reference
to ‘active assistance’ at para [20].
[49] A similar approach has been given statutory support in the context of
corporate insolvency. The development started with the introduction of h
s 426 of the Act. That Act applies to various relevant countries and
territories which have been designated by the Secretary of State (s 426(11)
(b)). The list does not at present include Russia. Section 426(5) provides
that:
‘The courts having jurisdiction in relation to insolvency law in any i
part of the United Kingdom shall assist the courts having corresponding
jurisdiction in any … relevant country or territory.’
The word ‘shall’ means that the English court ought to give the assistance
requested unless there are powerful reasons why this should not be done:
[2009] 1 BCLC 298

a see, for example, Re Dallhold Estates (UK) Pty Ltd [1992] BCLC 621 at
627 per Chadwick J.
[50] More recently, this approach has been emphasised by the
introduction into English law of the UNCITRAL Model Law by the
Cross-Border Insolvency Regulations 2006, SI 2006/1030. This law applies
where assistance is sought in this country by a foreign representative,
b including one appointed in Russia, in connection with a foreign proceeding.
[51] The regulations provide for a number of different ways in which
assistance can be provided; see e g arts 9 and 11 (direct access), arts 15–24
(formal recognition) and arts 28–31 (concurrent proceedings). There is no
requirement, for example, that assistance by way of formal recognition will
only be provided if direct assistance is not possible; or that concurrent
c
proceedings will not be permitted where formal recognition can be
provided.
[52] The intention of the Cross-Border Insolvency Regulations 2006 is to
ensure that all proper assistance can be and is provided to a foreign office
holder. See, for example, art 25 (‘… the court may cooperate to the
d maximum extent possible with foreign courts or foreign representatives …’)
and art 27 (co-operation may be implemented ‘by any appropriate means’).
[53] Thirdly, the petition is also presented by MOGC which holds more
than 50% of the shares in Yugraneft. It is not opposed by the company or
other creditors.
[54] The reasons why the petitioners and the liquidator consider that the
e making of a winding-up order and the appointment of a liquidator would
be in the best interest of the creditors of Yugraneft are straightforward and
should command acceptance. It is desirable that the person responsible for
pursuing the litigation on behalf of Yugraneft should be an English licensed
insolvency practitioner experienced with litigation in England; as opposed
to Mr Kotov, whose first language is not English and who has no experience
f of litigation in England let alone litigation of this magnitude. In addition the
making of a winding-up order would reduce the risk of the Commercial
Court proceedings being automatically affected by anything that might
happen in the Russian liquidation such as the removal of Mr Kotov or a
failure to renew his appointment or if steps were taken to try to conclude
the Russian liquidation before the conclusion of the Commercial Court
g
proceedings. The creditors of Yugraneft would prefer Mr Cork to be in
charge of the litigation and the court should permit their views to prevail.
The court should give little, if any, weight to Millhouse’s views. Its claim
against Yugraneft, which it acquired in March 2008, is for some £9,302
and represents about 0.03% of the total admitted claims. Whilst the debt
h gives it locus standi to appear, as a creditor, its views should not carry any
weight. Nor should those of Mr Abramovich.
[55] The petitioners also submit that the applicants’ view that Mr Cork
brings nothing of benefit to the case should be ignored. The issue of
whether Yugraneft would do better if Mr Kotov or Mr Cork was
responsible for pursuing the claim is an issue concerning the internal
i management of Yugraneft with which they are not concerned. The
applicants’ reasons for objecting to a provisional liquidator are unlikely to
be based on what they consider to be in the best interests of the creditors
rather than themselves as defendants. The contention that the petitioners
could get everything that they wanted from a winding-up order in some
[2009] 1 BCLC 298

other way begs the question of what is meant by everything. The petitioners a
were and are entitled to seek the assurance that the Commercial Court
proceedings would be commenced and continued by an insolvency
practitioner, other than Mr Kotov, whose authority would not be in
question. Although they did not in fact do so the defendants might have
contended that Mr Kotov lacked authority to commence and continue the
proceedings, or events in Russia might imperil his ability to do so. b
CONCLUSIONS
[56] This is not a case where a winding-up order is sought because
without it the petitioners cannot get relief, e g because the company has
ceased to exist or is moribund and there is no prospect of it ever becoming c
the subject of liquidation proceedings, as in Banque des Marchands; Cia
Merabello and Allobrogia. On the contrary, Mr Kotov could have launched
the Commercial Court proceedings whether or not winding-up proceedings
were launched and a liquidator appointed. It follows from that, that the
petitioners cannot rely on impossibility, or severe difficulty, in launching the
Commercial Court proceedings as a ground for ordering a winding up. d
[57] The dispute resolves itself, as it seems to me, into a question as to
whether or not the chose in action constituted by the Commercial Court
claim constitutes an asset which affords a sufficient connection with
England and whether there is a reasonable possibility of benefit to those
applying for the winding-up order.
[58] As to the former, I accept that the fact that there is an asset within e
the jurisdiction to which the company lays claim is not automatically a
reason for the court to exercise the winding-up jurisdiction. The asset may
be so small or of such a character that the link with the jurisdiction said to
be constituted by it is too tenuous to justify invoking the winding-up
jurisdiction. In Re Real Estate Development Co [1991] BCLC 210 the links f
with the jurisdiction relied on consisted of (i) a French judgment against a
Kuwaiti borrower registered in England; (ii) 98 shares in an English
registered company, but with non-UK directors, a non-UK business and
non-UK assets, those shares being in the ownership of another Kuwaiti
company to which they had been transferred between the oral judgment in
proceedings in Paris and the formal judgment; and (iii) a possible action in g
an English court (against a non-UK defendant) under s 172 of the Law of
Property Act 1925 to set aside the share transfer. Only (ii) was treated as
locally situated in England. The possible action under s 172 was not an
asset locally situated at the date of the petition because it would only arise
if a winding-up order was made. The links with England were regarded as
insufficient. h
[59] In the present case Yugraneft asserts a claim for $2bn against an
English company and Mr Abramovich, who, on the hypothesis that the
Commercial Court proceedings were to go ahead would either be resident
in England or a necessary or proper party to the claim against Millhouse,
and, in either event, subject to the jurisdiction of the English court. Such a
claim is in my view an asset which constitutes a sufficient link with i
England.
[60] As to the possibility of benefit, there is said to be a tension between
the Merabello formulation (‘reasonable possibility of benefit accruing to
creditors from making the winding-up order’) and that in the Real Estate
[2009] 1 BCLC 298

a case (‘a reasonable possibility if a winding-up order is made, of benefit to

those applying for the winding up’). I regard this point as largely semantic.
If the petitioners seek a winding-up order they must establish that the
making of it will be of some benefit to them. This was the point that
Megarry and Knox JJ had in mind by their respective formulations, that of
Megarry J being fashioned in order to take account of the distinction
b between benefiting from the order and benefiting from the winding-up
process. That is not the same as saying that the winding-up jurisdiction
cannot be invoked if the same, or a similar, benefit can be achieved by other
means, so that winding up is a remedy of last resort. The fact that a similar
result could be achieved by other means might be a reason for declining to
exercise the winding-up jurisdiction; but whether it does or not must
c
depend on all the circumstances.
[61] In the present case the appointment of Mr Cork as provisional
liquidator and his appointment, in all probability, as liquidator following a
winding up, would have meant that the Commercial Court proceedings
were under the superintendence of a licensed insolvency practitioner well
d versed in the intricacies of English litigation of this size and complexity,
who was an officer of, accountable to, and subject to the direction of the
English court. This appears to me to be an advantage that the petitioners
may legitimately seek.
[62] The appointment of a provisional liquidator, and then a liquidator,
would afford to the petitioners the assurance that there would be someone
e supervising the Commercial Court proceedings whose appointment was
fixed by the Companies Court and subject to revocation only by that court
or by a general meeting of the creditors, and who would conduct the
liquidation in England as an ancillary to the Russian liquidation, under
English law rules. The petitioners would thus be protected if, for whatever
reason, Mr Kotov’s appointment as liquidator was terminated or not
f renewed, contrary to the wishes of the creditors; or if, for some reason,
Mr Kotov were to have an inexplicable change of heart or, for whatever
reason, was unable to continue.
[63] Mr Boyle submits that there is no need for Mr Cork to be appointed
as provisional liquidator on this basis. Mr Kotov has successfully seen off
challenges to his actions, and his appointment as liquidator has been
g
renewed for another year. Whilst I see the force of these points, they do not
in my view mean that there is no real benefit to the petitioners in having a
court appointed liquidator, not least because it cannot be said that the
contingencies to which I referred in the previous paragraph are completely
remote.
h [64] Further, in this context it is of importance to take into account the
views of the foreign liquidator and the petitioners (if, as here, they are
representative of a large proportion of the creditors and contributories). It is
one thing to decline to exercise the winding-up jurisdiction in circumstances
where the foreign liquidator is opposed to ancillary proceeding in England.
It is quite another to decline to exercise the jurisdiction when the foreign
i liquidator, the principal creditor, and a 50% shareholder all invite its
exercise. In my judgment the court should incline to exercising its
jurisdiction in such circumstances. The policy of the legislature to afford
assistance to foreign representatives is exemplified in s 426 of the Act and
the Cross Border Insolvency Regulations. The dicta in Banque des
[2009] 1 BCLC 298

Marchands cited in para [11] above were not made in circumstances in a

which the foreign liquidator actively supported the proposed winding up.
[65] On the contrary, it seems to me that I should give little weight to the
objections of the applicants. Whether the Commercial Court action is one
brought by Yugraneft on the authority of Mr Kotov, or the provisional
liquidator, or both, does not appear to me to be of much significance for the
defendants, nor are they prejudicially affected by adopting one course b
rather than the other, unless, perhaps (which they have not suggested) they
apprehend that Mr Kotov may in the future be removed from his position
and that a different liquidator may be disinclined to continue the action.
[66] Accordingly, subject to the non-disclosure point, if I had rejected the
applications to dismiss the Commercial Court proceedings, I would not
c
have declared that the court should decline to exercise its winding-up
jurisdiction.
NON-DISCLOSURE d
[67] The applicants submit that, in making their application to Evans
Lombe J in November 2007 the petitioners owed duties of full and frank
disclosure, as a series of well-known authorities establish; e g R v
Kensington Income Tax Comrs, ex p Princess Edmond de Polignac [1917]
1 KB 486 (‘the fullest possible disclosure of all material facts’).
[68] As Bingham LJ said in Siporex Trade SA v Comdel Commodities Ltd e
[1986] 2 Lloyd’s Rep 428 at 437 an applicant for ex parte relief must—
‘identify the crucial points for and against the application, and not
rely on general statements and the mere exhibiting of numerous
documents … He must disclose all facts which reasonably could or
would be taken into account by the Judge in deciding whether to grant f
the application. It is no excuse for an applicant to say that he was not
aware of the importance of matters he has omitted to state. If the duty
of full and fair disclosure is not observed the Court may discharge the
injunction even if after full inquiry the view is taken that the order
made was just and convenient and would probably have been made
even if there had been full disclosure.’ g
[69] In Memory Corp v Sidhu (No 2) [2000] 1 WLR 1443 at 1459–1460
Mummery LJ said:
‘It cannot be emphasised too strongly that at an urgent without notice
hearing for a freezing order, as well as for a search order or any other
h
form of interim injunction, there is a high duty to make full, fair and
accurate disclosure of material information to the court and to draw the
court’s attention to significant factual, legal and procedural aspects of
the case. It is the particular duty of the advocate to see that … at the
hearing the court’s attention is drawn by him to unusual features of the
evidence adduced, to the applicable law and to the formalities and i
procedure to be observed.’ (My emphasis.)
[70] Amongst the principles set out by Ralph Gibson LJ in Brink’s
Mat Ltd v Elcombe [1988] 3 All ER 188 at 192, [1988] 1 WLR 1350 at
1356 was this:
[2009] 1 BCLC 298

a ‘(ii) The material facts are those which it is material for the judge to
know in dealing with the application as made: materiality is to be
decided by the court and not by the assessment of the applicant or his
legal advisers.’
[71] In Re City Vintners Ltd (10 December 2001, unreported) , a case in
b which a provisional liquidator was sought inter alia on the grounds that the
assets of the company were said to be in jeopardy, Etherton J referred to the
passage from Memory Corp v Sidhu (No 2) quoted above, and then said:
‘Full disclosure of these matters is of particular and critical
importance in relation to applications for the appointment of a
provisional liquidator.’
c
He went on to draw attention to the passage in para 5.16 of the Chancery
Guide 2005 which states:
‘The representatives for the Applicant must specifically direct the
court to passages in the evidence which disclose matters adverse to the
d application.’
[72] The rationale for the duty is plain:
‘The reason for this requirement is obvious: the court is being asked
to grant relief in the absence of the defendant and is wholly reliant on
the information provided by the claimant. Moreover, it is not only the
e duty of the claimant to disclose material facts: he must also present
fairly the facts which he does disclose.’3 (My emphasis.)
‘The principles are well-established and well known on applications
without notice for injunctions and other interim relief, but they are
fundamental to the proper functioning of the court’s process on any
application without notice. It is of course the very fact that the
f application is made without notice to other interested parties which
makes these principles so important. Other parties do not have the
opportunity to correct or supplement the evidence which has been put
before the court.’4 (My emphasis.)
g THE PETITIONERS’ SUBMISSIONS

[73] The petitioners do not dispute that they owed a duty to disclose to
the courts all facts relevant to the application that they were making. But
they point out that this was an application in which any dispute, if there
was one, would be between (a) the petitioners, (b) the other creditors; and
(c) the company. Moreover the application was not for a freezing order or,
h indeed, for any order preventing any disposition of assets, nor would the
order be likely to bring a business to a halt. It was solely an application for
the appointment of a liquidator who would authorise an action on the
company’s behalf.
[74] Accordingly, the petitioners needed to deal with questions of
i
3 As explained by Alan Boyle QC sitting as a deputy judge of the Chancery Division in
Arena Corp Ltd v Schroeder [2003] EWHC 1089 (Ch), [2003] All ER (D) 199 (May)
at [117].
4 Per David Richards J in Ghafoor v Cliff [2006] EWHC 825 (Ch), [2006] 2 All ER 1079
at [46], [2006] 1 WLR 3020.
[2009] 1 BCLC 298

jurisdiction and the requirements identified in the cases, which they did. But a
they did not need to treat the applicants as if they were respondents to the
petitioners’ application and disclose to the court every point which the
petitioners might in due course wish to raise in the course of the
Commercial Court proceedings. The petitioners’ application was not one in
respect of which the applicants had a legitimate interest. They were not
entitled to notice of the hearing, nor, on their own case, did the order itself b
affect them because, even if the provisional liquidator had not been
appointed, the Commercial Court proceedings could still have been issued
against them by Mr Kotov.
[75] In my judgment the petitioners understate the extent of their
obligation. The basis for seeking a provisional liquidator was that he would
c
pursue the Commercial Court proceedings against the defendants. The
primary basis for asserting that Mr Abramovich was subject to the
jurisdiction of the English court was that he was resident in England. The
basis upon which relief was said to be urgently needed was the prospect
that he would decamp. The Commercial Court claim was the latest in a
sequence of civil claims in the BVI and civil and criminal claims in Russia. d
The petitioners gave evidence of all these things. In those circumstances it
was incumbent on the petitioners to give a full and fair account of factors
known to them which indicated that the claim might be invalid, that
Mr Abramovich might not be resident in England or likely to change such
residence, and to give a full and fair account of the previous proceedings.
e
THE MATERIAL BEFORE EVANS-LOMBE J
[76] At the hearing before him on 14 November 2007 Evans-Lombe J had
before him: (a) a skeleton argument; (b) Mr Friedman’s second witness
statement; (c) the petition; (d) the draft Commercial Court particulars of
claim; and (e) Mr Kotov’s witness statement. The skeleton told the judge f
that ‘it is not thought necessary that any of the other documents exhibited
should be read prior to the hearing’ and that two hours’ reading time
should be allowed.
[77] Mr Friedman’s second affirmation gave details of Yugraneft’s claim.
It stated that although many of Mr Abramovich’s investments were related
to Russian companies, his personal interest was held through offshore g
companies managed by Millhouse Capital, ‘reflecting the fact that
Mr Abramovich has made England the centre of his business and domestic
life’. The affirmation set out details of the companies shown in the charts of
company structures to which I have referred in my earlier judgment, and
their part, where relevant, in the dilution of Yugraneft’s interest in h
Sibneft-Yugra, and gave details of Mr Abramovich’s properties in Lowndes
Square.
[78] Mr Friedman gave details of the Russian litigation and the fact that
Yugraneft had so far failed. He said that that failure was not because of any
adverse determination on any of the issues raised in the proposed action in
England: i
‘On the contrary, the focus of the Russian litigation has been technical
objections to the corporate acts that were undertaken by Mr Matevosov
and Mr Davidovich as part of the dilutions. The Russian courts have
not addressed their conduct as part of a fraud, and the limited
[2009] 1 BCLC 298

a allegations of bad faith which have been raised have not been
adjudicated upon, because it is difficult to interest civil judges in a
matter that they regard as criminal before a criminal prosecution has
occurred, as explained by Professor Sergeev in his report. The Russian
prosecutor has so far refused to pursue a criminal case, albeit that his
seem difficult to sustain reasons. I have been informed by Mr Ivanyan
b that there have been recent indications that the prosecutor has rescinded
his earlier refusal and may be prepared to review the position …’
[79] Mr Friedman’s statement exhibited the decisions at first instance and
on appeal in the BVI, and summarised the decision of the Court of Appeal.
He pointed out that no findings were made as to whether a fraud had been
c committed against Yugraneft, still less a fraud to which Mr Abramovich
and Millhouse were parties and added:
‘It is also the position that insofar as Russian law issues arise, the
expert evidence in the BVI proceedings did not cover the availability of
fraud based claims under Russian law against Mr Abramovich and
d Millhouse Capital and Yugraneft has obtained a detailed report from
Professor Sergeev which cogently analyses the flaws in the expert
evidence before the BVI court and sets out the bases for liability of
Mr Abramovich and Millhouse Capital under Russian law.’
[80] Mr Friedman made it plain that the primary basis upon which
Yugraneft claimed that the court had jurisdiction over Mr Abramovich was
e
that he was resident in the UK with which he had a substantial connection.
He then set out reasons for believing that Mr Abramovich was resident in
London. He referred to the fact that:
‘Although Mr Abramovich and his spokesmen have from time to time
made statements that his main home is not in the UK, but in Russia …
f the serious international press (including in Russia) have consistently
referred to the UK being his principal home and that he only makes
occasional visits to Russia. Indeed, in a transcript of an interview with
Viktor Grishin, chair of the State Duma Committee for Federation
Affairs and Regional Policy, and Valery Khomyakov, Director General
g of the Council for National Strategy on 9 November 2005, a member of
the public phoned in to ask: “Should the chief executive of a region live
and work in the region that he represents? If the answer is Yes, why
does Abramovich, who has been appointed governor, permanently live
in London?” ’5
[81] The basis upon which the appointment of a provisional liquidator
h was sought was that, pending the hearing of the petition the proposed
defendants were likely to become aware of the petition and its intended
purpose and that there was a risk that they would take action designed to
obstruct the proposed action in some way, ‘whether (in the case of
Mr Abramovich) by taking steps to change his domicile or by some other
i means.’ Mr Friedman suggested that the action, when added to that
commenced by Mr Berezovsky, might tip the balance of advantage to
5 The transcript reveals that the question was never answered.
[2009] 1 BCLC 298

Mr Abramovich away from having ‘his personal and business base in a

England.’
[82] In his witness statement Mr Kotov said that he understood that the
primary basis on which Sibir applied for the appointment of a provisional
liquidator was to enable the provisional liquidator to commence
proceedings so as to minimise as far as possible the risk that
Mr Abramovich and possibly Millhouse Capital would take steps to b
obstruct Yugraneft before Sibir’s petition could be heard and determined.
[83] The skeleton argument contended that the claims in the proposed
Commercial Court action were probably governed by English law. It
referred to the concerns of Sibir and Mr Kotov that any delay in
commencing the action would increase the risk that Mr Abramovich might
c
take steps designed to obstruct the pursuit of the claim.
[84] At the hearing the judge, who plainly had doubts as to whether what
he was being asked to do might be an abuse of the jurisdiction to appoint a
provisional liquidator, was told by counsel in respect of Mr Abramovich
that ‘We believe he is likely to be, he is certainly resident here’, and that the
concern was that by the time of the proceedings he might have so organised d
his affairs that he could then say that he was no longer resident in the
jurisdiction. Mr Dicker accepted that Mr Kotov could ‘in theory’ cause the
company to commence proceedings itself, but that it would be better if the
claim was run by an officer of the court who was familiar with English legal
process. The judge was referred to the Cross-Border Insolvency Regulations.
He expressed himself persuaded to appoint a provisional liquidator on the e
basis that that would trump a possible argument about the ability to
commence proceedings which might arise if Mr Abramovich altered his
position between the date of the hearing before him and the commencement
of proceedings following a winding-up order.
WHAT THE JUDGE WAS NOT TOLD f

[85] The judge was not told: (a) that in the BVI proceedings Sibir, both in
Mr Cameron’s statement and in the particulars of claim, had alleged that
Mr Abramovich was resident in England; and that Mr Abramovich had
denied this on oath (‘I am not’); had said that he was resident in Russia; and
had explained that the fact that he had property in England and owned g
Chelsea Football club (just as an American owns Manchester United) did
not mean that he resided here, in the light of his extensive property
elsewhere; and (b) that the BVI courts had accepted that Russia was the
country of habitual residence and centre of operations of Sibir and of all of
the defendants, including Mr Abramovich (see para 24 of the decision of
the Court of Appeal; and para 25 of the decision at first instance; see also h
paras 143, 152 and 161).
THE ALLEGED NON-DISCLOSURES

[86] The applicants contend that there was a failure of the duty of full
disclosure in the following respects.
i
LACK OF EVIDENCE OF FRAUD
[87] Firstly, the petitioners did not disclose to the judge that there was a
total lack of evidence to support the allegations (i) that Mr Abramovich
might flee the country in order to avoid being resident in England at the
[2009] 1 BCLC 298

a date of the issue of the proceedings; (ii) that Millhouse orchestrated the
alleged dilutions; and (iii) that Mr Davidovich’s explanation as to the reason
for the issue of participation interests in Sibneft-Yugra was ‘entirely false’
(para 49 of Mr Friedman’s second affirmation).
[88] Subject to two important caveats, I am not persuaded that there was
a culpable non-disclosure under these heads. On the material set out in
b Mr Friedman’s affirmation that Yugraneft had been the victim of a massive
fraud, for Mr Abramovich’s benefit and at his behest, Mr Davidovich’s
explanation was entirely false, and it could be inferred that Millhouse
played a role in the fraud. If so, and if Mr Abramovich was resident in
England, it was legitimate for the petitioners to apprehend that he might
cease to reside in England if he learnt that a claim was afoot. But that
c
begged the question: (i) whether Mr Abramovich was in fact resident here;
and (ii) whether there was material that cast a different light on the
existence of the supposed fraud. These matters are the subject of the further
non-disclosures alleged.
NON-DISCLOSURE IN RELATION TO MR ABRAMOVICH’S RESIDENCE
d [89] Secondly, the assertion (no doubt based on the evidence presented)
that Mr Abramovich was ‘certainly resident here’ was a serious
overstatement of the position. As I have now held, the balance of the
argument is decidedly against that proposition. Further, the case that
Mr Abramovich’s principal home was in England and that he made ‘only
e occasional visits to Russia’ was a travesty of the truth. More importantly
for present purposes, no indication was given to the judge that
Mr Abramovich had given sworn evidence expressly to the contrary in the
BVI proceedings and that such evidence had been accepted by the BVI
courts. The assertion that Mr Abramovich was resident in England was of
particular significance since the reason why an order for a provisional
f liquidator was sought was in order to avert the supposed danger of
Mr Abramovich changing his residence when he learnt of the claim.
[90] Mr Friedman in his fifth witness statement has said that he did not
disclose the BVI court‘s findings because he ‘did not believe that they
represented findings in any proper sense.’ This indicates that he addressed
his mind to the question of disclosure and decided that it was unnecessary
g for that reason. I do not regard this as an acceptable explanation. It seems
to me that it was plainly material for the judge to know that in the earlier
proceedings between Sibir and Mr Abramovich the court had proceeded, in
the light of his evidence, on the basis that Mr Abramovich was resident in
Russia, even though there had not been a thorough investigation of all the
evidence and a trial, or mini-trial, of that issue. At the very lowest it was
h
potentially material and should have been before the judge (otherwise than
by being buried in exhibited judgments which the judge was not invited to
read), in order for him to decide whether he thought it material. This was
so even though: (a) it was apparent that there would be an issue over
domicile; and (b) an alternative basis for jurisdiction was that
i Mr Abramovich was a necessary or proper party to the claim against
Millhouse.
THE DECISIONS OF THE RUSSIAN COURTS
[91] Yugraneft claims that the issue of further participation interests in
Sibneft-Yugra was wrongful. The applicants complain that the petitioners
[2009] 1 BCLC 298

did not draw the judge’s attention to the fact that the issue of whether a
Mr Matevosov and Mr Davidovich had acted wrongfully and in breach of
their fiduciary-like duties to Yugraneft had been decided adversely to
Yugraneft in the Russian courts. Mr Friedman referred to the fact that the
focus of the Russian litigation had been on technical objections to the
corporate acts undertaken by those two as part of the dilutions and that the
limited allegations of bad faith which had been raised had not been b
adjudicated upon.
[92] I am not persuaded that there has been non-disclosure under this
heading. In Case A75–4601/2005 Yugraneft asserted in its submissions at
the first appeal stage that Mr Davidovich had acted against Yugraneft’s
interests by voting in favour of the dilution resolutions. But the Arbitrazh
c
Appeal Court for Khanty-Mansiysk, although finding that Mr Matevosov
was authorised, does not appear to have addressed, or made findings in
respect of, this allegation. In two other cases (A40–30097/04-24-355 and
A40–30094/04-61-366) dealing with the claim that Yugraneft’s pre-emption
rights had been violated the court did not deal with allegations of fraud or
breach of duty. In the former case the court expressly declined to deal with d
the allegation that Mr Matevosov’s actions showed signs of ‘premeditated
bankruptcy’ on the ground that it ‘related to the sphere of criminal law
regulation.’
THE FIRST RULING OF THE SENIOR INVESTIGATOR

[93] In his evidence Mr Friedman had referred to the first ruling of the e
Russian senior investigator in the following terms:
‘The Russian prosecutor has so far refused to pursue a criminal case,
albeit that his seem difficult to sustain reasons. I have been informed by
Mr Ivanyan that there have been recent indications that the prosecutor
has rescinded his earlier refusal and may be prepared to review his f
position, but it is uncertain whether he will do so.’
[94] The judge was not asked to read the first ruling, which was
exhibited, nor was it referred to in the skeleton argument or in the oral
presentation to the court. Nor was the complaint contained in the 2,000
odd pages of exhibits. As a result there was no disclosure to the judge of the g
following facts:
(i) that the complaint was instigated by Mr Kotov himself and that it
alleged (in one version, albeit possibly not the version as filed) that
Mr Abramovich, Mr Davidovich and Mr Korsik ‘and other persons, guided
by lucrative impulse, formed an organised group and by means of fraud and
breach of trust caused an extensive property damage to the owner h
[Yugraneft].’ This was, as Mr Kotov would have known, the central
allegation in the present case. The other version of the complaint refers to
an organised group consisting of Mr Matevosov and ‘other persons’ with a
similar aim6;
(ii) that the senior investigator had interviewed both Mr Davidovich and
Mr Tchigirinsky; i
(iii) that he had accepted that the increase in the charter capital in
Sibneft-Yugra had been agreed between Mr Tchigirinsky and
6 See para [133] of my earlier judgment.
[2009] 1 BCLC 298

a Mr Davidovich in order to provide security for the loan made by Sibneft;

(iv) that the ruling that there was insufficient data revealing the
commission of a crime constituted a formal finding in Russia; and
(v) that Mr Kotov had a right of appeal which he had failed to exercise.
[95] The petitioners also did not reveal that in, or in connection with, the
criminal proceedings a number of allegations were made which appeared to
b be false, ie:
(a) the allegation that Mr Tolley had replaced Mr Matevosov on
10 September 20027;
(b) that it was Mr Korsik who proposed Mr Matevosov as general
director of Yugraneft8, when the relevant minute shows that it was
Mr Cameron who proposed him; and
c
(c) that the offshore companies never fulfilled their obligations to provide
finance9. Nor did they disclose that Yugraneft had put forward in
proceedings in Russia what purported to be a board minute of
10 September 2002 which was highly questionable in the light of
Mr Tolley’s evidence that he was not approached for the position until
d September 2003.
[96] In my judgment Evans-Lombe J’s attention should have been drawn
to the content of the first ruling and, in particular, items (i)–(v) set out in
para [94] above. The judge’s attention should also have been drawn to the
fact that Yugraneft had at one stage alleged that Mr Tolley had replaced
Mr Matevosov, and that this allegation had been rejected by the Russian
e courts, which heard evidence from Mr Tolley (to which he should have been
referred) and that, contrary to what the complaint said, it was Mr Cameron
who proposed the election of Mr Matevosov at a meeting not attended by
any Sibneft representative. The third matter referred to in para [95] above
does not appear, so far as I can tell, from the complaint and I do not think
it incumbent on the applicants to have alerted the judge to the fact that this
f allegation had been made and rejected (in the second ruling which was not
then to hand).
THE FRAUD ISSUE IN THE BVI PROCEEDINGS

[97] Mr Friedman explained in his second witness statement that the BVI
g Court of Appeal had held that all the pleaded claims against the BVI
companies were in knowing receipt and that the governing law of those
claims was Russian law. He also recorded the common ground between the
experts for the parties that there were no claims under Russian law against
the BVI dilution companies. He said in para 98:
‘It is also the position that insofar as Russian law issues arise, the
h
expert evidence in the BVI proceedings did not cover the availability of
fraud based claims under Russian law.’
[98] This statement is not correct. Professor Butler’s evidence was that
Yugraneft would be unlikely to establish any civil cause of action (including
i
7 This appears in the version of the criminal complaint which may well not be the version
as presented.
8 This appears in both versions of the criminal complaint.
9 This contention, contained in a statement by Mr Kotov, was rejected by the Senior
Investigator in his second refusal.
[2009] 1 BCLC 298

any claim of a restitutionary nature) against any of the defendants, who a

included Mr Abramovich (other than claims based on procedural
irregularities in respect of the EGMs), and that neither Sibir nor Yugraneft
would have any claim against either Mr Matevosov or Mr Davidovich on
present facts. Mr Rozenberg was of the same view. Professor Butler was
obviously considering fraud because he observed that, although the only
civil claim was one under the joint venture agreement, on the facts each of b
the defendants was party to a conspiracy to defraud Sibir, which would be
subject to criminal sanction. Sibir relied on the absence of such claims by it
or Yugraneft as the basis for an argument that Russia was not the
appropriate forum.
[99] Mr Friedman now accepts that both experts must have proceeded on
c
the basis that Sibir’s claims were fraud-based and that he was wrong to
suggest otherwise, for which he apologised. He points out, correctly, that
Professor Butler did not in his report address the possibility of (and, in that
sense, cover) a claim for unjustified enrichment on the basis of fraud,
confining himself to considering a claim under the joint venture agreement
and claims in respect of: (a) vindication; (b) a void transaction; (c) return of d
property when the consideration has wholly failed; and (d) violation of a
right of first refusal.
[100] I have no doubt that Mr Friedman did not intend to mislead the
court. But the judge should have had his attention drawn specifically to the
fact that in the BVI proceedings Sibir had been saying that there was, on the
facts relied on, no claim under Russian law, even though there was fraud. e
This was plainly material which potentially weakened Yugraneft’s position.
The judge should not have been left with the impression that the experts
had not addressed their minds to whether there was a claim if fraud was
established. To be fair to him, Mr Friedman plainly indicated that Professor
Sergeev was saying that there were flaws in the expert evidence before the
BVI courts. f
CONCLUSIONS ON NON-DISCLOSURE
[101] In summary, the petitioners should have but failed to disclose: (a)
Mr Abramovich’s evidence in the BVI proceedings about his residence and
the fact that the BVI courts had accepted his Russian residence; (b) the
terms of the first refusal and the features of it summarised in para [94] g
above; (c) the further matters set out in para [96]; and (d) that the question
of civil recovery on any basis, including fraud, had been addressed in the
BVI courts.
CONSEQUENCES
h
[102] Mr Boyle drew my attention, with appropriate diffidence, to a
decision of his own, sitting as a deputy judge of the Chancery Division, as
to the approach to be taken by the court in the event that there is culpable
non-disclosure. In Arena Corp Ltd v Schroeder [2003] EWHC 1089 (Ch),
[2003] All ER (D) 199 (May) at [213], he summarised the main principles
which should guide the court in the exercise of its discretion as follows: i
‘(1) If the court finds that there have been breaches of the duty of full
and fair disclosure on the ex parte application, the general rule is that it
should discharge the order obtained in breach and refuse to renew the
order until trial.
[2009] 1 BCLC 298

a (2) Notwithstanding that general rule, the court has jurisdiction to

continue or re-grant the order.
(3) That jurisdiction should be exercised sparingly, and should take
account of the need to protect the administration of justice and uphold
the public interest in requiring full and fair disclosure.
(4) The court should assess the degree and extent of the culpability
b with regard to non-disclosure. It is relevant that the breach was
innocent, but there is no general rule that an innocent breach will not
attract the sanction of discharge of the order. Equally, there is no
general rule that a deliberate breach will attract that sanction.
(5) The court should assess the importance and significance to the
outcome of the application for an injunction of the matters which were
c
not disclosed to the court. In making this assessment, the fact that the
judge might have made the order anyway is of little if any importance.
(6) The court can weigh the merits of the plaintiff’s claim, but should
not conduct a simple balancing exercise in which the strength of the
plaintiff’s case is allowed to undermine the policy objective of the
d principle.
(7) The application of the principle should not be carried to extreme
lengths or be allowed to become the instrument of injustice.
(8) The jurisdiction is penal in nature and the court should therefore
have regard to the proportionality between the punishment and the
offence.
e (9) There are no hard and fast rules as to whether the discretion to
continue or re-grant the order should be exercised, and the Court
should take into account all relevant circumstances.’ (My emphasis.)
[103] I regard that as a helpful review of the applicable principles, subject
to the overriding principle, reflected in proposition (9), that the question of
f whether, in the absence of full and fair disclosure, an order should be set
aside and, if so, whether it should be renewed either in the same or in an
altered form, is pre-eminently a matter for the court’s discretion, to which
(as Mr Boyle observes at para [180]) the facts (if they be such) that the
non-disclosure was innocent and that an injunction or other order could
properly have been granted if the relevant facts had been disclosed, are
g relevant. In exercising that discretion the court, like Janus, looks both
backwards and forwards.
[104] The court will look back at what has happened and examine
whether, and if so, to what extent, it was not fully informed, and why, in
order to decide what sanction to impose in consequence. The obligation of
full disclosure, an obligation owed to the court itself, exists in order to
h secure the integrity of the court’s process and to protect the interests of
those potentially affected by whatever order the court is invited to make.
The court’s ability to set its order aside, and to refuse to renew it, is the
sanction by which that obligation is enforced and others are deterred from
breaking it. Such is the importance of the duty that, in the event of any
substantial breach, the court strongly inclines towards setting its order aside
i and not renewing it, so as to deprive the defaulting party of any advantage
that the order may have given him. This is particularly so in the case of
freezing and seizure orders.
[105] As to the future, the court may well be faced with a situation in
which, in the light of all the material to hand after the non-disclosure has
[2009] 1 BCLC 298

become apparent, there remains a case, possibly a strong case, for a

continuing or re-granting the relief sought. Whilst a strong case can never
justify non disclosure, the court will not be blind to the fact that a refusal to
continue or renew an order may work a real injustice, which it may wish to
avoid.
[106] As with all discretionary considerations, much depends on the facts.
The more serious or culpable the non-disclosure, the more likely the court is b
to set its order aside and not renew it, however prejudicial the
consequences. The stronger the case for the order sought and the less
serious or culpable the non-disclosure, the more likely it is that the court
may be persuaded to continue or re-grant the order originally obtained. In
complicated cases it may be just to allow some margin of error. It is often
c
easier to spot what should have been disclosed in retrospect, and after
argument from those alleging non-disclosure, than it was at the time when
the question of disclosure first arose.
[107] In the present case, as it seems to me, there has been substantial
non-disclosure on more than one account in the respects summarised in
para [101] above. The matters not disclosed were not peripheral to the case d
which Yugraneft sought to assert or to the alleged urgency of the
application. Whilst I have no doubt that there was no intention to mislead
the court I am satisfied that, for whatever reason, inadequate disclosure was
made to Evans-Lombe J, and that the extent of the non-disclosure is such
that, had I not struck out the claims, I would have set aside the order
appointing a provisional liquidator and dismissed the claim. It would then e
be open to Yugraneft to commence new proceedings. Any question of
limitation or as to Mr Abramovich’s residence would fall to be addressed as
at the date of the new proceedings.
[108] I would have done that in order to ensure that Yugraneft gained no
advantage by obtaining the order for the appointment of a provisional
liquidator, as it would have done if I did no more than set aside the order f
for the appointment of a provisional liquidator and made a winding-up
order.
[109] The Commercial Court action was issued by Clyde & Co acting
under the authority of the provisional liquidator, whose appointment the
petitioners had sought. Mr Kotov made it plain to Evans Lombe J that he
g
supported the petition and that, insofar as it might be necessary or
appropriate for him to do so, he would authorise and request the
provisional liquidator, once appointed, to commence the proposed action.
He also added that, if it became necessary for some unforeseen reason, he
would apply for formal recognition and pursue the proposed action here or
cause Yugraneft to do so. But that proved unnecessary because the court h
was persuaded to do what the petitioners sought and Mr Kotov supported.
Paragraph 4(5) of Evans-Lombe J’s order specifically empowered Mr Cork
to bring the Commercial Court proceedings in the name of the company.
[110] The fact that Mr Kotov in his second and third witness statements
has said that he supported the appointment of Mr Cork and the
Commercial Court proceedings and authorised and ratified the steps taken i
to date, cannot alter the fact that, as was always intended, the authority by
which they were in fact commenced was that of Mr Cork acting as
provisional liquidator, whose appointment was obtained without disclosure
of all relevant facts. As Mr Friedman put it in his witness statement in
[2009] 1 BCLC 298

a support of the application for permission to serve Mr Abramovich out of

the jurisdiction: ‘Mr Cork … was appointed in England to enable the
present claims to be brought.’
[111] Neither Mr Kotov’s approval of the initiation of proceedings nor
the fact that the acts of the provisional liquidator are valid notwithstanding
any defect in his appointment mean that the court cannot strike out
b proceedings which have been commenced by a provisional liquidator whose
appointment for the purpose of launching those proceedings has been
obtained in circumstances where there has been significant non-disclosure.
The issue of proceedings in those circumstances is an abuse of the process of
the court and the court is entitled to take whatever steps are necessary to
deprive the defaulting party of the fruits of his default.
c
[112] As it is, in view of my findings on the reverse summary judgment
applications, I shall simply dismiss the winding-up petition.
Petition dismissed.
Neneh Munu Barrister.
[2009] 1 BCLC 298

Re OJSC Ank Yugraneft Millhouse Capital UK LTD and Another V Sibir Energy PLC and Others (2009) 1 BCLC 298

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exercise jurisdiction over one or more persons interested in the distribution a

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Ch D Re OJSC Ank Yugraneft 301

a sanction to impose in consequence, and would also look forward to see

Cases referred to in judgment

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Alan Boyle QC and Richard Walford (instructed by Skadden, Arps, Slate,

Cur adv vult

29 October 2008. The following judgment was delivered.

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that there should be external management of Yugraneft for 18 months and a

[12] As Lawrence Collins J explained in Re Drax Holdings Ltd [2003]

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Ch D Re OJSC Ank Yugraneft (Christopher Clarke J) 305

g ‘The proposition that there has to be a sufficient connection with this

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THE APPLICANTS’ SUBMISSIONS

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ABSENCE OF CONNECTION WITH THE JURISDICTION

THE REASONS GIVEN BY THE PETITIONERS g

The skeleton argument

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Ch D Re OJSC Ank Yugraneft (Christopher Clarke J) 309

a was to procure the winding up of Yugraneft in order that it might pursue

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England in the form of the intended Commercial Court proceedings. The a

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Ch D Re OJSC Ank Yugraneft (Christopher Clarke J) 311

a occurred in Russia and those interests are Russian interests.

THE PETITIONERS’ SUBMISSIONS

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creditor is entitled to a winding-up order ex debito justitiae. Nor is there a

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Ch D Re OJSC Ank Yugraneft (Christopher Clarke J) 313

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Ch D Re OJSC Ank Yugraneft (Christopher Clarke J) 315