Flexibility of injunctions: JSC Commercial Bank v Kolomoisky
In the recent decision of JSC Commercial Bank Privatbank v Kolomoisky and Ors [2022] EWHC 1445 (Ch), the English High Court considered a novel application for orders requiring a defendant to take active steps to recover a debt owed to him in furtherance of an existing freezing injunction over his assets. The decision illustrates the flexibility of the court’s jurisdiction to grant injunctions and ancillary relief when faced with unusual circumstances.
The claimant bank had previously obtained an interim freezing injunction over the assets of the defendant in long-running proceedings arising out of the alleged fraudulent misappropriation of more than US$1.9 billion from the claimant. The defendant had disclosed to the claimant that one of his assets was the right to receive substantial monetary consideration for the transfer of some shares that the defendant had beneficially owned. The consideration remained unpaid some four years after the injunction was granted, and the claimant sought various orders in relation to this receivable, including an order that the defendant issue a demand for payment.
This application was novel because a freezing injunction typically prohibits a defendant from disposing, dealing with or diminishing the value of assets and does not usually entail taking active steps in relation to the assets. In considering the claimant’s application, the Court noted the flexibility of its jurisdiction to grant injunctive relief, including Lord Legatt’s remark in the recent decision of the Judicial Committee of the Privy Council in Broad Idea Ltd v Convoy Collateral Ltd [2021] UKPC 24, that freezing orders will continue to develop with changing financial and commercial practices.
The Court held that the burden was on the claimant to demonstrate that the relief sought was necessary for the purpose of protecting the receivable against unwarranted dissipation or diminishment in value. Having regard to (among other factors) the wasting and precarious nature of the receivable, the lack of explanation for why the defendant had not sought payment, and the ease with which the defendant could deal with or diminish the value of the receivable without the claimant’s knowledge, the Court agreed it should make appropriate orders in relation to the receivable. In doing so, the Court rejected the defendant’s arguments that the relief sought amounted to an improper interference with the defendant’s property rights, and that the claimant’s true motive was not to ensure preservation of the asset but instead to convert it into a form (i.e. cash) that would be easier for the claimant to enforce against. Accordingly, the Court ordered the defendant to issue a formal demand for payment of the receivable, and ordered the defendant to use reasonable endeavours to obtain payment of it.
While the circumstances in JSC Commercial Bank were unusual, the decision serves as a reminder of the flexibility of the Court’s jurisdiction to make appropriate orders for the preservation of assets to enable and facilitate the enforcement of monetary judgments.
