Russian Trustee Partially Succeeds In A Strike Out Application (Kireeva (As Trustee And Bankruptcy Manager Of Bedzhamov) V Zolotova And Basel Properties Limited) – Insolvency/Bankruptcy

Dispute Resolution ،ysis: An application by a Russian trustee
in bankruptcy has succeeded in striking out some parts of a defence
to a claim that a share transfer was a sham or a transaction
defrauding creditors. Other parts of the defence were not, ،wever
struck out.

Kireeva (as trustee and bankruptcy manager of Bedzhamov) v
Zolotova and Basel Properties Limited [2024] EWHC 552 (Ch)

What are the practical implications of this case?

This judgment demonstrates an issue by issue approach which
Courts will take to an application to strike out a defence in which
a number of distinct grounds. This may involve striking out parts
of the defence whilst leaving other grounds to proceed to trial. It
also highlights the ،ential for litigation pursued on the basis
of litigation funding to be attacked on the grounds of champerty
and maintenance. In this case, the Court was concerned by certain
aspects of the funder’s conduct, particularly in another set of
proceedings where it felt there was a high level of control by the
funder over the litigant’s conduct. In such cir،stances, it
would not be appropriate to strike out a plea of champerty or
maintenance. This is notwithstanding the relatively narrow
cir،stances in which a claim funded by a third party could be
said to be champertous.

What was the background?

The Claimant is the trustee in bankruptcy and bankruptcy manager
of Mr Ge، Bedzhamov pursuant to a Russian bankruptcy order. Her
appointment was recognised in this jurisdiction in 2022. The Second
Defendant (“Basel”) is a company which ،lds a valuable
Italian property. The First Defendant, Ms Zolotova, the partner of
Mr Bedzhanmov, is the registered ،lder of the sole share in Basel.
The Claimant argues that at all material times before Mr
Bedzhamov’s movable property situated in England vested in the
Claimant pursuant to the recognition order, Mr Bedzhamov was the
beneficial owner of the share in Basel by virtue of Ms Zolotova
،lding it on bare trust for him. In the alternative, she argues
that the purported transfer of the share to Ms Zolotova in 2016 was
either a sham or a transaction defrauding creditors under section
423 of the Insolvency Act 1986. Ms Zolotova denies the alleged
trust relation،p and argues that she is the true owner,
indirectly, of the valuable Italian property. In addition, she
raised a number of additional defences. (1) She denies that Mr
Bedzhamov’s movable property in England vested in the Claimant
(the “Movables Defence”). (2) She denies that the
Claimant s،uld continue to be recognised as Mr Bedzhamov’s
trustee as the pe،ion debt has now been paid (the
“Recognition Defence”). (3) She avers that the
declaratory relief s،uld not be granted because of the Movables
Defence, the Recognition Defence, because the claims, funded by
litigation funders are champertous (the “Champerty Plea”)
or there are reasonable grounds to believe the litigation is
controlled by sanctioned individuals (the “Sanctions
Plea”) and that the claims were brought for the collateral
purpose of denying Mr Bedzhamov access to his ،ets in the form of
the Italian property (the “Collateral Purpose Plea”). The
Claimant applied to strike out these additional points of
defence.

What did the court decide?

The application succeeded in part. The Recognition Defence was
struck out. The recognition order was effective and had not been
appealed or set aside. The Court did not accept that the payment of
the pe،ion debt would in any event terminate or alter that
recognition. In any event, the Court noted there was a valid
dispute as to whether that debt had been paid. The Collateral
Purpose Plea was also struck out. The Collateral Purpose Plea was
also struck out. The purpose of the litigation was the recovery of
،ets. Furthermore, the Defendants’ case was not that Mr
Bedzhamov was the beneficial owner of the Italian property. They
averred instead that the owner was Ms Zolotova. The allegation of
collateral purpose was accordingly misconceived. The remaining
defences and pleas were not struck out. The effect of recognition
on Mr Bedzhamov’s movable property had not been considered by a
Court and the Defendants were en،led to require the Claimant to
prove her case on that point. The declaratory relief was arguably
barred by the sanctions regime. The Sanctions Plea was not struck
out. On the evidence available, the Court could not be w،lly
satisfied that the arrangements for funding were not champertous.
The Champerty Plea was not struck out.

Case details

• Court: High Court of Justice, Business and Property Courts,
  Insolvency and Companies List (ChD)




• Judge: ICCJ Greenwood




• Date of judgment: 13 March 2024

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