The High Court clarifies the extent of discretion in claims for declaratory relief and its interaction with sanctions and champertous agreements in Kireeva v Zolotova [2024] EWHC 552

Thomas Munby KC and James Mitchell were instructed by the First Defendant for the hearing, successfully resisting an application for strike out or summary judgment for parts of her pre-existing Defence.

The case concerns ownership of a share in an English company (the Share), which in turn owns a villa in Italy. The Claimant is the Russian bankruptcy trustee of Mr Georgy Bedzhamov, and the First Defendant is Mr Bedzhamov’s partner. The underlying dispute is about who is the beneficial owner of the Share - Mr Bedzhamov (and so the Claimant as trustee) or the First Defendant – and/or whether the transfer of the Share to the First Defendant is liable to be set aside under s.423 of the Insolvency Act 1986. As part of its case, the Claimant seeks orders transferring the Share to herself and declaratory relief as to the ownership of the Share.

Thomas and James successfully resisted the application to strike out pleas that declaratory relief should be refused because (i) the Claimant’s funder, A1, was arguably subject to sanctions and declarations or transfers of ownership of the share would amount to a breach of the sanctions regime; and (ii) the relationship between A1 and the Claimant was champertous and of such a nature that the proceedings were an abuse of process.

The case is important as ICC Judge Greenwood clarified a number of matters of law:

  • First, the Judge confirmed the breadth of discretion in claims for declaratory relief, which he accepted could take into account the legality of the purpose in seeking relief and/or matters of public policy (see [66]-[74]).
  • Second, the Judge distinguished the leading sanctions case of Mints v PJSC National Bank Trust [2023] EWCA Civ 1132 as this case concerned ownership of pre-existing property (the Share) that would be caught by the sanctions regime, as opposed to litigating bare causes of action that would not be. The present case, unlike Mints, also did not raise the same fundamental issues about access to justice as sanctions compliance was being considered as part of the court’s exercise of discretion and in circumstances where it was the funder who was sanctioned not the litigant themselves (see [94]).
  • Finally, the Judge confirmed that in certain circumstances a champertous funding agreement, while not ordinarily a defence to the underlying claim, can be of such a nature to be an abuse of process (see [117]). In the present case, without the funding arrangement before the court and in light of the prima facie unusual arrangements between the Claimant and A1, the Court accepted that whether the agreement was champertous and abusive such as to be a ground to refuse declaratory relief was an issue for trial (see [118]-[123]).

The court also held, when striking out a defence based on a challenge to the continuing recognition of the Russian bankruptcy trustee at common law, the correct forum to launch any such challenge to ongoing recognition was in those proceedings and not as a defence to separate claims brought in relation to the Share (see [51] and [62]).

Thomas and James were instructed by Smeetesh Kakkad and Claire van der List at Gresham Legal.

Judgment can be viewed here