Rare security for costs order against trustee

In August 2021, the High Court recognised the appointment of a Russian trustee in bankruptcy (the trustee). That order was set aside by the Court of Appeal at the start of January 2022 and various issues were remitted back to the High Court by the Court of Appeal for determination.

In the intervening period, Russia invaded Ukraine. The bankrupt issued an application for an order for security for costs against the trustee, arguing that the trustee had no assets in the jurisdiction and that the bankrupt had no chance of enforcing any costs awarded in Russia in light of the current political landscape.

The judge agreed and ordered security for costs, holding that there were “exceptional circumstances” on the facts. These included that the Home Office recognised that the bankrupt would be at real risk of breach of his human rights if he were to return to Russia, and that relevant parties were either subject to sanctions or at risk of that outcome.

In addition, the party funding and controlling the trustee’s proceedings had previously been owned by sanctioned individuals and was at risk of sanctions itself, and there was no evidence that the funder was obliged to, or would, pay any adverse costs order made against the trustee.

For these reasons and in combination with a finding that there was strong evidence in support of the bankrupt’s position, security for costs was ordered. This is undoubtedly a judgment that defendants being pursued by Russian claimants will pay careful attention to.

Kireeva v Bedzhamov [2022] EWHC 1047 (Ch)

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