England and Wales High Court (Chancery Division) Decisions

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION

		Royal Courts of Justice Rolls Building, Fetter Lane London EC4A 1NL
		20/02/2015

Mr Justice Morgan:

Introduction

1. The principal matter which is before me is an appeal by JSC Bank of Moscow ("Bank of Moscow") against the order of Chief Registrar Baister made on 15 April 2014, giving effect to a judgment he handed down on 9 April 2014. The appeal is brought with the permission of the Chief Registrar.
2. In summary, the procedural history of this matter is that on 25 September 2012, Mr Kekhman presented a debtor's petition seeking a bankruptcy order and on 5 October 2012, the court made a bankruptcy order on that petition. On 31 January 2013, Bank of Moscow (claiming to be a creditor of Mr Kekhman) applied under section 282 of the Insolvency Act 1986 for an order annulling the bankruptcy order. In his judgment of 9 April 2014, the Chief Registrar declined to annul the bankruptcy order and Bank of Moscow has appealed his consequential order of 15 April 2014. Mr Kekhman has served a Respondent's Notice challenging two findings which were made by the Chief Registrar. In this judgment, I will first consider Bank of Moscow's appeal and will postpone dealing with the issues raised by the Respondent's Notice.
3. Mr Alan Gourgey QC and Ms Marcia Shekerdemian QC appeared for Bank of Moscow. Mr Michael Swainston QC and Ms Blair Leahy appeared for Mr Kekhman. I am grateful to counsel for their considerable assistance. Mr Kekhman's trustees in bankruptcy (the Second and Third Respondents) were present at the hearing of the appeal, but did not take part in it, and were not represented.
4. All references in this judgment to sections of an Act are to the sections of the Insolvency Act 1986, save where the contrary is expressly stated.

Mr Kekhman

5. As at the date of his bankruptcy petition, and at all times since, Mr Kekhman has been a Russian citizen, domiciled and resident in the Russian Federation. Mr Kekhman has been an international businessman. He went into the fruit business in 1994. That business expanded rapidly from modest beginnings. In 1997, he formed the JFC Group, the ultimate holding company of which is JFC (BVI) Limited, which operates through companies in Russia, the British Virgin Islands, Costa Rica, Cyprus, Ecuador, Luxembourg and Panama. Mr Kekhman is the beneficial owner of the VK Family Private Foundation ("the Foundation"), a Dutch Antilles entity, which was set up in February 2008. The Foundation holds 70% of the shares in JFC (BVI) Limited and 90% of the shares in the LQ Group, which holds property in Russia. Mr Kekhman says that from around May 2007 he relinquished day-to-day control of the JFC Group and put its management and control in the hands of others. He says that he resumed control in March 2012.
6. Mr Kekhman's businesses were funded by loans from a number of banks and financial institutions, many of which were backed by his personal guarantees. In 2011, the businesses got into financial difficulties. Negotiations and restructuring attempts failed, and a number of lending banks took steps to enforce their securities and called in their guarantees. On 20 February 2012, insolvency proceedings were initiated in Russia by JFC Russia. A Russian supervisor was appointed over a number of Russian companies in the JFC Group. On 11 September 2012, Bank of Moscow obtained, in proceedings in the Commercial Court in London, a worldwide freezing order against the BVI companies in the group. In late 2012/early 2013, a receiver was appointed in Curaçao in relation to the Foundation.
7. Bank of Moscow is a Russian bank which claims to be a creditor of Mr Kekhman in a sum in excess of $150 million in respect of damages for an alleged conspiracy to defraud. Mr Kekhman denies the bank's allegations and contends that he had (before his bankruptcy) a claim against it, so that this claim is now vested in his trustees in bankruptcy.

The petition

8. Mr Kekhman's petition contained the following statements:

(1) his address was given as Apartment 1, Arts Square, 1 St Petersburg, Russian Federation;

(2) his occupation was described as that of theatre director and company director;

(3) his centre of main interests was not in a member state within the meaning of the EC Regulation on Insolvency Proceedings;

(4) he was not resident in England and Wales;

(5) he was unable to pay his debts;

(6) jurisdiction was claimed on the basis that Mr Kekhman was personally present in the country on the day of presentation of his petition.

9. In support of the claim to jurisdiction, the petition stated:

"I have been present in the United Kingdom since 12.10 pm on 24th September 2012 when I arrived at Gatwick Airport and whilst in London I reside at the Corinthia Hotel in Whitehall Place, London SW1A 2BD and presently intended to leave on Thursday 27th September 2012 and when I travel to St Petersburg, Russia. I am therefore present in the United Kingdom for some 2 clear days and the Court has jurisdiction under section 264(1)(b) and section 265(1)(b) of the Insolvency Act 1986 and I am advised that the Court has jurisdiction to make a bankruptcy order. I wish to submit to the jurisdiction of the Courts of England and Wales with regard to bankruptcy, as I am advised that there is no personal bankruptcy law in the Russian Federation and as I am connected with international business matters and the English jurisdiction as a sophisticated jurisdiction in these matters appears appropriate to help resolve my affairs in an orderly manner that will be recognised internationally. I wish to add that under 3 personal guarantees and indemnit[ies] subject to English law which I have given to 6 international banks particularised in my Statement of affairs and dated 15th March 2011, a total sum of £86,201,784 has been demanded of me on 6th April 2012."

10. The statement of affairs which accompanied the petition showed:

(1) Mr Kekhman was subject to nine sets of legal proceedings in the Russian Federation;

(2) there were proceedings in the Commercial Court in London; the statement of affairs gave only limited information about those proceedings; the position was that Bank of Moscow had brought those proceedings against three companies through which Mr Kekhman had carried on business; Mr Kekhman was not himself a party to those proceedings; in those proceedings, Bank of Moscow had obtained injunctions (on 11 and 26 September 2012) which, amongst other things, required Mr Kekhman to provide it with certain information;

(3) his assets consisted of cash in hand of £200,000, land in St Petersburg valued at £4.3 million, a Mercedes-Benz in Russia and a Bentley in France;

(4) he had not been visited by an enforcement officer or bailiff in the last 6 months;

(5) he had 19 unsecured creditors totalling £316,136,088, all located in the Russian Federation;

(6) details of 23 bank accounts, three of which were "arrested";

(7) Mr Kekhman's monthly household income amounted to £7,912 but he had monthly expenditure of £49,000 odd;

(8) he had a wife, daughter and two sons, all described as dependants.

11. In his petition, Mr Kekhman attributed his insolvency to:

"The overwhelming demands made on me personally under the guarantees […] that I gave to support bank facilities granted to JFC Group and in which group I have a substantial indirect interest. That group defaulted on those facilities and hence the numerous calls under the personal guarantees I refer to."

The hearing of the petition

12. Mr Kekhman's petition first came on for hearing before Mr Registrar Jones on 26 September 2012. Mr Kekhman was represented by counsel. A transcript of the hearing shows that a number of issues were canvassed. The registrar wanted to know whether there were assets in the jurisdiction and whether the £200,000 was to be brought into the jurisdiction. The registrar did not at any stage direct that that sum be brought in. The registrar was concerned that an English bankruptcy would not benefit creditors. He expressed doubt as to whether an English order would be recognised in Russia. He considered whether notice should be given to creditors. He approached the petition on the basis that, whilst there was jurisdiction to make a bankruptcy order, there were a number of factors which needed to be clarified to enable the court to consider whether to exercise its discretion to make the order. The upshot was that the petition was adjourned so that those factors could be further considered by Mr Kekhman and his advisers.
13. The second hearing of the petition took place on 5 October 2012 before Chief Registrar Baister. At this hearing, there was a witness statement of 2 October 2012 from Mr Kekhman's solicitor exhibiting a report from a Russian lawyer, Mr Torkanovskiy of Ivanyan & Partners. Mr Kekhman's solicitor also explained the position in relation to the guarantee dated 15 March 2011 which Mr Kekhman had specifically referred to in the petition. This guarantee was in favour of Raiffesen Bank International AG as security agent for itself and five other banks. The amount said to be due from Mr Kekhman under it was £86,201,784, which had been demanded on 6 April 2012. Clause 16 of the guarantee provided that it was governed by English law. Clause 17.1 provided that a dispute arising out of or in connection with the guarantee should be referred to arbitration under the Rules of Arbitration of the LCIA and that the seat of the arbitration should be London. By clause 17.1.7, the security agent was able to elect that a dispute in relation to the guarantee should be resolved by litigation before a court of law, rather than by arbitration. In the event of the security agent electing under clause 17.1.7, the courts of England were to have exclusive jurisdiction and the parties agreed that the courts of England were the most appropriate and convenient courts to settle such disputes and no party would argue the contrary. Clause 17.2.3 then provided that clause 17.2 should be for the benefit of the security agent only.
14. At the hearing on 5 October 2012, Mr Kekhman was again represented by counsel, who provided a skeleton argument referring to authority. Counsel submitted that there were a number of points favouring the making of a bankruptcy order in this jurisdiction, principally:

(1) the absence of a personal bankruptcy regime in the Russian Federation;

(2) the availability of assets in the jurisdiction (the £200,000, which was to be made available to the official receiver);

(3) connection to the jurisdiction in the form of contractual English law/jurisdiction provisions;

(4) the opinion of the Russian lawyer that the courts of the Russian Federation would recognise the bankruptcy;

(5) the fact that an English bankruptcy would allow for the investigation of Mr Kekhman's affairs and an orderly realisation of Mr Kekhman's assets for the benefit of his creditors as opposed to realisation on a first come first served basis; the promise that Mr Kekhman would co-operate with the official receiver and any trustee appointed;

(6) the prospect of Mr Kekhman's financial rehabilitation.

15. The Russian lawyer confirmed in his report that Russian law made no provision for the bankruptcy of an individual in Mr Kekhman's position. The lawyer said: "only individual entrepreneurs benefit from a bankruptcy procedure in Russia (and Mr Kekhman is not an individual entrepreneur)". The lawyer expressed the opinion that any bankruptcy order made could be recognised and enforced in Russia. Mr Kekhman's English solicitor may have been less certain about recognition because when he dealt, in his witness statement, with the potential benefits of an English bankruptcy he said that there could be benefit, even in the absence of recognition in Russia.
16. A number of other issues were explored at the hearing on 5 October 2012. The Chief Registrar was concerned that Mr Kekhman's beneficial interest in stocks and shares held by him through the Foundation should be regarded as an asset in the bankruptcy (they were not described as available assets in the statement of affairs which answered "No" to the question about stocks and shares) and that Mr Kekhman should not be under the misapprehension that an English trustee would allow him to spend almost £50,000 a month on school fees and support for his wife and children. The first point was disposed of by counsel for Mr Kekhman agreeing that the bankruptcy order should record that the shares held by the Foundation would be available to be realised as an asset in the bankruptcy (and this was later recorded in the bankruptcy order itself). The Chief Registrar was told that the expenditure figure simply reflected financial obligations to which Mr Kekhman was currently subject: he had no expectation of being able to continue to make payments on this scale. The Chief Registrar was told (and accepted) that the present case was not a "bankruptcy tourism" case of the kind that had recently been considered by the courts in relation to, primarily, German and Irish debtors who were shifting their centres of main interest opportunistically to avoid their domestic bankruptcy regimes. Like Mr Registrar Jones, the Chief Registrar raised the question of whether notice should be given to creditors but he was persuaded that that would not be necessary.
17. The hearing on 5 October 2012 also proceeded on the basis that there was jurisdiction to make a bankruptcy order and that the exercise of the discretion was the only relevant consideration. Although the Chief Registrar was at first reluctant to make the order there and then, he was in the end persuaded that he should do so and he then made a bankruptcy order. He did not give a reasoned judgment at the hearing on 5 October 2012 but his essential reasoning is apparent from the discussion at the hearing, of which there is a transcript.

The applications to annul

18. On 31 January 2013, Bank of Moscow applied under section 282 for an order annulling the bankruptcy order on the ground that that order ought not to have been made. Bank of Moscow also sought an order under section 375 rescinding the bankruptcy order. Further, it sought permission pursuant to section 285(3)(b) to commence proceedings against Mr Kekhman by issuing a claim form substantially in the form of an attached draft. The draft claim alleged that Mr Kekhman had conspired with various companies, and procured breaches of contract by those companies, said to be under his control, which companies owed substantial sums to Bank of Moscow, whereby Mr Kekhman's actions resulted in those companies having no assets with which to pay those sums.
19. On 27 March 2013, ZAO Sberbank Leasing, an admitted creditor, applied under section 282 for an order annulling the bankruptcy order on the ground that it ought not to have been made.
20. The applications to annul were not put forward on the basis that the court lacked jurisdiction to make the bankruptcy order on 5 October 2012. Instead, they were based on the contention that, in the exercise of its discretion, the court ought not to have made a bankruptcy order.

Other events after the bankruptcy order

21. On 24 October 2012, Bank of Moscow applied in the Commercial Court proceedings to which I earlier referred for a committal order in relation to Mr Kekhman on the ground that he had committed a contempt of court by failing to comply with an order or orders made in those proceedings requiring him to provide information to Bank of Moscow. Mr Kekhman was joined as a defendant to those proceedings.
22. On 4 December 2012, the official receiver reported to the court. In his report, he stated that there was a prospect of a distribution to creditors.
23. On 20 December 2012, at a meeting of creditors, Mr Sinclair and Mr Hewson, both of Mazars LLP, were appointed trustees in the bankruptcy.
24. In or around December 2012, following a judgment obtained by OJSC Bank St Petersburg, the court in Curaçao appointed a receiver in relation to the Foundation.
25. On 28 February 2013, a creditors' committee was formed, consisting of OJSC Promsvyazbank, Raiffeisen Bank International AG and OJSC Uralsib.
26. The trustees in bankruptcy reported to the court on 3 May 2013.
27. On 5 October 2013, Mr Kekhman was discharged from his bankruptcy under section 279(1).
28. The trustees in bankruptcy reported to the court on 28 November 2013.
29. On 21 January 2014, Mr Kekhman applied for an adjournment of the hearing of the committal application brought by Bank of Moscow against him, but that application was refused by Hamblen J. The next day, Bank of Moscow and Mr Kekhman agreed terms which led to the committal application being dismissed by consent.
30. The trustees in bankruptcy reported to the court on 28 February 2014. The trustees have also from time to time prepared reports to the creditors' committee.
31. In or around March or April 2014, Bank of Moscow brought proceedings against Mr Kekhman. The Chief Registrar commented in his judgment of 9 April 2014 that he could not possibly form even the most provisional view about the merits of this claim. Bank of Moscow served its Particulars of Claim in those proceedings on or about 17 April 2014. The proceedings put forward the claims which had been foreshadowed by the draft claim attached to Bank of Moscow's application dated 31 January 2013. Following Mr Kekhman's discharge from bankruptcy on 5 October 2013, it was not then necessary for Bank of Moscow to obtain permission under section 285(3)(b) to bring these proceedings. Bank of Moscow contends that Mr Kekhman is not discharged from the liability which is alleged in those proceedings because that liability is based on alleged fraud within section 281(3).
32. Bank of Moscow's Particulars of Claim include claims that Mr Kekhman conspired to defraud it and procured various companies, said to have been under his control, to commit breaches of their contracts with Bank of Moscow. It has pleaded that these claims are governed by English law, alternatively by Russian law. It has also pleaded further claims which it contends are governed by Russian law.
33. On or about 17 July 2014, Mr Kekhman served a detailed Defence denying any wrongdoing. As to the claims for alleged conspiracy and procuring breaches of contract, Mr Kekhman has pleaded that these claims are governed by Russian law. Mr Kekhman has also pleaded that he is discharged from any liability for the alleged wrongdoing by reason of his discharge from bankruptcy. Mr Kekhman contends that the alleged wrongdoing is not "fraud" within section 281(3).
34. On 23 December 2014, Bank of Moscow served on Mr Kekhman draft Amended Particulars of Claim which have added further allegations against him, asserting that he is liable for alleged fraudulent misrepresentations made to it.
35. I referred earlier to the Chief Registrar's comment in his judgment (before the detailed pleadings were served) that he could not form a view as to the merits of Bank of Moscow's claim. I consider that I am in the same position on the hearing of this appeal.
36. In letters dated 11 and 21 February 2014 from Mr Kekhman's solicitors to the trustees in bankruptcy, those solicitors have put forward an alleged claim against Bank of Moscow, contending that such claim was originally available to Mr Kekhman and is now available to be pursued by the trustees. As in the case of the claim by Bank of Moscow against Mr Kekhman, the Chief Registrar commented in his judgment of 9 April 2014 that he could not possibly form even the most provisional view about the merits of this cross-claim. I consider that I am in the same position on the hearing of this appeal.

The decision of the Chief Registrar

37. The hearing of the applications to annul took place over 4 days from 4 to 7 March 2014 and the Chief Registrar handed down judgment on 9 April 2014. At paragraphs [1] to [32], the Chief Registrar summarised the position in relation to the petition, the hearings on 26 September and 5 October 2012 and the applications which were before him. He then, at [33] to [86], considered the legal principles which he should apply and he summarised some of the submissions of counsel as to the application of those principles in this case.
38. The Chief Registrar then addressed two issues of Russian law. The first such issue was whether the bankruptcy order would be recognised and/or could be enforced in the Russian Federation. The second issue was whether, when Mr Kekhman brought the sum of £200,000 into England, he had acted in breach of an order of the Russian courts which had provided for the arrest of Mr Kekhman's assets. On the first issue, it will be remembered that the Chief Registrar had written evidence before him at the hearing on 5 October 2012 to the effect that the bankruptcy order would be recognised in Russia. At the hearing of the annulment applications, the Chief Registrar had a substantial body of written evidence from three academic Russian lawyers, Professor Dozhdev (called by Bank of Moscow), Professor Yarkov (called by Sberbank Leasing) and Professor Sergeev (called by Mr Kekhman). All three of these experts also gave oral evidence. Professor Sergeev expressed the opinion that the bankruptcy order would be recognised and could be enforced in Russia. The other two experts did not agree.
39. The Chief Registrar considered the evidence as to Russian law at [87] to [99] of his judgment. He gave his reasons at [118] to [126] for his conclusion, at [127], that the bankruptcy order was, and always was, unlikely to be recognised or enforced by the courts of the Russian Federation. He further held at [128] that, if he were wrong about Russian law on this point, nonetheless it was unlikely (as a matter of fact) that there would be any attempt to seek recognition or enforcement of the bankruptcy order in Russia. He explained that the trustees, on legal advice, considered it inappropriate to challenge actions taken in Russia to arrest Mr Kekhman's assets and, further, that the creditors' committee did not wish the trustees to incur costs in this respect. The Chief Registrar recognised at [132] that his conclusions, as to Russian law and as to the attitude of the trustees and the creditors' committee, meant that the relevant circumstances were now significantly different from those considered when the bankruptcy order was made on 5 October 2012.
40. The Chief Registrar then considered the effect of the order of the Russian court, providing for the arrest of Mr Kekhman's assets, on the £200,000 which was brought from Russia to England. The Chief Registrar held, at [129] to [131], that the effect of that order was that Mr Kekhman ought not to have brought that sum into this jurisdiction. He further held that, if he were wrong about that finding, then Mr Kekhman had misled him on 5 October 2012 and Mr Kekhman should have been frank about the obligations imposed by the Russian order. However, the Chief Registrar added that he had not gone into any question as to the £200,000 at the hearing on 5 October 2012 because he was concerned at that hearing that Mr Kekhman's actions in that respect were "artificial".
41. At [100] to [106] of his judgment, the Chief Registrar directed himself that the court had jurisdiction to make the bankruptcy order in this case by reason of Mr Kekhman's presence in the jurisdiction when the petition was presented. He dealt with a number of submissions as to how the court should approach a debtor's petition presented in that way. He summarised the approach to be applied at [105] to [106] as follows:

"105. A number of principles emerge from the case law. They seem to be:

(a) the courts in England and Wales will act to fill lacunae in foreign jurisdictions when it is proper to do so (SEA Assets Ltd v Garuda and Re Rodenstock etc.);

(b) the existence of insolvency proceedings in another jurisdiction is a relevant consideration but not a bar to making an order (In re a Debtor (No 737 of 1928); Re Thulin);

(c) the presence of assets in the jurisdiction may once have been an important factor (Lord Jessell MR and Baggallay LJ in Ex parte Robinson) as may be the fact that there is a prospect of there being assets in the jurisdiction (Re Betts, Ex parte Painter and Re Thulin); however, the absence of assets never has been an absolute bar to making an order (In re Field; Re Thulin, where the judge talked of letting the petitioner have its order for what it is worth); it is plainly not now essential that there be assets (International Westminster Bank plc v Okeanos Maritime Corp and Stocznia Gdanska SA v Latreefers Inc);

(d) a claim may be an asset (International Westminster Bank plc v Okeanos Corp; Shepherd v Legal Services Commission);

(e) even when it was thought there had to be assets or someone submitting to the jurisdiction the real test was the existence of "some commercial subject-matter on which the winding-up order can operate" (Banque des Marchands de Moscou v Kindersley);

(f) however, there is a need to show some benefit (Stocznia Gdanska SA v Latreefers SA; Re Magyar Telecom BV); the court will not make an order where there is no purpose or it would be a waste of costs (Ex parte Robinson; Re Betts);

(g) the presence of debts and debtor here may be a consideration (In re a Debtor (No 737 of 1928) ;

(h) a sufficient connection may be found in commercial dealings (International Westminster Bank plc v Okeanos Maritime Corp);

(i) submission to the jurisdiction appears to be relevant (Banque des Marchands de Moscou v Kindersley);

(j) the need for investigation is a relevant factor in considering whether or not to make an order (In re Field, Re Betts, Re Thulin; Shepherd v Legal Services Commission);

(k) there must be a benefit to someone from making the order (Stocznia Gdanska SA v Latreefers Inc et passim);

(l) the rehabilitation of the debtor or preservation of something for his benefit may be taken into account (Ex parte Painter).

Not all will be relevant in every case; some are not directly relevant to this case.

106. It is perhaps unsurprising that the cases take such varying approaches and throw up apparently contradictory (or perhaps complementary) propositions, since connection and utility can take many forms. In his closing submissions Mr Gourgey recognised that it was difficult to identify a "formulaic approach to discretion". I think he is right. As Lloyd J said at first instance in Stocznia Gdanska SA v Latreefers Inc, the principles change over time. I note here too Morritt LJ's reference in paragraph 31 of his judgment in Stocznia Gdanska v Latreefers to the way the judgment in the Banque des Marchands de Moscou case should be viewed, namely as laying down what was sufficient "in that case" as opposed to in all cases. (Something of the same thinking may arguably be discerned in David Richards J's point in the Magyar Telecom BV case about the link between questions of connection and effect.) It seems to me, if that is right, that the cases should be approached on that footing and not on the footing that they set out hard and fast rules that must be adhered to in all cases and in all circumstances. That is not to say that the discretion may be exercised capriciously or wantonly. The common thread in the authorities appears to me to be that there must be some purpose in making the order that is sought and that such purpose may arise in various ways, for example as a result of the presence of assets, or some contractual connection to the jurisdiction; it may arise where there is need to fill a lacuna in the law of other jurisdictions, or where there is some other benefit for the creditors and/or the debtor or some combination of the foregoing. The approach has been characterised by a degree of pragmatism, albeit principled pragmatism. Thus the courts here will probably not exercise the discretion to wind up a foreign company or bankrupt a foreign individual where there are no assets, there is no connection to the jurisdiction and there is no purpose to be fulfilled (at one end of the scale); but they probably will if there is an obvious benefit, a strong connection and something to administer (at the other end of the scale). There is necessarily a wide spectrum between those two polarities."

42. Immediately following that passage, the Chief Registrar then added the following comment, which is now the subject of a ground of appeal:

"107. If I am right about that, Mr Swainston's submissions on Owo-Samson take on a meaning that, I confess, eluded me in the course of the hearing; for the court, quite simply, must behave judicially, in a principled manner, or, if you like, with Wednesbury reasonableness, in exercising the unfettered discretion it has been given in the face of the wide range of possible circumstances with which it may be confronted, and provided it has done so, any order made should not be undone, at least not lightly."

43. The judgment then set out a detailed and closely reasoned analysis of the position. I can summarise the reasoning as follows:

(1) the court should adopt the same approach to the bankruptcy of foreign individuals as it does to the winding up of foreign companies: [108];

(2) Mr Kekhman had submitted to the jurisdiction: [109];

(3) the bankruptcy order was not sought for an improper purpose although it was sought to avoid the consequences of Russian law which did not permit Mr Kekhman to become bankrupt in Russia: [110];

(4) Mr Kekhman would have to "take his chances" as to any consequences in Russia: [110];

(5) a bankruptcy order in this jurisdiction had no real practical effect on his creditors and, in particular, Bank of Moscow and Sberbank Leasing: [110];

(6) Mr Kekhman had come to this jurisdiction to fill a lacuna in the laws of Russia; the courts have previously been content to assist in such circumstances, even in the teeth of creditor opposition: [111];

(7) Mr Kekhman had a connection to this jurisdiction before he presented his petition; there was contractual documentation providing for English law and English jurisdiction; there was a contempt application on foot; the fraud proceedings were in contemplation as was Mr Kekhman's cross claim against Bank of Moscow and others: [112];

(8) the possibility of rehabilitation of a debtor was a major factor and a firmly established purpose of English bankruptcy law: [113] to [116];

(9) it was not "wrong" for a debtor to present a petition for the purpose of being discharged from his debts where there was no benefit to creditors: [117];

(10) the discharge of Mr Kekhman's debts was not the sole purpose of the petition: [117];

(11) the petition would be of limited value in relation to rehabilitation if Mr Kekhman could not benefit from rehabilitation in Russia: [117];

(12) the bankruptcy order would not be recognised and could not be enforced in Russia: [118] to [127];

(13) even if the bankruptcy order could, under Russian law, be recognised and enforced in Russia, the trustees would not pursue recognition and enforcement there: [128];

(14) in view of the order of the Russian court in relation to the arrest of Mr Kekhman's assets, he should not have brought the £200,000 into England; Mr Kekhman had misled the court in this respect on 5 October 2012 but, at that hearing, the Chief Registrar had thought that it was "artificial" to have regard to that sum as an asset in this jurisdiction: [129] to [131];

(15) in view of his findings as to recognition, enforcement and the £200,000, the circumstances were now different from what they were thought to be on 5 October 2012; in two important respects, "this bankruptcy lacked utility from the first": [132];

(16) the finding in [132] did not entirely dispose of the question as to the utility of the bankruptcy: [133];

(17) investigation of the debtor's affairs can be an important consideration: [133];

(18) Mr Kekhman relied on the need to investigate his affairs as it was his case that he had lost control of them: [133];

(19) the non-Russian assets could be investigated by the trustees and they had in fact done so and made realisations: [133];

(20) Mr Kekhman had co-operated with the trustees: [133] to [134];

(21) the court would have regard to a recent report from the trustees (dated 28 February 2014) which showed that there had been realisations and there was a possibility of further realisations (leaving aside the £200,000 and Russian assets): [136];

(22) the shares held by the Foundation seemed unlikely to produce a return to creditors: [136];

(23) the trustee was investigating the ownership of a property in Cannes which Mr Kekhman said did not belong to him, but to his wife: [136]; the

(24) Chief Registrar was sceptical about a return from a possible development by LQ Smolny: [136];

(25) the trustees expressed the view that the bankruptcy had utility and that view should be given considerable weight so that the Chief Registrar held: "[t]here had been, then, and always was utility in this bankruptcy, and that utility continues": [136];

(26) Mr Kekhman's claim against Bank of Moscow and others had vested in the trustees; the Chief Registrar had "no idea" of its value; he thought it unlikely that the trustees would pursue the claim but they were the best persons to evaluate it: [137];

(27) the bankruptcy order had a commercial subject matter in the form of the claim as well as in the form of the non-Russian assets: [138];

(28) although the court did not have the same detailed information about assets on 5 October 2012, the assets did exist at that date: [139];

(29) although the realisations were modest (Sberbank Leasing submitted they were "minimal"), that was true of many bankruptcies and utility was not to be equated with a return to creditors: [140];

(30) there was a possibility of an orderly realisation of Mr Kekhman's assets outside Russia: [141];

(31) there was constructive contact with the Curaçao receiver of the Foundation: [141];

(32) there was a remote possibility of a pari passu distribution to creditors which was better than "the law of the jungle" advocated by Bank of Moscow and Sberbank Leasing: [141];

(33) there was no real prejudice to Bank of Moscow and Sberbank Leasing; if the bankruptcy order were not recognised in Russia, then the "free-for-all" could continue there in relation to the few assets left over after execution; as to assets elsewhere, all the creditors would be in the same position; Bank of Moscow's claim against Mr Kekhman had been delayed but not stifled; there was no special unfairness: [142]; there was no prejudice as a result of Mr Kekhman's failure to make full disclosure about the effect of the arrest of assets in Russia: [143].

44. The Chief Registrar's conclusion was expressed as follows:

"144. The arguments are finely balanced. Two major bases on which the bankruptcy order was sought (recognition in Russia and the existence of assets that that might come into the bankruptcy estate) have fallen away. However, notwithstanding the fact that it now appears there can be no recognition of the bankruptcy order in the Russian Federation, and notwithstanding what we now know to be the true position regarding the assets in that country, I conclude, for the reasons explored above, that the bankruptcy order still had utility when it was made, and that the matters about which the Applicants complain do not outweigh such utility, so that even if this court had known the true position regarding the problems of recognition and resulting from the arrest of the Russian assets, it still could and probably would have made the bankruptcy order on the basis that there was commercial subject matter on which it could operate, it would have enabled Mr Kekhman's affairs to be looked into, made possible an orderly realisation of his non-Russian assets and assisted his own financial rehabilitation even if only outside the Russian Federation (a potentially important consideration to someone with international interests)."

45. The Chief Registrar then added:

"145. It follows, in my view, that the discretion to annul ought not to be exercised in the circumstances of this case on the grounds that I have considered so far."

46. The Chief Registrar then considered other matters. He held that it would not be appropriate to rescind the bankruptcy order under section 375. There has been no appeal against that part of the decision. Further, he rejected a submission that the bankruptcy order should be annulled or rescinded on the ground of misleading information or non-disclosure when the order was made. Again, that conclusion is not challenged on appeal. Further, Sberbank Leasing have not appealed the dismissal of its application to annul the order.
47. Before I turn to consider Bank of Moscow's grounds of appeal against this decision, it will be helpful to explain some of the legal principles which apply in this case.

Debtor's petitions

48. A debtor may present a petition for his own bankruptcy: section 264(1)(b). Section 265 identifies the conditions to be satisfied in respect of a debtor as follows:

"Conditions to be satisfied in respect of debtor.

(1) A bankruptcy petition shall not be presented to the court under section 264(1)(a) or (b) unless the debtor—

(a) is domiciled in England and Wales,

(b) is personally present in England and Wales on the day on which the petition is presented, or

(c) at any time in the period of 3 years ending with that day—

(i) has been ordinarily resident, or has had a place of residence, in England and Wales, or

(ii) has carried on business in England and Wales.

(2) The reference in subsection (1)(c) to an individual carrying on business includes—

(a) the carrying on of business by a firm or partnership of which the individual is a member, and

(b) the carrying on of business by an agent or manager for the individual or for such a firm or partnership.

(3) This section is subject to Article 3 of the EC Regulation."

49. As appears from section 265(1), the court has jurisdiction in relation to a bankruptcy petition, including a debtor's petition, if the debtor is personally present in England and Wales on the day on which the petition is presented. If this qualification is satisfied, the domicile or the ordinary residence or the place of business of the debtor is irrelevant on the question of jurisdiction.
50. By section 272, a debtor's petition may be presented only on the grounds that the debtor is unable to pay his debts: section 272(1). A debtor's petition must be accompanied by a statement of the debtor's affairs, setting out, in particular, details of his creditors, his debts and other liabilities and his assets: section 272(2). The Insolvency Rules 1986 make further provision in relation to debtor's petitions: rules 6.37 to 6.47.
51. The court has a discretion as to whether to make a bankruptcy order on any petition: section 264(2).
52. Section 266(3) provides:

"(3) The court has a general power, if it appears to it appropriate to do so on the grounds that there has been a contravention of the rules or for any other reason, to dismiss a bankruptcy petition or to stay proceedings on such a petition; and, where it stays proceedings on a petition, it may do so on such terms and conditions as it thinks fit."

The position of a foreign debtor personally present in the jurisdiction

53. In the present case, it is agreed that the court had jurisdiction to make a bankruptcy order in relation to Mr Kekhman. Such jurisdiction was conferred on the court by reason of Mr Kekhman's presence in England and Wales on the day he presented his petition: see section 265(1)(b). Mr Gourgey submitted that it was nonetheless necessary for Mr Kekhman to persuade the court that it should make such an order and for that purpose, Mr Kekhman had to show three things, namely:

(1) that he had a sufficiently close connection with England and Wales;

(2) that there was a reasonable possibility of benefit resulting from the making of a bankruptcy order; and that one or more persons interested in the distribution of assets were persons over whom the English court could exercise jurisdiction.

54. The three matters identified in paragraph 53 above were said to be derived from the settled practice of the court in relation to its jurisdiction to wind up a company incorporated abroad. Mr Gourgey submitted that these three things had to be shown to the satisfaction of the court or, at any rate, they were relevant matters for the court to consider in the exercise of its discretion but they were not the only matters relevant when the court considered how to exercise its discretion.
55. Mr Swainston did not dispute the authority of the cases which established the practice of the court in relation to the winding up of a foreign company but he submitted that they did not deal with the position in relation to bankruptcy orders. He submitted that it was not necessary for a debtor presenting a bankruptcy petition to show a close connection with this jurisdiction in order to persuade the court to make a bankruptcy order. He submitted that when an English court was asked to make a bankruptcy order in a case with a foreign element, all that the court needed to consider was whether there would be any utility in making such an order. He referred to Re Thulin [1995] 1 WLR 165 and submitted that the court in that case justified the making of a bankruptcy order by reference only to the possible utility of such an order. I will now refer to the authorities relied upon and then express my conclusion on the need for there to be a connection with this jurisdiction.
56. At one time it was suggested that the court would not wind up a foreign company unless it had assets within this jurisdiction. In time, it came to be recognised that whilst the presence of assets in this jurisdiction was one way in which a sufficiently close connection with this jurisdiction could be established, the presence of assets was not always necessary for this purpose. The relevant principles, identifying the three matters referred to above, can be found in the decision of the Court of Appeal in Stocznia Gdanska SA v Latreefers Inc (No. 2) [2001] 2 BCLC 116, approving the decision of Knox J in Re Real Estate Development Co [1991] BCLC 201. The principles were again referred to in the recent decision of the Privy Council in Singularis Holdings Ltd v PricewaterhouseCoopers [2014] UKPC 36 at [10]. In some cases when those principles were applied to the facts, the court declined to order the winding up of a foreign company; examples of this are provided by Re Real Estate Development Co [1991] BCLC 201 and Banco Nacional de Cuba v Cosmos Trading Corp [2000] BCC 910.
57. More recently, the three matters referred to in paragraph 53 above have been considered in a number of cases involving schemes of arrangement in relation to a company's creditors under Part 26 of the Companies Act 2006. The court's jurisdiction under Part 26 of the 2006 Act extends to any company which is liable to be wound up under the Insolvency Act 1986. It has been held that the court has jurisdiction to wind up a foreign company and these three matters go to the court's discretion in relation to the making of such an order and not to its jurisdiction to make such an order: see Re Drax Holdings Ltd [2004] 1 WLR 1049, Re Rodenstock GmbH [2011] Bus LR 1245. Just as the three matters are relevant to the court's discretion to exercise its jurisdiction to wind up a foreign company, they are relevant to the court's discretion to sanction a scheme under Part 26 of the 2006 Act.
58. In a number of the scheme cases, the court has considered whether the fact that the debtor/creditor relationship is governed by English law and/or is subject to an exclusive or non-exclusive English jurisdiction clause is sufficient to provide a sufficiently close connection with this jurisdiction. In Re Apcoa Parking Holdings GmbH [2014] EWHC 3849 (Ch), at [219], Hildyard J listed a number of cases where the English court had sanctioned creditors' schemes where the rights of creditors were governed by English law. In one of those cases, Re Magyar Telecom BV [2013] EWHC 3800 (Ch), David Richards J had stated at [21] that the requirement of a connection with England and the need to show that the exercise of the jurisdiction would have a substantial effect were not wholly separate questions and were either aspects of the same question or, at least, closely related questions.
59. I do not accept Mr Swainston's submission that the principles applied in the winding up cases are not relevant in the bankruptcy context. I consider that the principles apply in a similar way in both contexts. A substantial connection with this jurisdiction does not go to the issue of the court's jurisdiction in either context. In both contexts, it is relevant as to how the court will exercise an admitted jurisdiction. The court will be concerned as a matter of international comity not to exercise its jurisdiction in an exorbitant way. This concern on the part of the court arises in a whole range of different contexts and is not a special rule applicable only to the winding up of foreign companies. Examples of a wider application of the rule are provided by Re Paramount Airways Ltd [1993] Ch 223 at 239 – 240, Masri v Consolidated Contractors Int (UK) Ltd (No 2) [2009] QB 450 at [34] – [36] and Agbaje v Akinnoye-Agbaje [2010] UKSC 13 at [52]. As the rule has a potentially general application, it applies also in the context of bankruptcy orders.
60. I do not consider that the decision in re Thulin is inconsistent with this view. In that case, the question of a connection with this jurisdiction was addressed: see at 168B and E. On the facts of that case, the creditor's petition was based on an unpaid loan pursuant to a contract governed by English law where the English court had non- exclusive jurisdiction: see at 166G. The judgment focussed on what seems to have been the only submission made by the debtor to the effect that the bankruptcy order would be pointless: see at 169G. The judge held that the order would not be pointless.
61. The parties did not agree as to the meaning of the second requirement referred to in paragraph 53 above. Mr Gourgey appeared to accept that the relevant benefit could include a benefit to the debtor but submitted that the court should also consider the position of the creditors. Mr Swainston submitted that in the case of a debtor's petition, it was only relevant to consider the possibility of benefit to the debtor; once such a benefit was shown, the court ought to make a bankruptcy order. He referred to Re Painter [1895] 1 QB 85 where it was held that it was not an abuse of process for a debtor to present a bankruptcy petition even where a bankruptcy would place creditors at a disadvantage as compared with their position if there were no bankruptcy. He also relied on Re Dunn [1949] 1 Ch 640 where it was held that it was not an abuse of process for a debtor to present his own petition to obtain a discharge from a debt or possible debt and without the intention of benefiting his creditors by securing a fair distribution of assets among them.
62. In so far as this point is assisted by the authorities, I note that Knox J in Re Real Estate Development Co [1991] BCLC 201 referred (at page 217) to "a reasonable possibility … of benefit to those applying for the winding up order". In later cases dealing with the winding up of a foreign company, the courts have referred to the need to show a benefit "to creditors"; the reference to the creditors is explained by the fact that the court was specifically considering creditors' petitions. I consider that the reason that the question of the benefit resulting from an order is mentioned in the winding up cases is that there is an obvious overlap between the question of connection with this jurisdiction and the benefit flowing from an order made in this jurisdiction. However, I also consider that there are separate reasons why the court needs to be satisfied that there is a reasonable possibility of a benefit resulting from a bankruptcy order. A court will not wish to make an order that is pointless. Therefore, a court will wish to be satisfied that there is a reasonable possibility of benefit resulting from its order.
63. When the court considers the possibility of benefit resulting from an order, the normal starting point is to consider any possible benefit to the petitioner, whether it be a debtor or a creditor. In many cases, showing benefit to the petitioner will be sufficient to persuade the court to make the order. I am not persuaded that anything in Re Painter or in Re Dunn establishes that the court should leave out of account the position of creditors when it considers whether to exercise its discretion to make a bankruptcy order on a debtor's petition. I do not see why a consideration of benefit should be restricted to the possibility of benefit to the petitioner; benefit to others should also be relevant. Conversely, disadvantages or unfairness to others may also be relevant. After all, the court is exercising a discretion and is surely required to consider the effect of the proposed order on all relevant persons. In such a case, as is normal, the court will consider the effect of making the order and the effect of not making the order and will then consider what to do, having regard to all relevant considerations, including the legitimate aspirations of all potentially affected persons.
64. There was no dispute as to the application of the third requirement referred to in paragraph 53 above.

The power to annul a bankruptcy order

65. Section 282 confers on the court a power to annul a bankruptcy order. Section 282 is in these terms, so far as material:

"(1) The court may annul a bankruptcy order if it at any time appears to the court—

(a) that, on any grounds existing at the time the order was made, the order ought not to have been made, or

(b) that, to the extent required by the rules, the bankruptcy debts and the expenses of the bankruptcy have all, since the making of the order, been either paid or secured for to the satisfaction of the court.

(2) …

(3) The court may annul a bankruptcy order whether or not the bankrupt has been discharged from the bankruptcy. Where the court annuls a bankruptcy order (whether under this section or under section 261 or 263D in Part VIII)—

(a) any sale or other disposition of property, payment made or other thing duly done, under any provision in this Group of Parts, by or under the authority of the official receiver or a trustee of the bankrupt's estate or by the court is valid, but

(b) if any of the bankrupt's estate is then vested, under any such provision, in such a trustee, it shall vest in such person as the court may appoint or, in default of any such appointment, revert to the bankrupt on such terms (if any) as the court may direct;

and the court may include in its order such supplemental provisions as may be authorised by the rules.

(5) … "

66. Section 282 does not specify who has sufficient standing to make an application to annul a bankruptcy order. In the present case, it was accepted that Bank of Moscow had sufficient standing for that purpose.
67. The power to annul may, in principle, be exercised "at any time". As section 282(1)(a) expressly provides, when asked to annul a bankruptcy order, the court will consider "any grounds existing at the time that the order was made". This wording makes it clear that the court, when considering an annulment application, is not confined to the facts and matters which were drawn to the court's attention at the time when the bankruptcy order was made. It is open to the parties concerned in relation to an annulment application to put forward further evidence of fact, and to make further submissions, as to the grounds which existed at the time the bankruptcy order was made.
68. There will necessarily be a period of time between the date of the bankruptcy order and the date of the hearing of the annulment application. As section 282(1)(a) makes clear, the court is required to consider the grounds existing at the earlier, and not the later, point in time. Thus, if the facts change between these two dates, the court must consider the facts as they stood before the change. This does not mean that the court will leave entirely out of account events which occurred between the two dates. For example, events which occur after the bankruptcy order may throw reliable light on "the grounds existing at the time the [bankruptcy] order was made". An example would be where there was a dispute about the value of an asset at that time and, following the bankruptcy order, that asset is sold in the open market in such a way as to provide reliable evidence as to the value of the asset at the date of the bankruptcy order; see, for example, the approach in Phillips v Brewin Dolphin Bell Lawrie Ltd [2001] 1 WLR 143 at [26] (a case on section 238), applied in Re Thoars [2003] 1 BCLC 499 and Stanley v TMK Finance Ltd [2011] BPIR 876. Conversely, other events will not be relevant in that way and must be left out of account when considering the grounds existing at the date of the bankruptcy order. An example would be where an asset owned by the bankrupt is destroyed by fire after the bankruptcy order.
69. What sometimes happens when a court is asked to make a bankruptcy order is that the court has to make an assessment of certain possibilities. It might be said that the bankruptcy order will provide an opportunity for the trustee in bankruptcy to investigate certain matters. It might also be said that a bankruptcy order will carry with it the risk of certain adverse consequences. These matters involve an assessment of future possibilities. The court has to do its best to judge those matters as at the time the order is made. On an annulment application, it will be open to a party to lead evidence as to further facts which existed at the date of the bankruptcy order, even though those further facts were not provided to the court at the date of the order. But is it open to a party to inform the court, perhaps some considerable time later, of what actually happened in relation to the various possibilities and then to submit that because things turned out differently, that the court's initial assessment was wrong and that the order "ought not to have been made"? The Chief Registrar directed himself that, when matters are uncertain at the date of the order, but the uncertainty was resolved before the date of the hearing of a later annulment application, he should have regard to the later events. He relied on the decision in Watts v Newham LBC [2009] BPIR 718, at [76] – [77], where the deputy judge said: "why should I speculate about what might eventually happen, when I now know what did happen?"
70. At the hearing of the appeal, it was not suggested that the decision in Watts was wrong or that the Chief Registrar should not have directed himself as he did. The Chief Registrar did take into account a number of matters which had occurred after the making of the bankruptcy order. He was clearly right to take account of subsequent events in so far as they provided evidence of what the facts were on 5 October 2012. However, I am less convinced that it was appropriate to entertain a submission that because a possibility which was assessed in a particular way on 5 October 2012 turned out differently from the assessment that the bankruptcy order "ought not to have been made". In view of the absence of any challenge to his judgment on this ground, this matter was not argued in any detail before me. However, as will be seen, I will in this case make my own decision on how the relevant discretion ought to have been exercised. I have therefore considered whether the approach in Watts was correct. In the end, I have decided that it is not necessary for me to rule on that point. If it had been necessary to give such a ruling, then I would have wished to consider whether that approach goes too far and whether a case where the court's assessment in relation to future events does not prove to be accurate should be dealt with by rescission under section 375, rather than by annulment under section 282. This question of the court's approach to the assessment of a contingency, and the relevance of later events is a difficult one, and a court asked to consider the meaning of "on the grounds existing at the time the order is made" in section 282 might wish to consider whether it derives benefit from the citation of authorities in other areas of the law such as Bwllfa and Merthyr Dare Steam Collieries v Pontypridd Water Works Co [1903] AC 426 (a case which might have influenced the deputy judge in Watts), Stein v Blake [1996] AC 243 at 252 and Golden Strait Corp v Nippon [2007] 2 AC 353 or whether such authorities should be distinguished.
71. Section 282(1)(a) requires the court to consider whether, on the grounds existing when the bankruptcy order was made, the order "ought not to have been made". There may be various reasons why the court hearing an annulment application is satisfied that the bankruptcy order "ought not to have been made". For example, it may emerge that the court had no jurisdiction to make the bankruptcy order. An example is where the order was made in relation to a debtor whose centre of main interests, for the purposes of the Insolvency Regulation (Council Regulation (EC) No. 1346/2000), was in another member state: see, by way of examples, Re Eichler (No. 2) [2011] BPIR 1293; Irish Bank Resolution Corporation Ltd v Quinn [2012] NICh 1 and Sparkasse Hilden Ratingen Velbert v Benk [2012] EWHC 2432 (Ch). A court may annul a bankruptcy order where the debt on which the petition was founded did not exist: see Royal Bank of Scotland v Farley [1996] BPIR 638 at 638H-640A. Further, a court may annul a bankruptcy order if the debtor was able to pay his debts when the order was made (so that section 272 was not then satisfied): see Paulin v Paulin [2009] EWCA Civ 221 at [40]; similarly, if the petition involved an abuse of process: see the discussion in Paulin v Paulin at [43] – [48].
72. In addition, on a petition for a bankruptcy order, the court has a discretion whether to make the order. If on the hearing of an annulment application, the court is satisfied that on the grounds existing at the date of the bankruptcy order, such an order ought not to have been made, as a matter of discretion, then I consider that the court hearing the annulment application is able so to determine and to hold that the bankruptcy order "ought not to have been made" for the purposes of section 282(1)(a).
73. I wish, however, to comment further on this last possibility. In many cases, the court hearing the annulment application will have different evidence from that which was before the court at the hearing of the petition. This could arise in the case of a debtor's petition where the creditors were not notified of the petition and, following the bankruptcy order, a creditor applies for an annulment of the order relying on matters which were not previously before the court. In such a case, the court hearing the annulment application is not conducting an appeal against the decision made on the petition but is exercising its own original jurisdiction under section 282. However, in a case where there is no new evidence before the court hearing the annulment application, the court will normally take the view as a matter of discretion (a topic I consider below) not to annul the bankruptcy order.
74. The power to annul under section 282 is discretionary ("the court may annul"). Thus, even if the court is satisfied that on the grounds existing at the date of the bankruptcy order, the order ought not to have been made, the court can still decide not to annul the order. An obvious example would be where the annulment would be pointless, for example, where the circumstances were such that a new bankruptcy order would certainly be made. Another example would be where circumstances had changed following the bankruptcy order making it inappropriate to annul the order. It follows that when considering whether to exercise its discretion to annul an order which it has found ought not to have been made the court will take into account all relevant matters, including matters which have come about after the bankruptcy order was made.
75. The discretionary nature of the jurisdiction to annul is shown by the decisions in Owo-Samson v Barclays Bank plc [2003] BPIR 1373 and [2004] BPIR 303. In that case, on an application to annul a bankruptcy order, the Court of Appeal held that, on the grounds existing at the time the order was made, the order ought not to have been made: see [2003] BPIR 1373. That meant that the court had a discretion whether or not to annul the bankruptcy order. The Court of Appeal remitted that matter to the registrar who declined to exercise the discretion to annul the order and his decision was upheld on appeal: see [2004] BPIR 303.
76. It is also relevant to refer to the type of case where nothing has changed between the date of the hearing of the petition and the date of the hearing of the annulment application and the party seeking the annulment is effectively seeking to re-run the original arguments before a different judge, hoping for a different result. Ahmed v Mogul Eastern Foods [2005] EWHC 3532 (Ch) (in particular, at [19], [20], [23] and [25]) is authority for the proposition that, in such a case, the court will normally take the view that, in the absence of an appeal against the bankruptcy order, the court should not permit an attempt to have a second bite of the cherry before a judge of coordinate jurisdiction; this approach is an exercise of the discretion conferred by section 282(1) not to annul a bankruptcy order.

The effect of a bankruptcy order

77. It is relevant in this case to consider the general effect of a bankruptcy order. What follows is a brief summary only of the general position and does not deal with the many qualifications of, and exceptions to, the general position if they are not of particular relevance in the present case.
78. A bankruptcy order may be made on a debtor's or a creditor's petition: section 264(1)(a), (b) and (2). The bankruptcy of the debtor commences with the day on which the order is made and continues until the debtor is discharged from bankruptcy: section 278. The bankrupt is discharged from bankruptcy at the end of the period of 1 year beginning with the date on which the bankruptcy commenced: section 279. Where a bankrupt is discharged, the discharge releases him from all the bankruptcy debts (section 281(1)) but he is not released from a bankruptcy debt which he incurred in respect of any fraud or any fraudulent breach of trust to which he was a party: section 281(3). "Bankruptcy debt" is defined by section 382. A court may annul a bankruptcy order: section 282.
79. The bankrupt's estate comprises all property belonging to or vested in the bankrupt at the commencement of the bankruptcy: section 283(1). After the making of a bankruptcy order, no creditor of the bankrupt, in respect of a debt provable in the bankruptcy, has any remedy against the property or person of the bankrupt in respect of that debt nor may such a creditor commence any action or other legal proceedings against the bankrupt, except with the leave of the court: section 285.
80. The 1986 Act provides for the appointment of a trustee in bankruptcy. The function of the trustee is to get in, realise and distribute the bankrupt's estate: section 305. The bankrupt's estate vests in the trustee on his appointment: section 306. The trustee may claim for the bankrupt's estate any property which has been acquired by, or has devolved upon, the bankrupt since the commencement of the bankruptcy: section 307. Section 322 provides that the proof of a bankruptcy debt is to take place in accordance with the Insolvency Rules 1986. Whenever the trustee has sufficient funds in hand of the purpose, he shall declare and distribute dividends among the creditors in respect of the bankruptcy debts which they have respectively proved: section 324(1).
81. The bankrupt is obliged to co-operate with the trustee, in particular, by providing relevant information as to his affairs: section 333. Every bankruptcy is under the general control of the court: section 363(1).
82. As explained above, the bankruptcy legislation refers to a bankrupt's creditors. The relevant creditors can be anywhere in the world. They can include creditors whose debts are governed by foreign law as well as debts governed by English law. Such creditors can prove in the bankruptcy and, if proving, are eligible to receive any dividend. Similarly, the references in the legislation to the bankrupt's debts include all such debts. Further, the references to the bankrupt's property extends to his property anywhere in the world.
83. In theory, therefore, a bankruptcy order has worldwide effect. However, there can be a disparity between theory and practice. For example, if a bankruptcy order is made in relation to a Russian citizen, and if the Russian courts would not recognise the bankruptcy order or the title of the trustee in relation to the bankrupt's property in Russia, then in practice the order may have limited, or no, effect in relation to Russian creditors and no effect in relation to assets in Russia. Those creditors will be able to sue the bankrupt in the Russian courts in relation to his debts, to obtain judgment for the full amount of the debt and to proceed to execute any such judgment in relation to the bankrupt's assets in Russia.

The grounds of appeal

84. Bank of Moscow puts forward 13 grounds of appeal. I will attempt to summarise them at this stage and I will deal with them in appropriate detail in due course. They are as follows:

(1) the Chief Registrar applied the wrong test in paragraph [107] of his judgment;

(2) he failed to recognise that the discretion to make a bankruptcy order in this case should have been exercised with caution and vigilance;

(3) he failed to take account of relevant matters, or gave them insufficient weight or gave excessive weight to irrelevant matters;

(4) he should not have regarded the state of Russian law in relation to personal insolvency as a "lacuna";

(5) he should have held that the bankruptcy order was contrary to the principle of comity;

(6) he should have held that the bankruptcy order was unfair to creditors as a whole;

(7) he should have held that Mr Kekhman did not have a sufficient connection with this jurisdiction;

(8) he failed to consider the impact of his finding that the bankruptcy order would not be recognised or enforced in Russia;

(9) he ought not to have regarded Mr Kekhman's rehabilitation or "partial rehabilitation" as a relevant factor;

(10) he ought to have considered whether the bankruptcy order would be of utility to the creditors as a whole;

(11) he ought to have annulled the bankruptcy by reason of his findings that the bankruptcy order would not be recognised in Russia and that the court had been misled on 5 October 2012 as to the £200,000;

(12) he should not have found that the de minimis realisations meant there was utility in the bankruptcy;

(13) he should not have held that future investigations and possible realisations meant that there was utility in the bankruptcy.

The nature of this appeal

85. As I will explain when considering the first ground of appeal, there is scope for argument as to the precise basis of the Chief Registrar's decision, as expressed in paragraphs [144] and [145] of his judgment, not to annul the bankruptcy order. Did he decide that this was a case where the order "ought … to have been made" or did he decide that he had jurisdiction to annul the order but, as a matter of discretion, he would not do so? Either way, his decision involved an exercise of discretion, either the discretion to make a bankruptcy order conferred by section 264(2) or the discretion not to annul conferred by section 282(1). Accordingly, Bank of Moscow's appeal is against his exercise of a discretion.
86. The principles applicable to such appeals are well known. The appeal court can only interfere with the lower court's exercise of a discretion if the lower court:

(1) has applied the wrong principle;

(2) has left out of account a material consideration;

(3) has taken into account an immaterial consideration; or

(4) has reached a conclusion which no reasonable court could have reached if it had correctly directed itself in law.

The first ground of appeal

87. The first ground of appeal is that the Chief Registrar applied the wrong test in paragraph [107] of his judgment which I have quoted earlier. In order to address this submission, I will elaborate on what I have already described as the correct approach to an application to annul under section 282 and then consider whether the Chief Registrar applied a different approach.
88. Section 282 confers on the court a jurisdiction to annul a bankruptcy order where it appears to the court that "on the grounds existing at the time the order was made, the order ought not to have been made". If that matter appears to the court, then the court has a discretion whether to annul the order: the section says "may annul". Accordingly, when dealing with an application to annul the court normally needs to decide:

(1) what were the grounds existing at the time the order was made (question 1): whether on those grounds, the order ought not to have been made (question 2); and

(2) if the answer to question 2 is: "the order ought not to have been made", whether it should annul the order (question 3).

89. In relation to question 2, the court may have to consider whether the court had jurisdiction to make the bankruptcy order or it may have to consider whether in its view, the bankruptcy order "ought not to have been made" as a matter of discretion. In a case where the original court had jurisdiction to make the order, the court hearing the annulment application must consider afresh whether the order ought to have been made. The court hearing the annulment application is not conducting an appeal against the exercise of a discretion. Nor is it conducting a process akin to judicial review. Instead, it is exercising an original jurisdiction to annul an earlier order where it is of the view that the order ought not to have been made. In many cases where a court is asked to annul a bankruptcy order, the court will have before it material which was not before the court which made the bankruptcy order. In such a case, it seems obvious that the court hearing the annulment application is not confined to a process of appeal or judicial review against the original order. The court hearing the annulment application must take account of all relevant material and make up its own mind as to whether the bankruptcy order ought to have been made.
90. In a case where the material before the court hearing the annulment application is the same as the material considered when the bankruptcy order was made, then the court will not normally address question 2 in any detail but will proceed direct to question 3 in order to hold that even if the bankruptcy order ought not to have been made, in the absence of an appeal against that order, the court should exercise its discretion not to annul the order.
91. The decision in Owo-Samson v Barclays Bank plc [2004] BPIR 303, referred to by the Chief Registrar, does not cast doubt on any of this reasoning. In that case, the Court of Appeal held, answering question 2, that the bankruptcy order ought not to have been made and it remitted question 3 to the registrar. The registrar then answered question 3 by holding that it was not appropriate to annul the bankruptcy order. The bankrupt appealed to the judge against the registrar's exercise of his discretion in relation to question 3. That led the judge to apply the conventional test for an appeal court considering a challenge to the exercise of a discretion. The conventional test was correctly stated by the judge in that case but he was not purporting to say anything about the test which is to be applied in relation to question 2, as described above.
92. Mr Swainston submitted to the Chief Registrar that the test for an appeal court identified in Owo-Sampson applied to question 2. During the course of the argument, the Chief Registrar commented that the test in that case was not the right test. However, in his judgment at [107], he expressed himself differently. As I interpret that paragraph, the Chief Registrar seems to be saying that if the original court, when exercising its discretion in relation to the making of a bankruptcy order, does not commit an error of principle or act perversely in the Wednesbury sense, then the court hearing the annulment application should not annul the order or should at least be reluctant to annul it. I consider that the Chief Registrar's statement is different from the correct approach as I have described it above. His statement appears to run together questions 2 and 3 and does not amount to an accurate statement as to either step, nor as to the combined operation of the two steps.
93. The first ground of appeal was that the Chief Registrar had wrongly applied the test in paragraph [107] of his decision. In arguing against this ground of appeal, Mr Swainston argued that the test for an appeal court considering a challenge to an exercise of discretion was, by analogy, the right test. He put forward a submission which, without citing the authority, echoed some of the reasoning in Ahmed v Mogul Eastern Foods [2005] EWHC 3532 (Ch). However, I consider that decision is not directly applicable in the present case because the facts actually existing at 5 October 2012 were different from that which they were then believed to be. I do not accept his submission that the appeal test is relevant, even by way of an analogy. Mr Swainston submitted, in the alternative, that the Chief Registrar had in fact reconsidered fully the factors for and against making a bankruptcy order as if he were considering the merits for the first time and his approach could not be faulted.
94. If the Chief Registrar did apply the test in paragraph [107] in this case, then I would hold that he went wrong in law with the result that I ought then to go on to reach my decision on the annulment application. The question then is: did the Chief Registrar actually apply the test in paragraph [107] when he ultimately came to make his decision?
95. I do not think that, in the end, the Chief Registrar applied the test in paragraph [107]. It would have been very difficult for him to have done so. The test in paragraph [107] is not really workable where the facts established for the purposes of the annulment application are significantly different from the grounds which were believed to exist when the bankruptcy order was made. In this case, the Chief Registrar expressly held that the position as established at the annulment hearing was significantly different from the basis on which the court had made the bankruptcy order. At [132], he said that a "major factor" had "now gone" and at [144] he said that "[t]wo major bases … had fallen away". He then discussed the issue as to the utility of a bankruptcy order in the light of those different findings.
96. However, this does not mean that I am persuaded that the Chief Registrar applied the right test. His conclusion comes in paragraph [144] and the first part of paragraph [145] of his judgment. On his revised findings as to the grounds existing when the bankruptcy order was made, he held that the court "still could and probably would have made the bankruptcy order". He then said that: "[i]t follows … that the discretion ought not to be exercised in the circumstances of this case …". These conclusions are open to interpretation. It might be possible, although not altogether easy, to read them as if the Chief Registrar was saying that the bankruptcy order "ought to have been made" and therefore no question of a discretion to annul arose. However, if the findings are taken literally, the Chief Registrar's reasoning is that because the bankruptcy order would "probably" have been made on the grounds actually existing on 5 October 2012, he had a discretion as to whether to annul the order and he chose not to do so.
97. On this reading of the Chief Registrar's reasons, he did not decide in terms that the bankruptcy order ought to have been made. He appears to have drawn back from that finding and merely held that it was probable that it would have been made. He also said, at paragraph [144], that the arguments were "finely balanced" which may explain a reluctance to make a firm decision as to whether the bankruptcy order ought to have been made. He went on to consider how to exercise the discretion to annul in those circumstances. He held, at paragraph [145], that the discretion to annul ought not to be exercised. In other words, he held that if it were the case (which it probably was not) that the bankruptcy order ought not to have been made, he would not exercise his discretion to annul it. If, as I think, the Chief Registrar disposed of the application by exercising a discretion not to annul, he did not explain that part of his decision in any detail. He merely said that because the original order "probably would have" been made, it followed that the discretion to annul "ought not" to be exercised. On the hearing of the appeal, the parties' submissions addressed the issue whether the Chief Registrar had or had not applied the test in paragraph [107] of his judgment and I did not receive specific submissions as to whether it was open to him to form a view as to the exercise of his discretion when he did not decide one way or the other whether the bankruptcy order ought not to have been made but he used his finding that it "probably" would have been made as the principal or only factor to support a discretionary refusal to annul the order.
98. My conclusion is that the Chief Registrar did not answer the questions which he needed to answer to determine the annulment application. He ought to have decided what I have described as "question 2" above: did it appear to him that the bankruptcy order "ought not to have been made"? It was not sufficient for him to leave that question undecided and then to say that the order "probably" would have been made. If he had held that the order ought to have been made, then he had no discretion to exercise under section 282 but instead he would be bound to dismiss the annulment application. He only had that discretion if he held that the bankruptcy order ought not to have been made and he should then have exercised his discretion in the light of that finding and any other relevant circumstances.
99. I acknowledge that I have submitted the Chief Registrar's reasoning to close analysis and that my conclusion is not the same as either of the submissions made by the parties on this appeal. In other circumstances, I might have been more ready to read the decision in a beneficial way as intended to express the correct legal approach. In the end, I do not feel able to lean in favour of upholding the decision in this respect when the wording in paragraphs [144] and [145] does appear, clearly enough, to differ from a correct statement of the law and the Chief Registrar started his discussion with a wrong self-direction at [107]. Although I am not able to hold that he applied that self-direction to the letter, his ultimate decision appears to have been influenced by it, particularly the part of it where he referred to the court "not lightly" annulling a bankruptcy order. Accordingly, I hold that the Chief Registrar erred in principle in his approach to his jurisdiction to annul the bankruptcy order.
100. The consequence is that it becomes necessary for me to form my own view as to whether, on the grounds existing at the date of the bankruptcy order, that order ought not to have been made.

Whether the bankruptcy order ought not to have been made

101. Consistently with my earlier analysis of the legal principles, I need to address the following questions:

(1) what were the grounds existing when the bankruptcy order was made?

(2) was there a sufficient connection with this jurisdiction?

(3) was there a reasonable possibility of a benefit resulting from a bankruptcy order?

(4) did the making of an order breach obligations of international comity?

(5) are there reasons not to make a bankruptcy order?

(6) by way of an overall assessment, whether the order ought not to have been made?

What were the grounds existing when the bankruptcy order was made?

102. The Chief Registrar made detailed findings as to the grounds which existed when the bankruptcy order was made. Those findings were criticised in three respects. The criticisms related to three matters referred to in [112] of his judgment, which appeared to describe matters as at 5 October 2012. First, he said that there was a contempt application "on foot". In fact, the contempt application was made a little later, on 24 October 2012. However, this is a comparatively minor matter. Before 5 October 2012, Mr Kekhman had been served with an order made in the Commercial Court proceedings (to which he was not then a party) and it was said that he was required by the order to provide information to Bank of Moscow. Secondly, the Chief Registrar held that Bank of Moscow's proceedings against Mr Kekhman which were issued much later "seem to have been in contemplation" on 5 October 2012. Mr Gourgey submitted that there was no evidence to support that finding and Mr Swainston did not show me any such evidence. The third point is essentially the same as the second; the Chief Registrar suggested that Mr Kekhman's claim against Bank of Moscow and another also seemed to have been in contemplation. Mr Gourgey made the same submission in this respect and I was not shown any evidence directly supporting the Chief Registar's finding. Accordingly, in these three respects, I will not adopt his findings.
103. The Chief Registrar took into account certain matters which had emerged after 5 October 2012. For example, he took account of what had emerged as to the existence of assets. This was plainly permissible. Later events had revealed assets which existed on 5 October 2012. The Chief Registrar also took account of the trustees' assessment in their report of 28 February 2014. In that report, the trustees expressed the view that the bankruptcy had utility. In so far as that assessment was based on, amongst other things, matters which had developed since 5 October 2012, it might be said that what mattered was the proper assessment on 5 October 2012 rather than an assessment on 28 February 2014. However, as stated earlier, I do not find it necessary for the purpose of my decision to decide that matter. This will be apparent from the detailed discussion later in this judgment of the matters which I consider to be relevant.

Was there a sufficient connection with this jurisdiction?

104. The first question is whether Mr Kekhman had a sufficient connection with this jurisdiction to justify the court making a bankruptcy order in relation to an individual domiciled and resident in Russia. The connections identified by the Chief Registrar were:

(1) Mr Kekhman's liability in the sum of £86 million pursuant to guarantees governed by English law and the subject of an exclusive English jurisdiction clause;

(2) Mr Kekhman's involvement in the then existing Commercial Court claim by Bank of Moscow against his companies; in particular, it was held that a contempt application was "on foot";

(3) a possible claim by Bank of Moscow against Mr Kekhman personally;

(4) a possible claim by Mr Kekhman against Bank of Moscow.

105. I will proceed on a different basis from that set out in the last paragraph. There is no doubt about the matter in sub-paragraph (1). As to sub-paragraph (2), contempt proceedings were not "on foot" on 5 October 2012. As to sub-paragraphs (3) and (4), there was no evidence that these matters were "in contemplation" as found by the Chief Registrar.
106. As to assets in this jurisdiction, the Chief Registrar held that the £200,000 should not have removed from Russia and, in any case, he would give it little or no weight. I take the same view.
107. Of course, Mr Kekhman had substantial connections with other jurisdictions. He was domiciled and resident in Russia. He had assets in Russia and elsewhere. He carried on business in various countries but not in England and Wales. He had debts governed by laws (principally, if not exclusively, Russian law) other than English law. He was involved in court proceedings in Russia. His creditors were Russian and other non-English lenders.
108. Knox J had said in Re Real Estate Development Co [1991] BCLC 201 at 217 d-f:

"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 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. In the absence of assets, that will normally have to consist of activities carried on by the company within the jurisdiction although in common with Nourse J in the Eloc case I do not find it necessary to hold that is an essential. "

109. I consider that Mr Kekhman is able to show, in the context of a petition for a bankruptcy order, a sufficient connection with this jurisdiction by reason of his liability under the guarantees for £86 million, where a bankruptcy order would lead in due course to the discharge of that liability. I would give little or no weight to the fact that companies in which he had an indirect interest were being sued in the Commercial Court in London. I would also give little or no weight to the fact that as at 5 October 2012, he was being required to provide information to Bank of Moscow in connection with those proceedings. I will consider later, and separately, whether the making of a bankruptcy order in this jurisdiction would be contrary to this country's obligations of international comity in view of the legal position under Russian law.

Was there a reasonable possibility of a benefit resulting from a bankruptcy order?

110. The next question is whether there was a reasonable possibility of benefit accruing from the making of a bankruptcy order. As explained earlier, it is natural first to ask whether the order would be of benefit to Mr Kekhman. However, it will also be relevant to ask whether an order would be of benefit to others.
111. Prima facie, Mr Kekhman would benefit from the making of a bankruptcy order. In theory, his debts worldwide would be discharged. The discharge of the debts of an insolvent debtor is an important part of the policy of English bankruptcy law. The discharge of debt allows the debtor to start afresh, to be rehabilitated. In the ordinary case, the discharge of debt and the possibility of rehabilitation of the debtor is a clear benefit to the debtor and a sufficient reason to make a bankruptcy order on a debtor's petition. In the ordinary case, the creditors cannot complain about this. They are treated equally and there is an orderly administration of the bankrupt's estate rather than a free-for-all.
112. However, it would be wrong in this case to stop the assessment with this theoretical position. The court must consider the consequences of an order in practice. Viewed that way, prima facie, Mr Kekhman would benefit to the extent of his liability to pay £86 million under the guarantees governed by English law. Those debts would be discharged. However, as I understand it, the remainder of Mr Kekhman's debts, certainly his significant debts, are governed by Russian law. In practice, due to non- recognition in Russia of an English bankruptcy order, he will not be discharged from those other debts.
113. Mr Gourgey submits that if Mr Kekhman's total indebtedness is £316 million and only £86 million of his debts are discharged, then that is of no real benefit to him. If he is overwhelmed by his debts when they amount to £316 million, he is still overwhelmed by his debts when they are reduced by "only" £86 million. There is force in this submission but I consider that it does not entirely obliterate the fact of benefit to Mr Kekhman by the discharge of a liability to pay £86 million. The discharge to that extent will be real and effective. Mr Kekhman will not have to pay that debt. Whatever happens in the future as regards pressure from creditors or action taken by creditors, the creditors who are owed that £86 million cannot apply pressure and their actions will be restricted to proving for their debt in the bankruptcy. Of course, the practical effect of the bankruptcy in this case is a very long way short of the beneficial effect of a worldwide discharge but I am not able to find that a discharge of a liability to pay £86 million is of no benefit to Mr Kekhman.
114. As I stated earlier, there is no evidence that the claim for £150 million damages brought by Bank of Moscow against Mr Kekhman personally was in contemplation on 5 October 2012. In any event, even if subsequent events showed that that claim was a real possibility at that date, I would not give any weight to the effect of a bankruptcy order on such a claim. That claim is framed in such a way as to come within the exception to discharge in section 281(3). I make this finding even though I recognise that there is a dispute as to whether section 281(3) catches the claim as it was originally pleaded, as well as the claim as it is proposed to be amended.
115. As to the possibility of the rehabilitation of Mr Kekhman, the reality was that he could not expect to achieve total rehabilitation. He cannot be rehabilitated in Russia. If he were to start a new business and to bring assets into Russia, then they would be vulnerable to enforcement by his creditors in Russia. However, if he were to start a new business in circumstances where his assets were in England and Wales, then those assets would not be available to Russian creditors. The English court would hold that the debt owed by Mr Kekhman to a Russian creditor was discharged as a result of the worldwide effect of the English bankruptcy order. The same result would apply if the assets of the new business were in another jurisdiction which recognised the English bankruptcy order. Whether another jurisdiction would recognise the English bankruptcy order was not the subject of specific findings by the Chief Registrar. The focus at the hearing before him was on the position in Russia and not elsewhere. I was shown some passing references made during the hearing before him as to the position in France but there was no real discussion of the position elsewhere. In his judgment, the Chief Registrar referred to realisations which had been made by the trustees in relation to assets in France and he also seemed to treat "non-Russian assets" (see, in particular, paragraphs [138] and [144]) collectively as potentially caught by the bankruptcy order. There was no challenge in the Appellant's Notice to an approach which regarded the bankruptcy order as having practical effect in jurisdictions other than Russia. The position is that there was no evidence of the law applicable in such jurisdictions and Mr Gourgey in the end made his submissions on the basis that it was open to me to hold that the bankruptcy order might be recognised in such jurisdictions.
116. The Chief Registrar referred to the benefits of having an orderly realisation of the bankrupt's assets as distinct from a free-for-all. This point is relevant to a consideration of the position of creditors but I consider that this matter can also be of some benefit to the bankrupt. In relation to the bankrupt, this point is connected to the point I have already made as to the benefit of being relieved from pressure from creditors, even some only of the total number of creditors.
117. The Chief Registrar thought that there was a further benefit to Mr Kekhman resulting from a bankruptcy order. He thought that the order would benefit Mr Kekhman as a result of a possible investigation by the trustees into his affairs. I doubt if this point is really available to Mr Kekhman. If it is suggested that third parties had harmed Mr Kekhman's business and that it would be a good thing for Mr Kekhman if a trustee could be appointed to carry out such an investigation and pursue those third parties, it was not established that Mr Kekhman would be better off by the trustee pursuing third parties as compared with Mr Kekhman pursuing them himself. One would expect that he would be a better person to investigate matters. So far as I can see, the only possibility of benefit to him in this respect as the result of the appointment of a trustee would be to do with the funding of such investigation. A question might arise whether it would be easier for the trustees to obtain funding to pursue the investigation as compared with Mr Kekhman obtaining funding to do so. I doubt if there was any reality in that possibility assessed as at 5 October 2012. Even if I took into account events after that date, all that I know is that it seems unlikely that the trustees will be funded to pursue such investigations whereas Mr Kekhman has been able to obtain funding from an unidentified source which has enabled him to oppose the application for annulment and to defend the claim to damages brought against him.
118. I do not consider that this case is comparable to the position in Shepherd v Legal Services Commission [2003] BCC 728. That was a case of a creditor's petition where the debtor contended that he had a substantial claim against the creditor. The court's assessment of that claim must have been that it was not sufficient to prevent the court making a bankruptcy order. The creditor accepted that the debtor had no assets so the creditor could not say that the bankruptcy would be beneficial to it, in that it would lead to the payment of a dividend to creditors. However, the creditor persuaded the court that it would be beneficial to it to have the question of the alleged claim against it investigated by an independent and objective officer of the court rather than by the debtor. There is no parallel in the present case.
119. It also appears to have been the view of the trustees, expressed in their report to the court, that there might be some value in an investigation into transactions entered into by Mr Kekhman. Reference was made in particular to a gift of $1 million to his son and to certain charitable donations. It would be a very unusual case where a debtor justified his own petition on the ground that, in order to be fair to his creditors, he would like a trustee to pursue third parties in whose favour he had parted with assets at an undervalue or with a view to putting assets out of the reach of his creditors. I do not think it would be right to regard such a possibility as a benefit to the debtor but it might, nonetheless, be possible to regard it as a benefit to creditors.
120. Standing back, I consider that a bankruptcy order in this case would be of some benefit to Mr Kekhman in the ways described above. I will consider the possibility of a benefit to creditors when I later consider Mr Gourgey's submissions as to the effect of a bankruptcy order on the creditors generally.

Did the making of an order offend obligations of international comity?

121. I have already dealt with the obligations of international comity in so far as they require a sufficient connection with this jurisdiction and a reasonable possibility of a benefit resulting from the order. I have held that those requirements are satisfied in this case. Mr Gourgey submitted on other grounds that it would be contrary to the principles of comity for the English court to make a bankruptcy order in relation to Mr Kekhman. Mr Gourgey referred to Russian law as regards personal insolvency. Under Russian law, it is possible for some, but not all, individuals to be made bankrupt in Russia. When an individual is made bankrupt in Russia, the rules relating to the bankruptcy are similar to the rules of English bankruptcy law. Only registered entrepreneurs can be made bankrupt in Russia. Mr Kekhman was not, and is not, a registered entrepreneur. If he had carried on business in his own name, then he could have been registered as an entrepreneur. However, I was told that his liability as a guarantor for the debts of a company, with which he was connected, did not enable him to register as an entrepreneur. Accordingly, he had not been able to be made bankrupt in Russia. The result is that under Russian law he remains liable for his debts.
122. There are legislative provisions enacted in Russia which, when they are brought into force will permit insolvent individuals generally to enter bankruptcy in Russia. If those provisions were to be brought into force, then Mr Kekhman could take advantage of them. There seemed to be a difference of emphasis in the explanations given as to why those provisions had not been brought into force. One possible explanation is that certain steps had to be taken before the provisions could be brought into force and not all of those steps had been taken. Another explanation was that the Russian legislature had decided that it ought not to bring these provisions into force. The fact remains that all material times, Mr Kekhman was not able to be made bankrupt in Russia.
123. Mr Gourgey submitted, against this background of Russian law, that it would be contrary to the principles of comity for an English court to allow Mr Kekhman to do something in England that he could not do in Russia. It is said to be contrary to comity to allow Mr Kekhman to be discharged from his debts, even debts governed by English law, when Russian law says that Mr Kekhman should remain liable for his debts.
124. I consider that the making of a bankruptcy order in this case does not infringe this country's obligations of comity. This result is produced because, on the findings of

the Chief Registrar, the Russian courts will simply not recognise an English bankruptcy order in Russia. Matters will proceed in all respects in Russia as if the bankruptcy order had not been made. It is not contrary to the principles of comity for an English court to make an order which will be effective in England and in jurisdictions which choose under their law to recognise it, but which will be wholly ineffective in a jurisdiction which under its law refuses to recognise it. It is not contrary to the principles of comity for an English court to make an order which will be effective to discharge the debtor's liability under a contract which the parties have agreed should be governed by English law and which is the subject of an English jurisdiction clause.

125. Mr Gourgey also submitted that the foreign element in this case should make me cautious before I upheld a bankruptcy order in relation to Mr Kekhman. Mr Gourgey cited the comments made by Sir Richard Scott V-C in Banco Nacional de Cuba [2000] BCC 910 at 915 F where he said that a court should "hesitate very long" before subjecting foreign companies with no assets here to a winding up here. The extent of the caution or the hesitation with which a court should proceed is reflected in the rules as to comity to which I have referred. Those rules are to be conscientiously applied by the court to the case before it. If, having done so, the court finds that the case has a sufficient connection with this jurisdiction and that an order would be of benefit to relevant persons, then it is not necessary to withhold an order, certainly not on the basis of comity, out of some sense of hesitancy.

Are there reasons not to make a bankruptcy order?

126. Mr Gourgey submitted that the bankruptcy order in this case would be unfair to creditors and, accordingly, the court should have refused to make a bankruptcy order. Mr Gourgey made clear that, for the purposes of his submission, it was appropriate to consider the position of creditors as a whole rather than Bank of Moscow in particular. Mr Swainston submitted that if I were satisfied that a bankruptcy order would be of benefit to Mr Kekhman, it was not appropriate to consider whether the order was beneficial to creditors or adverse to their interests. I have already held that it is appropriate for the court to consider all of the consequences of making the order, and of not making the order, before deciding whether an order is appropriate.
127. Mr Gourgey rightly submitted that the court's focus should be on the position of creditors as a whole. A bankruptcy is normally regarded as being in the interests of the creditors as a whole which is, of course, why creditors often themselves petition for the bankruptcy of an insolvent debtor. Bankruptcy can bring various benefits to creditors. One benefit is the orderly realisation of the debtor's assets and an equal distribution to creditors. The alternative is a free-for-all which will favour some creditors at the expense of other creditors. Thus, if one regards the creditors as a whole, an orderly equal realisation is better than a free-for-all. Normally, the court prefers to avoid a free-for-all of this kind. In Singularis Holdings Ltd v PricewaterhouseCoopers [2014] UKPC 36, at [12], the judgment of the Privy Council explained that the main purpose of a winding up order in England was usually to avoid this kind of free-for-all. In Stichting Shell Pensioenfonds v Krys [2014] UKPC 41, [2015] 2 WLR 289, at [24], the Privy Council referred to "the broader public interest" in the ability of a court to conduct an orderly winding up of a company's affairs. It added:

"The alternative is a free-for-all in which the distribution of assets depends on the adventitious location of assets and the race to grab them is to the swiftest, and the best informed, best resourced or best lawyered."

128. So far as the theoretical consequences of a bankruptcy order in this case are concerned, there is no problem. All creditors can prove. All proving creditors are entitled to a distribution. Any proving creditor who has enforced against assets in Russia will have to bring the value of the realisation into the pot. All bankruptcy debts will be discharged. However, this will not be the position in practice. The creditors who are owed £86 million under the English law guarantee cannot sue to recover that sum outside England and Wales and Mr Kekhman will be discharged from that liability. Other creditors may choose not to prove in the bankruptcy but instead to obtain judgment in Russia and to attempt to enforce against Mr Kekhman's assets in Russia. In relation to the creditors who pursue a free-for-all in Russia, some will do better than others and they will therefore not be treated equally. However, the free- for-all which cannot be prevented in Russia is not itself a good reason for declining to make a bankruptcy order and thereby allowing a free-for-all worldwide.
129. The Chief Registrar considered the effect of the bankruptcy order in England and in Russia. However, there are, or at any rate may be, assets in France and in Curaçao. The precise legal position in those jurisdictions was not investigated in any detail although the Chief Registrar held that the trustees had in fact realised assets which had been in France and he also held that the receiver of the Foundation would in some way or other "recognise" or at least cooperate with the trustees.
130. I can see that the difference between the theoretical effect of a bankruptcy order and its practical effect might produce inequality between creditors in some circumstances. An example would arise from a variation of the facts of this case. Assume that Mr Kekhman's insolvency was not so extreme and that if all the assets were gathered in and all the creditors proved, that a creditor would receive a dividend of 50 pence in the pound. Assume then that most of the debts are governed by English law, and the English court has exclusive jurisdiction, but most of the assets are in Russia. If the only proving creditors were those whose debts were governed by English law, and if the trustees only realised the assets in England, the dividend might then only be 5 pence in the pound. That would mean that those debts would be discharged in return for a dividend of 5 pence and the other creditors could pursue the assets in Russia without competition from the creditors whose debts are governed by English law. However, this problem does not in practice arise in this case, save possibly to a minimal extent. On the material available on 5 October 2012, the total debts were £316 million and the total assets were of the order of £5 million. Even ignoring all bankruptcy expenses, the maximum dividend on those figures would be about 1.5 pence in the pound. The creditors whose debts were governed by English law were some £86 million and the assets available to the trustees might be virtually nil or perhaps a little more. With potential dividends of those likely amounts, I do not think that this inequality of treatment of creditors should be given any real weight in this case.
131. Mr Gourgey submitted that a bankruptcy order was unfair to creditors in a number of respects. In particular, he said:

(1) if Mr Kekhman removed assets from Russia and brought them to England, then assets which were in practice not affected by the bankruptcy would become available to the trustees and the creditors would be denied the ability to enforce against those assets;

(2) if Mr Kekhman started business again and generated new assets which he brought into England and Wales, a creditor could not obtain a judgment in England for a debt which would be regarded as a bankruptcy debt and could not ask the English court to enforce a Russian judgment against such assets; conversely, if Mr Kekhman generated new assets in Russia, those assets would be available for execution in Russia;

(3) the position in (1) and (2) would also apply in any other jurisdiction in the world which recognised the English bankruptcy order.

132. I do not see that the matters relied upon by Mr Gourgey and summarised in the last paragraph produce an unfairness for creditors or, at any rate, any unfairness which should persuade the court not to make a bankruptcy order and to permit a continued free-for-all as regards Mr Kekhman's present and future assets. As to the suggestion in (1) above, I discount the possibility that Mr Kekhman will be able to bring assets out of Russia into England and Wales (or another jurisdiction which would recognise the English bankruptcy order). Mr Kekhman's assets have been arrested in Russia. I know that Mr Kekhman brought £200,000 out of Russia in October 2012 but it was unlikely that he would have managed to do anything similar again. As to new assets which might be generated by a new business venture and brought into England and Wales, English law favours rehabilitation and favours a result whereby such assets cannot be seized in relation to discharged bankruptcy debts. Mr Gourgey submitted that Russian creditors were entitled to expect that their debts would be governed by Russian law under which Mr Kekhman could not be made bankrupt; it was submitted that it would be wrong for English law to allow Mr Kekhman to rely on an English bankruptcy order to preserve his new assets in England. The answer to that is that if a Russian creditor wants to seek an English judgment or to enforce a Russian judgment in England, the creditor will have to submit to English law in those respects.
133. The Chief Registrar also considered that a bankruptcy order was in the interests of creditors, in that it would permit the trustees to investigate Mr Kekhman's affairs and that might lead to further realisations. It is right that the ability of a trustee to investigate a debtor's affairs is often regarded by creditors, and by the court, as a reason for making a bankruptcy order. Accordingly, if a debtor contended that he had no assets so that a bankruptcy order would not be of benefit to anyone, his creditors might say, and the court might agree, that it was not appropriate to accept the debtor's say-so on that matter and his affairs ought to be investigated by a trustee in bankruptcy.
134. Earlier in this judgment I considered the argument that possible investigations by a trustee would be of benefit to Mr Kekhman. I distinguished between a possible investigation into the activities of third parties acting adversely to Mr Kekhman and a possible investigation into Mr Kekhman's own transactions. I did not regard the first of these possibilities as being of benefit to Mr Kekhman. For the same reasons, I conclude that it would not be of benefit to creditors. As to the second possibility, this could be of some benefit to creditors although it is very odd to find this being put forward by a debtor to support his own petition. Normally, if the creditors opposed the debtor's petition or sought an annulment of a bankruptcy order made on such a petition, a suggestion of benefit to the creditors arising in this case would be given little or no weight. I do not totally dismiss it in this case in view of the fact that there appears to be a possibility that a trustee might be able to investigate a gift of $1 million to Mr Kekhman's son. On the subject of the views of the creditors generally, I note that the bankruptcy order in this case is not opposed by the creditors generally. It is opposed by Bank of Moscow and it was (and I assume still is) opposed by Sberbank Leasing (with whom Sberbank of Russia agreed). As to the other creditors, I do not have direct evidence of their views although I know that a creditors' committee has been formed and the majority (in value) of the creditors appear (at least) to acquiesce in the fact of the bankruptcy. I consider that the possibility of benefit to creditors, resulting from an investigation into Mr Kekhman's dealings with others, is not inadmissible but I would give it little weight.

By way of an overall assessment, whether the order ought not to have been made?

135. I can now stand back and consider the combined effect of the various assessments I have made of the individual circumstances. I reach the following conclusions in relation to the more important considerations:

(1) a bankruptcy order in this case will not lead to the total rehabilitation of Mr Kekhman;

(2) a bankruptcy order will not prevent there being an undesirable free-for-all in all jurisdictions; this comment particularly applies to Russia;

(3) there is no evidence of any assets currently in this jurisdiction so that there will not be a free-for-all in this jurisdiction at the present time;

(4) a bankruptcy order will prevent there being a free-for-all in any jurisdiction which recognises the order and it is possible there will be some such jurisdictions;

(5) a bankruptcy order will result in Mr Kekhman being discharged from a liability in respect of £86 million, which was agreed to be governed by English law;

(6) a bankruptcy order will allow Mr Kekhman to start again and preserve assets which arise in, or are brought into, this jurisdiction and any other jurisdiction which would recognise an English bankruptcy order;

(7) there are other matters (but only of very limited weight) which might favour the making of a bankruptcy order.

136. As the Chief Registrar stated, the ultimate decision as to how the court's discretion should be exercised in this case is a finely balanced one. Nonetheless, the decision has to be made. Is this a bankruptcy order which ought to have been made on 5 October 2012 on the grounds then existing? My conclusion, by a narrow margin, is that the order ought to have been made. Although I have held that the Chief Registrar did not apply the right test in his judgment, he did hold that he would probably have made the order on 5 October 2012, if he had known then what he later came to know. In view of the considerable experience of the Chief Registrar, I derive comfort from the fact that he says he would probably have reached the decision which I have reached.
137. By way of a footnote, I should mention that in the course of the hearing of the appeal, the parties supplied to the court certain information as to Mr Kekhman's debts which was different from the information set out in his statement of affairs, which information was relied upon by the Chief Registrar when he made his findings of fact. As indicated, in this judgment I have generally adopted the Chief Registrar's findings of primary fact. The information provided by the trustees in the course of the hearing of the appeal was that there was now reason to believe that the total of Mr Kekhman's debts came to about £248 million, rather than the earlier stated figure of £316 million. Also, depending on the exchange rate between sterling and the U.S. dollar, the figure of £86 million owed under the English law guarantee might be of the order of £57 million. There was no formal application by either party to admit fresh evidence on this appeal so that I ought formally to proceed on the basis of the findings of fact made by the Chief Registrar. I can say, however, that even if I had revised the relevant figures in accordance with the new information put forward by the trustees, I would have reached the same conclusion.
138. It follows from my conclusion that the court did not have a discretion to annul the order under section 282.

The other grounds of appeal

139. I now need to address the other grounds of appeal. These grounds of appeal address the various factors which were taken into account and weighed by the Chief Registrar. If I were to consider those grounds individually, I would need to consider whether the Chief Registrar was right to take into account, or to leave out of account, as the case may be, the matter to which the ground of appeal relates and/or whether his decision in that respect was one which a reasonable judge, properly directed in law, could have reached. If I held that the Chief Registrar had gone wrong in any such respect, then it would be necessary for me to make my own decision on whether the bankruptcy order in this case ought to have been made on the grounds existing on 5 October 2012. However, when considering the first ground of appeal, I have already decided that taking account of all relevant matters and giving them the weight which I have considered appropriate, the bankruptcy order ought to have been made. In these circumstances, it seems to me to be pointless to assess individually the further grounds of appeal and I will therefore not do so.
140. It follows from my conclusion that the court did not have a discretion to annul the order under section 282 and the application by Bank of Moscow to annul the order was rightly dismissed by the Chief Registrar. It also follows that the appeal should be dismissed.

The Respondent's Notice

141. As I have concluded that the bankruptcy order will not be annulled on the basis of the findings of fact (with three exceptions) made by the Chief Registrar, it is not necessary for me to address the two matters raised by the Respondent's Notice (recognition in Russia and the £200,000), where Mr Kekhman contends that the Chief Registrar should have made findings of fact which were more favourable to him, and I will not do so.

The result

142. On the first ground of appeal, I have held that the Chief Registrar's reasoning was wrong in principle and I have therefore made my own decision on the annulment application. My decision is that the bankruptcy order ought to have been made and, therefore, may not be annulled. I have therefore reached the same overall result as the Chief Registrar. It follows that I will dismiss the appeal.