“True-or-False” Compliance with Funding Certificates: Kireeva v Zolotova & Anor – A New Strictness in Unless Orders

1. Introduction

The Court of Appeal’s decision in Kireeva v Zolotova & Basel Properties Ltd ([2025] EWCA Civ 847) addresses a procedural but commercially crucial question: what happens when a claimant fails to comply accurately with an “unless” order requiring certification of trial funding? The judgment crystallises a new principle – that any material inaccuracy in such a certificate ipso facto invalidates the certificate and triggers the sanction in the order, without the claimant being able to argue that the error was made innocently or in good faith. The case arose out of protracted insolvency litigation concerning assets of the Russian bankrupt Mr Bedzhamov, but its implications reach far beyond cross-border bankruptcy work into everyday case-management under the Civil Procedure Rules (CPR).

2. Background and Key Issues

Ms Natalia Kireeva, the Russian-appointed trustee in bankruptcy of Mr Georgy Bedzhamov, sued to recover a luxury Italian villa owned via an English company (Basel Properties Ltd) the share of which had been transferred to Mr Bedzhamov’s partner, Ms Alina Zolotova. Funding for the English proceedings depended on Russian businessman Mr Lyuboshits through his entity “Cezar Consulting Law Firm LLC” (LLC).

Because Cezar had recurrent difficulty moving funds out of Russia, Sir Anthony Mann (High Court) adjourned the July 2024 trial but only on stringent terms, including an “unless” order that by 31 August 2024 the claimant must:

• pay the defendants’ wasted costs; and
• file a solicitor’s certificate confirming (i) that funding for the adjourned trial was in place and (ii) the banking route through which the funds would reach the English lawyers.

Failure to do either would automatically strike out (“stand dismissed”) the claim.

On 30 August 2024 the claimant’s then solicitor, Mr Patrick Elliot, filed the required certificate. Sir Anthony later found the certificate materially inaccurate – it asserted that funds would be sent “directly” from Mr Lyuboshits’ account at Raiffeisen Bank in Moscow to the solicitors, when the bank had publicly announced on 15 August that from 2 September cross-border transfers would cease unless accepted before 16:00 Moscow time on 30 August (which by then had already passed). He struck out the claim. Arnold LJ granted permission to appeal on three grounds:

1. The certificate was not inaccurate.
2. Even if inaccurate, bad faith was not proved or did not vitiate it.
3. Striking out for abuse of process was wrong.

3. Summary of the Judgment

Delivering the lead judgment, Newey LJ (with Bean LJ and Cobb J agreeing) dismissed the appeal in its entirety. The Court held that:

• “Banking route” meant more than naming the source account; it required a workable path for funds to travel from Russia to the English solicitors.
• Because Raiffeisen had closed the route by the relevant cut-off, the statement that funds would be transferred “directly” was materially false as at the time of certification.
• Bad faith was in fact established on the part of the funder (Mr Lyuboshits) and his representative (Mr Nurtdinov); their knowledge tainted the certificate even though the solicitor may have been innocent.
• Even had bad faith not been established, a material inaccuracy alone was sufficient to invalidate the certificate and trigger the sanction in the unless order.
• Alternatively, reliance on the certificate constituted an abuse of process meriting strike-out.

4. Detailed Analysis

4.1 Precedents Cited

• Reiss v Woolf [1952] 2 QB 557 and later authorities on inadequate particulars/disclosure. These were relied on by the appellant to argue that only dishonest non-compliance invalidates a document. The Court distinguished them: they concern incomplete answers, whereas here the answer was positively inaccurate.
• Foskett v McKeown [2001] AC 102: cited for the mechanics of inter-bank transfers (Lord Millett’s analysis). The Court accepted the technical point but held it irrelevant; the question was practical ability to transmit funds.
• Earlier litigation in Kireeva v Bedzhamov ([2022] EWCA Civ 35; [2024] UKSC 39). Though substantive, it provided background showing repeated funding problems.
• Standard CPR “relief from sanctions” cases (Mitchell, Denton) were not expressly cited but underpin the Court’s approach: strict compliance with unless orders is vital to effective case management.

4.2 The Court’s Legal Reasoning

The reasoning may be distilled into five steps:

1. Meaning of “route”. Ordinary language – a route is the method, not merely the starting point. Identifying Mr Lyuboshits’ account alone did not reveal how funds would reach London.
2. Materiality of “directly”. This single word converted what would otherwise be a vague statement of source into a concrete assertion of means. Given past failed attempts (Hungary, Spain, Dubai), “direct” transfer was crucial.
3. Temporal accuracy. Because the certificate was effectively forward-looking (“funding will be provided”), it had to be objectively true that the route could still be used. It was not, since the bank’s window had closed by 14:00 BST.
4. Need (or not) for bad faith. Newey LJ’s obiter view: a “true-or-false” test suffices; bad faith is not a pre-condition to invalidating a certificate under an unless order. That said, the judge below had found bad faith and this was upheld.
5. Agency and attribution. Knowledge of the funder and his agent was attributable to the claimant because they were authorised intermediaries for funding matters. Their deliberate silence toward the solicitor rendered the certificate unreliable and an abuse of process.

4.3 Potential Impact

The decision tightens procedural discipline in several ways:

• Funding certificates under unless orders – courts may now treat accuracy as binary; any material misstatement automatically triggers sanctions.
• Litigation funders’ conduct – knowledge possessed by non-party funders can be imputed to litigants in procedural contexts, even where solicitors are innocent.
• International sanctions and banking risk – claimants reliant on cross-border funding must prove not only that money exists but that a viable payment corridor presently functions.
• Relief from sanctions – parties should apply promptly if difficulties arise; silence or “wait-and-see” may be fatal.
• Abuse of process – even technical compliance may not save a party if the court regards reliance on a document as fundamentally unfair.

5. Complex Concepts Simplified

• Unless Order: A court order that specifies: “Do X by date Y or your claim/defence will be struck out.” Automatic sanction; no further hearing required.
• Funding Certificate: A statement by solicitors confirming that their client possesses (and can transmit) the money necessary to take the case to trial, often demanded where funding doubts exist.
• Material Inaccuracy: An error that goes to the heart of what the court wanted to know – here, whether a practical banking route existed.
• Bad Faith: Conscious wrongdoing or reckless disregard for the truth. In this case, the funder knew the transfer route had closed but let the solicitor say otherwise.
• Abuse of Process: Conduct that misuses or perverts the court’s procedure such that fairness and justice are threatened; the ultimate sanction is dismissal.

6. Conclusion

Kireeva v Zolotova establishes that compliance with an unless order requiring a funding certificate is judged by a strict “true-or-false” standard: if the certificate is materially false, the sanction bites, irrespective of whether the solicitor acted innocently. Furthermore, knowledge of third-party funders is imputed to the litigant, and reliance on a tainted certificate can amount to an abuse of process. Practitioners must therefore:

• Conduct rigorous factual verification before signing procedural certificates.
• Ensure funders communicate changes immediately; silence can be fatal.
• Apply for relief from sanctions promptly if circumstances change – hoping the problem resolves later is no longer safe.

The judgment reinforces the CPR’s emphasis on procedural efficiency, deterrence of non-compliance, and fairness to opposing parties. Its ripple effect will be felt in any litigation dependent on international funding streams, especially in sanction-sensitive jurisdictions. Ultimately, the Court of Appeal has underscored that courtroom justice begins with factual honesty in procedural documents.