Repayment Defences in Foreign-Law Tort Claims: Pleading “Choice” and Proving Discharge Beyond Ledger Entries

1. Introduction

JSC Commercial Bank Privatbank v Kolomosiky & Anor [2026] EWCA Civ 658 is a Court of Appeal decision dismissing an appeal from a lengthy Chancery Division trial ([2025] EWHC 1987 (Ch)), in which the Bank (the claimant/respondent) obtained judgment for approximately US$1.76bn (after agreed credit for the real value of certain transferred assets).

The Bank alleged that two former controlling shareholders (the appellants) orchestrated a fraudulent scheme extracting funds through sham lending and associated documentation. Liability at trial was found under Article 1166 of the Ukrainian Civil Code (“UCC”) (a general tort provision requiring unlawful conduct, harm, causation, and fault).

The appeal was narrowly focused. The appellants advanced a “Repayment Defence”: even if the original drawdowns were wrongful, the Bank suffered no recoverable loss because the relevant loans were (almost entirely) repaid via (i) cash repayments sourced from later loans and (ii) transfers of assets booked at stated values. The Bank had framed its English claim around a defined “misappropriation” sum; the appellants argued the Bank could not “ignore” ledger credits showing repayment.

2. Summary of the Judgment

The Court of Appeal (Arnold LJ, with Nugee LJ and Sir Launcelot Henderson agreeing) dismissed the appeal.

  • Ground 2 (factual premise) failed: the appellants’ case at trial was pleaded as automatic extinction of loss upon repayment. Once it was accepted/found that the relevant loans were void, that pleaded case was abandoned and replaced in closing with an unpleaded, different case: that the Bank made a post-event choice to allocate credits to discharge restitutionary liabilities. The trial judge was entitled to refuse that late shift, and in any event the evidence did not prove such a choice.
  • Ground 1 (Ukrainian-law effect) did not need determination: but the Court indicated it would be slow to interfere with the trial judge’s foreign-law findings given the civil-law context, the lack of Ukrainian authority on the point, and the trial judge’s evaluation of the experts after extensive cross-examination.

3. Analysis

3.1 Precedents Cited

Delay in handing down judgment: standard, flexibility, and appellate caution

  • Bank St Petersburg PJSC v Arkhangelsky [2020] EWCA Civ 408, [2020] 4 WLR 55: cited for the general expectation that even long, complex judgments should ordinarily be delivered within about three months. The Court used it to frame the seriousness of a 20-month delay.
  • Phones 4u Ltd v EE Ltd [2025] EWCA Civ 869: cited for the proposition that the three-month “rule” is not inviolable. The Court treated it as confirming flexibility in exceptional litigation.
  • NatWest Markets plc v Bilta (UK) Ltd [2021] EWCA Civ 680: applied for the principle that serious delay is not itself a ground of appeal, but it requires the appellate court to exercise “special care” when reviewing the evidence, fact-finding and reasoning. The Court accepted the need for care but held the delay did not assist the appellants on the narrow repayment issue.

Background jurisdictional history

The judgment noted the earlier jurisdiction appeal resolved for the Bank in [2019] EWCA Civ 1708, [2020] Ch 783, providing context for why the Bank had confined aspects of its claim. That earlier authority was not determinative of the repayment issue, but it explains the litigation posture the appellants sought to exploit.

3.2 Legal Reasoning

(A) The decisive point: pleadings, not post-hoc recharacterisation

The Court upheld the trial judge’s core procedural finding: the Repayment Defence was pleaded and opened as a case of “automatic extinction”—i.e., ledger credits said to repay the relevant loans necessarily extinguished the Bank’s loss. That case did not depend on evidencing any discretionary allocation decision by the Bank.

However, in closing submissions the appellants pivoted: if the relevant loans were void ab initio, then (on their own articulation) repayment would not “automatically” extinguish restitutionary liabilities; instead, the creditor could choose how to allocate the credit, and it became “a question of fact what choice the creditor has made”. The Court agreed with the trial judge that this was a new, unpleaded case requiring amendment. No amendment application was made; and the appellants did not challenge on appeal the judge’s conclusion that any such late amendment should be refused due to prejudice.

The practical holding is that where a defence depends on a fact-sensitive “allocation/choice” mechanism, it must be pleaded and put in issue in time for the opposing party to meet it with evidence. It cannot be introduced for the first time in closing.

(B) Ledger entries were not enough to prove discharge by “choice”

Even assuming the late “choice” case could be entertained, the Court agreed it failed evidentially. The appellants relied heavily on the Bank’s books continuing to show the drawdowns as repaid (including after nationalisation), and on the absence of evidence that credits were allocated to other liabilities. The Court held that this was insufficient: a legally relevant “choice” required evidence about Bank decision-making, not merely accounting entries.

The Court endorsed the trial judge’s approach of looking at the “broader canvas” and rejected “island-hopping” (selective reliance on snippets of testimony). The appellants did not demonstrate that the judge’s conclusion—no proven choice to discharge the restitutionary liabilities—was “rationally insupportable”.

(C) Appellate restraint on foreign-law questions (Ground 1)

The Court did not need to decide Ground 1 (the Ukrainian-law effect of repayment on Article 1166 harm), but signposted a strong non-intervention stance where:

  • the foreign legal system is materially different (civil law vs common law), making the issue closer to fact-finding;
  • there is no authoritative foreign decision on the precise point;
  • the trial judge assessed expert credibility after extensive cross-examination;
  • the appealing party’s argument is essentially “the judge was wrong” despite conceding the finding is supported by one expert’s analysis.

This passage reinforces that appeals on foreign law—especially novel points requiring predictive assessment of what an apex foreign court would do—face a high hurdle when the trial judge’s evaluation turns on expert evidence and credibility.

3.3 Impact

  • Sharper discipline for “repayment” defences in fraud/misappropriation claims: defendants cannot rely on internal accounting “repayment” markers where the alleged repayments are themselves tainted or where discharge depends on legally significant allocation choices.
  • Pleading and trial management: where a defence turns on a creditor’s “choice” or allocation, it must be pleaded, supported by particulars, and reflected in the issues list. Late pivots—especially after a key legal premise changes (here, voidness)—are vulnerable to exclusion.
  • Foreign-law litigation in England: the decision underscores how English appellate courts will typically defer to first-instance judges on contested foreign-law questions grounded in expert evaluation, particularly where foreign authority is absent.
  • Delay in judgment: while the Court reaffirmed the expectation of timely judgments and the need for caution where delay is serious, the case illustrates that delay will not translate into appellate success without a demonstrable link to error on the issues appealed.

4. Complex Concepts Simplified

  • “Void ab initio”: treated as never legally effective from the outset. If a loan is void, the borrower may not owe a contractual debt, but may owe restitution (a duty to restore what was received).
  • Restitutionary obligation vs contractual repayment: contract repayment follows the contract’s terms; restitution repayment responds to unjust enrichment/invalid transactions and can raise allocation questions where multiple liabilities exist.
  • “Choice” (allocation): where a debtor makes a payment/credit and multiple liabilities could be satisfied, the creditor may have a legally relevant choice as to which liability the payment discharges. Proving that choice generally requires evidence of intention/decision, not just bookkeeping.
  • Article 1166 UCC: a general tort basis for full compensation of property harm caused by unlawful conduct, subject (in broad terms) to causation and fault. In this case, “harm” was assessed by reference to fraudulent drawdowns, with credit for the real value of transferred assets.
  • “Island-hopping”: an appellate criticism of selecting isolated fragments of evidence while ignoring the trial judge’s full evaluation.

5. Conclusion

[2026] EWCA Civ 658 confirms that a repayment-based defence in a foreign-law tort claim cannot be rescued by a late, unpleaded shift to a fact-sensitive “choice/allocation” theory, and that ledger entries alone will not establish the legal discharge required to negate “harm”. It also reinforces appellate restraint in reviewing first-instance determinations of unsettled foreign law rooted in expert evidence, and reiterates that judgment-writing delay—though concerning—will not itself undermine a judgment absent identifiable consequential error.