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Servis-Terminal LLC v Drelle
Factual and Procedural Background
Company A, a Russian company in bankruptcy, acted through its trustee. The Appellant, its former director and shareholder, had left Russia and settled in The City. Company A had advanced a substantial loan to Company C, guaranteed personally by Company C’s owner, but the loan was not repaid after Bank A collapsed. [1][2][3][4]
Foreign commercial proceedings concluded that the Appellant had breached duties owed to Company A and ordered him to pay the loan amount. Appeals through the foreign appellate and supreme courts were unsuccessful. [5][6][7][8][9]
Company A subsequently served a statutory demand and presented a bankruptcy petition in England. The Appellant applied to set aside the demand, alleging that the foreign judgments were improperly obtained, biased, contrary to natural justice and English public policy, or procured by fraud or collusion. The Insolvency and Companies Court rejected the application and made a bankruptcy order; the High Court dismissed the appeal. [10][11][12][13][14]
On an earlier appeal, the Supreme Court held that an obligation under an unrecognised foreign judgment could constitute a statutory debt and remitted the remaining grounds to the Court of Appeal. [15][16]
Legal Issues Presented
- Whether the lower courts applied the correct approach to deciding if the foreign judgment debt was disputed on genuine and substantial grounds. [17][18][19]
- Whether the lower courts wrongly treated the Appellant’s evidence concerning alleged judicial predetermination as inadmissible or insufficient merely because it was hearsay. [17][20][21]
- Whether the evidence, considered cumulatively with expert evidence and the foreign judgments, established a genuine and substantial dispute that the judgment was impeachable for fraud, breach of natural justice or conflict with public policy. [17][22][23][24]
Arguments of the Parties
Appellant’s Arguments
- The witness evidence provided credible support for the allegation that the foreign proceedings had been predetermined. [25][26]
- The lower courts wrongly rejected or discounted the evidence because it was hearsay and improperly identified evidential gaps that should have been matters for cross-examination. [27][28]
- The expert evidence concerning state influence, judicial pressure and irregularities in the foreign proceedings supported the witness evidence and should have been considered with it. [29]
Respondent’s Arguments
- The first-instance court had evaluated all the evidence and reached a conclusion reasonably open to it, so there was no basis for appellate intervention. [30]
- The witness evidence contained material gaps and did not provide a cogent basis for alleging fraud or predetermination; the expert evidence was generalised and unrelated to the particular proceedings. [30]
- The foreign judgments were reasoned and convincing, and the Appellant’s failure to raise judicial predetermination in the foreign appeals was significant. [31]
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Long v Farrer & Co [2004] BPIR 1218 | Written evidence should generally not be disbelieved without cross-examination. | Supported the conclusion that the witness evidence should not have been effectively discounted at this stage. [32][33] |
| Maximov v. Open Joint Stock Company Novolipetsky Metallurgichesky Kombinat [2017] EWHC 1911 (Comm), [2017] 2 C.L.C. 121 | A merely incorrect foreign judgment is insufficient; the evidence must support the relevant allegation of bias, deliberate error or impeachability. | The Court distinguished the case and rejected any general requirement to prove that a judgment was deliberately wrong where the allegation was judicial predetermination. [34][35][36] |
| Allied Fort Insurance Services Ltd v Creation Consumer Finance Limited [2015] EWCA Civ 841 | A summary process should not become a mini-trial; the appellate approach depends on the nature of the challenge. | The Court held that the lower court’s legal misdirection required correction rather than appellate deference. [37][38][39] |
| Coyne v DRC Distribution Ltd [2008] EWCA Civ 488 | Courts should be cautious about disbelieving untested written evidence. | It supported the treatment of the Appellant’s witness evidence. [37] |
| Malik v Henley Homes plc [2023] EWCA Civ 726 | An evaluative first-instance decision should generally be disturbed only if it was not open to the judge. | The Court held that this principle did not protect a decision reached through an erroneous legal approach. [40][38][41] |
| Bryce Ashworth v Newnote Limited [2007] EWCA 793 | A genuine and substantial dispute is one that is real, rather than frivolous or remote. | The Court applied this standard to the bankruptcy petition. [42] |
| Altimo Holdings v Kyrgyz Mobil Tel Ltd [2011] UKPC 7 | Foreign judicial corruption may be examined, but international comity requires cogent evidence and generalised assertions are insufficient. | The Court accepted that foreign-system allegations may be adjudicated under ordinary procedural rules, without a heightened standard of proof. [43][44][45][46] |
| Yukos Capital Sarl v OJSC Rosneft Oil Co (No 2) [2012] EWCA Civ 855, [2014] QB 458 | Cogent evidence is required before describing a foreign court as partial or dependent. | The Court explained that the decision did not establish a heightened standard for the present issue. [47][48] |
| Bank of St Petersburg v Arkhangelsky [2020] EWCA Civ 408, [2020] 4 WLR 55 | The civil standard of proof is unitary. | The Court relied on it in rejecting a special heightened standard for impugning foreign judgments. [46] |
| Kireeva v Bedzhamov [2022] EWCA Civ 35, [2023] Ch 45 | Written evidence should not be rejected unless manifestly incredible. | The Court accepted the witness evidence for assessment on its merits. [49][33] |
| Griffiths v TUI (UK Ltd) [2023] UKSC 48, [2025] AC 374 | Cross-examination allows a witness to explain alleged problems or contradictions. | The alleged gaps in the witness statement were treated as matters suitable for cross-examination, not decisive defects. [50][33] |
| Adams v Cape Industries Plc [1990] 1 Ch. 433 | A party alleging fraud in a foreign judgment need not necessarily have raised the issue in the foreign proceedings. | The Court held that the Appellant was not required to raise judicial predetermination in the foreign appeals. [51][52] |
Court's Reasoning and Analysis
The Court held that the relevant bankruptcy question was whether the Appellant had raised a genuine dispute on substantial grounds. The ordinary civil standard of proof applies when a foreign judgment is challenged for fraud, breach of natural justice or similar reasons; there is no special heightened standard merely because the judgment is foreign. [46][19]
The Insolvency and Companies Court had treated the witness evidence as lacking cogency because it was double hearsay, without analysing its strengths, weaknesses or weight. That was an error of law because hearsay evidence is admissible in civil proceedings and must be evaluated rather than automatically discounted. [20][21]
The High Court compounded the error by treating the Insolvency and Companies Court’s conclusion as an evaluative assessment deserving appellate deference. Because the assessment followed an incorrect legal approach, the High Court should have treated it as an error of law. [53][41]
Remaking the decision, the Court found that the witness evidence, read with the expert evidence, raised a realistic arguable case of predetermination. The alleged statements predicted both that the Appellant would lose and that judgment would be entered for the precise principal amount, despite the possibility that further evidence might still be submitted. [49][54][55]
The Court rejected the alleged evidential gaps as decisive. The hearsay nature affected weight, but the evidence retained significant weight, particularly because it had not been tested by cross-examination. [56][33][57]
The expert evidence added weight by explaining the pressures allegedly faced by judges dealing with major state-owned entities and by identifying the significance of Company B’s interest in pursuing the Appellant. The expert evidence concerning substantive and procedural flaws also formed part of the broader evidential picture. [58][59][60]
The foreign appellate judgments were not conclusive. Their reasoning and treatment of the parties could be considered as evidence, but the Appellant was not required to prove that every foreign judgment was deliberately wrong. The question was whether the first-instance judgment was arguably tainted by fraud or breach of natural justice. [61][52][62][63]
On the global assessment, the Court concluded that the evidence established a genuine and substantial case that the foreign judgment was impeachable for fraud, breach of natural justice or inconsistency with public policy. Recognition proceedings were the appropriate forum for final determination because disclosure and cross-examination would be available there. [64][24]
Holding and Implications
APPEAL ALLOWED. The bankruptcy order was set aside. [65][66]
The direct consequence was that the bankruptcy order against the Appellant could not stand on the existing evidential assessment. The underlying allegations remained suitable for determination in recognition proceedings, which had been stayed pending the appeal. [67][24]
The opinion does not state broader practical implications beyond that procedural consequence or identify a new precedent.
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