Re Mikhail Shlosberg (2018) - Unreported

The Court held that it had jurisdiction to order a Latvian bank to disclose information regarding a bankrupt's dealings. The Joint Trustees of the Bankrupt's estate had demonstrated that their request was reasonable and was required to identify further assets that the Bankrupt might hold.

This decision is the latest that has been made in relation to the bankruptcy of Mr Shlosberg, a Russian businessman domiciled in London.  Mr Shlosberg was made bankrupt in January 2015 on a judgment debt of US$195 million plus interest. 

The Joint Trustees had so far recovered approximately £3.3 million for the benefit of the bankruptcy estate. There were ongoing proceedings against offshore entities and ongoing enquiries as it was believed Mr Shlosberg had not provided full disclosure of his assets.

The Joint Trustees applied under s.366 of the Insolvency Act 1986 for a Latvian bank to disclose information concerning the financial dealings of Mr Shlosberg. The bank was initially concerned that:

1. any order for disclosure would be in breach of Latvian law and it would be unable to comply with it;
2. the costs of collating the information would be excessive;
3. under Latvian law it was unable to compel employees or former employees to produce witness statements regarding the Bankrupt's affairs; and
4. the Joint Trustees were conducting a fishing expedition.

However, the bank subsequently did not oppose the application and the Joint Trustees submitted that:

1. the Court had jurisdiction to make an order which would be recognisable and enforceable in Latvia under Regulation 1346/2000; and
2. it was reasonable to request the information sought.

Although the application was unopposed the Court held it had to be satisfied it had jurisdiction to make the order sought and that it was appropriate in all the circumstances of the case. Since the order sought was specific to insolvency proceedings the Court considered it had jurisdiction to make the order as it fell within the scope of Regulation 1346/2000.

The Court had to conduct a balancing exercise in determining whether the information sought was reasonable. The Joint Trustees sought the information in order to identify assets that fell within the bankrupt's estate. The Court considered the assets in question were valuable and the large amounts due to creditors were important factors. However, the potential prejudice against the respondent also had to be considered.

The fact that the bank had abandoned its initial objections to the application indicated that the balancing exercise was in favour of the Joint Trustees. In any event, the Court addressed the bank's initial concerns by stating that:

1. the proposed order would allow the bank 28 working days to provide the information requested, within which time an application could be made to the Latvian Courts to recognise the order;
2. the Joint Trustees had agreed to pay the bank's reasonable costs;
3. the Joint Trustees were content with the bank providing information from employees by way of letter; and
4. the information sought by the Joint Trustees had been specified with sufficient particularity to allow it to be identified and located.

As a result, the Court made an order in the terms sought. We previously provided on Insolvency Update in relation to this matter in January 2018 - read more about it here.