1) Kazakhstan Kagazy Plc and Others v 1) Baglan Abdullayevich Zhunus 2) Maksat Askaruly Arip (First Appellant) 3) Shynar Dikhanbayeva (Second Appellant)

JurisdictionEngland & Wales
JudgeLord Justice Longmore,Lord Justice David Richards
Judgment Date26 October 2016
Neutral Citation[2016] EWCA Civ 1036
Docket NumberCase No: A3/2016/2128
CourtCourt of Appeal (Civil Division)
Date26 October 2016

[2016] EWCA Civ 1036






Royal Courts of Justice

Strand, London, WC2A 2LL


The Right Honourable Lord Justice Longmore


The Right Honourable Lord Justice David Richards

Case No: A3/2016/2128

1) Kazakhstan Kagazy Plc
2) Kazakhstan Kagazy JSC
3) Prime Estate Activities Kazakhstan LLP
4) Peak Akzhal LLP
5) Peak Aksenfer LLP
6) Astana-Contract JSC
7) Paragon Development LLP
1) Baglan Abdullayevich Zhunus
2) Maksat Askaruly Arip
First Appellant
3) Shynar Dikhanbayeva
Second Appellant

Mr Andrew Twigger QC & Miss Anna Dilnot (instructed by Cleary Gottlieb Steen & Hamilton LLP) for the Appellants

Mr David Head QC & Mr Paul Choon Kiat Wee (instructed by Peters & Peters Solicitors LLP) for the Respondent

Hearing dates: 11 th October 2016

Approved Judgment

Lord Justice Longmore



This is another appeal in litigation brought by the claimant Kazakh companies against the former chairman of the board ("Mr Zhunus") and the former chief executive officer ("Mr Arip") of the first and second claimants for alleged fraudulent misappropriation of the companies' assets. On 10 th February 2016 the claimants and Mr Zhunus settled their dispute and all further proceedings have been stayed except (inter alia) for the purpose of carrying the settlement into effect. At the same time as serving his defence in the proceedings Mr Zhunus served a contribution notice on Mr Arip and the third defendant who was at the material time, the finance director of the second claimant. No permission was required for doing so. When Mr Arip and the third defendant served their defence, they did not at that time serve a contribution notice against Mr Zhunus. They later discovered that the proceedings against Mr Zhunus were to be settled and then sought permission (as required by rule 20.6(2) of the Civil Procedure Rules) to serve a contribution notice on Mr Zhunus seeking (if they were themselves held liable) to rely on allegations made by the claimants against him as establishing Mr Zhunus' liability to the claimants. They also sought a worldwide freezing injunction against Mr Zhunus so as to ensure that he did not dissipate his assets, prior to any judgment being obtained. Leggatt J refused to give permission for the service of the contribution notice as drafted by Mr Arip and the third defendant because they did not make any assertion of fraudulent conduct against Mr Zhunus apart from relying on the (stayed) allegations made by the claimants. Since there were thus no proceedings in existence to support the application for the freezing order, he declined to make a freezing order as well, although he said that, if he had granted permission to issue and serve the contribution notice, a freezing injunction "could … properly have been granted". The second and third defendants now appeal, while Mr Zhunus contends that, even if the appeal succeeds, no freezing injunction should be granted.

The Background


I take this from the judgment adopting the judge's numerical abbreviations of the parties.


The three main claims pleaded in the particulars of claim are, in summary, as follows:-

i) The claimants allege that, between 2005 and 2009, the defendants dishonestly caused C2, C3, and C4 (subsidiaries of C1) to make payments to a purportedly independent construction company, Arka-Stroy LLP, for the development of a logistics centre and industrial park in Kazakhstan. It is alleged that only a minimal amount of construction work was actually done, that Arka-Stroy LLP was secretly controlled by the defendants and that much of the money was paid out to entities controlled by them. The claimants allege that the group has thereby suffered losses equivalent to around US$102 million ("the Peak fraud").

ii) The claimants allege that in 2008 and 2009 the defendants committed a similar fraud involving payments purportedly made for construction work by C6, which resulted in a further loss of some US$14 million ("the Astana fraud").

iii) A third claim, added by amendment in 2015, involves allegations that the defendants used nominee companies to acquire land plots cheaply from farmers in Kazakhstan which were then re-sold to C2, ostensibly for development, at highly inflated prices, resulting in a loss of some US$44 million ("the Land Plots fraud").


Mr Zhunus served a defence on 27 th January 2014. In summary, he asserted that his role in the KK group was essentially a non-executive and not a managerial one, that he was not responsible for the relevant transactions, that he at all times acted honestly and in what he believed to be the best interests of the group, and that he did not receive any illicit payments.


D2 and D3 served their defence on 6 th February 2015. In summary, they largely admit that they were involved in the decisions to enter into the relevant transactions but assert that those were commercial decisions taken in what were perceived to be the best interests of the KK group at the time and not in furtherance of any fraudulent scheme. D2 and D3 deny that there was any fraud or that they personally benefited from the transactions.


There is a further defence of time-bar. All the claims are governed by the law of Kazakhstan, which has a three year limitation period. Each of the defendants has alleged that the claims are time-barred on the basis that the claimants knew or ought to have known of the material facts more than three years before this action was commenced.

The freezing injunctions


When they began these proceedings on 2 nd August 2013, the claimants applied without notice for a freezing order against Mr Zhunus and D2. Orders were made freezing their assets worldwide up to an amount of £100 million, later reduced to £72 million.


On the return date, the freezing injunction against Mr Zhunus was replaced by equivalent undertakings given by him to the claimants and the court. D2, on the other hand, applied to discharge the injunction against him, arguing that the claimants had no good arguable case because of his limitation defence. That argument was rejected by Judge Mackie QC sitting as a judge of the Commercial Court and also, on an appeal, by this court, [2014] EWCA Civ 381.


There has since been another challenge to the freezing orders, in which this time Mr Zhunus took part. In August 2015 all three defendants applied for summary judgment based on new evidence which was said to demonstrate that the claimants had knowledge of the material facts by 1 st August 2010 (i.e. more than three years before this action was begun), with the consequence that the claimants had no real prospect of succeeding on their claims against the defendants. D2 also applied for the freezing injunction against him to be discharged and Mr Zhunus applied to be released from the equivalent undertakings on the ground that there was no good arguable case that the claims were brought before the limitation period expired.


In a judgment given on 27 th October 2015 those applications were dismissed by His Honour Judge Waksman QC, who also gave directions for trial. The trial has been listed to begin in April 2017, with a time estimate of 12 weeks.

The Contribution Act


Section 1 of the Civil Liability (Contribution) Act 1978 ("the 1978 Act") provides as follows:-

" Entitlement to contribution

(1) Subject to the following provisions of this section, any person liable in respect of any damage suffered by another person may recover contribution from any other person liable in respect of the same damage (whether jointly with him or otherwise).

(2) A person shall be entitled to recover contribution by virtue of subsection (1) above notwithstanding that he has ceased to be liable in respect of the damage in question since the time when the damage occurred, provided that he was so liable immediately before he made or was ordered or agreed to make the payment in respect of which the contribution is sought.

(3) A person shall be liable to make contribution by virtue of subsection (1) above notwithstanding that he has ceased to be liable in respect of the damage in question since the time when the damage occurred, unless he ceased to be liable by virtue of the expiry of a period of limitation or prescription which extinguished the right on which the claim against him in respect of the damage was based.

(4) A person who has made or agreed to make any payment in bona fide settlement or compromise of any claim made against him in respect of any damage (including a payment into court which has been accepted) shall be entitled to recover contribution in accordance with this section without regard to whether or not he himself is or ever was liable in respect of the damage, provided, however, that he would have been liable assuming that the factual basis of the claim against him could be established.


(6) References in this section to a person's liability in respect of any damage are references to any such liability which has been or could be established in an action brought against him in England and Wales by or on behalf of the person who suffered the damage; but it is immaterial whether any issue arising in any such action was or would be determined (in accordance with the rules of private international law) by reference to the law of a country outside England and Wales."


Section 2(1) of the Act provides that, in any proceedings for contribution under section 1, the amount of the contribution recoverable from any person "shall...

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