Kazakhstan Kagazy Plc & Others v Baglan Zhunus (First Defendant/Applicant)
| Jurisdiction | England & Wales |
| Judge | Paul Walker,Mr Justice Walker |
| Judgment Date | 16 April 2015 |
| Neutral Citation | [2015] EWHC 996 (Comm) |
| Docket Number | Case No: 2012 Folio 1055 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 16 April 2015 |
[2015] EWHC 996 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Rolls Building
Fetter Lane
London
EC4A 1NL
Mr Justice Walker
Case No: 2012 Folio 1055
Mr P Lowenstein QC and Mr D Head (instructed by Peters & Peters Solicitors LLP) appeared on behalf of the applicant (first defendant)
Mr M Brindle QC, Mr J Cutress and Mr J Miller (instructed by Zaiwalla & Co LLP) for the respondents (claimants)
Hearing dates: 11 July, 14 November 2014.
Written submissions were lodged during the period 27 November 2014 to 4 March 2015.
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
Paul Walker, 16 April 2014.
| A. Introduction | 3 |
| A1. Mr Zhunus's application under CPR 25 | 3 |
| A1.1 The application notice and the evidence | 3 |
| A1.2 The need for a sense of proportion | 3 |
| A1.3 Some suggested universal guiding principles | 4 |
| A1.4 What happened on Mr Zhunus's application until February 2015 | 4 |
| A2. The February 2015 application by the claimants | 5 |
| A3. My overall conclusions | 5 |
| B. What CPR 25 requires | 5 |
| C. Background, issues, & events up to 12 July 2014 | 6 |
| C1. Background, substantive issues & events to 17 April 2014 | 6 |
| C1.1 Background: introductory | 6 |
| C1.2 The 2013 fraud allegations: the PEAK fraud | 7 |
| C1.3 The 2013 fraud allegations: the Astana fraud | 7 |
| C1.4 Freezing order and other orders on 2 August 2013 | 8 |
| C1.5 Particulars of claim and responses to the freezing order | 8 |
| C1.6 HHJ Mackie QC's assessment of Mr Arip's objections | 9 |
| C1.7 The Court of Appeal's assessment of Mr Arip's objections | 9 |
| C1.8 Mr Zhunus's defence and Tickner 3 | 12 |
| C2. Events between 17 April and 10 July 2014 inclusive | 13 |
| C2.1 Tickner 3, the MGAP Report, Zaiwalla 2 and Signum Law 1 | 13 |
| C2.2 Tickner 4 and Linkage & Mind 1 | 13 |
| C2.3 Zaiwalla 3, Crestohl 5, and Signum Law 2 | 14 |
| C3. The hearing on 11 July 2014 | 14 |
| C4. Events between 12 July and 13 November 2014 inclusive | 17 |
| C4.1 Tickner 6 and Linkage & Mind 2 | 17 |
| C4.2 Zaiwalla 7 and a request concerning additional matters | 17 |
| C4.3 The claimants' supplementary outline submissions | 18 |
| C4.4 Tickner 7 and the joint note on timetable | 19 |
| C4.5 McGregor 4, Crestohl 6, and Tickner 8 | 19 |
| C5. The hearing on 14 November 2014 | 20 |
| C5.1 Objectionable aspects of Zaiwalla 7 | 20 |
| C5.2 Other opening submissions by Mr Lowenstein | 22 |
| C5.3 Submissions by Mr Brindle, and Mr Lowenstein's objection | 22 |
| C5.4 Mr Lowenstein's reply | 23 |
| C6. Events: 15 November 2014 to 18 February 2015 | 23 |
| C7. Events after 18 February 2015 | 23 |
| C7.1 The February 2015 application | 23 |
| C7.2 The 20 February 2015 questions and request | 24 |
| C7.3 Werner 2 and the March 2015 submissions | 25 |
| D. The inability to pay pre-condition | 25 |
| D1. Principles in an inability to pay pre-condition case | 25 |
| D2. The staged approach | 27 |
| D3. Application of the staged approach | 27 |
| D3.1 Analysis of stage 1 evidence, including Beber 1 | 27 |
| D3.2 Stage 2: financial material dealt with in Zaiwalla 7 | 29 |
| D3.3 Tickner 7, Beber 2 and the Zhunus supplemental skeleton | 31 |
| D3.4 McGregor 4 and Crestohl 6 | 35 |
| D3.5 14 November: Mr Lowenstein's opening submissions | 38 |
| D3.6 14 November: Mr Brindle's response submissions & Beber 3 | 39 |
| D3.7 14 November: Mr Lowenstein's reply submissions | 42 |
| D3.8 The note of objection | 43 |
| D4. Conclusion on the inability to pay pre-condition | 43 |
| E. The residence pre-condition | 46 |
| E1. Residence pre-condition: general | 46 |
| E2. Residence pre-condition: the Kazakh claimants | 47 |
| E3. Residence pre-condition: KK Plc | 50 |
| E4. Residence pre-condition: the proposed undertaking | 51 |
| E5. Conclusion on the residence pre-condition | 51 |
| F. The justice test | 51 |
| F1. Justice test: general | 51 |
| F2. Justice test: inability to pay and obstacles to enforcement | 51 |
| F3. Justice test: other factors | 52 |
| F1. Justice test: overall assessment | 53 |
| G: The February 2015 application | 53 |
| G1. February 2015 application: general | 53 |
| G2. February 2015 application: principles as to stifling | 54 |
| G3. February 2015 application: the March 2015 material | 55 |
| G4. February 2015 application: conclusions | 56 |
| H. Quantum and conclusion | 56 |
A. Introduction
A1. Mr Zhunus's application under CPR 25
A1.1 The application notice and the evidence
By notice dated 24 April 2014 the first defendant ("Mr Zhunus") applied for an order under CPR 25 requiring the claimants to provide security for the costs of this action. The main evidence in support of the application was provided in witness statements made by Mr Jonathan Tickner of Peters & Peters LLP ("Peters & Peters"), solicitors for Mr Zhunus. The main evidence opposing the application was provided in witness statements made by Mr Sarosh Zaiwalla and Mr Leigh Crestohl of the claimants' solicitors Zaiwalla & Co. LLP ("Zaiwalla & Co").
A1.2 The need for a sense of proportion
This case is an example of something which the court is seeing with increasing frequency. Claims are made for large sums. Emergency orders are obtained, without notice to the other side, which freeze assets worldwide up to the value of the sums claimed. From then on there is a series of interlocutory applications. They are heavier than they should be. Not weeks, but months, are spent assembling material to be put in evidence. Correspondence is exhibited. In some cases it includes something which correspondence should never include, namely the trading of insults between the solicitors for the parties. There has been little, if any, attempt to agree facts or issues. Time estimates for pre-reading are given which underestimate the time needed to read the key evidence and gain a grasp of what the real issues may be. The time needed is far more than it ought to be, largely because no expense has been spared in taking every point. There is an urgent need for commercial practitioners to bring a sense of proportion to this type of litigation.
A1.3 Some suggested universal guiding principles
In that regard it seems to me that there are universal guiding principles which practitioners should always have in mind. Below I make some suggestions as to what those universal guiding principles may include. I stress that they are not rules. They are not intended to define or to limit. My suggested universal guiding principles would include:
(1) The court expects solicitors and counsel to take appropriate steps to conduct the debate, whether in advocacy or in correspondence, in a way which will lower the temperature rather than raise it.
(2) This remains the case even where – indeed particularly where – any concession is perceived as anathema by one or other or both sides. It is perfectly possible to be vigorous without being insulting.
(3) Imputations on others, whoever they may be, should only be made if they are both necessary and justified. If they are not strictly necessary, or they are not objectively justified, they should be rigorously excluded. Sometimes they are necessary, for example when seeking a freezing order, or when an allegation of bad faith is necessary. They must be confined to what is necessary. As to what is objectively justifiable, regard should be had to the degree of proof that is needed. What is needed in order to support an application for a freezing order may differ from what may be required if an imputation is to be made and sustained in a different context.
(4) Rather than focus on criticisms of the other side, the focus should be on working out a timetable which will enable opposing parties to consider what facts and issues can be agreed, and what information and revised estimates for reading and hearing time can be given to the court prior to the hearing so as to ensure that the court's time is used efficiently and productively.
(5) If it is likely that a point which might be taken by a party, or it becomes likely that a point previously taken by a party, will not significantly advance that party's case, or will require a disproportionate amount of time or resources if it is to be resolved, then notification should be given that the point will not be relied upon for present purposes. The notification can be accompanied by an appropriate reservation as to the position in future.
A1.4 What happened on Mr Zhunus's application until February 2015
In the present case, the hearing was listed for 11 July 2014. On that day Mr Lowenstein QC and Mr Head appeared for Mr Zhunus. Mr Brindle QC, Mr Cutress and Mr Miller appeared for the claimants. As explained below I adjourned the hearing that afternoon and gave directions for further evidence. Oral submissions resumed on 14 November 2014 and occupied the entire day. Further written submissions were lodged by the parties.
A2. The February 2015 application by the claimants
On 30 January 2015 the written submissions appeared to be complete. The timetable thereafter envisaged was that I would circulate the present judgment in draft in the week of 23 February 2015.
However by letter dated 19 February 2015 the claimants applied to reopen the hearing of Mr Zhunus's application, so as to allow the claimants to adduce further evidence relating to what was described as a "changed factual situation" which had arisen since the last hearing. A response by Mr Zhunus dated 24 February 2015 identified substantive and procedural objections to this course.
I shall refer to the application made by the...
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