Kazakhstan Kagazy Plc & Ors v Zhunus & Ors

Factual and Procedural Background

The judgment concerns applications for payments on account of costs pursuant to CPR 44.2(8), following a hearing held on 20-21 January 2015. The claimants are a group of companies formerly owned and controlled by the first and second defendants, who are alleged to have defrauded the claimants of substantial sums. A worldwide freezing injunction over assets amounting to 72 million was granted against the first and second defendants. The claimants sought to amend their particulars of claim to allege a further fraud involving misappropriation of approximately US$45 million, with dishonest assistance alleged against the third defendant. The proposed amendments focused on a proprietary claim to trace the proceeds of the alleged fraud into the hands of the fourth and fifth defendants. The amendment application occupied one and a half days of court time and was unsuccessful. The claimants were ordered to pay the defendants' costs of the amendment application and the costs of the fifth defendant's application to amend the freezing order, which the claimants had unreasonably opposed. Provision was made for interim payments on account of costs, with a process for agreement or written submissions if no agreement was reached.

Legal Issues Presented

1. Whether the claimants should make interim payments on account of the defendants' costs following the unsuccessful amendment application and the costs of the freezing order amendment application.
2. Whether the claimants' requests for a stay of the order for interim payment, referral to a costs judge for detailed assessment before any payment, and a hearing for the payment on account should be granted.
3. The appropriate amount of interim payment on account of costs to be ordered, considering the reasonableness and proportionality of the costs claimed.

Arguments of the Parties

Appellants' Arguments

• The claimants requested a stay of the order to pay costs pending an appeal against the dismissal of their amendment application.
• They argued that due to the disproportionate amount of costs claimed by the defendants, all costs should be referred to a costs judge for detailed assessment before any payment on account is made.
• The claimants requested a half day hearing to argue the amount of the payment on account, intending to instruct specialist costs counsel.
• They accused the defendants of abusive litigation tactics aimed at financially exhausting the claimants.

Respondents' Arguments

• The defendants provided statements of costs in the form applicable for summary assessment, claiming substantial sums for the amendment application and the freezing order amendment application.
• They contended that the claimants failed to engage constructively in agreeing interim payments, contrary to court orders.
• They opposed the stay application, arguing that no solid grounds were presented to justify a stay pending appeal.
• They maintained that disproportionate costs claimed do not justify withholding interim payments on account.
• They argued that a hearing for the payment on account would be disproportionate and wasteful, contrary to the agreed procedure for paper determination.

Table of Precedents Cited

No precedents were cited in the provided opinion.

Court's Reasoning and Analysis

The court emphasized the importance of reasonableness and proportionality in determining recoverable costs, distinguishing between costs reasonably attributable to the other party's conduct and costs arising from a party's own choices in litigation strategy. The court noted that the total costs claimed by the defendants were very high and likely disproportionate, but the precise discounting factor could only be determined on detailed assessment. The court applied an approximate, conservative approach to estimate recoverable costs on the standard basis, drawing on experience from similar commercial litigation cases.

For the first defendant, the court found the solicitors' hours and rates broadly reasonable but considered the counsel fees likely to include unrecoverable elements. The court estimated the recoverable costs at £150,000 and ordered £100,000 as a payment on account.

Regarding the second and third defendants, the court recognized the substantial work but noted the hearing was limited in duration and complexity. It considered the submitted costs unhelpful in assessing reasonableness and proportion, instead using the first defendant's costs as a benchmark. The court ordered £100,000 as a payment on account for these defendants.

For the fifth defendant's application to amend the freezing order, the court found the costs incurred to be disproportionate, given the straightforward nature of the application and the claimants' unreasonable opposition. The court conservatively estimated recoverable costs at £25,000 and ordered £20,000 as a payment on account.

The court rejected the claimants' requests for a stay of the interim payment order, referral to detailed assessment before payment, and a hearing on the payment amount, finding these requests unreasonable and contrary to court orders or principles of proportionality.

Finally, the court allowed 28 days for the payments on account to be made, taking into account further information about the claimants' financial situation.

Holding and Implications

The court REFUSED the claimants' application for a stay of the interim payment order pending appeal.

The court ORDERED the claimants to make payments on account of costs as follows: £100,000 to the first defendant; £100,000 to the second and third defendants collectively; and £20,000 to the fifth defendant, to be paid within 28 days.

The court dismissed the claimants' requests for referral to detailed assessment before any payment and for a hearing on the payment amount, emphasizing adherence to the agreed procedure and proportionality principles.

The decision directly affects the parties by enforcing interim cost payments but does not establish new legal precedent.