In JSC Mezhdumarodiniy Promyshlenniy Bank -v- Pugachev [2015] EWHC 1694 (Ch) Mr Justice Hildyard considered the issue of whether a respondent to an order for cross-examination should be ordered to pay the costs of that application and whether those costs should be on an indemnity basis.  There is a detailed consideration of the issue of whether costs should be awarded and the factors involved in whether costs should be ordered.


The defendant had been ordered to attend for cross-examination to assist in the policing of a freezing order. the hearing was heard over five days.


  • When a party had been ordered to attend for cross-examination in relation to compliance with a freezing order it did not necessarily follow that that party would be ordered to pay the costs of that cross-examination.
  • This was not a case where is was appropriate to award costs on an indemnity basis.
  • The conduct of the application by the claimants was such that it was appropriate to order the defendant to pay only 80% of the costs.


The general purpose of these applications is summarised by the judge.

  1. The purpose of the process of cross-examination to assist in the policing of a freezing order is to clarify issues arising in relation to asset disclosure; it is essentially to enable investigation and clarification of the disclosure given, and of issues to which that disclosure gives rise, rather than to enable adjudication of points of disputed fact. The role of the court is primarily supervisory rather than adjudicatory, so that it would not usually be necessary for the court to delve into the evidence which emerges.


Test for order for costs on an indemnity basis

  1. Before turning to my assessment of whether by reference to the examples chosen by the Claimants, and my impression of the evidence given more generally, the Claimants have made good their grounds for an exceptional order of indemnity costs against the Defendant and for an order that he make a further affidavit, I need first to outline my understanding of the relevant principles or tests applicable to each issue in the circumstances.
  2. Dealing first with the incidence of costs, it is important to distinguish between the costs of obtaining an order for cross-examination and the costs of the cross-examination itself. The former have already been adjudicated: by his order of 11 March 2015 Arnold J required the Defendant to pay those costs on the standard basis, to be assessed if not agreed. But by that order Arnold J reserved the latter to the judge hearing the cross-examination.
  3. Inherent in the distinction between the two stages is that it does not follow from the mere fact that the court has been persuaded to make an order for cross-examination (which is itself unusual), on the grounds that there are significant issues in relation to disclosure which require an explanation or clarification (see paragraph 40 of Arnold J’s judgment), that the cross-examinee will also have to pay the costs of that cross-examination.
  4. As to the incidence of the costs of the cross-examination itself, there is little direct authority. The Claimants cited to me various cases. These included:

(1) JSC BTA Bank v Ablyazov and others (Tyschenko, Third Party) [2015] 1 WLR 1547, in which notwithstanding the usual provision for a third party’s reasonable costs of compliance with a freezing order Flaux J ordered a third party examinee to pay the costs of his cross-examination on the standard basis because it was shown that he was implicated and had actively assisted the defendant’s wrongdoing;

(2) another of the numerous cases involving Mr Ablyazov, this time a decision of Teare J ordering him to pay costs on the standard basis on the ground that “the cross-examination…provided information and referred to documents which had not been set out, at any rate in terms, in the affidavit and schedule of assets”;

(3) an order of Cooke J in yet another Ablyazov case ordering a cross-examinee to pay costs on an indemnity basis; but no reasoned judgment appears to have been given;

(4) Bird v Hadkinson [2000] CP Rep 21, in which Neuberger J (as he then was) ordered payment of costs on an indemnity basis by a person who had failed to take all reasonable steps to investigate the truth or otherwise of the disclosure given.

  1. As with almost all issues of costs, the decision is discretionary and every case must be decided on its own facts. But it seems to me that amongst the matters which the court needs to consider are (a) whether the examination elicits explanations or clarifications which were necessary for the purposes of proper disclosure and which should previously have been given in some other and less time-consuming and expensive way; (b) whether the cross-examinee in providing such explanations or clarifications has been co-operative or obstructive or evasive, and thus whether he or she has assisted in or frustrated a process of cross-examination that is as efficient and orderly as possible; (c) whether the cross-examination has been proportionate and properly directed to the ultimate objective of enabling revelation or a better understanding or protection of assets falling within the ambit of the freezing order which disclosure is intended to assist to police; and (d) whether overall the cross-examination has in the event proved to be a profitable exercise in terms of more complete disclosure and enabling enforcement and policing of the freezing injunctions to which such disclosure is ancillary.
  2. As to the basis of assessment of any costs awarded, the general rule is that the standard basis applies, unless the court is persuaded that the paying party’s conduct or some other exceptional circumstance takes the case “out of the norm” (see Excelsior Commercial & Industrial Holding Ltd v Salisbury Hamer Aspden & Johnson (Costs) [2002] EWCA Civ 879).
  3. In the particular circumstances, the Claimants accept that to justify an order for costs on an indemnity basis they must satisfy me that the Defendant did not engage in good faith with the process of cross-examination and was not merely evasive but actually intending to obstruct justice, the paradigm in a sense being by giving answers demonstrated to be plainly and obviously false.
  4. The hurdle is a high one. The court is likely to be reluctant to reach a conclusion of bad faith and dishonesty in the course of what is meant to be an exploratory rather than adjudicatory process, and at an interlocutory stage, except on the clearest evidence.
  5. As it seems to me, it is right that the hurdle be set particularly high where it is sought to persuade the court of the falsity of the examinee’s evidence as to disputed factual matters, as distinct from the impropriety of that person’s conduct in terms of want of good faith efforts to comply with court orders; and even higher where (especially in the context of freezing injunctions in aid of foreign claims) the court is being invited to assess propriety and honesty in the context of a business and political culture which it may not well understand.
  6. Put another way, the court may be in a position to reach a firm conclusion, on the basis of clear evidence of their conduct, that an examinee or third party has actually been dissipating or assisting in the dissipation of assets (as in JSC BTA Bank v Ablyazov [2015] 1 WLR 1547); but it is likely to be far more reluctant to reach a conclusion contrary to the examinee’s evidence on oath that the examinee has no interest in a given asset, or as to lack of knowledge of the whereabouts of assets of which he or she disclaims any ownership or control.
  7. Caution seems to me to be necessary in any event since the conclusion may itself found a contempt, without the protections applicable in the context of an application for contempt.


  1. That brings me back to the question as to whether and if so what proportion of costs should be paid by the Defendant on the standard basis, given the conclusion I have expressed that I should not award costs on an indemnity basis.
  2. As to this, my approach has been most especially influenced by the following factors.
  3. First, the fact that cross-examination was, after a detailed hearing, thought justified and when it took place did apparently reveal inconsistencies as I have described.
  4. Second, the fact that, as also indicated briefly, it did also reveal substantial debts of some GBP 8 million owed to the Defendant from certain trusts.
  5. Third, the fact that the exercise was prolonged by the Defendant’s speeches, his tendency to seek to recast questions and to answer the recast question, which tended to give rise to more uncertainties than provide satisfactory explanations.
  6. Fourth, and also in favour of an order for costs against him, the fact that the Defendant during the course of his cross-examination revealed that the living expenses that had been adumbrated were in all probability substantially overstated, in the sense that he had had to cut his cloth accordingly.
  7. Fifthly, I take into account that the Defendant did have an (albeit limited) opportunity to provide a witness statement after the hearing before Arnold J as a means of shortening, even if not rendering unnecessary, his cross-examination.
  8. Against all this I must also take into account the fact that in relation to a principal ground for ordering cross-examination (and for restraining the Defendant from leaving the jurisdiction), that is, the Defendant’s continuing failure to comply with Henderson J’s trust disclosure order, Ms Dozortsova’s admittedly last-minute but detailed description of the trusts and their provisions resulted in considerably less enquiry than I sense had been envisaged when the Claimants sought to justify an order for cross-examination in the first place. Put another way, the issue of trust disclosure was, as appears form the transcript of the hearing before Arnold J on 11 March 2015, one of the principal justifications for the Claimants’ original application for an order for cross-examination: but it became more of a side-show, even if important issues as to the source of the trust funds, and the extent of the trusts’ corporate interests, remained and still remain opaque.
  9. I think I should also make allowance for the fact of the difficulties for the Defendant as a litigant in person, which he said were exacerbated by late production of very considerable material and what he felt was the occasional tendency of Counsel to conduct a quiz without grounding the question in a particular document or piece of evidence.
  10. Also, though only of incidental and not determinative weight, I have to bear in mind my impression, which is only that, but which I should acknowledge, that the Claimants must always have appreciated that cross-examination was unlikely to result in perhaps its principal purpose of revealing assets in the name of, or nominally owned by, one or more of his children, or by trustees, to be in truth owned or controlled by him, and my associated impression (which the Claimants strongly disclaimed) that the cross-examination was in part being pursued as a test of consistency and credibility in respect of events which took place some time ago, rather than a torch exclusively focused to reveal assets presently hidden or in danger of dissipation.
  11. I consider there is also something in the Defendant’s point that the Claimants have demonstrated occasional heavy-handedness, including in the repetition of questions which, it appeared to me, and for better or worse, had already been asked and answered.
  12. I have also to look finally, in terms of determining what the entire five-day exercise eventually revealed beyond the inconsistencies that I have described, at what in effect was a so far undisclosed loan of an admittedly large sum of money by usual standards, but which is nevertheless small in comparison to the claim at large, and which I think it quite possible that the Defendant had overlooked or been unaware of.
  13. Doing the best I can to balance these factors, and in recognition of the fact that other than deferring the question as to cost to another day, which would also be unsatisfactory, and after (as previously indicated) further review of all the evidence, I have concluded that I should make an order for the Defendant to pay 80 per cent (on the standard basis) of the costs of the hearing.
  14. The discount, if one can call it that, of 20 per cent in relation to those days is intended to reflect the caveats or contrary factors that I have adumbrated, my overall assessment as to the utility of the process, and my assessment as to the outcome of Day 6 which was not wholly in the Claimants’ favour (see further below).
  15. I should acknowledge in this context that my initial disposition was to require payment by the Defendant of a lesser percentage, and also to separate out the costs of Day 2 (which was aborted and the costs of which seemed to me should be paid by the Defendant) and Day 6 (which concerned ancillary or consequential applications for indemnity costs and further evidence (as to which see further below) on which the Claimants were only successful in part).
  16. My assessment now reflects (a) my further review of all the transcripts and the evidence filed, and in particular my increased misgivings as to the inconsistencies in the Defendant’s evidence, especially in relation to EPK; and (b) my view, on further reflection, that it is more practical and realistic to deal with all the costs of the hearing together. My assessment upwards (in comparison to my initial inclination) of the percentage of those costs to be paid by the Defendant also reflects this modified approach.