In  Kazakhstan Kagazy PLC  -v-  Baglan Abdullayevich Zhunus [2015] EWHC 404 (Comm) Mr Justice Leggatt  makes important observations about costs; the basis for assessing costs in “big money” cases (if not all cases) and interim costs in a case where  the defendants’ costs of two day application tcame to £945,000.


  • It may be reasonable for a party incurring costs to spare no expense in a case where large amounts of money are at stake.
  • It does not follow that such expense should be regarded as reasonably or proportionally incurred or reasonable or proportional in amount when it comes to determining the costs to be paid by the other party.
  • The touchstone is the lowest amount a party could reasonably be expected to spend in order to have its case conducted and presented proficiently having regard to all the relevant circumstances.
  • Expenditure over and above this is for a party’s own account and not recoverable from the other party.
  • This approach discourages waste, deters the escalation of costs and is for the overall benefit of litigants.
  • A paying party should engage in constructive responses to applications for interim costs.


Mr Justice Leggatt :

  1. This judgment gives my ruling on applications for payments on account of costs pursuant to CPR 44.2(8). The applications have been dealt with in writing in accordance with orders dated 21 January 2015 following a hearing 0n 20-21 January 2015.
  2. The claimants are a group of companies previously owned and controlled by the first and second defendants, Mr Zhunus and Mr Arip, who are alleged in these proceedings to have defrauded the claimants of substantial sums of money. A worldwide freezing injunction has been granted over assets of Mr Zhunus and Mr Arip in an amount of £72 million. The claimants subsequently applied to amend their particulars of claim to allege a further fraud by which Mr Zhunus and Mr Arip are alleged to have misappropriated another US$45 million or thereabouts in breach of their fiduciary duties to the first claimant, with the dishonest assistance of the third defendant (Ms Dikhanbayeva). The application was heard on 20 and 21 January 2015. The main focus of the proposed amendments was a proprietary claim seeking to trace the proceeds of the alleged fraud into the hands of the fourth defendant (a Cyprus trust company) and the fifth defendant (Mrs Arip).
  3. The amendment application was a heavy application which occupied one and a half days of court time (including the time taken to give judgment) and required a day of pre-reading. A further half day was available, if necessary, to deal with an application by Mrs Arip to vary the freezing order to clarify that the freezing order does not apply to her assets, including money standing in a bank account in her name in Switzerland. As the claimants did not in the event contend that the freezing order did apply to those assets, that application was dealt with shortly.
  4. The claimants’ application to amend the particulars of claim was unsuccessful and they were ordered to pay the defendants’ costs of the application. They were also ordered to pay Mrs Arip’s costs of her application to amend the freezing order, which they had unreasonably opposed. Both orders made provision for an application to be made in writing for an interim payment on account of costs. Under the terms of the orders the defendants were to provide the claimants with details of the total costs claimed within seven days and the parties were then to endeavour to agree an interim payment. The orders provided that, if the interim payment was not agreed within seven days, the parties were to submit brief written submissions to the court, “following which the award and amount of any interim payment shall be dealt with on paper by the Judge”.
  5. The defendants have provided statements of their costs of the applications in the form applicable for summary assessment. The costs claimed are extremely large and no interim payments have been agreed. Indeed the claimants’ solicitors have not even attempted to engage in the process of endeavouring to agree interim payments, contrary to the terms of the court’s orders.
  6. The total costs claimed in the statements of costs (including VAT) are as follows:

i) Costs of Mr Zhunus for the amendment application – £183,739;

ii) Costs of Mr and Mrs Arip and Ms Dikhanbayeva for the amendment application – £583,145; and

iii) Costs of Mrs Arip for her application to amend the freezing order – £178,569.

Thus it can be seen that for a two day hearing the total costs claimed by the defendants are around £945,000.

  1. The claimants’ approach has not been constructive. Instead of making sensible proposals for suitable interim payments, they have made none at all and instead wrote a letter to the court dated 12 February 2015 accusing the defendants of abusive litigation tactics and of attempting to “bleed the claimants dry”. This complaint might have carried more credence if the claimants had not themselves on a previous occasion submitted a schedule of costs in a sum of £809,000 for their costs of resisting an application by the defendants to discharge the freezing injunction.
  2. The claimants’ letter makes three requests, none of which is reasonable.
  3. First, the letter enclosed a copy of an application which the claimants have made to the Court of Appeal for permission to appeal from the order dismissing their amendment application. In their skeleton argument in support of the application for permission to appeal the claimants seek a stay of the order that they must pay the defendants’ costs of the amendment application (although not, it seems, of the order providing for an interim payment). It is unclear whether the claimants’ letter is intended to be an application under CPR 52.7 for a stay of the order for an interim payment. If so, I refuse the application. Solid grounds are required to justify a stay pending an appeal such as that, absent a stay, the appeal would be stifled. No such grounds have been put forward.
  4. The second request made is that all the costs claimed by the defendants should be referred to a costs judge for detailed assessment. The justification offered for this proposal is that, because the total costs claimed are disproportionate, the court should order that nothing should be paid by way of a payment on account. This is a bad argument. If costs claimed by a party are disproportionate, there is no reason why that should affect (either upwards or downwards) the sum which it is reasonable to order the other party to pay on account.
  5. The third request made in the claimants’ letter is that, if the court intends to make an order for a payment on account of costs, a half day hearing should be fixed for this purpose for which the claimants would wish to instruct a specialist costs counsel. Not only is this request contrary to the terms of the order agreed by the claimants for the matter to be dealt with on paper, but to incur the costs of a half day hearing to argue about the amount of a payment on account of the costs of a two day hearing would be utterly disproportionate and wasteful.
  6. As may be apparent from what I have said so far, these proceedings are an instance of what is often euphemistically described as “hard fought litigation” in which neither side shows any sense of moderation. The claims are based on allegations of dishonesty and the amounts of money involved are very large. Some of the allegedly fraudulent transactions in issue are of considerable complexity. Both sides have many lawyers working on the case. At the hearing on 20-21 January 2015 the claimants were represented by two senior leading counsel, as well as junior counsel. So were the main group of defendants. The first defendant, Mr Zhunus, was separately represented by leading and junior counsel.
  7. In a case such as this where very large amounts of money are at stake, it may be entirely reasonable from the point of view of a party incurring costs to spare no expense that might possibly help to influence the result of the proceedings. It does not follow, however, that such expense should be regarded as reasonably or proportionately incurred or reasonable and proportionate in amount when it comes to determining what costs are recoverable from the other party. What is reasonable and proportionate in that context must be judged objectively. The touchstone is not the amount of costs which it was in a party’s best interests to incur but the lowest amount which it could reasonably have been expected to spend in order to have its case conducted and presented proficiently, having regard to all the relevant circumstances. Expenditure over and above this level should be for a party’s own account and not recoverable from the other party. This approach is first of all fair. It is fair to distinguish between, on the one hand, costs which are reasonably attributable to the other party’s conduct in bringing or contesting the proceeding or otherwise causing costs to be incurred and, on the other hand, costs which are attributable to a party’s own choice about how best to advance its interests. There are also good policy reasons for drawing this distinction, which include discouraging waste and seeking to deter the escalation of costs for the overall benefit for litigants.
  8. Where, as here, the court is not actually assessing the amount of costs to be recovered and has nothing like the level of information that could be required on a detailed assessment, there is additional reason to be conservative. The fact that the total costs claimed are very high cannot by itself be allowed to increase the sum awarded as an interim payment. I am sure that the costs claimed by the main group of defendants are neither reasonable nor proportionate. By what factor they should be discounted, however, to arrive at a reasonable and proportionate amount can only properly be determined by a detailed assessment.
  9. For present purposes the approach that I intend to follow is a necessarily approximate one of estimating the recoverable amount in broad terms based on my knowledge of this case and of the issues raised by the applications and also drawing on such experience as I have of the costs of commercial litigation from summarily assessing and awarding payments on account of costs in other cases. I will then discount this figure to reflect the margin of error in my estimate and the principle that an interim payment should err on the side of awarding less than is ultimately likely to be recovered.
  10. I consider that the statement of costs submitted on behalf of Mr Zhunus is an appropriate starting-point for an assessment on the standard basis. The hours spent and rates charged by his solicitors appear to me broadly reasonable and proportionate. Counsels’ fees totalling over £95,000, however, of which there is no breakdown seem to me likely to include an element of cost that should be for Mr Zhunus’ own account. My rough estimate of the likely recoverable amount of his costs at £150,000, of which I consider that £100,000 is a reasonable sum to order as a payment on account.
  11. Mr and Mrs Arip and Ms Dikhanbayeva are represented by a separate legal team. Their evidence and arguments largely covered the same ground of those of Mr Zhunus and, though their counsel took the lead in making oral submissions at the hearing and the submissions made by counsel for Mr Zhunus were much shorter, this was only in the interests of avoiding duplication. I accept that a substantial amount of work was needed to prepare evidence and present legal argument in opposing the amendment application, and I have mentioned already that the sums involved are large and the transactions in issue of considerable complexity. A sense of perspective is, however, necessary. This was a one and a half day hearing of an application to amend a statement of case and not a trial. I consider that it would have been reasonable and proportionate to employ a team of three solicitors (as opposed to the seven solicitors actually employed) and one as opposed to two leading counsel. In terms of time spent and rates and disbursements charged, I do not consider that the statement of costs submitted provides any meaningful assistance in gauging what sums have been reasonably and proportionately incurred. In these circumstances the best guide to what sum might be recoverable on a detailed assessment seems to me to be the amount of costs incurred by Mr Zhunus. I will accordingly order that a sum of £100,000 should also be paid on account of these defendants’ costs.
  12. Mrs Arip’s application to amend the wording of the freezing order was a matter which should have been dealt with by consent and at minimal cost. The fact that it was not was in large part the result of the claimants’ conduct in opposing the application without any valid basis for doing so. Nevertheless, a good deal of time was wasted on both sides in cantankerous correspondence and unnecessary evidence. The total costs incurred by Mrs Arip on this application, while she may well see them as money well spent in order to secure unrestricted access to her Swiss bank account, bear no relationship at all to the nature and difficulty of the matter. The application was very straightforward and the notion, to take one example from the summary statement of costs, that it was reasonable and proportionate for four solicitors to attend court for the hearing of the application is not one that can be seriously entertained. In the absence of any reliable information about the amount of costs likely to be recoverable on a detailed assessment, I will estimate that amount conservatively at £25,000, of which I order £20,000 to be paid on account.
  13. Having regard to the further information about their current financial situation which the claimants have provided since this judgment was circulated in draft, I will allow 28 days for the payments on account of costs to be made.