In Kazakhstan Kagazy Plc -v- Baglan Zhunus [2015] EWHC 996 Mr Justice Walker had strong words to say, and constructive guidance to give, in relation to some aspects of commercial litigation.  The case further serves as a reminder of the nature of the evidence that a party has to adduce when opposing an application for security for costs on the grounds that an action would be “stifled”.


The defendants applied for security for costs. The main evidence in support of, and opposing, the application was provided in witness statements provided by the parties’ solicitors.


At the outset the judge set out some observations on the need for a sense of proportion along with some practical guidance.

A1.2 The need for a sense of proportion

  1. 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

  1. 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:

i) 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.

ii) 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.

iii) 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.

iv) 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.

v) 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.


The judge explained the procedural history which involved a number of applications, including an application to re-open the situation. He reviewed the criteria in CPR 25 for security for costs. The judge found the criteria were ment.


After the initial hearing the claimant applied to adduce evidence that security for costs would “stifle” the action.  This represented a major change from the submissions put forward at the hearing itself.

G: The February 2015 application

G1. February 2015 application: general

  1. The February 2015 application asserts that a new state of affairs, unforeseeable in November 2014, has now arisen. It is said to have the consequence that the claimants will not be able to pay security for costs in the sum sought by Mr Zhunus. To do so, it is said, would mean mass redundancies and defaulting on bonds and obligations to EBRD. Thus, it is now submitted, a bona fide claim would have effectively been stifled.
  2. As noted in section C3 above, Mr Brindle expressly stated that it was not said that an order for security would stifle the claim. This new submission is an about turn from that express disavowal. It relies in part upon a collapse in the value of the RUB. The justification for making an about turn is said to be that the group “has … been dealt a surprising and unexpected double-blow by the currency crisis – demand from its core clients has sharply fallen, while competition from Russian producers has increased aggressively.”
  3. In these circumstances it is necessary to refer to key features of the way in which the court approaches a contention that the claim will be stifled.

G2. February 2015 application: principles as to stifling

  1. In section D1 above I cited observations by Briggs J in Chemistree. In the light of what is now sought to be advanced in the February 2015 application, I set out further observations by Briggs J in paragraphs 4 to 6 of his judgment about the court’s approach to an allegation that an order for security would stifle a claim:

4. A particular consideration much relied upon by claimants is whether an order for security would stifle the claim. In this respect the onus is on the claimants, see Radu v Houston [2006] EWCA Civ 1575

5. The court must therefore guard against an uncritical acceptance of a mere assertion to that effect and deal with the issue objectively on the evidence as its stands. It is not enough, to make good an assertion of stifling, for the claimants’ directors to say that, if faced with an order for security, they will decide on commercial grounds to discontinue the claim …

6. The claimants do not have, in support of the stifling submission, to go so far as to prove that they could not in any circumstances raise the money. The claimants are expected to show that there is after due enquiry no available external source of funds to pay security, for example, from shareholders, stakeholders or associated companies.”

  1. In relation to the last sentence of the passage quoted above I refer also to what was said by Kitchen J in Allen v Bloomsbury Publishing [2011] EWHC 770. At paragraph 66 of his judgment Kitchen J explained that in this context the court must consider whether it has:

… a full account of the resources available to [the claimant], whether he and those backing him have been full and candid in setting out what their means are, and whether he can raise the amount needed to meet an order for security from his backers and other interested persons.

G3. February 2015 application: the March 2015 material

  1. As noted in sections A2 and C7.3 above my directions required full evidence and full written submissions on behalf of the claimants, and in response I was provided with what I shall call “the March 2015 material”: namely, Werner 2 and the March 2015 submissions.
  2. There are numerous difficulties with the contentions in the March 2015 material. Two examples immediately spring to mind. First, it would be surprising if it were indeed the case, as late as November 2014, that the difficulties now described could not have been foreseen. Second, it is difficult to reconcile the contention that the difficulties are as great as they are now said to be with the contention that they do not have the consequence that the inability to pay pre-condition is met. This inherent implausibility may cast doubt on the reliability of the assertions made in Werner 2. However I do not need to investigate these or other potential difficulties, as in my view there is a far more formidable difficulty which plainly is not surmounted by the March 2015 material.
  3. The insurmountable difficulty is the failure to comply with the expectation, explained in section G2 above, that claimants relying upon a stifling contention will show that there is, after due enquiry, no available external source of funds to pay security. I shall refer to this expectation as “the due enquiry expectation”.
  4. The need to make such an enquiry is something that the claimants are and have been well aware of. In this regard Werner 2 says at paragraph 29:

I anticipate that the First Defendant will say that if KK cannot meet an order of security for his costs, then its creditors (principally IFK and Alliance Bank) or shareholders such as EBRD or myself should provide the funds. This issue has already been addressed in the Second Witness of Sarosh Zaiwalla dated 23 June 2014 at para 59.

  1. There is no need to look at Zaiwalla 2 in order to observe that this cannot possibly meet the due enquiry expectation. A witness statement made in June 2014 cannot possibly give an account of due enquiry made in February 2015.
  2. I do not lengthen this judgment by setting out paragraph 59 of Zaiwalla 2. It is sufficient to note that what was said there was rightly described at paragraph 6.3 of Mr Zhunus’s skeleton as:

vague and unsupported assertions that those funding the Claimants’ (very substantial) costs “cannot be expected” to fund [Mr Zhunus’s] costs …

  1. The March 2015 submissions make an observation at paragraph 22 that paragraph 59 of Zaiwalla 2 was not challenged in Mr Zhunus’s reply evidence. This observation seems to confuse evidence and argument. Mr Zhunus can hardly be expected to investigate the position in relation to those funding the claimants and to set out in reply evidence the result of that investigation. The matter was properly dealt with by way of argument in paragraph 6.3 of Mr Zhunus’s skeleton. That paragraph drew attention to something which I am sure that the claimants were fully aware of: the court expects a detailed enquiry to have been made so that it can consider the matters identified by Kitchen J in his judgment in the Allen case.

G4. February 2015 application: conclusions

  1. There is no evidence of any such enquiry as would meet the due enquiry expectation. I can identify nothing in the March 2015 material which explains or excuses the failure to carry out such an enquiry. In those circumstances the February application discloses no adequate evidence of stifling. Accordingly I dismiss that application without the need to call for evidence or argument in answer to it.