(1) Jsc Mezhdunarodniy Promyshlenniy Bank (2) State Corporation "Deposit Insurance Agency" v Sergei Viktorovich Pugachev

Cross-examination ordered to police a freezing order is primarily supervisory. Its purpose is to investigate and clarify asset disclosure, rather than adjudicate disputed facts. Costs remain discretionary: the standard basis is the norm, while indemnity costs require exceptional conduct outside the norm and clear evidence of bad faith, dishonesty or intentional obstruction.

Further affidavit evidence should be ordered only where it has practical utility, is necessary to police the order and is proportionate. It should not become a means of investigating credibility, building a contempt case or obtaining evidence for foreign proceedings. The disclosure obligation remains personal, although reasonable delegation of complex enquiries is permissible.

The claimants had obtained freezing orders in support of proceedings in the Russian Federation and an order for the defendant’s cross-examination concerning his assets. Following the examination, they sought indemnity costs, further affidavit evidence, continuation of the passport order and an adjournment of the cross-examination with liberty to restore. The defendant appeared in person and disputed the significance of inconsistencies between earlier evidence and his answers under cross-examination.

The judgment records earlier interlocutory decisions, including [2014] EWHC 4336 (Ch) and [2015] EWCA Civ 139. The central issues were the appropriate costs basis, the necessity and proportionality of further disclosure, and continuation of the passport restrictions.

Disposition. Indemnity costs were refused. The defendant was ordered to pay 80 per cent of the costs of the cross-examination on the standard basis. Further affidavit evidence was limited, and the passport orders were continued pending completion of the process.

1. Nature of cross-examination. Cross-examination in support of a freezing order is principally supervisory and investigative. It exists to clarify asset disclosure and issues arising from it, not ordinarily to adjudicate disputed facts. The court should avoid resolving contested ownership, control or credibility issues at this interlocutory stage unless consequential applications require a more detailed assessment.
2. Costs. The costs of obtaining an order for cross-examination are distinct from the costs of the examination itself. The general rule, stated in Excelsior Commercial & Industrial Holding Ltd v Salisbury Hamer Aspden & Johnson (Costs) [2002] EWCA Civ 879, is assessment on the standard basis unless conduct or another exceptional circumstance takes the case out of the norm. The threshold is especially high where indemnity costs depend on findings of bad faith or dishonesty in disputed factual matters. The approach in JSC BTA Bank v Ablyazov and others (Tyschenko, Third Party) [2015] 1 WLR 1547 was treated as a materially different example involving clear evidence of active assistance in dissipation.
3. Relevant costs factors. The court should consider whether the examination elicited explanations which ought to have been provided earlier, the examinee’s co-operation or obstruction, whether the process was proportionate and properly directed to policing the order, and its overall utility. The examination justified a substantial standard-basis costs order, but the evidence did not establish dishonesty clearly enough for indemnity costs.
4. Further evidence. Further affidavit evidence must have practical utility and be necessary to make the freezing order more effective. It must also be proportionate, particularly where the order supports foreign proceedings, consistent with Motorola Credit Corpn v Uzan (No 2) [2003] EWCA Civ 752. It should not be ordered merely to expose inconsistencies, pressure the defendant, support contempt proceedings or assist the foreign merits.
5. Disclosure obligation. A defendant must take reasonable steps to investigate answers concerning assets in which he has or had an interest or a right to information. In complex structures, reasonable delegation to professional advisers is permissible, but the obligation remains personal and a casual approach is insufficient, applying the principle in Bird v Hadkinson [2000] CP Rep 21. The further affidavit was confined principally to interests and transactions concerning EPK, Safelight and Creative Associates, and to the funding of living expenses. Further cross-examination required a later application. The passport orders continued, subject to variation for good cause.

The judgment records earlier interlocutory orders in the same proceedings, including an order by Arnold J on 11 March 2015 for cross-examination and the Court of Appeal’s decision at [2015] EWCA Civ 139. This was a first-instance consequential decision; no appeal from it is stated.