Kazakhstan Kagazy Plc & Ors v Zhunus & Ors

A defendant may claim contribution from a co-defendant after the claimant has settled with that co-defendant, but only if the defendant advances and proves an independent factual case establishing the co-defendant’s liability for the same damage. A defendant cannot conditionally adopt allegations which the claimant is no longer pursuing.

Once a contribution notice has been validly filed and served, the Part 20 claimant has an accrued cause of action sufficient in principle to support a freezing injunction. The claimant need not already have been held liable or have paid compensation. The usual requirements remain a good arguable case, prospective substantive proceedings and a sufficient risk that enforcement will be frustrated.

The claimants brought fraud and breach of duty claims against three former officers and sought substantial damages under Kazakhstan law. The first defendant settled with the claimants. The second and third defendants then sought permission under CPR Part 20 to bring contribution claims against him, relying largely on the allegations previously pleaded by the claimants.

The second defendant also sought a worldwide freezing injunction against the first defendant in support of the proposed contribution claim. The central issues were whether the proposed contribution claims were properly constituted after settlement and whether a contingent contribution claim could support freezing relief.

1. Contribution application. Permission for the second and third defendants to serve contribution notices was refused. The allegations against the first defendant were no longer facts in issue because the claimants had settled and the proceedings against him had been stayed. The proposed contribution claim was therefore bound to fail.
2. A defendant may advance an alternative case based on allegations made by the claimant against another defendant while those allegations remain actively pursued. After settlement, however, the defendant must positively assert and assume the burden of proving the allegations needed to establish the other defendant’s liability. Conditional reliance on allegations which the claimant no longer advances is insufficient.
3. The draft notice did not allege that the first defendant acted dishonestly or otherwise wrongfully, caused loss, or received illicit payments. It therefore did not establish liability for the same damage under section 1 of the Civil Liability (Contribution) Act 1978. The deficiency was substantive, not a case-management matter under CPR 20.9.
4. The first defendant’s existing contribution claim was different. Under section 1(4) of the Act, a settling party may claim contribution without proving that he was liable, provided that he would have been liable if the factual basis of the claim could be established.
5. Freezing injunction. The clean-hands argument failed. Alleged fraud forming part of the underlying dispute was not misconduct connected with the conduct of the proceedings or with the relief sought. A wrongdoer may in principle obtain ancillary relief needed to make contribution effective.
6. The authorities requiring a pre-existing cause of action were reconsidered. The relevant requirement is satisfied where the Part 20 claimant is entitled to commence proceedings claiming contribution. The cause of action accrues when a contribution notice is filed and served as of right, or when permission to file and serve it is granted. Section 10 of the Limitation Act 1980 concerns limitation only and does not determine when the cause of action accrues for freezing relief.
7. A validly constituted Part 20 contribution claim may therefore support a freezing injunction where there is a good arguable case and a sufficient risk of dissipation. The injunction application was nevertheless refused because permission to bring the contribution claim had been refused and there was no prospective judgment capable of being frustrated.