Kazakhstan Kagazy Plc & Ors v Zhunus & Ors

Under Civil Procedure Rules Part 38, permission to discontinue is required only where an interim injunction still in force covers the claim or part of the claim being discontinued. A compliant notice takes effect on service when permission is unnecessary, regardless of the claimant’s mistaken belief that permission is required. Permission to reintroduce substantially the same claim requires a material change of circumstances and a real prospect of success. Speculative future events do not justify enlarging existing proceedings or introducing unnecessary evidence. The rule against recovery of reflective loss continues to bar a shareholder’s claim where the company remains able to pursue its own claim.

The claimants applied to re-amend their particulars of claim. They sought to retain claims under Manx law alleging breaches of fiduciary duty and dishonest assistance, despite having served a notice of discontinuance.

The claims had previously been removed from the scope of a freezing injunction after a finding that the shareholder had not shown a good arguable case because of the rule against recovery of reflective loss. The claimants later relied on developments in Kazakhstan which they said might prevent the company from pursuing its own claims, and referred to Giles v Rhind [2003] Ch 618.

The issues were whether permission had been required to discontinue, whether the notice had taken effect, and whether the claims could be reinstated or raised a serious issue to be tried.

The application to re-amend was refused. The Manx law claims had been discontinued on 15 April 2016, and there was no sufficient basis to reinstate them.

1. Meaning of claim. In Part 38 of the Civil Procedure Rules, claim could not mean an individual cause of action, since a cause of action could not sensibly be discontinued in part. It meant at least the entire action or all causes of action asserted by one claimant against one defendant. The court did not need to choose between those alternatives.
2. Permission to discontinue. The words in r 38.2(2)(a) requiring permission where the court had granted an interim injunction referred to the claim, or part of the claim, which the claimant wished to discontinue. Permission was unnecessary where the injunction covered a different part of the claim. The injunction also had to remain in force; it was not enough that an injunction had previously covered the relevant claims.
3. Effect of notice. The claimants had filed and served the notice as required by r 38.3(1). Under r 38.5, discontinuance therefore took effect on service. Its effectiveness did not depend on the solicitors’ subjective intention or mistaken belief that permission was necessary.
4. Reinstatement. Under r 38.7, permission would in principle be required to make the same or substantially the same claim after a defence had been filed. There had been no material change of circumstances. C2 remained able to pursue its claims, and there were no facts supporting an inference that this would become impossible before trial. The possible exception to reflective loss discussed in Giles v Rhind [2003] Ch 618 therefore did not give the Manx law claims a real prospect of success.
5. Case management and jurisdiction. Introducing the proposed issues would require additional factual and Manx-law expert evidence concerning a purely hypothetical event. That would improperly enlarge expensive litigation. If the claims had not already been discontinued, the court would have declared that they raised no serious issue to be tried and would not have exercised jurisdiction over the hypothetical issues.

This was a first-instance application. Earlier in the same proceedings, HHJ Mackie QC held that the claimant had not shown a good arguable case for the Manx law claims because of the rule against recovery of reflective loss. The Court of Appeal upheld that decision, and the freezing injunction was varied accordingly. The present judgment determined the later discontinuance and re-amendment issues.