JSC Mezhdunarodniy Promyshlenniy Bank & Anor v Pugachev & Ors

The court may impose conditions on an application, including a jurisdiction challenge, under CPR rule 3.1 where necessary to further the overriding objective. Such conditions are exceptional and must not stifle the application.

A payment into solicitors’ client account may be required where previous non-compliance and unpaid costs create a real risk that adverse costs will not be recovered, provided the payment does not prejudice the application. Disclosure of the source of litigation funding may likewise be required where there is a properly arguable case that the funds derive from assets subject to a freezing order.

Cross-examination on an application remains exceptional and should not be required merely because the application is very late or supported by evidence strongly alleged to be dishonest.

The claimants, a Russian bank and the Russian deposit insurance agency, brought enforcement proceedings concerning assets held through trusts associated with the first defendant. The first defendant applied at a very late stage to challenge the court’s jurisdiction and sought to set aside a default judgment on substantially related grounds.

The claimants sought conditions requiring payment of costs, disclosure of the source of funding, and attendance for cross-examination. The central questions were whether the court had power to impose those conditions, whether they were justified on the evidence, and whether they would improperly impede a challenge to jurisdiction.

1. Power to impose conditions. The court had jurisdiction under CPR rules 3.1(2)(m) and 3.1(3) to take steps furthering the overriding objective and to impose conditions, including payment of money. Conditions of this kind are exceptional, particularly where attached to a jurisdiction challenge.
2. Cross-examination. Cross-examination on an application is a power to be exercised sparingly. Applying Jenington v Assaubayev [2010] EWHC 2351, the evidence strongly suggested that the first defendant had known of the proceedings and that his evidence might have been knowingly false. Nevertheless, it would be wrong to require him to attend cross-examination or make it a condition of hearing an application concerning jurisdiction.
3. Costs condition. A payment of £60,000 into the defendant’s solicitors’ client account was justified. There had been serious previous breaches, unpaid costs orders and unpurged contempt. The payment would protect the respondents against unrecovered costs and would not stifle the application.
4. Funding disclosure. The freezing order permitted reasonable expenditure on legal representation, subject to disclosure of the source of funds. Following the principle derived from Dadourian v Simms [2008] EWHC 1784, such disclosure could be required where there was a properly arguable case that the funding came from frozen assets. The worldwide freezing order, non-disclosure of assets and earlier use of frozen funds satisfied that threshold. Disclosure was therefore imposed as a condition.
5. The compliance date was extended from 19 July to 24 July 2017. The court did not resolve a possible tension between Dadourian v Simms and JSC BTA Bank v Solodchenko.