Tonstate Group Ltd & Ors v Wojakovski & Ors

A party who has failed to pay an interim costs order may be permitted to continue proceedings only on payment, unless the court is satisfied that the condition would deny access to justice or breach Article 6 of the ECHR. The party asserting inability to pay bears the burden of providing detailed, cogent and full evidence of his financial position and ability to raise funds. Deliberate breaches of court orders and inadequate disclosure are relevant to the exercise of the discretion. A debarring order should ordinarily be made as an unless order, unless strong reasons justify immediate debarring. The sanction must remain proportionate and may apply to some, but not all, related proceedings.

The judgment concerned an application by Tonstate Group Limited and others for a debarring order against Edward Wojakovski in three related proceedings: a derivative action, a claim concerning transfers of shares, and an unfair prejudice petition. Mr Wojakovski had failed to pay a final costs order and other sums due under previous orders. He contended that he lacked funds because monies available to him were allegedly proceeds of wrongful extractions and subject to injunctions.

The central issues were whether he had established inability to pay, whether continued participation could properly be conditional on payment, and whether any order should extend to all three proceedings or take immediate effect.

1. The application succeeded in part. Mr Wojakovski was ordered, unless he paid the costs order within 14 days of the order made on handing down judgment, to be debarred from defending the Main Action, including the Additional Claims, and from participating in the Petition. The order did not extend to the Shares Claim.

2. The court applied the principles summarised in Michael Wilson & Partners Ltd v Sinclair [2017] EWHC 2424 (Comm). A sanction for non-payment of costs is discretionary. The court must consider Article 6, alternative enforcement methods, the circumstances in which the costs order was made, the defaulting party’s evidence of impecuniosity, and the procedural conduct of that party.

3. A party relying on inability to pay must provide detailed, cogent and proper evidence giving full and frank disclosure of his financial position, including prospects of raising funds. Mr Wojakovski’s incomplete bank disclosure, unexplained assets, possible funding sources and continuing breaches of court orders failed to satisfy that burden. Reliance on his own assertion that he was using tainted funds was insufficient.

4. The court treated the default position identified in Siddiqi v Aidiniantz [2020] EWHC 699 (QB) as applicable to a defendant as well as a claimant. No sufficient Article 6 justification displaced the condition requiring payment.

5. Although the proceedings were case managed together, the costs order related overwhelmingly to the Main Action, Additional Claims and Petition. The Shares Claim concerned distinct rights in shares and the sanction would be disproportionate there. The history of default justified a debarring order, but not an immediate one, because the period of non-payment was less than a month and a final opportunity to comply was appropriate.