Kazakhstan Kagazy Plc & Ors v Zhunus & Ors

Relief from sanctions under Civil Procedure Rules 1998, rule 3.9 requires a structured three-stage assessment: the seriousness and significance of the breach, the reason for it, and all the circumstances. Breach of an unless order is an important indicator of seriousness, but does not make every breach serious or significant. The court must assess the breach itself at the first stage and consider wider litigation conduct, where relevant, at the final stage. Where evidence substantially complies with an unless order, and any omissions are limited, promptly remediable and do not affect the fairness or progress of the litigation, the sanction should not take effect; relief should be granted if necessary. A party cannot rely on a self-created foreign procedural impediment to avoid compliance with an English order.

The judgment concerned three applications arising from charging order proceedings involving two BVI companies connected with judgment debtor Mr Arip. The Claimants sought judgment on the basis that the Respondents had failed to comply with unless obligations imposed by the order of Andrew Baker J dated 10 July 2020. Those obligations concerned evidence about the destruction or non-preservation of a forensic image, the procedures used to create it, its chain of custody and the record of documents identified by court-ordered searches.

The Respondents sought relief from sanctions and also sought deletion of, or an extension of time to comply with, a further unless obligation requiring review of 2,660 documents. The central issues were whether the evidence complied with the orders, whether any non-compliance was serious or significant under Denton v TH White Ltd [2014] EWCA Civ 906, and whether the subsequent Cyprus injunction justified varying the English order.

1. Applications dismissed. The Claimants’ application for judgment was dismissed. The Respondents’ application to delete or extend paragraph 5 of the Baker J Order was also dismissed. The court held that the Respondents had not breached the relevant unless orders. Alternatively, any non-compliance was insufficiently serious or significant and relief from sanctions would have been granted.
2. Relief from sanctions. Applying Denton v TH White Ltd [2014] EWCA Civ 906, the court considered first the seriousness and significance of the alleged breaches, then the reasons for them, and finally all the circumstances. The focus at the first stage was the breaches identified in the application, not the Respondents’ wider history of unsatisfactory conduct.
3. The fact that an unless order had been breached was a strong indicator of seriousness, as explained in Sinclair v Dorsey & Whitney (Europe) LLP [2016] 1 Costs LR 19 and British Gas Trading Ltd v Oak Cash & Carry Ltd [2016] EWCA Civ 153. It was not, however, conclusive. Not every breach of an unless order is serious or significant.
4. The witness statements substantially explained why the forensic image had not been retained, when it was probably deleted, who deleted it, the procedures used, and the chain of custody. The absence of a retained record of the 4,709 search hits did not itself establish a serious or significant breach where no such record existed. Any lack of clarity was limited and was subsequently explained.
5. At the third stage, the need for efficient litigation and compliance with court orders received particular weight, consistently with Clearway Drainage Systems Ltd v Miles Smith Ltd [2016] EWCA Civ 1258. Nevertheless, imposing final judgment concerning properties worth approximately £38 million for minor omissions would be disproportionate and would not realistically protect the fairness of the proceedings.
6. The foreign injunction obtained in Cyprus did not justify deleting or extending the further unless obligation. Any impediment caused by it was self-inflicted, and the Respondents could alternatively conduct a fresh search of the original data. No cogent basis for varying the order was established.