Shahraab Ahmad v Karim Ouajjou & Anor

An application made before the expiry of an unless order is governed by CPR r3.1(2)(a) and the overriding objective, rather than the relief-from-sanctions test in CPR r3.9. The court may nevertheless give substantial weight to the public interest in enforcing unless orders. Where payment of costs is said to be impossible, the applicant must provide detailed, cogent and frank evidence of assets and of the prospects of raising funds. A material change of circumstances may justify an extension, particularly where a realisable asset can satisfy the costs promptly. The extension may be granted subject to safeguards, including updated asset disclosure, independent valuations and controls over sale proceeds, so that the claim can proceed on its merits while the claimant remains protected.

The defendants applied before the expiry of an unless order for an extension of time to pay outstanding costs orders. They also sought variation of worldwide freezing orders to permit the sale of a Dubai property and payment of the costs from the proceeds.

The unless order had been made after earlier contempt proceedings arising from dissipation of a Madrid property. The defendants relied on the continuing unavailability of Spanish property proceeds and the subsequent identification of an arm’s-length purchaser for the Dubai property. The claimant opposed the extension, contending that there had been no material change of circumstances and that the application sought to re-argue the earlier order.

The central issues were whether the application was governed by the test for an in-time extension, whether circumstances had materially changed, and what safeguards were required.

1. Applicable test. The application was made before the deadline in the unless order. It therefore fell under CPR r3.1(2)(a) and the overriding objective. The principles governing relief from sanctions under CPR r3.9 did not apply. The court was nevertheless required to consider the importance of enforcing compliance with court orders as part of the overriding objective.
2. Impecuniosity and evidence. A distinction exists between inability to pay and unwillingness to pay. Where inability to pay is relied upon, the evidential threshold is high. The applicant must provide detailed, cogent and frank evidence of its financial position, including available assets and prospects of raising funds.
3. Material change. In the absence of a material change since the original unless order, the prospects of an extension would be poor because the inability-to-pay case should ordinarily have been advanced when the order was sought. Here, the evidence established relevant subsequent changes. The Spanish proceeds would not be available by the existing deadline, and a buyer had been found for the Dubai property. The proposed sale could provide sufficient funds to discharge the costs within a relatively short period.
4. Discretion and safeguards. Balancing enforcement of the order against the catastrophic consequences of striking out the defence and counterclaim, the just and proportionate course was to extend time so that the action could proceed on its merits. The worldwide freezing orders were varied to permit the Dubai sale, subject to two independent valuations, disclosure of the purchaser, payment of the proceeds into a UK account, an undertaking by the defendants’ solicitors, continued freezing of the proceeds and further asset disclosure. The defendants were also required to update the position concerning the Spanish proceeds and to bring an available Rolex watch into the jurisdiction.
5. Outcome. Time for compliance was extended to 16 November 2024 and the freezing orders were varied on the stated terms. The defendants were ordered to pay the claimant’s costs of the application, summarily assessed at £17,500.