The English High Court in Kazakhstan Kagazy plc v Zhunus set out the principles for when it will be just and convenient to cross-examine a defendant on their asset disclosure given pursuant to a worldwide freezing injunction and what safeguards may go towards ensuring such examination is not oppressive.
The freezing order against Mrs Arip contained the usual provisions for asset disclosure to be confirmed by affidavit. The claimants said the disclosure was inadequate and sought cross-examination of her on the same.
The relevant principles in such cases include:
- The Court has a broad and unfettered statutory discretion to order cross-examination whenever it is just and convenient to do so.
- The exceptional nature of the remedy.
- It should further the purpose of the order, such as revealing additional assets the defendants might dissipate to avoid payment of a judgment.
- It must be just and proportionate, not oppressive or for an ulterior purpose; normally requiring significant or serious deficiencies in the existing disclosure.
The Court agreed the claimants had a strong evidential case that the disclosure had significant or serious deficiencies and that cross-examination may reveal further relevant assets, based on:
- Failure to explain payments made to family members and her connection to various trusts.
- Failure to reference significant assets in her schedule of assets that she mentioned in earlier evidence in the proceedings.
- No adequate offer of security.
The claimants’ application was not oppressive or made for an ulterior purpose because it had a legitimate interest in policing and enforcing the freezing injunction. The Court also suggested the following safeguards to ensure the cross-examination was not oppressive:
- Limiting cross-examination to one day.
- Advance provision of the list of cross-examination topics and documents to which the claimants intended to refer, including documents received from banks pursuant to without notice non-party disclosures orders.
The Court held the inadequate disclosure and safeguards satisfied the just and proportionate test. The claimants’ legitimate desire to protect their rights under an existing order satisfied the just and convenient test.
This is useful guidance to onshore and offshore practitioners alike, but particularly to those offshore where cross-examination orders are even rarer due to the fact that the defendants are typically foreigners disputing the offshore court’s jurisdiction. Due to the serious difficulties that arise in such circumstances, the settled practice is not to order cross-examination.