The High Court has ordered the wife and mother-in-law of a Kazakh businessman, the subject of a “very substantial fraud claim”, to pay the claimants’ costs bill of over £12m.
Mr Justice Jacobs rejected the argument that, in paying Maksat Arip’s legal costs of over £14m, Sholpan Arip and her mother Larissa Asilbekova were motivated by “ordinary” in the case of the wife or “natural” in the case of the mother-in-law “love and affection”.
Jacobs J said he accepted the arguments of the claimants, led by the Kazakhstan Kagazy group, that the justice of the case made a non-party costs order under section 51 of the Senior Courts Act appropriate for both women.
“Mr Arip contends that he is bankrupt, and Ms Arip contends that she only retains limited assets from the distributions received, such that enforcement of the section 51 order against her will be far from straightforward.
“By contrast, Ms Asilbekova has been the recipient, without consideration, of a net sum of $77.5m, and the whereabouts of the majority of this money is unknown notwithstanding disclosure orders made against Ms Arip.”
Jacobs J said he was satisfied that “there has clearly been an asset dissipation exercise by Ms Arip, with substantial funds having been passed to her mother as part of that exercise”.
He went on: “Ms Asilbekova has been content to assist. The obvious reason for this exercise is that Ms Arip, with the assistance of her mother, has sought to protect family assets from potential and actual enforcement by the claimants.
“This motivation on the part of Ms Arip must have been shared by Ms Asilbekova, and there is no other sensible explanation for the transfers which have taken place.
“The overall effect of these arrangements has been, as the claimants submitted, to denude Mr Arip of readily available assets from which he could pay their costs, and to render enforcement of an order for costs against Ms Arip problematic.”
Jacobs J said Ms Asilbekova contributed to the funding of Mr Arip’s defence at least to some extent and she did not provide £500,000 “out of natural love and affection”.
He went on: “The money was provided because assets were parked with her, and her daughter had practical control over her accounts.
“Whilst this contribution to funding would not, on its own, justify a section 51 order for reasons already given, it is nevertheless a relevant factor.”
Delivering judgment in Kazakhstan Kagazy plc v Zhunus and others  EWHC 2630 (Comm), Jacobs J said the section 51 application arose from a Commercial Court trial which ended in December 2017.
Mr Justice Picken found that the claimants had established a “very substantial fraud claim” against Mr Arip, former chief executive of the Kazakhstan Kagazy group and its former chief finance officer Shynar Dikhanbayeva.
“The trial judge held that both of these defendants had given extensive dishonest evidence to the court, as well as calling a number of other dishonest witnesses in an attempt to corroborate their false account of events.”
In a further judgment, in February 2018, Picken J found that Mr Arip and Ms Dikhanbayeva were liable for a sum of almost $299m and ordered them to pay £8m as an interim payment – none of which “has been satisfied”.
The claimants made a without notice application under section 37 of the 1981 Act and, pursuant to an order to disclose information made by Mr Justice Knowles, the defendants’ former solicitors, Cleary Gottlieb, confirmed that Ms Arip had paid the firm £14m in legal fees between 2014 and 2018. Ms Asilbekova had contributed £500,000.
The claimants obtained a worldwide freezing order in September 2018 and made a successful application to cross-examine Ms Arip, which took place in July this year.
Since litigation funder Harbour had provided a “substantial amount of funding” for the claimants to pursue the proceedings, it was joined as an additional party.
The judge said the fact of third-party funding was not relevant: “I do not think that the justice of this case changes because the litigation has been funded by Harbour, which has spent significant sums on the litigation, rather than the claimants themselves…
“I think that it would be unfortunate if the involvement of a litigation funder, which has advanced monies to support a valid claim, should be a reason for not making an order under section 51.
“Just as Harbour’s involvement does not provide a reason against the making of an order for costs against Mr Arip, it equally provides no reason to exercise a discretion against the making of an order against Mrs Arip.”
In a blog on the case, well-known costs commentator Kerry Underwood, senior partner of Hemel Hempstead firm Underwoods, said: “It is hard to imagine a case in which a spouse will not have a financial interest in her or his spouse’s litigation and it is hard to see why the facts of this case are sufficiently exceptional to justify departure from the usual rule that family members will not be subject to non-party costs orders.
“The risk in this decision is that family members will be unprepared to support their relatives in dealing with the costs of litigation.”
Mr Underwood argued that the decision turned the Arkin cap on its head, “holding that non-commercial funders do not enjoy its benefit, thus exposing family members to a risk of a greater financial penalty than commercial funders who are investing in a case for profit”.
He added: “The decision also suggests that funding a defence, as this was, of itself was somehow unreasonable, as compared with the usual test of the funder causing unreasonable or unnecessary costs to be incurred.”
He considered it “a poor decision which is likely to be distinguished by any other court”.