1. A.B. Jnr. 2. Mme B. Plaintiffs v 1. M.B. 2. Ab.B. 3. J.de.R 4. K.B. 5. J.R Defendants

• Jurisdiction: Cayman Islands
• Judge: THE HON. ANTHONY SMELLIE, CHIEF JUSTICE
• Judgment Date: 14 June 2013
• Court: Grand Court (Cayman Islands)
• Docket Number: CAUSE NO. FSD
• Date: 14 June 2013

In the Matter of the Trusts Deed Dated 21^st November 1985 and Made by A.B. Snr.

And

In the Matter of the Trust Law (2001 Revision)

Between

1. A.B. Jnr.

2. Mme B.

Plaintiffs

and

1. M.B.

2. Ab.B.

3. J.de.R.

4. K.B.

5. J.R.

Defendants

[2013] CIGC J0614-1

Before

THE HON. ANTHONY SMELLIE, CHIEF JUSTICE

CAUSE NO. FSD

IN THE GRAND COURT OF THE CAYMAN ISLANDS

RULING AS TO COSTS

1 The trial of the claim and counterclaim it this action spanned some nine weeks from April to June of 2012 resulting in a lengthy judgment delivered, with mixed outcomes, on 13^th August, 2012.

2 The issue now before the Court is what, if any, order should be made for the costs of the action.

3 All sides agree that in keeping with Grand Court Rules Order 62, the award of costs is a matter to be decided in the discretion of the Court.

4 All sides agree that for the purposes of the exercise at hand, the action may be compartmentalized under three main heads or groups of issues; all as more fully identified and explained in the judgment of 13^th August 2012:

• (1) The Plaintiffs” joint claim for breach of trust against the first three Defendants who at all material times were the Trustees; the claim itself involving four sub-issues:

  • (i) what was the nature of the duty alleged to have been breached by the Trustees;

  • (ii) was there in fact a breach of duty;

  • (iii) the nature of the defence to the alleged breach;

  • (iv) whether the Trustees were entitled by virtue of provisions of the Trust Deed, to be relieved from liability for the alleged breach

• (2) The 4^th Defendant's (KB's) counterclaim alleging that Mme B (the 2^nd Defendant) had forfeited her interests under the Trust and so had no standing to bring a claim for breach of trust — all the consequence of her having allegedly acted in breach of the so-called ‘No Contest’ provisions of the Trust Deed — in the manner of her earlier challenge to the proprietary rights of the Trust and the actions taken by the Trustees to protect those rights.

• (3) The Equitable Defence raised by the Defendants to the Plaintiffs” claim (and entirely abandoned as against the First Plaintiff A.B. Jnr. only as late as after commencement of the trial):

  • (i) Affirmation or Election;

  • (ii) Estoppel

  • (iii) Laches/Acquiescence

5 Those being the three main groups of issues, it is also agreed between the parties that the costs of the action, however they are to be awarded, may be apportioned expressed as percentages as follows:

Breach of Trust	-	80%
Forfeiture	-	15%
Equitable Defences	-	5%

6 I adopt these apportionments as being a fair representation of the incidence of the costs incurred on all sides in the action.

7 While it was the subject of argument whether the costs jurisdiction here is as yet as wide or as specifically defined as it now is n England and Wales under the Civil Procedure Rules there, all sides are agreed that the jurisdiction under GCR Order 62 is wide enough to allow for different approaches to be taken to the award of costs; allowing for either or a combination of the following:

• (i) an order for costs to follow the event;

• (ii) a proportionate order having regard to the eventual outcomes of each of the three main groups of issues;

• (iii) an order based even more specifically upon the outcome of each issue.

8 Mr. Machell proposed that the order I make should be one that the defendants pay the Plaintiffs” costs but Mme B pays the costs of the Defendants on the Equitable Defence issue — the only issue on which either of the Plaintiffs (viz: Mme B herself) lost. He proposed further that if I should decide to discount the costs awarded to the Plaintiffs, then the discount should be no more than necessary to reflect the costs incurred by the Defendants in their successful presentation of the Equitable Defences as against Mme B's claim.

9 Thus as the apportioned costs of the Equitable Defences is 5% of the total, she would bear 2.5% of those costs and actually pay the other 2.5% to the Defendants Trustee. In that event, A.B. Jnr. would pay no costs. As he was entirely successful the entirety or a large proportion of his costs should be awarded to him. At all events, there should be a significant net payment of costs in favour of the Plaintiffs.

10 Mr. Nugee QC for the Defendant Trustee and Mr. Tidmarsh for the 4^th Defendant both argued for an order that costs follow the event of the outcome of the trial.

11 This would mean that as on the breach of trust claim Mme B was entirely unsuccessful (she was barred by the Equitable Defences successfully raised by the Defendants) the Defendants should get their costs of defending her claim; they should get all the costs of raising their defences.

12 As to A.B. Jnr.'s claim, though it was successful in establishing a breach of trust that was only the narrowest of bases as explained in the judgment of 13^th August, 2012 — not justified by the allegations of deliberate or dishonest breaches which he alleged.

13 Moreover, as to quantum he succeeded for only 17.5% of his claim — USD6.5 million as against a claim for USD43 million (USD64 million when combined with Mme B's unsuccessful claim).

14 A great deal of time and costs were spent in preparation for trial and at the trial itself on the issue of the Trustees” liability which need not have been spent and on quantum so as to enable the court to arrive at the correct amount. This latter point on quantum having regard in particular to the unsuccessful raising by the Plaintiffs of the so-called ‘alternative transaction’ basis for the computation of their claim.

15 So, says, Mr. Nugee, I should regard one plaintiff as being wholly unsuccessful and one plaintiff, although successful in recovering compensation, as having succeeded in doing so as to less than one-fifth of his claim.

16 He submitted that the court should take the principled approach, in the words of Order 62 rule 4(5) — the Courtshall order costs to follow the event. This is ‘the primary rule’ not to be departed from in the absence of a particular set of circumstances justifying another form of order. This is not such a case he said: the event is readily discerned and understood — A.B. Jnr. was only partially successful in his claim both as to liability and quantum, with the Defendant Trustees being more than 80% successful in defending against them. His mother, Mme B was totally unsuccessful. Those are the events to be followed in the award of costs.

17 Given that GCR O. 62 r.4(5) still reflects virtually word for word the old Rules of the Supreme Court Order 62 r.3.3 (despite changes to other aspects of the Cayman rules); Mr. Nugee, supported by Mr. Tidmarsh, submitted that the law as it applied pre-CPR in England, should guide the exercise of my discretion now. The CPR were intended to be a ‘fresh start’ in England and allow for a less stringent and different approach than the GCR O 62 r 4 (5) and the old RSC — both of which in identical terms state that the Courtshall order costs to follow the event except ‘when it appears to the Court that in the circumstances of the case some other order should be made as to the whole or any part of the costs.’

18 Elaborating upon these submissions on behalf of the 4^th Defendant who brought the counterclaim to Mme B's claim (and so being responsible for raising the specific issue of forfeiture (which failed) and the Equitable Defences (which succeeded as against her), Mr. Tidmarsh says that the counterclaim should in reality be regarded as a defence to Mme B's claim. As she failed entirely in her claim, she should pay not only the costs of defending against her claim but the entire costs of the counterclaim as well. The issues based approach would not be appropriate as Mme B won no discrete issue.

19 He argued that there were at least two good reasons why the counterclaim was brought by the defendant K.B. and not by the Trustees themselves:

• (1) The Trustees did not want to take the forfeiture point. The Trustees must maintain an even hand as between all beneficiaries and it was not their view that they should seek to deny an apparent beneficial entitlement. By contrast K.B. as a beneficiary himself and appointed in a representative capacity torepresent the interests of all beneficiaries who could not represent themselves, was bound by no such conflict of interest or general duty.

• (2) Moreover, K.B. was not a party to the 1999 Settlement Agreement between the Trustees and the Plaintiffs by which it had been intended that their interests be bought out from the Trust, nor a party to the still earlier 1994 Protocol by which it had been intended that the challenges then...