Adamas Global Alternative Investment Management Inc. v The Public Institution for Social Security for the State of Kuwait
| Jurisdiction | Cayman Islands |
| Judge | Sir Richard Field JA |
| Judgment Date | 13 December 2019 |
| Year | 2019 |
| Court | Court of Appeal (Cayman Islands) |
| Docket Number | Civil Appeal No. 27 of 2019 (Consolidated) Civil Appeal No. 26 of 2019 Cause No. FSD 72 of 2019 (IKJ) |
In the Matter of Section 131 of the Companies Law (2018) Revision
And in the Matter of Asia Private Credit Fund Limited (In Voluntary Liquidation)
In the Matter of Section 131 of the Companies Law (2018) Revision
And in the Matter of Adamas Asia Strategic Opportunity Fund Limited
The Hon Sir Richard Field, JA
The Hon C Dennis Morrison JA
The Rt Hon Sir Jack Beatson, JA
Civil Appeal No. 27 of 2019 (Consolidated)
Cause No. FSD 232 of 2018 (RMJ)
Civil Appeal No. 26 of 2019
Cause No. FSD 72 of 2019 (IKJ)
IN THE COURT OF APPEAL OF THE CAYMAN ISLANDS
This is the judgment of the Court.
Justice Kawaley's Supervision Order dated 23rd July 2019 ordered that: (i) the costs of The Public Institution for Social Security for the State of Kuwait (“the Petitioner”) of and incidental to the Petition prior to the directions hearing on 22 May 2019 should be paid out of the assets of Adamas Asia Strategic Opportunity Fund Ltd (“the Company”) as an expense of the liquidation to be taxed on the indemnity basis (para 11); (ii) costs as between the Petitioner and Adamas Capital Partners Ltd (“the Manager”) be reserved, with the question of such costs to be determined separately on the basis of written submissions from each side (para 12); and (iii) the fees and expenses of the Joint Voluntary Liquidators (“the JVLs”) incidental to the voluntary liquidation of the Company, including but not limited to the JVLs' fees and expenses of and incidental to the Petition, be paid in full out of the assets of the Company as an expense of the liquidation (para 13).
The appellant, Adamas Capital Partners Limited (“ACPL”) does not seek alternative orders to those set out in (i) and (iii) and in respect of (ii) seeks a direction that the costs as between the Petitioner and the Manager be determined in the Grand Court on the basis of submissions made to that Court.
With respect to the proceedings that followed the determination of the Petition namely:
ACPL submits that the Petitioner should pay ACPL's costs in respect of (a) and (b) because the Petitioner resisted both applications and ACPL ultimately succeeded in obtaining a stay and leave to appeal from this Court.
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(a) the failed application for leave to appeal made to Kawaley J;
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(b) the successful application for a stay and leave to appeal to this Court, the costs of which were reserved; and
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(c) the unsuccessful appeal to this Court,
ACPL further contends that in respect of (c) there should be no order as to costs for the following reasons. The public interest was served by the appeal which involved a novel point of law, namely the meaning and effect of section 131 (b) of the Companies Law this point being at the centre of the other appeal in related section 131 (b) proceedings (17 of 2019). The situation was also one in which different stakeholders in a liquidation could legitimately take different views on the effect of s. 131 (b) and, where a stakeholder acts reasonably in expressing views that do not ultimately prevail with the Court, the usual costs order is no order as to costs, with the stakeholder's costs being paid out of the company's assets as an expense of the liquidation, see eg the dictum of Henderson J In re Parmalat Capital Finance [2004 – 2005] CILR Note 35, set out below:
In an insolvency proceeding, the rule that costs usually follow the event is of limited application. Liability to pay a costs award would create an unnecessary disincentive to creditor participation in the process, contrary to the rationale of the English Insolvency Rules 1986. When a creditor has acted reasonably in making its views known on a subject in which it has a legitimate interest, including by means of a formal application to the court, and it fails to get what it asks for, it should not be liable to an award of costs.
Where joint provisional liquidators are appointed by an order made ex parte pursuant to a petition for winding up by petitioning creditors and the objecting creditors are unsuccessful in challenging the identity of the joint provisional liquidators appointed (see 2004–05 CILR 22), the objecting creditors, provided they have acted reasonably, will not be liable for the costs of the petitioning creditors, which should be paid without delay from the assets of the company as costs in the provisional liquidation.
Additionally, although the appeal was dismissed, the appeal judgment upholds certain aspects of ACPL's submissions, namely: (i) that there was no residual discretion over and above the evaluative exercise that must be taken in respect of s. 131 (b); (ii) the standard of proof was not the balance of probabilities; and (iii) there were no relevant public policy considerations independent of the statutory language of s. 131 (b).
The Petitioner seeks an order that ACPL should pay the costs of the appeal from Kawaley J's order on the indemnity basis on the ground that ACPL acted unreasonably in pursuing a hopeless and speculative appeal. The Petitioner submits that ACPL acted unreasonably in: (i) unilaterally resolving to appoint the Grant Thornton liquidators as voluntary liquidators rather than the FTI liquidators nominated by the Petitioner which was effectively the sole stakeholder in the proposed liquidation; (ii) opposing the wish of the Petitioner to have the liquidation supervised by the Court in view of matters that made a supervised liquidation more appropriate than a voluntary liquidation; (iii) proceeding with the appeal when, ACPL must have known it was likely to fail despite after having had the benefit of Kawaley J's judgment that was described by this Court as being “wide ranging and impressive” in circumstances; (iv) seeking a costs order in respect of the appeal that is entirely without merit.
The Petitioner further contends that, for the following reasons, there is no basis for any order which would require it to pay any costs to ACPL.
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(1) This Court rejected the following submissions advanced by ACPL: (i) Kawaley J had proceeded on the basis that s. 131 (b) conferred on the Court the same broad discretion as was conferred by the former s. 150 of the Companies Law; (ii) the Petition was an abuse of process; (iii) Kawaley J erred in giving pre-eminent weight to the views of the Petitioner as to the identity of the liquidators; (iii) there was insufficient evidence for the finding that a supervised liquidation would be more effective than a voluntary winding up.
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(2) The unreasonableness of the conduct of ACPL took the case outside the dictum of Henderson J in In re Parmalat Capital Finance Ltd (above).
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(3) The case did not involve a novel point of law: it has long been held that liquidation proceedings, solvent or insolvent, should be conducted in the interests of those who are financially interested in the liquidation process.
In respect of ACPL's contention that it should be awarded the costs of its failed application to Kawaley J for leave to appeal, the Petitioner submits that Kawaley J's order that the costs of the summons be paid by ACPL in any event must stand because the costs of the application have been finally determined and are not the subject of a separate costs appeal.
As to the costs of ACPL's successful application to the Court of Appeal for leave to appeal and a stay (the costs of which were reserved), the Petitioner argues that since it was wholly successful in the appeal, ACPL should not have obtained leave and the costs of this application should be costs in...
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