Ahmad Hamad Algosaibi and Brothers Company (‘AHAB’) Plaintiff v Saad Investments Company Ltd (‘SICL’) Maanal-Sanea Awal Finance Company Ltd ((in Liquidation) (‘AWALCO’) and various other defendant companies ((in Liquidation)) Defendants
| Jurisdiction | Cayman Islands |
| Judge | The Hon. Anthony Smellie |
| Judgment Date | 24 October 2013 |
| Judgment citation (vLex) | [2013] CIGC J1115-1 |
| Docket Number | CAUSE NO. FSD 54 OF 2009 |
| Court | Grand Court (Cayman Islands) |
| Date | 24 October 2013 |
The Hon. Anthony Smellie QC, Chief Justice
IN CHAMBERS
Mr. David Quest QC, instructed by Mr. Peter Hayden and Mr. George Keightley of Mourant Ozannes for AHAB
Mr. Michael Crystal QC instructed by Ms. Colette Wilkins and Ms. Shelley White of Walkers for the GT Defendants
Mr. Marcus Smith, QC instructed by Mr. Ian Lambert of HSM Chambers for the AWALCos.
Mr. David Herbert of Harneys for SIFCO #5 (watching brief)
By a judgment in this action on 22 nd February 2013, applications by some of the defendant companies to strike out AHAB's claim were refused. It was decided that the action shall proceed to trial and that directions to that end should be given promptly.
The parties now seek directions to trial and the liquidators of the defendant companies also seek further relief by way of additional security for their future costs of the action and an assessment now and order for payment of certain costs already incurred.
The defendant companies fall into two groupings roughly described as the ‘GT Defendants’ (those having Grant Thornton representatives as their Joint Official Liquidators, including SICL) and the ‘AWALCos’ (those part of the AWAL group having FRP Advisory LLP and Chris Johnson Ass. Ltd. representatives as their Joint Official Liquidators, together with those of the GT Defendants, to be referred to as the context requires as the ‘JOLs’). The defendant companies all have in common the fact that they come within the SAAD Group of Companies established by the second defendant, Mr. Maan Al Sanea, in this jurisdiction.
It is AHAB's case that the GT Defendants and the AWALCos were co-conspirators with Mr. Al Sanea and utilized by him, in the fraudulent misappropriation of massive sums of money from AHAB's Money Exchange business in Saudi Arabia, in the order of USD9.2 billion. The fraud is alleged to have been perpetrated between 2000–2009, the years during which Mr. Al Sanea had been put in charge of the Money Exchange by the AHAB partners.
In this action (the ‘Action’), AHAB seeks to recover, either by way of its proprietary tracing claim or its claim in damages, some USD6.2 billion of the sums defrauded. The main issues (apart from directions to trial) arising for resolution now, are raised on separate summonses issued by the GT JOLs and the AWALCos JOLs seeking relief by way of:
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(1) Additional security for costs of their companies in liquidation in defending the action, beyond the amount of USD5 million already provided by AHAB.
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(2) The summary assessment and order for payment of damages (in the nature of legal costs and other liquidators' expenses) incurred in having to respond to the Worldwide Freezing Order (‘WFO’) granted by Justice Henderson of this Court over all the assets of the SAAD Companies and Mr. Al Sanea, at the instance of AHAB, on the 24 th July 2009.
The WFO having been subsequently discharged on AHAB's admitted failure to have made full and frank disclosure when it applied for the WFO, AHAB became liable, under its undertaking in damages given as a condition of the WFO, to indemnify the GT Defendants and the AWALCos in respect of the consequential costs and expenses. This liability is still admitted by AHAB but it disputes that the liability is amenable to summary assessment and order for payment now.
As to the directions to be given to trial. I am able to record that an agreement was reached during this hearing and a form of directions order has been approved with the consent of parties.
Recognizing the scale, scope and complexity of the action, the directions embody a series of pivotal events with practical timeframes set towards their completion; including discovery by February 2015; the final amendments of pleadings by April 2015; the exchange of statements of witnesses and experts within 56 days of final amendments; and the trial to commence by April 2016.
The two contested issues, involving as they would the provision of many millions of dollars for security for costs or to compensate for loss, were not given to amicable settlement and so full arguments were heard over 2 Vi days. This is the judgment.
The jurisdiction to make an order for security for costs is given in Order 23(1) of the Grand Court Rules which provides that on application by a defendant, the Court may order security for costs where:
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(1) the plaintiff is ordinarily resident out of the jurisdiction; or
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(2) the plaintiff is a nominal plaintiff who is suing for the benefit of some other person and there is reason to believe that he will be unable to pay the defendant's costs if ordered to do so; or
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(3) The plaintiffs address is not stated, or incorrectly stated, in the writ or originating process (unless this is an innocent mistake); or
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(4) The plaintiff has changed his address in the course of proceedings with a view to evading the consequences of the litigation.
Where at least one of these conditions is met the Court may order the plaintiff to give security for costs, to the extent that it is considered just to do so and having regard to all the circumstances of the case: Cigna Worldwide Company v Ace Limited [2012] (1) CILR 55 at [38] to [39] per Cresswell J.
The appropriateness of security for costs, pursuant to the first condition of Order 23(1), has been acknowledged by AHAB, recognizing that, as a foreign plaintiff, it has no settled assets within the jurisdiction against which an order for costs could be levied.
It was on this basis that AHAB agreed the order of 24 th February 2011 by which AHAB was required to and did provide security of USD5 million for the defendants' costs up to the first close of pleadings, which occurred on the 19 August 2011. Security was provided by way of a legal charge over a property in London, a large residential flat overlooking Grosvenor Square (‘the London Property’). By the 24 th February 2011 order, it was directed also with AHAB's agreement, that there should be liberty given to the JOLs to apply for further security such as the Court might deem appropriate.
Although a separate matter involving different legal principle, AHAB also accepts that the JOLs should, within reason, be able to fund the defence of AHAB's claims from assets available within their respective liquidation estates and AHAB provided its consent for this in another provision of the order made by the Court on the 24 th February 2011 1.
Mr. Quest QC invites me to take this latter provision into consideration now as a reason for refusing to a large extent, the JOLs' applications for further security for their costs of defending AHAB's claim.
But this argument must be disposed of unhesitatingly, as it begs the very question to be decided at trial as to the true ownership and title to the assets.
Security for costs is justified so that in the event a defendant succeeds, there will be assets of the unsuccessful plaintiff available against which the costs of defending can be recovered, see In re Cybervest Fund (below). If the defendants succeed in this action, there could be no question as to their entitlement to recover their costs from AHAB, because the assets expended in defence of AHAB's claim would have been found to be the defendant's assets, not AHAB's. This therefore is the real basis in the circumstances of this case, for a requirement of security for costs from AHAB.
The GT JOLs seek additional security (on top of their percentage share of the USD5 million already provided) for estimated costs of some USD 15,062,000 up to trial. They argue through Mr. Crystal QC, that the security provided is more than exhausted by their costs already incurred, including those directly incurred in responding to the WFO and for which AHAB has admitted they are entitled to be indemnified. Their application is supported by projections and calculated estimates for the work to be undertaken as explained in the ninth affidavit of Mr. Stephen John Akers, one of the GT JOLs.
For their part, the AWALCo JOLs seek not very dissimilar amounts of USD14,143,000 for additional security up to trial, as projected and calculated in the seventh affidavit of Mr. Geoffrey Carton-Kelly, one of the AWALCo JOLs. They also say, per Mr. Smith QC, that their percentage share of the USD5 million provided has been exhausted by costs already incurred, including those related to the WFO. A third percentage share of the existing security is allocated to the costs of SIFCO 5, another company in liquidation and sued by AF1AB, but which has succeeded in having AHAB's claim dismissed 2.
For the purposes of their present applications, the JOLs recognize however, that the proceedings to trial are to be undertaken in stages and so it is acknowledged that it may be appropriate for the Court to order further security for costs relative to those stages, to be provided in tranches. If so, Mr. Crystal and Mr. Smith would urge me nonetheless to set predetermined amounts for all stages up to the conclusion of the trial, in order to avoid further contested hearings over what those tranched amounts should be.
I will return to deal with these issues below.
For AHAB, Mr. Quest QC urges me to accept that the value in the London property — posited by reference to a professional valuation at USD 18 million (£11.2 million) – is more than sufficient to secure the JOLs' costs up to and including the trial and that I should regard the full value of the London property as being available as...
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