Ahmad Hamad Algosaibi and Brothers Company v Saad Investments Company Ltd (in Official Liquidation) and Maan Al Sanea and Others

• Jurisdiction: Cayman Islands
• Judge: (Smellie, C.J.)
• Judgment Date: 19 October 2017
• Court: Grand Court (Cayman Islands)
• Date: 19 October 2017

Grand Court, Financial Services Division

(Smellie, C.J.)

AHMAD HAMAD ALGOSAIBI AND BROTHERS COMPANY

and

SAAD INVESTMENTS COMPANY LIMITED (in official liquidation) and MAAN AL SANEA and OTHERS

T. Lowe, Q.C., J. Watson and W. Peake for the liquidators of SIFCO 5;

S. White and S. Gavin for the liquidators of the GT defendants;

H. Fear Davies and I. Lambert for the liquidators of the AWALCo defendants;

H. Robinson, Q.C. and D. McMahon for the plaintiff, AHAB.

Cases cited:

(1) Bestfort Devs. LLP v. Ras Al Khaimah Invs. Auth., [2016] EWCA Civ 1099; [2016] 2 CLC 714, followed.

(2) Dyxnet Hldgs. Ltd. v. Current Ventures II Ltd., 2015 (1) CILR 174, applied.

(3) Elliott v. Cayman Islands Health Servs. Auth., 2007 CILR 163, referred to.

(4) Gong v. CDH China Mgmt. Co. Ltd., 2011 (1) CILR 57, referred to.

(5) Kazakhstan (Republic) v. Istil Group Inc., [2005] EWCA Civ 1468; [2006] 1 W.L.R. 596; [2006] 2 All E.R. (Comm) 26; [2006] C.P. Rep. 12, followed.

(6) Locke v. CWM Ltd., Grand Ct., April 7th, 2017, Cause No. FSD 104 of 2016, unreported, referred to.

(7) Nasser v. United Bank of Kuwait, [2001] EWCA Civ 556; [2002] 1 W.L.R. 1868; [2002] 1 All E.R. 401, followed.

(8) Procon (Great Britain) Ltd. v. Provincial Building Co. Ltd., [1984] 1 W.L.R. 557; [1984] 2 All E.R. 368, referred to.

(9) Stokors SA v. IG Markets Ltd., [2012] EWHC 1684 (Comm), dictum of Popplewell, J. considered.

(10) TMSF v. Wisteria Bay Ltd., 2006 CILR 351, referred to.

(11) Vald. Nielson Hldg. A/S v. Baldorino, [2017] EWHC 1033 (Comm), referred to.

Legislation construed:

Grand Court Rules 1995 (Revised), O.23, r.1(1): The relevant terms of this paragraph are set out at para. 12.

Cayman Islands Constitution Order 2009 (S.I. 2009/1379), Schedule 2, Part 1, s.1(3): The relevant terms of this sub-section are set out at para. 17.

Schedule 2, Part 1, s.7: The relevant terms of this section are set out at para. 16.

Schedule 2, Part 1, s.16: The relevant terms of this section are set out at para. 16.

Civil Procedure — costs — security for costs — court has discretion under GCR O.23, r.1 to order full security for costs if defendant shows, on objectively justified grounds relating to obstacles to or burden of enforcement, real risk of unenforceability of award of costs against plaintiff — defendant not required to show insuperable obstacles to enforcement

Civil Procedure — costs — security for costs — further security — security may be increased if material change in circumstances — court to apply broad-brush approach — trial lasting longer than anticipated not material change in circumstances — further security awarded for defendants’ costs of responding to plaintiff’s application to amend pleadings

The plaintiff (“AHAB”) brought an action against the defendants to recover compensation in respect of fraud.

AHAB claimed to have suffered loss of over US$9 bn. as a result of fraud committed by the director of one of its businesses. It alleged that billions of dollars had been used to fund the defendant companies, now in liquidation, including the GT group and the AWALCo group. AHAB was itself in financial difficulties.

AHAB, as a plaintiff outside the jurisdiction, had already been ordered to provide a substantial amount as security for costs (see the decisions reported at 2016 (2) CILR 208 and 2016 (2) CILR 244). That sum had been intended to cover the defendants’ recoverable costs up to the end of the trial, which had been estimated to last eight months. The trial had in fact overrun by some five months. The defendants now sought security for the further costs attributable to that overrun by reference to the realized time costs and disbursement costs of the trial. The GT defendants claimed a further US$6,387,765 for additional time costs and $4,214,495 for disbursements. The AWALCo defendants claimed a further $667,409 for additional time costs and $1,190,830 for disbursements.

AHAB submitted that the defendants should be entitled to security only for the costs of enforcement in its domicile of Saudi Arabia of any costs awarded against it. The defendants did not satisfy the modern test for an award of full security, namely to show that enforcement in Saudi Arabia would be practically impossible.

The defendants submitted that the test for an award of full security required them to show that on objectively justified grounds relating to obstacles to or the burden of enforcement, there was a real risk that it would not be in a position to enforce an order for costs.

Held, ordering as follows:

(1) Security for costs could be awarded if an applicant adduced evidence to show that on objectively justified grounds relating to obstacles to or the burden of enforcement there was a real risk that it would not be in a position to enforce an order for costs against a plaintiff and that, in all the circumstances, it was just to order security. A defendant was not required to show that there were insuperable obstacles to enforcement for full security to be ordered, which would unduly hamper the purpose of the jurisdiction to award security for costs to protect a successful defendant from the real risk of unenforceability of an award of costs against an unsuccessful foreign plaintiff. A mandatory requirement to show insuperable difficulty, as suggested by AHAB, would unjustifiably circumscribe and delimit the clear judicial discretion granted by GCR O.23, r.1(1) for the making of such orders in appropriate circumstances. The focal concern of the modern case law was not to ensure that a plaintiff was seldom required to provide security or that orders for security were only exceptionally made but rather to ensure that such orders were not imposed in an arbitrary or discriminatory manner. Accordingly, the making of such an order against a non-resident plaintiff would be appropriate and might be justified not on the discriminatory basis of the plaintiff’s foreign status but because there were real risks of unenforceability. This modern approach was aimed at addressing not only the basic tenets of fairness but more particularly the requirements of the Bill of Rights, s.16 of which required that the government should not treat any person in a discriminatory manner in respect of the rights under that Part of the Constitution, the most directly operative being the right in s.7 to a fair and public trial. In exercising its own powers, the court was required to give effect to those provisions by avoiding discriminatory treatment between different classes of litigant. The mandate to avoid discrimination in the exercise of the jurisdiction to award security for costs against a non-resident plaintiff did not justify the imposition of unreasonable burdens on a defendant applying for security such as an evidential burden to prove the existence of substantial or insuperable difficulties of enforcement. Where no real risk of unenforceability was shown to exist, there might well be a different entitlement to security for the costs of enforcement in recognition of the likelihood of significant costs to be incurred in enforcement in the foreign jurisdiction (paras. 9–25).

(2) The court was satisfied that the present case remained one in which there was a real risk that the defendants’ efforts at enforcement in Saudi Arabia would fail because of difficulties or obstacles there. The defendants did not accept that AHAB should be entitled to place any of the difficulties in their way or to resist in Saudi Arabia a costs judgment duly obtained in this jurisdiction, but AHAB gave no assurances that it would not seek to do so. Accordingly, security should be given for the as yet unsecured part of the recoverable costs of the proceedings, not merely for any additional costs of enforcement (paras. 26–31).

(3) The court had discretion under GCR O.23, r.1 to vary an existing order for security for costs where there was a material change of circumstances since the original order had been made. In the present case, the change of circumstances relied on by the defendants was the additional expenses by way of professional time costs and disbursements which had resulted from the unanticipated extension of the trial period. With one exception, the fact that the trial period had been extended had no obvious correlation to additional work not originally anticipated. The exception was the work involved in the defendants having to respond to AHAB’s application to amend its pleadings to introduce a case on alleged manipulation of documents. The additional days in and out of court that were now allowed were intended to allow for that work. No other exceptional task out of court had been identified. The defendants having to deal with ongoing disclosure by AHAB involved no exceptional work out of court which could not have been done during the additional days which were now allowed. The court’s discretion under GCR O.23, r.1 to award security was a discretion to award an amount that it considered just in all the circumstances of the case. The appropriate amount would generally be the sum the court considered the applicant would be likely to recover in a detailed assessment upon taxation if awarded its costs on the standard basis following trial. At this stage, the court would not undertake a detailed assessment but rather a robust examination of the evidence relied upon by the defendants in their application for security and the application of a broad brush to the costs estimate. The court had to balance the prejudice to the defendants if the security were set too low and the prejudice to AHAB if it were set too high. The mere fact that the defendants’ actual time costs were greater than the amounts already secured was not a material change of circumstances. Such costs had not yet been subject to taxation. To treat the additional costs incurred by the defendants as arising inevitably from the extension of the trial period would be contrary to the requirement to show a material change of...