Ahmad Hamad Algosaibi and Brothers Company v Saad Investments Company Ltd (in Official Liquidation)
| Jurisdiction | Cayman Islands |
| Judge | Chief Justice Anthony Smellie |
| Judgment Date | 26 April 2022 |
| Court | Grand Court (Cayman Islands) |
| Docket Number | CAUSE NO: FSD0054 of 2009 (ASCJ) |
The Hon. Chief Justice Anthony Smellie
CAUSE NO: FSD0054 of 2009 (ASCJ)
CICA 15 of 2018
IN THE GRAND COURT OF THE CAYMAN ISLANDS
FINANCIAL SERVICES DIVISION
Nicholas Fox of Mourant Ozannes for the Plaintiff (“AHAB”)
Ben Valentin QC and Harriet Fear Davies instructed by Ian Lambert of Broadhurst LLC for the Thirteenth to Eighteenth Defendants (“the AWALCos”).
Shelley White of Walkers for the First, Eight, Thirtieth to Thirty-Third and Thirty-Fifth to Thirty-Seventh Defendants (“the GT Defendants”).
Tom Lowe QC instructed by William Peake, Grainne King and Niall Dodd of Harney, Westwood & Riegels for the Thirty — Fourth Defendant (“SIFCO5”).
Following the trial of this complex action, by judgment delivered on 31 May 2018 (“the Judgment”), AHAB's claim against the Defendants was dismissed. On 6 September 2018 following a hearing as to costs, AHAB was ordered to pay the Defendants' costs of defending its claim, to be taxed if not agreed, on the indemnity basis.
I now have before me for determination, in the context of the Defendants seeking to recover their costs awards, a question regarding access to funds which AHAB was required during the course of the proceedings to provide as security for costs, framed as follows:
“Absent the agreement of all parties, is any party entitled to payment out of the funds held as security for costs in the Proceedings before the final resolution of the Proceedings against all defendants?” (Herein referred to as “the Access to Security Question”).
The Defendants fall within three distinct groups of companies in liquidation, referred to conveniently and respectively as “the GT Defendants”, “the AWALCos” and “SIFCO5”.
A counterclaim brought by one set of Defendants, the GT Defendants, was also dismissed after trial on 31 May 2018, with the related costs awarded to AHAB. However, the costs of the counterclaim do not arise for consideration now.
On 14 June 2018, AHAB issued a Notice of Appeal against the Judgment and in May and June 2019, the Court of Appeal heard the appeal. In March 2021, the Court of Appeal indicated to the parties that it would dismiss AHAB's appeal and uphold the Judgment in so far as it dismissed AHAB's claim against the GT Defendants and the AWALCos but would order a retrial in respect of an aspect of AHAB's claim against SIFCO5. On 31 December 2021, the Court of Appeal delivered its judgment confirming those earlier indications.
By a series of rulings and orders given during the proceedings (the “Rulings”), this Court had ordered AHAB to provide the aforementioned security for the costs of the Defendants. The amount of security eventually ordered and provided over the course of the proceedings became USD 93.5 million, comprised of a charge over a certain property located in London, England (further explained below), cash and bank guarantees. These are the funds in respect of which the Access to Security Question has arisen (“the Funds”).
During the pendency of the Court of Appeal's judgment, the GT Defendants and the AWALCos separately entered into settlement agreements with AHAB. Essentially, by those agreements, AHAB agreed to withdraw its appeal as it related respectively to those Defendants, in return for AHAB's liability to costs being limited to and being enforceable only as against the amounts secured by the Funds, as respectively apportioned to them and identified in the settlement agreements (the “Apportioned Amounts”).
The GT Defendants and the AWALCos have also respectively with AHAB, proposed to enter into consent orders by which they would seek the Court's approval to allow them to have payment out of the Funds of the Apportioned Amounts, although for reasons to be explained below, the GT Defendants have not yet sought the Court's approval.
In the case of the GT Defendants, the Apportioned Amount would be USD 38.68 million. In the case of the AWALCos, it would be USD 29 million and that is the amount covered by their consent order entered into with AHAB and for which the AWALCos now seek the Court's approval, subject to obtaining an affirmative answer to the Access to Security Question.
As yet, the GT Defendants have not sought the Court's approval for their further consent orders entered into with AHAB. Their settlement agreement with AHAB takes account not only of the Apportioned Amount of USD38.68 million but also acknowledges that the actual costs incurred by the GT Defendants are much greater, viz: USD 117 million plus interest for the costs to trial and USD 5.196 million plus interest for the costs of the appeal. The GT Defendants, for reasons asserted in their arguments now, have decided not to seek access to the Funds pursuant to their consent orders entered into with AHAB but to await the final outcome of all proceedings (including any retrial as between AHAB and SIFCO5 and any further appeals). While any intention to enhance their recovery at the expense of the Apportioned Amounts of the AWALCos or SIFCO5 is disavowed by the GT Defendants, given that the Funds comprise only of the definite amount identified above, that disavowal is understandably regarded with scepticism by the AWALCos and SIFCO5.
The AWALCos, for their part, seek to have payment out from the Funds now of the amount agreed by their consent order; viz: USD29 million which, as a term of their agreement with AHAB (but not in actuality as will be explained below), would represent 100% of the AWALCos' costs of the proceedings. By a further proposed consent order to be presented to the Court of Appeal for approval, AHAB and the AWALCos would agree that the AWALCos be paid USD3.5 million (plus interest which has accrued upon that sum as lodged with EFG Bank) pursuant to an order of the Court of Appeal of 16 November 2018, in respect of the costs of the appeal but to be included also within the Apportioned Amount of USD29 million.
SIFCO5 for its part supports the AWALCos' application for approval of the AWALCos/AHAB consent order.
The GT Defendants object to the Court's approval of the AWALCos/AHAB consent order on two main bases. The first is as they argue, that that order has been agreed by AHAB in breach of its settlement agreement with the GT Defendants 1 and so, “as a matter of
propriety”, should not be approved by this Court. Their second main basis for objection, is as they submit, that the Court's earlier rulings on security for costs, in particular the SIFCO5 Ruling (as discussed below), clearly demonstrate that the Funds were to be inaccessible until the end of the proceedings when all the Defendants' costs orders were finalized. Accordingly they submit that there were no settled allocations of security from the Funds during the proceedings, only notional apportionments. The GT Defendants say that although they also have a settlement agreement (already approved by this Court) and consent order with AHAB which would entitle them to access the Funds, they have been waiting for the end of the proceedings and have not sought to access the Funds although it has been more than a year since their settlement with AHAB. It would therefore be unjust they submit, for the Court to sanction the AWALCos' attempt to “steal a march” by agreeing to immediate access to the Funds for 100% of their agreed costsThus, the GT Defendants seek to maintain the status quo in respect of the security for costs until the Court can make, at the conclusion of all proceedings, what they say would be “a fair assessment based on the justice of the case” as to how the Funds should be allocated to meet the respective costs. This would include any costs which may become ultimately due to SIFCO5 after conclusion of the retrial which has been ordered by the Court of Appeal. As the GT Defendants assert a creditor's interest in SIFCO5's estate, the more SIFCO5 recovers by way of costs, the more the GT Defendants would therefore hope to recover as creditor. It is said by the GT Defendants that allowing the AWALCos to take 100% of their agreed costs now, would risk irreparable harm to the GT Defendants and/or SIFCO5 (and so also their putative creditor's interest in SIFCO5) because amounts found to be due to the GT Defendants and/or SIFCO5 upon taxation, may be more than the amount of USD64.5 million (ie: USD 93.5 million minus USD 29 million) remaining after the AWALCos would get their payment out.
Despite the GT Defendants' position, SIFCO5 as already noted, for its part supports the AWALCos' position. This is on the basis, also relied upon by the AWALCos, that the Funds should indeed be regarded as having been apportioned to secure the costs of the parties as identified by the Court in the Rulings by reference to evidence which they respectively provided to the Court in support of their costs estimates and which became the basis for the amounts of security ordered in response to their respective applications.
It is also significant that AHAB itself disagrees with the GT Defendants' stance, as set out in a letter from Mourant of 28 October 2021 :
“AHAB has always understood that the security for costs was allocated to the Defendants by the Honourable Chief Justice and the Court of Appeal in the specific amounts ordered and referred to in the Court's judgments handed down after each security application. AHAB has never considered that allocation to be notional. It has not been suggested during the parties' submissions, or in the detailed security judgments, that the sums ordered as security for costs might be capable of being re-allocated between the Defendants'”.
Finally, it must be noted for setting the...
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