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

JurisdictionCayman Islands
Judge(Smellie, C.J.)
Judgment Date26 April 2022
CourtGrand Court (Cayman Islands)

(Smellie, C.J.)

Grand Court, Financial Services Division (Cayman Islands)

Civil Procedure — costs — security for costs — access to security for costs — court approved consent order entered into between unsuccessful plaintiff and one of several defendants for payment out of secured funds of amount apportioned to defendant — plaintiff retained limited proprietary interest in funds paid in as security such as to allow it to enter into consent order

Held, approving the AWALCos/AHAB consent order:

(1) The starting point was that, in keeping with s.24(1) and (3) of the Judicature Act, the award of costs was in the discretion of the court and the court “shall have full power to determine by whom and to what extent the costs are to be paid.” Money paid into court by a plaintiff by way of security for costs ordered by the court became charged with an equitable security interest in favour of the defendant(s). If the defendant(s) succeeded in the action, they would become entitled to the money, subject at all times however to the discretion of the court being exercised as to any award of costs. Until such an award was made, the plaintiff retained a limitedproprietary interest in the money and, subject to any order the court might make, was entitled to pledge that limited interest to a third party or to a defendant to the action in which the security was paid in. In the present case, this was what AHAB purported to do by way of the consent orders entered into respectively with the GT defendants and the AWALCos. This was on the basis that they should be entitled to the apportioned amounts stated in those orders as representing the amounts which were apportioned respectively to them by the rulings and, in the case of the GT defendants, to any further amounts they could recover from the funds to top up their acknowledged much greater entitlement to costs. In answering the first question, namely whether AHAB retained a proprietary interest such as to allow it to enter into the consent orders, as AHAB retained a proprietary interest in the funds subject to those of the defendants, there was nothing to prevent AHAB from entering into the consent order with the AWALCos (or with the GT defendants) in respect of their respective apportioned amounts of the funds. This was subject of course to the discretion of the court as to whether to approve the consent orders (paras. 34–37).

(2) The second issue went to the jurisdiction of the court to approve the AWALCos/AHAB consent order before the completion of the entire proceedings (i.e. pending the retrial in respect of a portion of AHAB’s claim against SIFCO5) but with all proceedings against the AWALCos and the GT defendants completed. The GT defendants did not dispute the jurisdiction of the court to do so. They relied on the premise that the SIFCO5 ruling had cast the die for dispensation of costs to be allowed only after the entire proceedings were concluded by reference to the funds as an unallocated whole. The SIFCO5 ruling did not support the GT defendants’ proposition. The GT defendants’ argument, relying on the SIFCO5 ruling, that security subsequently ordered by the rulings had been only notionally allocated was contrary to the long and consistent history of security for costs applications in the action (paras. 38–43).

(3) By approving of the AWALCos/AHAB consent order, the court would simply be recognizing the settled expectations of the parties that they would have access to at least their respective apportioned amount. By contrast, by their settlement with AHAB, the GT defendants sought to enhance their ability to recover more than their apportioned amount. While that was understandable, they were not entitled to the court’s accommodation for doing so if that would involve unfairness to another party by allowing them to undermine the settled expectations. While the GT defendants disavowed any such intention, this was precisely what they would aim to achieve by postponing all access to the funds until completion of all proceedings upon taxation when they would argue for a pro rata distribution of the funds. They would then argue that relative to the actual total entitlements to costs on the indemnity basis and the available funds, their entitlement should be recognized as being proportionally much greater than that of any other of the defendants. That would be an unjust outcome. On the other hand, by allowing access to the funds now rather than awaitingthe final outcome of AHAB’s case against SIFCO5, the GT defendants would have access, for top up of recoveries, to any amount remaining after that outcome. There was no potential prejudice to the GT defendants and SIFCO5 by allowing the AWALCos access to their apportioned amount now. Nor was this concern shared by the SIFCO5 liquidators who must therefore accept the fairness of their apportioned amount even if it fell short of an ultimate indemnity recovery. The same was true of the AWALCos liquidators. On the issue of non-admitted foreign lawyers’ fees, the GT defendants argued that awaiting the final outcome would allow the court to level the playing field because the AWALCos’ apportioned amount included non-admitted foreign lawyers’ fees and so was predicated on there having to be further consideration upon taxation. However, the apportioned amount now to be released to the AWALCos was significantly less than the total amount of their actual incurred costs, even excluding non-admitted foreign lawyers’ costs. By contrast, the full indemnity amounts which the GT defendants would seek to recover on the pro rata basis at taxation would, on their own admission, include non-admitted foreign lawyers’ fees. In short, it seemed that the GT defendants wished to retain the opportunity so that if, as would be likely upon taxation, their costs figure was higher on a pro rata basis than that of the other defendants, as compared to the security which was apportioned for each of them, they would be able to appropriate a greater sum than the approximately US$38m. specifically apportioned to them by the court, by taking the security which had been apportioned for the benefit of the AWALCos and/or SIFCO5. That would be manifestly unfair. It would also be practically unworkable given that in any event there would be no taxation of the AWALCos’ costs because that was the subject of an amount which they had already finally settled by agreement with AHAB in terms which they as parties to that agreement were entitled to reach (paras. 47–50).

(4) There were important further practical reasons why the GT defendants’ argument could not be accepted. (a) In the circumstances of AHAB’s impecuniosity and the resultant need for each defendant to rely on the security which had been lodged by way of the funds, this would mean that none of the defendants could conclude its dispute with AHAB or enter into a settlement agreement with any immediate effect because they would each have to wait for the final conclusion of any taxation process pursued by other defendants. This would have the knock on effect that no defendant group would be able to complete their liquidation process until all defendant groups had completed taxation. That would make no sense in a case which had already lasted for many years and taken up huge amounts of court time. (b) Given the vast amounts of time spent by lawyers and other professionals over the many years the proceedings had been on foot, the costs and disbursements were enormous and complex. The taxation process for each of the three defendant groups would be almost unprecedented in its size and would be likely to last for months if not years, and to incur significant costs to complete. The suggestion that it should be the case that the parties could not opt to avoid that by reaching agreementwith AHAB as to their costs, and as to the manner of payment of those costs, was commercially nonsensical. If of general application, it would mean that individual parties in multi-party claims where security for costs had been lodged could never settle and achieve finality before the entire proceedings had concluded. (c) It was reasonably to be expected, given the long history of security for costs issues in this case, that the liquidators of the AWALCos had over the past 10 years, when making decisions concerning the proceedings, proceeded on the basis that the sums specifically secured in the AWALCos’ name were ultimately for the benefit of the AWALCos, and not potentially subject to some subsequent reallocation, at the whim of the GT defendants. (d) Finally as regarded agreements on costs reached without intervention of the court, in February 2016 the AWALCos and SIFCO5 settled summonses for security for costs with AHAB, and SIFCO5 did the same again in June 2017, without the matter being considered substantively by the court. If the sums which they each then agreed with AHAB were now apt to be reconsidered as part of a bigger pool, that would undermine the commercial decisions reached at the relevant times as to resolving the matter in a way which the parties considered best protected their interests (para. 51).

Cases cited:

(1) Cleaver v. Delta American Reins. Co., 2001 CILR 34, considered.

(2) Gordon, In re, ex p. Navalchand, [1897] 2 Q.B. 516, considered.

(3) Peak Hotels & Resorts Ltd. v. Candey Ltd., [2018] EWCA Civ 2256; [2019] 1 W.L.R. 2145; [2019] BPIR 49; [2019] Bus. L.R. 899; [2019] PNLR 8, considered.

(4) W.A. Sherratt Ltd. v. John Bromley (Church Stretton) Ltd., [1985] Q.B. 1038; [1985] 2 W.L.R. 742; [1985] 1 All E.R. 216, considered.

Legislation construed:

Judicature Act (2017 Revision), s.24:

“(1) Subject to the provisions of this or any other Law and to rules of court, the costs of and incidental to all civil proceedings in—

(a) the Court of Appeal; and

(b) the Grand Court...

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