Algosaibi Bros v Saad Invs

• Jurisdiction: Cayman Islands
• Judge: (Smellie, C.J.)
• Judgment Date: 28 November 2011
• Court: Grand Court (Cayman Islands)
• Date: 28 November 2011

Grand Court, Financial Services Division

(Smellie, C.J.)

AHMAD HAMAD ALGOSAIBI AND BROTHERS COMPANY

and

SAAD INVESTMENTS COMPANY LIMITED and FORTY THREE OTHERS

G. Keightley for the plaintiff;

J. Golaszewski for the Maples defendants;

Ms. S. Trevan held a watching brief for the estate liquidators.

Cases cited:

(1) Bonotto v. Boccaletti, 2001 CILR 292, considered.

(2) Excelsior Comm. & Indus. Holdings Ltd. v. Salisbury Hammer Aspden & Johnson, [2002] C.P. Rep. 67; [2002] CPLR 693; [2002] EWCA Civ. 879, dicta of Waller, L.J. considered.

(3) Garbutt v. Edwards, [2006] 1 W.L.R. 2907; [2006] 1 All E.R. 553; [2006] 1 Costs L.R. 143; [2005] N.P.C. 122; [2005] EWCA Civ 1206, considered.

(4) Liebaers v. Smith, 2008 CILR 176, referred to.

(5) Mireskandari v. Law Society, [2011] Costs L.R. Online 125; [2009] EWHC 2224 (Ch), referred to.

(6) Simms v. Law Society, [2006] 2 Costs L.R. 245; [2005] A.C.D. 98; [2005] EWCA Civ. 849, dicta of Carnwath, L.J. applied.

(7) T.S.B. Private Bank Intl. S.A. v. Chabra, [1992] 1 W.L.R. 231; [1992] 2 All E.R. 245, referred to.

(8) Three Rivers D.C. v. Bank of England, [2006] 5 Costs L.R. 714; [2006] EWHC 816 (Comm), dicta of Tomlinson J. considered.

Legislation construed:

Grand Court Rules, O.62, r.4(11): The relevant terms of this paragraph are set out at para. 10.

Practice Direction cited:

Practice Direction No. 1/2001, Guidelines Relating to the Taxation of Costs.

Practice Direction No. 1/2011, Guidelines Relating to the Taxation of Costs.

Civil Procedure-costs-indemnity basis-available to successful party under GCR, O.62, r.4(11) if unsuccessful party acts ‘improperly, unreasonably or negligently’-full costs recoverable unless exorbitant-principal consideration unsuccessful party”s conduct, not merits of position-speculative claim brought to compel other party to comply justifies indemnity basis-maintenance of unparticularized claim may not be unreasonable if other party failed to meet discovery obligations

Civil Procedure-costs-indemnity principle-ordinarily should make costs order to reimburse successful litigant reasonable and proportionate costs incurred by him, by reference to prescribed scale of hourly rates, i.e. on standard basis-distinct from indemnity basis, which is punitive measure of taxation

The plaintiff brought an action against the defendants in respect of an alleged fraud.

The plaintiff brought a personal claim against the alleged fraudster and a proprietary claim against his Cayman companies, into which the misappropriated funds could allegedly be traced; however, partly due to the principal”s persistent disregard for his discovery obligations, its tracing claim remained, in many respects, unparticularized. It obtained, ex parte, a worldwide freezing order against certain defendants, but, apart from as against the 3rd and 20th defendants, this was discharged on appeal. As against the 3rd and 20th defendants, the plaintiff succeeded by pleading new causes of action based on the receipt of misappropriated funds, and it later obtained a renewed worldwide freezing order against those defendant companies owned by the 3rd and 20th defendants.

It was subsequently revealed that the plaintiff had obtained both worldwide freezing orders in breach of its duty of full and frank disclosure; accordingly, it consented to an order discharging the renewed worldwide freezing order and awarding the 3rd and 20th defendants their costs in relation to the worldwide freezing orders on the full indemnity basis. The Court of Appeal made an order for costs in favour of the defendants, to be taxed subject to their providing information as to, inter

alia, whether any costs had been paid by a third party. The plaintiff ultimately discontinued its claim against the 3rd and 20th defendants.

The 3rd and 20th defendants sought the court”s directions as to (a) whether the rest of their costs-payable by the plaintiff on the basis that costs follow the event-should be taxed on the standard or indemnity basis; and (b) whether they had to provide the information as to the identity of any third party which had funded its costs. They submitted that their costs should be taxed on the indemnity basis as the plaintiff had acted unreasonably in seeking to maintain the worldwide freezing order after it became clear that several of the defendants had little or no assets and were not entities against which it could assert a proprietary tracing claim.

Held, making the following directions:

(1) The court distinguished between the ‘indemnity principle’ applicable to costs generally and the ‘indemnity basis’ for awarding costs in particular cases. The indemnity principle provided that, in the ordinary case, a costs order should be made to reimburse the successful litigant the amount of his reasonable and proportionate costs, by reference to the prescribed scale of hourly rates-i.e. on the standard basis. In exceptional cases, however, a costs order could be made on the indemnity basis-a punitive measure of taxation, pursuant to which a successful litigant would recover all his costs, on the attorney-and-own-client basis, provided only that the scale of fees was not exorbitant (paras. 16–18).

(2) The defendants” costs should be taxed on the standard basis. Under GCR, O.62, r.4(11), the court could only order taxation on the indemnity basis if the unsuccessful party had acted ‘improperly, unreasonably or negligently.’ The principal consideration was the unsuccessful party”s conduct, not the substantive merits of his position. If a claim were patently speculative and brought merely to compel the defendant to comply, the plaintiff”s conduct would justify taxation on the indemnity basis. In the present proceedings, however, the maintenance of the plaintiff”s claim was not unreasonable, particularly as the defendants” principal had persistently failed to meet his discovery obligations, making it difficult for the plaintiff to particularize its claim against the defendants (paras. 9–15; para. 18; paras. 25–27).

(3) The court would not require the defendants to disclose the identity of any third party which had funded the litigation. This condition was intended to support the ordinary indemnity principle that beneficiaries of a costs order should not recover any costs which they were not themselves liable to pay. In the present case, however, the plaintiff”s concern to ensure that the defendants” principal was...