Allied Leasing & Fin Corporation v Banco Economico SA

• Jurisdiction: Cayman Islands
• Court: Court of Appeal (Cayman Islands)
• Judge: (Zacca, P., Georges and Collett, JJ.A.)
• Judgment Date: 23 February 2001
• Date: 23 February 2001

ALLIED LEASING AND FINANCE CORPORATION

and

BANCO ECONOMICO S.A.

(Zacca, P., Georges and Collett, JJ.A.)

Court of Appeal

Companies-compulsory winding up-costs-‘Bathampton order’-under Judicature Law (1995 Revision), s.24(2), may order company”s costs of opposing petition not to be paid from company”s assets before payment of petitioner and other unsecured creditors-order made only if company guilty of unjustifiable opposition and wasting costs

Companies-compulsory winding up-costs-no costs award to peti-tioner against principals of company directing unjustified opposition to petition if not parties to winding-up proceedings

Held, allowing the appeal in part:

(1) The Grand Court had no jurisdiction, either in statute or at common law, to award costs against persons who had not been made parties to the winding-up proceedings. The power to do so in England had originated in s.5 of the Supreme Court of Judicature Act 1890 (now s.51 of the Supreme Court Act 1981) which gave the court jurisdiction to determine ‘by whom and to what extent’ costs were to be paid. Section 24(2) of the local Judicature Law, however, stated merely that the awarding of costs and charges was in the court”s discretion, as had been the case in England before 1890. This was insufficient to create here a new and exceptional jurisdiction unknown to common law, for if it had been sufficient, the English legislative amendment would have been unnecessary. The order for payment of the respondent”s costs of the Grand Court proceedings by the three non-parties would be set aside, and no order could be made against them in respect of the company”s failed appeal (paras. 5–9).

(2) However, the Bathampton order in respect of the appellant company”s costs would be affirmed, and a further such order would be made in respect of the company”s costs of its unsuccessful appeal. The purpose of such an order was to ensure fairness between the beneficial owners of the appellant company (who had acted in their own interests in delaying the winding up as long as possible) and the company”s creditors, including the respondent. The use of the order had become discredited in England only when the power to award costs against non-parties was recognized as an alternative means of achieving equity. In the Cayman Islands, where no such power existed, the court had a discretion to order that the respondent”s claims and those of other creditors be paid in priority to the appellant company”s costs. It had exercised that discretion

appropriately. Although the appellant”s attorneys were not to blame for the unwarranted opposition to the petition, they should have anticipated that their client was at risk in respect of costs and secured provision for payment of their fees accordingly, especially for the purposes of the appeal, when a Bathampton order had already been made by the Grand Court. The costs of this appeal would be treated as costs in the appeal generally (paras. 11–15).

Cases cited:

(1) Aiden Shipping Co. Ltd. v. Interbulk Ltd., [1986] 1 A.C. 965; [1986] 2 All E.R. 409, distinguished.

(2) Bathampton Properties Ltd., In re, [1976] 1 W.L.R. 168; [1976] 3 All E.R. 200, applied.

(3) Company (No. 004055 of 1991), In re aWLR, [1991] 1 W.L.R. 1003; sub nom. Re Record Tennis Centres Ltd., [1991] BCC 509, distinguished.

(4) Fairfax (John) & Sons Pty. Ltd. v. De Witt (E.C.) & Co. (Australia) Pty. Ltd., [1958] 1 Q.B. 323; [1957] 3 All E.R. 410.

Legislation construed:

Judicature Law (1995 Revision)...