An Application of Bdo Cayman Ltd Concerning Argyle Funds Spc Inc. (in Official Liquidation)

• Jurisdiction: Cayman Islands
• Judge: (Parker, J.)
• Judgment Date: 27 March 2018
• Court: Grand Court (Cayman Islands)
• Date: 27 March 2018

IN THE MATTER OF AN APPLICATION OF BDO CAYMAN LIMITED CONCERNING ARGYLE FUNDS SPC INC (in official liquidation)

(Parker, J.)

Grand Court, Financial Services Division (Cayman Islands)

Civil Procedure — costs — indemnity basis — applicant awarded indemnity costs of summary proceedings for anti-suit injunction to restrain paying party continuing foreign proceedings commenced in breach of parties’ clear contractual agreement to resolve disputes by arbitration in Cayman Islands

Held, ordering as follows:

(1) The applicant would be granted a costs order on the indemnity basis, if not agreed, together with interest. The court had a wide and flexible discretion as to costs which could be exercised as the circumstances required. GCR O.62, r.4(11) provided that the court could make an order for costs to be taxed on the indemnity basis if it was satisfied that the paying party had conducted the proceedings, or that part of the proceedings to which the order related, improperly, unreasonably or negligently. Where a party such as the applicant in the present case had been compelled to apply for an anti-suit injunction to restrain the continuation of foreign proceedings brought against it in breach of the parties’ contractual bargain, it was fair and reasonable that it be compensated as a party which had been forced to deal with the consequences of a breach of contract. The evidence filed in the present case showed that Argyle had sought to obtain procedural and substantive advantages by commencing the New York proceedings which would not have been available in the Cayman Islands. The costs order should discourage such conduct where there were clear contractual provisions which a party circumvented to obtain tactical and other advantages. Moreover, such conduct was also unreasonable. Argyle’s determined defence of the applicant’s summons in the light of the terms of the engagement letter and evidence became unreasonable. Although the judge had not criticized Argyle’s case during the hearing as manifestly hopeless, some of its arguments had been weak and unlikely to succeed. For all of these reasons, an award of indemnity costs was appropriate (paras. 6–19).

(2) The applicant would be granted damages reflecting its costs of and occasioned by the New York proceedings, with interest. Section 11 of the Grand Court Law (2015 Revision) gave the court a like jurisdiction to that vested in the High Court of Justice and Divisional Courts in England under the Senior Courts Act 1981, and under s.50 of the 1981 Act there was power to award damages as well as or in substitution for an injunction or specific performance. This court’s jurisdiction was not limited to onlyawarding costs in relation to the domestic proceedings before it in circumstances where the costs of foreign proceedings (here, the New York proceedings) could be fairly characterized as damages suffered by reason of a breach of contract which the court had found proven. In the present case, it would not be right to force the applicant to resolve the issue of its New York costs by way of arbitration, which would add to costs and delay on both sides. It would be appropriate to award the applicant its costs claimed in the Cayman proceedings but incurred in the New York proceedings in circumstances where those proceedings were brought in breach of jurisdiction and arbitration clauses and there had been no adjudication as to costs in the New York proceedings. The court noted that the applicant confirmed it would not seek its costs of the New York proceedings from the New York court if it recovered damages in these proceedings. It was irrelevant that Argyle asserted that it would have won the New York case and obtained its costs. The New York proceedings should never have been brought in that forum (paras. 20–28).

(3) Argyle would not be ordered to pay the applicant 70% of its costs (i.e. US$300,000) on account. The court had a discretion to order a payment on account under GCR O.62, r.4(7)(h). In the exercise of its discretion the court was entitled to do justice on a principled basis. It could not be said that an interim payment would ordinarily be ordered unless there were good reasons not to do so. Argyle argued that in the absence of a properly itemized costs schedule verified by evidence and a full breakdown it was not appropriate for the court to summarily evaluate what a reasonable sum should be. It also submitted that the application for an interim payment was an attempt to stifle an appeal, which was a consideration where Argyle was in official liquidation and funds were limited. Taking all the matters into account and balancing the interests between the parties, it would not be fair to order an amount to be paid on account (paras. 29–38).

(4) The applicant would not be granted liberty to apply for damages for any loss suffered as a result of reputational damage (para. 40).

Cases cited:

(1)A v. B, [2007] EWHC 54 (Comm); [2007] Arb L.R. 1; [2007] 1 Lloyd’s Rep. 358, followed.

(2)AB Trust, In re, Grand Ct., June 16th, 2013, unreported, referred to.

(3)Ahmad Hamad Algosaibi & Bros. Co. v. Saad Invs. Co. Ltd., 2012 (2) CILR 1; further proceedings, 2013 (2) CILR 344, referred to.

(4)Al Sadik v. Investcorp Bank BSC, 2012 (2) CILR 33, referred to.

(5)Kyrgyz Mobil Tel Ltd. v. Fellowes Intl. Holdings Ltd., [2005] EWHC 1329 (QB), followed.

(6)Pipeline Services WA Pty. Ltd. v. ATCO Gas Australia Pty. Ltd., [2014] WASC 10, referred to.

(7)Primeo Fund v. Bank of Bermuda (Cayman) Ltd., Grand Ct., Cause No. FSD 30 of 2013, February 4th, 2016, unreported, considered.

(8)Svendborg v. Akar, [2003] EWHC 797 (Comm), referred to.

(9)Talent Business Invs. Ltd. v. China Yinmore Sugar Co. Ltd., 2015 (2) CILR 113, referred to.

(10)Union Discount Co. Ltd. v. Zoller, [2001] EWCA Civ 1755; [2002] 1 W.L.R. 1517; [2002] 1 All E.R. 693; [2002] C.L.C. 314, referred to.

(11)Weavering Macro Fixed Income Fund Ltd. v. Ernst & Young Chartered Accountants, Grand Ct., Cause No. FSD 160 of 2012, May 5th, 2015, unreported, referred to.

Legislation construed:

Grand Court Law (2015 Revision), s.11:

“(1) The Court shall be a superior court of record and, in addition to any jurisdiction heretofore exercised by the Court or conferred by this or any other law for the time being in force in the Islands, shall possess and exercise, subject to this and any other law, the like jurisdiction within the Islands which is...