BTU Power v Hayat
| Jurisdiction | Cayman Islands |
| Judge | (Chadwick, P., Forte and Mottley, JJ.A.) |
| Judgment Date | 23 May 2011 |
| Court | Court of Appeal (Cayman Islands) |
| Date | 23 May 2011 |
(Chadwick, P., Forte and Mottley, JJ.A.)
G. Halkerston and Ms. K. Brown for the appellant;
J.S. Eldridge for the respondent.
(1) Jirehouse Capital v. Beller, [2008] EWHC 725 (Ch), referred to.
(2) M”Queen v. Great W. Ry. Co.(1875), 10 Q.B. 569, dicta of Cockburn, C.J. applied.
(3) Marine Blast Ltd. v. Targe Towing Ltd., [2003] EWCA Civ 1940, distinguished.
(4) Mbasogo v. Logo Ltd., [2006] EWCA Civ 608, dicta of Auld, L.J. considered.
(5) Phillips v. Eversheds, [2002] EWCA Civ 486, distinguished.
(6) Wisniewski v. Central Manchester Health Auth., [1998] P.I.Q.R. P324; [1998] Lloyd”s Rep. Med. 223, dicta of Brooke, L.J. applied.
Companies Law (2009 Revision), s.74: The relevant terms of this section are set out at para. 2.
Civil Procedure-costs-security for costs-company”s refusal to provide evidence of finances, when not obliged to do so, not sufficient by itself to support order for security under Companies Law (2009 Revision), s.74-to draw inference that company unable to pay costs order from refusal, must be other evidence of inability to pay
A company brought an action in the Grand Court against the applicant.
The applicant requested information from the company concerning its finances. The company refused to provide the information, asserting that he had no entitlement to it. Simultaneously, proceedings were also taking place in Massachusetts between the applicant and the company”s alleged owner, in which the applicant alleged misconduct, including exclusion from management of the owner and refusal to provide information about the company. The defendant applied to the Grand Court for security for costs from the company under s.74 of the Companies Law (2009 Revision). The company did not provide the court with any information as to its finances.
The Grand Court (Henderson, J.) declined to order the company to provide security for costs, holding, inter alia, that, as there was no evidence giving the court reason to believe that the company would be unable to meet a costs order, no adverse inference could be drawn against it for failing to provide evidence of its finances.
On appeal, the applicant submitted that (a) the Grand Court was wrong to hold that refusal to provide financial information was insufficient to support an order for security for costs; and (b) the Grand Court had erred in not considering evidence that the applicant”s inability to access information concerning the company was caused by the company”s misconduct as alleged in the Massachusetts action.
The company submitted in reply that the appeal should be dismissed, since (a) the applicant had not provided the court with prima facie reason to believe that the company would not pay a potential costs order; (b) no adverse inference should be drawn against it for refusing to provide financial information, which it was not under any obligation to do; and (c) the misconduct alleged in the Massachusetts action was not relevant to this application.
Held, dismissing the appeal:
(1) The court would affirm the decision of the Grand Court not to order security for costs. On an application for security for costs under s.74 of the Companies Law (2009 Revision), the onus was on the applicant to satisfy the court that there was reason to believe that, if it were successful, the respondent company”s assets would be insufficient to pay a costs order against it. The applicant did not need to prove on the balance of probabilities that the company would be unable to pay a costs order; rather, the court needed to be satisfied that there was a real risk that the applicant”s costs would go unpaid. The misconduct alleged in the Massachusetts action was not relevant to this application, as the misconduct was alleged against the respondent company”s owner, and not the respondent company itself. It could not be used as evidence of reason to believe that the company would be unable to pay a costs order in the present proceedings (para. 3; paras. 30–34).
(2) Moreover, the applicant had failed to adduce any evidence giving reason to believe that the company would be unable or unwilling to pay a costs order that required an answer, in the form of provision of financial information, from the company. Generally, if an applicant established by evidence, however weak, that there was a prima facie case to answer, and the respondent failed to answer the case, the court could infer that there was no answer to the case. If, however, the applicant did not raise a prima facie case to answer, there would be no basis on which the court could draw such an inference. In the context of security for costs, therefore, the company”s refusal to provide evidence of its finances, when it was under no obligation to do so and in circumstances in which there was no other reason to think that it would be unable to meet a costs order, did not provide a basis on which to order security for costs. The appeal would therefore be dismissed (paras. 15–17; paras. 28–29; para. 35).
1 CHADWICK, P.: This is an appeal from an order made by Henderson, J. on August 26th, 2010 on an application by Mr. Abdul-Mohsen Hayat, the defendant to proceedings brought against him by BTU Power Management Co. The application was for an order that the plaintiff provide security for his costs of the proceedings.
2 BTU Power Management Co. is a Cayman-registered company to which s.74 of the Companies Law (2009 Revision) applies. The section is in these terms:
‘Where a company is plaintiff in any action, suit or other legal proceeding, any Judge having jurisdiction in the matter, if he is satisfied that there is reason to believe that if the defendant is successful in his defence the assets of the company will be insufficient to pay his costs, may require sufficient security to be given for such costs, and may stay all proceedings until such security is given.’
3 It is clear that, on an application for security under that section, the onus is on the applicant to satisfy the judge that there is reason to believe that, if the defendant is successful in the defence, the assets of the claimant company will be insufficient to pay the costs. There is guidance in the reported cases as to the test which a judge should apply when deciding whether he is satisfied that there is reason to believe that the...
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