China Branding Group Ltd (in Official Liquidation) Between:- Tony Bobulinski Appellant v China Branding Group Ltd (in Official Liquidation) Respondent
| Jurisdiction | Cayman Islands |
| Judge | Field, JA,John Martin,Sir John Goldring |
| Judgment Date | 14 June 2023 |
| Docket Number | CICA (CIVIL) APPEAL No. 26 of 2021 |
| Court | Court of Appeal (Cayman Islands) |
In the Matter of China Branding Group Limited (In Official Liquidation)
The Rt Hon Sir John Goldring, President
The Hon John Martin KC, Justice of Appeal
The Hon Sir Richard Field, Justice of Appeal
CICA (CIVIL) APPEAL No. 26 of 2021
(Formerly FSD 52 of 2016 (RMJ))
IN THE COURT OF APPEAL OF THE CAYMAN ISLANDS
ON APPEAL FROM THE GRAND COURT
FINANCIAL SERVICES DIVISION
The abbreviations adopted in the judgment dated 31 March 2023 (“the Judgment”) continue to be used in this Ruling.
At the conclusion of the Judgment, the Court declared, inter alia, as follows:
“100. (1) The appeal is allowed with costs.
(2) …
(3) The sum paid into court by the appellant to stand as security for the costs of this appeal should forthwith be paid out to him together with any interest that has accrued thereon.”
“101. The preliminary view of the Court is that:
(a) Having regard to the JOLs' failure to disclose the AAA in the appeal, the costs order made by the Grand Court below should be varied so as to order:
(1) that the JOLs be paid 70% of their costs (reflecting their success on Issues 1 and 2) and the appellant be awarded 30% of his costs (reflecting the failure of the JOLs to disclose the AAA); and
(2) that the JOLs must restore to the appellant 30% of the costs he has paid to the JOLs under the Grand Court Order.
(b) In light of the failure to disclose the AAA in the appeal below, the following costs shall be met from the JOLs' own resources and not the insolvent estate
(i) The costs incurred by the JOLs in resisting this appeal;
(ii) 30% of the costs incurred by the JOLs in the appeal below;
(iii) The costs ordered to be paid to the appellant in [100(1)] above;
(iv) The reimbursement to the appellant of 30% of the costs he has paid to the JOLs under the costs order made below as contemplated in (a) above; and
(v) The order that the JOLs pay 30% of the costs incurred by the appellant below as contemplated in (a) above”.
On 6 April 2023, the appellant was granted liberty to advance submissions as to the basis on which those costs that were to be awarded to him were to be assessed and on 21 April 2023, he served his opening submissions on costs. Also on 21 April 2023, the JOLs served their submissions in respect of the basis on which the costs to be awarded to the appellant should be taxed and their submissions on the preliminary views expressed by the Court in [2. (101)] above. On 1 May 2023, the appellant served submissions in reply to the JOLs' opening submissions and on 11 May 2023, the JOL's served their reply submissions on the preliminary view expressed in paragraph [2 (101)] above.
GCR O.62, r.4 (11), that is applicable to this Court pursuant to Rule 28 of the Court of Appeal Rules, provides: “The Court may make an inter partes order for costs to be taxed on the indemnity basis only if it is satisfied that the paying party has conducted the proceedings or that part of the proceedings to which the order relates, improperly, unreasonably or negligently.”
As was held by this Court in Asia Pacific Limited v Arc Capital LLC [2015] (1) CILR 299, the Court of Appeal's power to order indemnity costs is restricted to cases covered by the wording of GCR O.62, r.4 (11) (“O.62, r4”). That said, it is clear from the wording of O.62, r.4 that it will only be in an exceptional case that indemnity costs will be awarded (cf Ahab v Saad Investments Co. Ltd [2012] 2 CILR 1), for instance where the Court is of the view that the conduct of the paying party is such as deserves a mark of disapproval ( AHAB v SAAD [2013] 3 CILR 344).
In agreement with the view of Smellie CJ expressed at p. 353 in the latter case, I too am of the opinion that for conduct to be unreasonable or negligent within O 62, r. 4 it must be more than simply wrong or misguided in hindsight.
I agree with the following view expressed by Henderson J in Bennett v Attorney General [2010] (1) CILR 478] at paras 6 – 9:
“Advancing a [case] which is merely weak or unlikely to succeed is to be distinguished from maintaining a [case] which is manifestly hopeless. The latter can be characterized as unreasonable. The former is a regular occurrence with which every barrister will be familiar…
The assessment of unreasonableness must avoid the wisdom of hindsight. The question is whether it was unreasonable to advance the claim or maintain the defence taking into account what should have been evident to the party concerned at the outset of the trial.”
I note that in making these observations Henderson J justifiably cited with approval the following passage from the judgment of Coulson J (as he then was) in ( Fitzpatrick Contractors Ltd. v. Tyco Fire & Integrated Solutions (UK) Ltd. [2008] EWHC 1391 (TCC), at para. 3):
“There are a number of decisions, both of the TCC and of other courts, which make plain that the pursuit of a weak claim will not usually, on its own, justify an order for indemnity costs, whereas the pursuit of a hopeless claim (or a claim which the party pursuing it should have realised was hopeless) will lead to such an order. In both Wates Construction Ltd. v. HGP Greentree Allchurch Evans Ltd. [2006] BLR 45 and EQ Projects Ltd. v. Javid Alavi [2006] BLR 130 this court was persuaded that, in the circumstances of those cases, an order for indemnity costs was appropriate because the claimants should have realised that their claim was hopeless and should not have taken the matter on to trial. However, in Healy-Upright v Bradley & Another [2007] EWHC 3161 (Ch), the court reiterated that an order for indemnity costs was not justified by the mere fact that the paying party had been found to be wrong, either in fact or in law or both, or by the fact that in hindsight, the result of the case now being known, the position adopted by that party may be thought to have been unreasonable.”
The appellant contends that the costs orders made in his favour by this Court should be on the indemnity basis and that certain of those costs should be paid out of the JOLs' own resources and not out of the liquidation estate. In support of these contentions, he prays in aid the following:
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9.1 The JOLs at the outset refused to accept that he was a secured creditor and proceeded to sell CBG's assets without reference to him in breach of the Pledge.
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9.2 The JOLs rejected the appellant's first proof of debt in which he claimed he was a secured creditor without giving reasons, contending, on highly dubious legal advice, that the Pledge was ineffective by reason of not having been perfected.
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9.3 In response to an expert legal opinion provided on the appellant's behalf by Mr Jeff Valle of Valle Makoff, the JOLs served an expert opinion of Mr Mark Dosker of Squire Patton Boggs who opined that CBG did not own any assets constituting “collateral” under the Pledge at the point that CBG went into liquidation on 2 June 2016. At the same time the following documents were in the possession of the JOLs that individually and collectively controverted the position taken by Mr Dosker and the JOLs:
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(a) the AAA (executed by Mr Dickson, transferring ownership of the licences from CBG to RAAD);
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(b) the APA (executed by Mr Dickson, listing the license agreements in the Disclosure Schedule);
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(c) the license agreements themselves,
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(d) email exchanges which made clear to the JOLs that such licenses were held at CBG level;
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(e) email exchanges which discussed the considerable value of the licenses;
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(f) the CIM prepared by Houlihan Lokey Financial referencing the income stream attributable to the licenses.
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9.4 Notwithstanding that the JOLs' files contained the above documents, the JOLs resisted the appellant's disclosure summons in the course of which Mr Dickson swore an affidavit stating that CBG had no US assets and that there was no further material to disclose. The JOLs also submitted that the appellant had the burden of proving that he was a secured creditor under the Pledge and that the Company Winding Up Rules (“CWRs”) did not confer jurisdiction on the Grand Court to order disclosure.
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9.5 In paragraph 84 of the Judgment, this Court said that it had no hesitation in finding that the JOLs, as officers of the Court, were seriously amiss in failing to disclose the AAA and the Disclosure Schedule in the Grand Court appeal proceedings (“the Grand Court appeal”).
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9.6 In the light of the JOLs' failure to disclose the AAA and the Disclosure Schedule in the Disclosure Summons proceedings, the “no order as to costs” order made by McMillan J on the that summons reflecting the appellant's success on his application for cross examination but his failure to obtain a disclosure order, should be varied so as to award him his costs on both applications on the indemnity basis and to order that these costs are paid by the JOLs out of their own resources.
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9.7 As a result of the JOLs' failure to disclose the AAA and the Disclosure Schedule the appellant's appeal in the Grand Court proceeded on a false basis resulting in a deeply flawed decision and an order for costs against the appellant.
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9.8 The entirety of the costs associated with the appellant seeking to enforce his secured rights would have been saved if the JOLs had recognised his security in 2016. Accordingly, the appellant's primary submission is that he should have 100% of his costs of the Grand Court appeal on the indemnity basis given that the JOLs acted so as to deprive him of the security expressed in the Notes and the Pledge and the negotiating leverage arising therefrom.
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9.9 The appellant's secondary position is that since the main issue of the Grand Court appeal was...
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