Fortunate Drift Ltd v Canterbury Securities, Ltd
| Jurisdiction | Cayman Islands |
| Judge | Kawaley |
| Judgment Date | 30 October 2020 |
| Court | Grand Court (Cayman Islands) |
| Docket Number | CAUSE NO: FSD 227 OF 2018 (IKJ) |
The Hon. Justice Kawaley
CAUSE NO: FSD 227 OF 2018 (IKJ)
IN THE GRAND COURT OF THE CAYMAN ISLANDS
FINANCIAL SERVICES DIVISION
Costs of withdrawn interlocutory summons-indemnity or standard basis of taxation-whether costs should be payable forthwith-whether payment on account of costs should be ordered-Preamble to the Grand Court Rules-Grand Court Rules Order 62 rule 4 (2), rule 11
Ms Katie Pearson, Harneys, for the Plaintiff (“FDL”)
Mr Jalil Asif QC, Kobre & Kim (Cayman), on behalf of the Defendant (“Canterbury”)
On July 15, 2020, FDL issued a Summons primarily seeking an Order that:
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(a) Canterbury transfer the “Shares and Proceeds” to an Escrow Agent to be held pending the determination of these proceedings;
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(b) Canterbury and FDL should jointly appoint FFP (Cayman) Limited (“FFP”) as Agent to hold the Shares and Proceeds; and
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(c) seeking an explanation as to the location of US$3,701,851.85 said in the supporting Sixth Affidavit of Dominic Sin to be unaccounted for.
Canterbury filed the Fifth Affidavit of Eric Miller sworn on August 11, 2020 in response. By letter dated August 20, 2020 “Without Prejudice Save as to Costs”, Harneys signified FDL's willingness to conditionally withdraw the Summons having reviewed Canterbury's evidence in order to save costs. Kobre & Kim communicated the position adopted at the present hearing on September 9, 2020, namely that Canterbury would consent to the withdrawal of the Summons but sought their costs on the indemnity basis and to be payable forthwith. In the last pre-hearing exchange, Harneys indicated that FDL's position remained what had been communicated on August 28, 2020. FDL would pay Canterbury's costs to be taxed on the standard basis and payable at the end of the hearing.
The issues which fall to be determined were addressed by counsel with typical persuasiveness and welcome economy:
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(a) whether an indemnity basis award justified because the Plaintiff's Summons was always “doomed to fail” and was improperly issued, or whether the Summons was merely unmeritorious, and properly agreed to be withdrawn once the merits of Canterbury's responsive evidence had been assessed;
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(b) whether costs should be ordered to be payable forthwith because the application raised a discrete issue and FDL had acted unreasonably in making it; and
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(c) if costs were ordered to be taxed and payable forthwith, whether a payment on account of costs should be ordered.
The first question was the most difficult one to readily resolve because it turned on a nuanced analysis of the correspondence preceding the application and an assessment of, in particular, the interaction between the Plaintiff's Summons and an Order of the Eight Judicial District Court, Clark County, Nevada dated February 14, 2019 (the “Nevada Order”).
FDL submitted in its Skeleton Argument that the mere fact that an application or action was discontinued did not amount to conduct warranting an indemnity costs award, a legal proposition with which Canterbury did not dissent. It was common ground that indemnity costs may be awarded on the basis the Court being “ satisfied that the paying party has conducted the proceedings, or that part of the proceedings to which the order relates, improperly, unreasonably or negligently”: GCR Order 62 rule 4 (11). Reliance was also placed on Bennett v Attorney General [ 2010(1) CILR 478 where Henderson J opined as follows:
“ 6. Advancing a defence which is merely weak or unlikely to succeed is to be distinguished from maintaining a defence which is hopeless. The latter can be characterised as unreasonable. The former is an occurrence with which every barrister will be familiar….There are also cases which are hopeless and which appear that way to anyone with the requisite legal training. It is open to a judge to determine that it was unreasonable to bring such a claim or advance such defence. The usual result of such a finding is that the unsuccessful party will pay costs on the indemnity basis.”
Since FDL agreed to withdraw the Summons before it was heard, the case for indemnity costs necessarily focussed on whether the Summons was from the outset patently hopeless. Mr Asif QC submitted the Plaintiff's Summons was “doomed to fail” from the outset because of three main roadblocks:
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(a) the Summons sought relief this Court had no jurisdiction to grant;
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(b) the Summons sought relief which FDL could not seek by virtue of the Nevada Order; and
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(c) the Summons sought relief which was inconsistent with the undertaking given by FDL pursuant to this Court's December 13, 2018 Order.
Ms Pearson responded as follows:
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(a) although the draft Order attached to FDL's Summons sought relief in terms the Court could not grant (compelling Canterbury to enter into an agreement with FFP), the substantive relief sought could properly be granted on other terms, such as FFP holding the Shares and Proceeds;
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(b) although the relief sought could not be granted without an application to vary the Nevada Order (which prohibited FDL from taking “ any action whatsoever” to transfer the Shares and Proceeds from Canterbury if it was released from its undertaking to this Court), such application could properly have been made at any stage after the Summons was issued, even after a provisional Order had been made; and
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(c) although the Summons did not expressly seek a release from FDL's December 13, 2018 undertakings, such relief could also have been sought at any stage after the Summons was filed.
In my judgment it is ultimately clear that the substantive relief sought by FDL was to have the Shares and Proceeds (which it contends in this action constitute its property) transferred to a third party escrow agent. It has been a longstanding gripe of FDL's in this action that its litigation adversary cannot be trusted to manage these assets. FDL has been pursuing a consensual transfer from an early stage. The ‘no jurisdiction’ argument is in reality a technical point about the form of the application. This Court clearly has jurisdiction to direct that the subject matter of the dispute should be preserved by being held to the Order of the Court by an appropriate third party escrow agent. GCR Order 29 rule 2 provides as follows:
“ (1) On the application of any party to a cause or matter the Court may make an order for the detention, custody or preservation of any property which is the subject matter of the cause or matter, or as to which any question may arise therein, or for the inspection of any such property in the possession of a party to the cause or matter.”
FDL's Summons (paragraph 3) and the draft Order attached to it (paragraph 7) each sought “ Such further or other orders as the Court thinks fit.” So FDL is able to swerve around the first roadblock.
As far as the Nevada Order is concerned, Mr Asif QC accepted that he could not contend that the issuance of FDL's present Summons contravened the Nevada Order. Nor could he contend that FDL lacked standing to issue its Summons. The complaint, properly understood, was that since varying the Nevada Order was essential to obtaining the relief sought from this Court, the only proper way of proceeding was to first go to the Nevada Court. This seemed at first blush an insubstantial submission, but it was one which it was difficult to summarily reject on clearly articulated grounds.
The Nevada Court is adjudicating a dispute between FDL and PFS, a US entity connected to Canterbury's principal. FDL, as Plaintiff, undertook to this Court on December 13, 2018:
“ that it will make no attempt to, withdraw or transfer from the Defendant any shares in Yangtze River Port and Logistics Ltd. held for it by the Defendant pending further order of the Court or agreement by the Defendant.”
The Nevada Order provides:
“…that in the event that the Cayman Islands Order is varied, overruled, superseded, or otherwise altered so as to allow the withdrawal, transfer or other removal of the remaining Additional Shares or the Proceeds from Canterbury, FDL shall be immediately enjoined and prohibited from taking any action whatsoever to withdraw, transfer or otherwise remove the remaining Additional Shares or the Proceeds from Canterbury unless expressly authorized to do so by further order of this Court or by written agreement with PFS.”
The combined effect of the December 13, 2018 Order of this Court and Nevada Order is to require the Shares and Proceeds to be held by Canterbury and not transferred without either (a) the agreement of Canterbury and PFS, or (b) an Order of this Court and the Nevada Court. Since it...
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