Gong v CDH China Management

• Jurisdiction: Cayman Islands
• Judge: (Jones, J.)
• Judgment Date: 22 February 2011
• Date: 22 February 2011
• Court: Grand Court (Cayman Islands)

Grand Court, Financial Services Division

(Jones, J.)

GONG

and

CDH CHINA MANAGEMENT COMPANY LIMITED

G. Halkerston and Ms. J.A. Collett for the plaintiff;

S.J. Alexander for the defendant.

Cases cited:

(1) Derbyshire County Council v. Times Newspapers Ltd., [1992] Q.B. 770; [1992] 3 W.L.R. 28; [1992] 3 All E.R. 65, dictum of Balcombe, L.J. applied.

(2) Elliott v. Cayman Islands Health Servs. Auth., 2007 CILR 163, followed.

(3) Leeds United A.F.C. Ltd. v. Admatch, 2009 JLR 186, followed.

(4) Nasser v. United Bank of Kuwait, [2002] 1 W.L.R. 1868; [2002] 1 All E.R. 401; [2001] EWCA Civ 556, applied.

(5) Parkinson (Sir Lindsay) & Co. Ltd. v. Triplan Ltd., [1973] Q.B. 609; [1973] 2 W.L.R. 632; [1973] 2 All E.R. 273, referred to.

Legislation construed:

Grand Court Rules 1995, O.23, r.1(1): The relevant terms of this sub-rule are set out at para. 5.

European Convention for the Protection of Human Rights and Fundamental Freedoms (Rome, November 4th, 1950; Treaty Series 71 (1953)) (Cmnd. 8969), art. 14: ‘The enjoyment of the rights and freedoms set forth in this Convention shall be secured without discrimination on any ground such as sex, race, colour, language, religion, political or other opinion, national or social origin, association with a national minority, property, birth or other status.’

Civil Procedure-costs-security for costs-order against non-resident pursuant to Grand Court Rules, O.23, r.1(1)(a) restricted to added costs of enforcing costs order abroad-no order merely because resident abroad since contrary to public policy and European Convention on Human Rights, art. 14 prohibiting discrimination on ground of nationality

The plaintiff brought an action against the defendant seeking to recover a proportion of its profits.

The defendant was a Cayman company carrying on an investment management business in Hong Kong and Beijing. The plaintiff, who was ordinarily resident in China and did not have any assets in the Cayman Islands, brought an action claiming that he was entitled to be paid a proportion of the profits earned by the defendant from the investment funds.

The defendant sought security for costs from the plaintiff pursuant to the Grand Court Rules (‘GCR’), O.23, r.1(1)(a), in such amount as the court thought just, submitting that (a) the plaintiff was ordinarily resident in China, and therefore could be subject to an order under r.1(1)(a); (b) since the plaintiff did not have any assets in the Islands, any costs order would need to be enforced against his assets in China; (c) it would be just to order security for costs calculated to cover the defendant”s projected total costs, or part thereof; and (d) it would further be just to order security

for costs calculated to cover the added difficulty and cost of enforcement of a Cayman costs order in China, since it would be necessary to incur extra legal fees and disbursements, and there was a fee of at least US$5,000 for bringing an enforcement action in the Chinese courts.

The plaintiff submitted in reply that it should only be required to provide security for costs of US$5,000, since (a) the court was required to exercise discretionary powers, such as that in GCR, O.23, r.1(1)(a), in accordance with Cayman public policy, which-since the Islands were party to the European Convention on Human Rights-included not discriminating on grounds of nationality contrary to art. 14; (b) GCR, O.23, r.1(1)(a) could therefore not be used to require a plaintiff to pay security merely because he was resident overseas, but rather was for the purpose of protecting defendants against the extra difficulty and cost of enforcing a Cayman costs order in a foreign jurisdiction; (c) the amount required to be paid in security on an order under GCR, O.23, r.1(1)(a) was therefore ‘capped’ by reference to the additional amount which it would cost to enforce the order in China; (d) there was no evidence to suggest that the defendant would be unable to enforce a Cayman costs order in this proceeding in the Chinese courts, and therefore an order for security calculated to cover the defendant”s total costs or part thereof would not be appropriate; and (e) security of US$5,000, covering the likely cost of bringing an enforcement action in the Chinese courts, would be appropriate.

Held, ordering security for costs:

(1) The plaintiff would be ordered to provide security for costs of US$10,000. The court was not entitled to exercise a discretionary power for a purpose which would be contrary to the public policy of the Cayman Islands. The fact that the Islands were party to the entire European Convention on Human Rights indicated that the principles set out in the Convention-including art. 14”s prohibition of discrimination on grounds of, inter alia, nationality-reflected Cayman public policy. The discretionary power in GCR, O.23, r.1(1)(a) to require a plaintiff to give security for costs if ordinarily resident out of the jurisdiction therefore could not have been intended to discriminate against foreigners, but rather had the purpose of protecting defendants against the extra difficulty and cost of enforcing a Cayman costs order in a foreign jurisdiction, and the court needed to exercise its discretion in a manner intended to achieve this purpose. An order for security under O.23, r.1(1)(a) would therefore be restricted to an amount calculated to cover the added difficulty and cost of enforcement abroad (para. 10; paras. 13–14).

(2) Applying those principles, it would be just to require that the plaintiff pay US$10,000 into court as security for the defendant”s costs. The court would only order security for an amount calculated to cover all the costs the defendant could reasonably expect to be awarded on taxation if it appeared that such an award would be unenforceable in the jurisdiction where the plaintiff”s assets were located. Since there was no evidence

that a costs order in this proceeding would be unenforceable in China, where the plaintiff”s assets were probably located, the court would not require the plaintiff to provide security calculated to cover representing the defendant”s total costs, or part thereof. However, the court would order security for an amount calculated to cover the added difficulty and cost of enforcement in China, rather than the Islands. A Cayman costs order could potentially be enforced in China, but a fee of at least...