Al-Ibraheem v Bank of Butterfield Intl (Cayman) Ltd

• Jurisdiction: Cayman Islands
• Judge: (Smellie, C.J.)
• Judgment Date: 08 August 2000
• Court: Grand Court (Cayman Islands)
• Date: 08 August 2000

Grand Court

(Smellie, C.J.)

AL-IBRAHEEM

and

BANK OF BUTTERFIELD INTERNATIONAL (CAYMAN) LIMITED, DJEDDAH and BARRIE

A.J. Simmonds, Q.C., A. Arthur and A.J. Jones for Maples & Calder;

L.F.R. Cohen, Q.C., and W.J. Helfrecht for the plaintiff (appearing as amici curiae);

K.J. Farrow for the trustee (holding a watching brief).

Cases cited:

(1) Bahai v. Rashidian, [1985] 1 W.L.R. 1337; [1985] 3 All E.R. 385, applied.

(2) Jones, In reELR (1870), L.R. 6 Ch. App. 497; sub nom. Fielden v. Northern Ry. of Buenos Ayres Co. Ltd., In re Jones, 40 L.J. Ch. 113; 23 L.T. 655, dicta of Lord Hatherley, L.C. applied.

(3) Manzanilla Ltd. v. Corton Property & Invs. Ltd., [1997] 3 F.C.R. 389; [1997] T.L.R. 442, considered.

(4) Myers v. Elman, [1940] A.C. 282; [1939] 4 All E.R. 484, applied.

(5) R. v. Immigration Bd., ex p. Kirk Freeport Plaza Ltd., 1996 CILR N–1, considered.

(6) Ridehalgh v. Horsefield, [1994] Ch. 205; [1994] 3 All E.R. 848, considered.

(7) Robertson Research Intl. Ltd. v. ABG Exploration B.V., [1999] C.P.L.R. 756; [1999] T.L.R. 740, considered.

(8) Turner Page Music v. Torres Design Assocs. Ltd., [1998] T.L.R. 499, considered.

(9) Wall v. Lefever, [1998] 1 F.C.R. 605; [1997] T.L.R. 436.

Legislation construed:

Supreme Court Act 1981 (c.54), s.51(6): The relevant terms of this sub-section are set out at page 301, lines 8–12.

s.51(7): The relevant terms of this sub-section are set out at page 301, lines 13–20.

Attorneys-at-Law-personal liability-wasted costs-inherent juris-diction to make personally liable for costs unreasonably incurred by misconduct or gross negligence-unnecessary to show dishonesty or conduct warranting removal from roll but mere mistake or error of judgment insufficient-causal link between conduct and costs wasted to be shown on balance of probabilities

Attorneys-at-Law-personal liability-wasted costs-inquiry justified by attorney”s prima facie concealment from court of information relevant to central issue in litigation and failure to seek directions when appropriate, if proceedings lengthened unnecessarily

Civil Procedure-costs-wasted costs-trial judge to identify wasted costs from own knowledge of conduct of proceedings and apportion costs broadly-assessment of quantum may be referred for taxation

Civil Procedure-costs-wasted costs-discretion to order inquiry to be exercised sparingly-only trial judge may order inquiry on own motion-inquiry to be as fair, simple and summary as possible, but no specific procedural restrictions-no order if costs of inquiry likely to exceed wasted costs recovered

The applicants applied to set aside a notice of inquiry into wasted costs.

The plaintiff brought proceedings challenging the validity of an amendment to a Cayman trust on the grounds of the incapacity of the settlor, her father. The trustee resisted the allegations at all stages. When, in the course of the proceedings, it came to its attention that the amendment had never been notarized as was required for its proper execution under the trust, the trustee arranged, on the advice of its attorneys (the applicants), for the deed of amendment to be notarized. This was done without informing the court or seeking directions and was subsequently found to have been an invalid attempt to cure the defect in the deed. The power of amendment had been invalidly exercised and could not be remedied, given the settlor”s proven incapacity in the interim (see 1999 CILR 436).

The costs of the determination of the notarization issue alone were substantial, and the overall cost to the plaintiff of challenging the

amendment over the course of several years exceeded the entire value of the trust fund.

It later came to the attention of the court that the trustee and its attorneys had had notice of the settlor”s incapacity at an early stage in the proceedings, even though the applicants had informed the plaintiff”s attorneys that the trustee had seen no evidence of it. An officer of the trustee had written to the applicants enclosing medical opinions on the subject and the applicants had prepared a draft affidavit containing further evidence, but neither had been disclosed to the plaintiff”s attorneys or the court. Furthermore, the applicants had acknowledged to the plaintiff”s attorneys that the discovery that the amendment had not been notarized raised important matters for the trustee”s consideration, which might require directions from the court, but none were sought.

At a costs hearing (reported at 2000 CILR 88), the court ordered an inquiry of its own initiative into the allegations that substantial costs had been unreasonably and improperly incurred by the trustee, first in resisting the challenge to the amendment, and secondly in seeking to prefer the interests of other beneficiaries over the plaintiff and her sisters by notarizing the defective deed and defending the validity of that notarization in litigation.

Furthermore, the court ordered an inquiry into the conduct of the litigation by the applicants, under its summary jurisdiction to order the payment of wasted costs by an attorney guilty of professional misconduct or gross neglect of duty.

The applicant attorneys applied to set aside the notice of inquiry. They submitted that (a) the court”s disciplinary jurisdiction should be exercised only in plain and obvious cases amenable to summary disposal, i.e. those involving no significant dispute of fact and disclosing a clear causal link between the acts or omissions of the attorneys and the wasted costs; (b) accordingly, since the proper interpretation of the evidence supporting the allegations was disputed by the applicants, the notice should not have been issued even if the case against them, if made out, disclosed gross misconduct; (c) the costs incurred during the proposed wasted costs hearing could exceed those allegedly wasted in the earlier proceedings; (d) dealing with the allegations in the summary manner intended would place them at a disadvantage by requiring them to state their defence before hearing the plaintiff”s evidence; and (e) since the notice had been issued of the court”s own initiative, the plaintiff would participate in these proceedings with the hope of recovering for her own benefit costs expended by the trust and without the risk of paying the applicants” costs.

Held, dismissing the application to set aside the notice:

(1) The court had power to make a wasted costs order against an attorney who had acted in breach of his duty to promote the cause of justice within his sphere of competence. This inherent jurisdiction was distinct from the disciplinary jurisdiction exercised over attorneys and was compensatory as well as punitive. Since misconduct or serious

negligence could constitute a breach of the duty, it was unnecessary to show dishonesty, criminal conduct or behaviour warranting striking the attorney from the roll. A mere mistake or error of judgment, however, would be insufficient (page 293, lines 16–34).

(2) A causal link must be shown on the balance of probabilities between the misconduct of the attorney and the costs allegedly wasted. The trial judge would identify broadly which costs were wasted from his overall knowledge of the conduct of the proceedings in which they were incurred, and apportion costs accordingly. The process of inquiring into causation and the quantum of costs should be confined in the same manner as the inquiry into the alleged misconduct. The assessment of quantum could be referred for taxation if necessary once costs had been finalized in the action as a whole (page 300, lines 11–42; page 302, lines 31–37; page 303, lines 12–24).

(3) The discretion to order a wasted costs inquiry should be exercised sparingly, since attorneys should not be exposed too readily to liability for costs in representing their clients. Only the trial judge would be qualified to initiate such proceedings of the court”s own motion. The overriding requirement was that the procedure should be as fair and as simple and summary as possible. No such order should be made if the proceedings would be so complex and time-consuming that the costs recovered were exceeded by the costs of the hearing. However, although it was also in the public interest to discourage a flood of wasted costs proceedings, the recent guidelines purporting to restrict the jurisdiction in England (e.g. prohibiting the cross-examination of witnesses and discovery) where such litigation was more common did not apply as procedural rules to the Cayman Islands. Furthermore, the unique disciplinary relationship between the Grand Court and attorneys as its officers did not exist in England (page 290, line 31 – page 291, line 39; page 297, lines 6–15; page 297, line 33 – page 298, line 6; page 301, line 38 – page 302, line 11).

(4) The notice of inquiry had been properly issued in this case, since there was prima facie evidence that the applicants had been in possession of information crucial to the central issue in the case, the disclosure of which might have significantly shortened the proceedings, saving considerable costs. Furthermore, they had failed to bring the notarization issue (also crucial to the validity of the amendment) to the court”s attention. Whether the plaintiff”s attorneys had been misled by the applicants was of secondary importance. The inquiry was not to be viewed as a claim brought by the plaintiff against them, but as the fulfilment of the court”s duty to preserve the integrity of the administration of justice. The issues for determination were clearly defined in the notice of inquiry and there was no reason why the proceedings should be complex or protracted. Moreover, the wasted costs involved were of such magnitude that the

costs of the hearing were most unlikely to exceed them (page 286, line 44 – page 287, line 10; page 288, lines 4–24; page 289, lines 5–25; page 294, lines 7–37; page 296, line 40 – page 297, line...