J.M. Bodden & Son International Ltd v Dettling et Al
| Jurisdiction | Cayman Islands |
| Judge | Malone, J |
| Judgment Date | 01 January 1991 |
| Court | Grand Court (Cayman Islands) |
| Docket Number | No. 318 of 1990 |
| Date | 01 January 1991 |
Malone, C.J.
No. 318 of 1990
Grand Court
Practice and procedure - Costs — Security for costs — Plaintiff company in financial difficulties — Factors to be taken into account in deciding whether to exercise discretion to grant security for costs.
Alberga Q.C. — defendants/applicants
Grant — plaintiff/respondents
The plaintiff is in financial difficulties. As it is unlikely to be able to pay the defendants' cost if the action fails, the defendants by this application seek from the court an order under section 71 of the Company's Law (“the Law”) for security of costs. That section 447 of the English Companies Act, 1948, and is as follows: (71. 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 security to be given for such costs, and may stay all proceedings until such security is given.(
The question is, should the court exercise the discretion it undoubtedly possess under that section and grant the application? In considering that question I shall bear in mind the advice tendered by the English Court of Appeal in Trident International Freight Services Ltd. v. Manchester Ship Canal Co. and another (1990) Butterworth's Company Law cases 263. Namely that: “On an application for security of costs it is not appropriate to go in to the merits of the case unless it can be clearly demonstrated one way or the other that there is a high probability of success or failure.”
In England there have been two approaches as Megarry V.C. explained in Pearson and another v. Nayden and another (1977) 3 All E.R. 531. At p 536 he said:
“Now in ( Sir Lindsay Parkinson & Co Ltd. v. Triplan Ltd. [1973] 2 All E.R. 273) the majority of the Court rejected the view that under the section there was any burden of proof one way or the other; the discretion is one that has to be exercised having regard to all the circumstance of the case. Cairns L.J. appears to have approached the matter on the different footing that the jurisdiction would be exercised unless, there were special circumstances which justified refusing the order; …”
Megarry V.C., of course, followed the majority in the Court of Appeal. It is, however, of interest to note that as Mr. Alberga has skillfully pointed out, a philosophic basis for the opinion of the minority was postulated by Megarry V.C. At p 535 of his judgment in Pearson's case (ibid) he said.
“In the case of a limited company, there is no basic rule conferring immunity from any liability to give security for costs. The basic rule is the opposite; S. 447 applies to 311 limited companies and subjects them all to give security for costs. The whole concept of the section is contrary to the rule developed by the cases that poverty is not to be made a bar to bringing an action. There is nothing in the statutory language (the substance of which goes back at least as far as the Companies Act 1862 S. 69) to indicate that there are any exceptions to what is laid down as a broad and general rule for all limited companies. Nor is it surprising that there should be such a rule. A man may bring into being as many limited companies as he wishes, with the privilege of limited liability; and S. 447 provides some protection for the community against litigious abuses by artificial persons manipulated by natural persons. One should be as slow to whittle away this protection one should be to whittle away any natural person's right to litigate despite poverty.”.
The above passage was cited by Nourse L.J. in the Trident case (ibid) 269 with the following comment: “I entirely agree with that approach which could it have teen adopted by the judge or by this court, would very likely have led to a different result.(
Purchas L.J. in the Trident case (ibid) also expressed at p 270: “great sympathy” for the approach taken by Lord Cairns in his...
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