JM Bodden & Son Intl Ltd v Dettling

• Jurisdiction: Cayman Islands
• Judge: (Malone, C.J.)
• Judgment Date: 25 January 1991
• Court: Grand Court (Cayman Islands)
• Date: 25 January 1991

Grand Court

(Malone, C.J.)

J.M. BODDEN AND SON INTERNATIONAL LIMITED

and

DETTLING and SPARKS

E. Grant for the plaintiff;

R.D. Alberga, Q.C. for the defendants.

Cases cited:

(1) Bodden (J.M.) & Son Intl. Ltd. v. Bodden, 1990–91 CILR 214, dicta of Harre J. applied.

(2) Parkinson (Sir Lindsay) & Co. Ltd. v. Triplan Ltd., [1973] Q.B. 609; [1973] 2 All E.R. 273, dictum of Lawton, L.J. applied.

(3) Pearson v. Naydler, [1977] 1 W.L.R. 899; [1977] 3 All E.R. 531, dicta of Megarry, V.-C. applied.

(4) Prospect Properties Ltd. v. McNeill, 1990–91 CILR 171.

(5) Trident Intl. Freight Servs. Ltd. v. Manchester Ship Canal Co., [1990] BCLC 263, dicta of Nourse and Purchas, L.JJ. applied.

Legislation construed:

Companies Law (Laws of the Cayman Islands, 1963, cap. 22), s.71: The relevant terms of this section are set out at page 221, lines 34–40.

Civil Procedure-costs-security for costs-appropriate case for plaintiff company to give security if (a) not trading, (b) five-year delay in bringing proceedings, (c) doubts as to bona fides of director bringing suit, (d) considerable expense involved in defending action

Civil Procedure-costs-security for costs-inappropriate to go into merits of case but court has unfettered discretion whether to grant defendant security for costs having regard to all circumstances

The defendants applied for an order that the plaintiff company provide security for costs in respect of its action against the defendant for breach of contract or breach of fiduciary duties.

The plaintiff had ceased to trade as a result of its financial difficulties and alleged through its Managing Director that the defendant employees had been guilty five years earlier of certain malpractices which led to this situation. The plaintiff”s Managing Director was himself extensively involved in litigation and had been found to have diverted to his own use the funds of another company of which he was a director. In the light of the plaintiff”s financial circumstances and the possibility that it might not be able to pay costs if the present proceedings failed, the defendants sought an order under s.71 of the Companies Law (cap. 22) forxsecurity for costs.

The plaintiff submitted that it should not be required to give security (a) because it was alleging that the defendants by their conduct had contributed to its want of means; and (b) it would therefore be unjust to require security as its legitimate claim could thereby be stifled.

The defendants submitted in reply that the court should order security in the exercise of its discretion especially as there was no rule conferring immunity on a limited liability company from the need to give such security.

Held, granting the application:

Since the plaintiff”s primary allegation was that the defendants were responsible for its impecunious state and as there had been no admissions by the defendants of any actions upon which to base the allegation, this was not a case which clearly demonstrated at the outset a high probability of either success or failure. Accordingly, it would not be appropriate to go into its merits to determine whether the plaintiff

should give security for costs. But the court had an unfettered discretion in the matter which it would exercise having regard to all the circumstances of the case, namely, (a) the plaintiff was not a trading company; (b) the unexplained five years which had elapsed between the conduct complained of and the bringing of the proceedings gave cause for questioning the genuineness of the action, especially as the bona fides of the Managing Director was doubtful and it might be that the limited liability of the plaintiff was being exploited to litigate a cause of little or no merit at no personal risk to pay costs; and (c) in addition, the nature of the action was one that could put the defendants to considerable expense. This was therefore an appropriate case in which to order that the plaintiff give security for costs (page 223, lines 22–38; page 224, line 14 – page 225, line 12).

MALONE, C.J.: The plaintiff company is in financial dif-
ficulties. As it may be unlikely to be able to pay the defendants”
30	costs if the action fails, the defendants by this application seek
from the court an order under s.71 of the Companies Law (cap.
22) for security of costs. That section reflects

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