Re SPhinX Group
| Jurisdiction | Cayman Islands |
| Judge | (Smellie, C.J.) |
| Judgment Date | 31 March 2009 |
| Court | Grand Court (Cayman Islands) |
| Date | 31 March 2009 |
(Smellie, C.J.)
Ms. C.J. Bridges for the joint official liquidators;
A.J. Walters for the respondents;
A. Turner and Ms. R. Lawrence for the liquidation committee.
(1) Australian Consol. Invs. Ltd. v. Woodings(1996), 16 WAR 388; 14 ACLC 1187, not followed.
(2) Kentwood Constrs. Ltd., In re, [1960] 1 W.L.R. 646; [1960] 2 All E.R. 655n, referred to.
(3) Rafsanjan Pistachio Producers Co-op. v. Bank Leumi (UK) Ltd., High Ct., November 4th, 1992, unreported, followed.
(4) Tanning Research Labs. Inc. v. O”BrienUNK(1990), 169 CLR 332; 64 ALJR 211; 91 ALR 180; 8 ACLC 248; 1 ACSR 510, dicta of Brennan and Dawson, JJ. followed.
Grand Court Rules 1995, O.62, r.9: The relevant terms of this rule are set out at para. 9.
Companies-compulsory winding up-costs-creditors” committee-if committee given permission to appear, court in its discretion may allow recovery of its costs from estate on indemnity basis
Companies-compulsory winding up-costs-proof of debt-if creditor appealing against liquidators” rejection of proof of debt, proceedings deemed hostile and costs to follow outcome of any step taken-creditor to have no special right to be protected against costs of appeal
Companies-compulsory winding up-creditors-proof of debt-another creditor may be entitled to oppose appeal against rejection of proof of debt-may be circumstances in which third party interests not otherwise properly represented by liquidator
The liquidators and liquidation committee of a Cayman company applied for their costs incurred in opposing an application for the trial of preliminary issues.
The respondents sought directions for the trial of certain preliminary issues in their appeal against the rejection of the proof of debt. At an earlier hearing, the respondents had objected to the participation of the liquidation committee in the proceedings because they believed that they should not be at risk for its costs when its arguments would be merely repetitive of those of the liquidators. Nevertheless, the court allowed the liquidation committee to proceed and appear on the basis that the respondents would not be liable to meet its costs. Subsequently, the application for the trial of the preliminary issues was rejected and the appeal was stayed, pending the outcome of separate proceedings between the parties ongoing in New York. The liquidators and the liquidation committee both sought to recover their costs.
The liquidators submitted that as this was hostile litigation, costs would follow the resolution of any stage within them and should be paid immediately. The liquidation committee, with the support of the liquidators, submitted that it was entitled to recover its costs from the respondents and, if not, alternatively from the estate, because it had a right to be heard in the proceedings since it held a financial interest in the litigation and had been given permission to take part by the court.
The respondents submitted in reply that it should not be held liable to pay the costs at this stage because (a) the application had been merely interlocutory rather than deciding the appeal itself; (b) it would be more suitable to reserve any decision on costs until the resolution of the appeal since it might ultimately transpire that the estate would have to indemnify the respondents against all its costs; and (c) the normal procedure was for costs to be taxed and paid at the conclusion of the matter. Further, they submitted that the committee should bear its own costs since as a claimant it had a potential interest in the estate.
Held, allowing the recovery of costs, but not immediately:
(1) The respondents would be liable for the costs of the joint official liquidators. The proceedings were hostile, since when the liquidators rejected the proof of debt they were defending the assets available for distribution, and therefore costs would follow the outcome of any step taken within the proceedings. The refusal of directions for the trial of the preliminary issues had been determinative of the respondents” application in that regard and while the proof of debt remained rejected they would have no special right as an established creditor to be protected against the costs of litigation arising from their appeal (paras. 6–7).
(2) There would be no order for immediate taxation and payment of costs since, pursuant to O.62, r.9 of the Grand Court Rules, it...
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