Re Wyser-Pratte EuroValue Fund

• Jurisdiction: Cayman Islands
• Judge: (Jones, J.)
• Judgment Date: 25 November 2010
• Court: Grand Court (Cayman Islands)
• Date: 25 November 2010

Grand Court, Financial Services Division

(Jones, J.)

IN THE MATTER OF WYSER-PRATTE EUROVALUE FUND LIMITED

T. Lowe, Q.C. and S.M.P. Dawson for the petitioner;

Ms. C. Wilkins for the company.

Case cited:

(1) Sagicor Gen. Ins. (Cayman) Ltd. v. Crawford Adjusters (Cayman) Ltd., 2008 CILR 482, referred to.

Legislation construed:

Companies Winding Up Rules 2008, O.3, r.11(2):

‘Upon hearing the summons for directions, the Court shall give such directions as it thinks appropriate in respect of the followings matters-

(a) whether or not the company is properly able to participate in the proceeding or should be treated merely as the subject-matter of the proceeding;

(b) whether the proceeding should be treated as a proceeding against the company or as an inter partes proceeding between one or more members of the company as petitioners and the other member or members of the company as respondents . . .’

O.24, r.8: ‘(1) The general rule is that the costs incurred by a person who successfully presents a creditor”s winding up petition under Order 3, Part II or creditor”s petition for a supervision order under Order 15, rule 3 should have his costs paid out of the assets of the company, such costs to be taxed on an indemnity basis unless agreed with the official liquidator.

(2) In the case of a contributory”s winding up petition under Order 3, Part III, the general rules are that-

(a) if the Court has directed that the company itself is properly able to participate in the proceeding, the general rule is that the costs of a successful petitioner be paid out of the assets of the company; or

(b) if the Court has directed that the winding up petition be treated as an inter partes proceeding between one or more members of the other members or members of the company as respondents, the general rule is that none of the costs should be paid out of the assets of the company and the unsuccessful parties should pay the costs of the successful party, such costs to be taxed on the standard basis unless agreed . . .’

Grand Court Rules 1995, O.62, r.18(1):

‘Work done by foreign lawyers may be recovered on taxation under these rules on the standard basis provided that-

Practice Direction cited:

Practice Direction No. 1/2001, Guidelines Relating to the Taxation of Costs.

Companies-compulsory winding up-costs-by Companies Winding Up Rules, O.24, r.8(2)(a), contributory entitled to costs out of company assets if successful on application to wind up company on just and equitable ground heard as against company able to participate pursuant to court order under O.3, r.11(2)-costs to be on indemnity basis, i.e. may recover all costs except any incurred improperly or unreasonably, including fees owed to foreign lawyers-Grand Court Rules, O.62, r.18 not to apply since Grand Court Rules not source of jurisdiction to order costs to be paid out of fund

The petitioner sought the winding up of a Cayman company on the just and equitable ground.

The petitioner was a shareholder in the company, and, at about the same time as several other shareholders, sought to redeem its shares, in response to which the company suspended redemptions and ceased accepting new subscriptions. The company subsequently proposed and began carrying out an informal liquidation under the supervision of its investment manager. Several shareholders, the petitioner included, objected to the informal liquidation, and the petitioner applied to wind up the company on the just and equitable ground. The company subsequently revised the informal liquidation plan in order to resolve some of the shareholders” objections, and informed the petitioner of this at a case management hearing.

The Grand Court (Jones, J.) held that the petitioner had made out a case for relief on the just and equitable ground, but declined to make an immediate winding-up order, instead making alternative orders and adjourning the petition (in proceedings reported at 2010 (2) CILR 194). The court further ordered that the petitioner”s costs as incurred up to the date of the case management hearing be paid out of the assets of the company, to be taxed on the indemnity basis if not agreed.

The parties sought directions from the court as to whether the legal fees payable by the petitioner to its US lawyers in connection with these proceedings were in principle recoverable as costs.

The court considered (a) the correct characterization of both this costs order and costs orders against companies in winding-up proceedings more generally, pursuant to O.24, r.8 of the Companies Winding Up Rules (‘CWR’); (b) the basis on which costs should be taxed, if not agreed; and (c) whether and in which circumstances O.62, r.18 of the Grand Court Rules (‘GCR’) applied to prohibit recovery of the costs of work done by foreign lawyers, unless done after the foreign lawyer had been temporarily admitted as a Cayman attorney.

Held, confirming the petitioner”s entitlement to costs:

(1) The petitioner would be entitled in principle to recover as costs the fees...