Al Sadik v Investcorp

• Jurisdiction: Cayman Islands
• Judge: (Jones, J.)
• Judgment Date: 16 July 2012
• Court: Grand Court (Cayman Islands)
• Date: 16 July 2012

Grand Court, Financial Services Division

(Jones, J.)

AL SADIK

and

INVESTCORP BANK BSC and FIVE OTHERS

Cases cited:

(1) Amoco UK Exploration Co. v. British American Offshore Ltd., [2002] B.L.R. 135, considered.

(2) HSH Cayman I GP Ltd. v. ABN AMRO Bank N.V., 2010 (1) CILR 114, applied.

(3) Nike Real Estate Ltd. v. De Bruyne, 2002 CILR 31, considered.

(4) Sagicor Gen. Ins. (Cayman) Ltd. v. Crawford Adjusters (Cayman) Ltd., 2008 CILR 482, considered.

(5) Wyser-Pratte EuroValue Fund Ltd., In re, 2010 (2) CILR 233, referred to.

Legislation construed:

Court of Appeal Rules (2004 Revision), r.20:

‘Except so far as the Court below or the Court may otherwise direct-

(a) an appeal shall not operate as a stay of execution or of proceedings under the decision of the Court below . . .’

Grand Court Rules, O.62, r.4(11): The relevant terms of this paragraph are set out at para. 8.

O.62, r.11(2): The relevant terms of this paragraph are set out at para. 8.

Practice Directions cited:

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

Practice Direction No. 1/2011, Guidelines Relating to the Taxation of Costs.

Civil Procedure-costs-indemnity basis-court may order costs on indemnity basis under GCR, O.62, r.4(11) if part of proceeding conducted ‘improperly, unreasonably or negligently’-requires abuse of court”s process, e.g. asserting false cause, pursuing action for ulterior motive, or maintaining after realizing bound to fail

Civil Procedure-costs-interim payment-court”s inherent jurisdiction to control own procedure includes jurisdiction to order interim payment of costs-as taxing officer usually issues interim certificate for uncontested costs, interim payment of costs may be unnecessary duplication-in wholly exceptional circumstances may be appropriate to make interim payment order before/instead of delivery of bill of costs

Civil Procedure-costs-taxation-stay of taxation-under Court of Appeal Rules (2004 Revision), r.20, taxation of Grand Court costs not automatically stayed pending appeal but court may grant discretionary stay-to consider risk of injustice to either party if granted-in particular, ability to pursue appeal and recover costs paid if successful

The plaintiff brought claims for breach of contract, breach of fiduciary duty and breach of trust against the defendants.

The Grand Court (Jones, J.) found the plaintiff to be an unreliable witness and dismissed all his claims (in proceedings reported at 2012 CILR (1) 451). The defendants consequently sought their costs on the indemnity basis under GCR, O.62, r.4(11) and directions as to whether the court had jurisdiction to order an interim payment for their costs. The

plaintiff sought an order staying taxation until after the conclusion of his pending appeal.

The defendants submitted that (i) the plaintiff had made wide-ranging and obviously flawed allegations of fraud, generating unnecessary work in preparation for the trial; (ii) this amounted to improper conduct within O.62, r.4(11); (iii) causation and loss were not necessary elements of liability under r.4(11); (iv) indemnity costs were therefore appropriate; and (v) the court”s inherent jurisdiction to control its own procedure included the jurisdiction to make interim payment orders for costs.

The plaintiff submitted in reply that (i) he had not conducted his case improperly within O.62, r.4(11); (ii) a stay of taxation was justified pending the conclusion of his appeal; (iii) any inherent jurisdiction to make interim payment orders for costs was precluded by the Grand Court Law (2008 Revision), s.20, which dealt with the court”s power to order interim payments and stated that it did not affect the statutory power to make rules relating to costs; and (iv) the court”s inherent jurisdiction related only to matters of procedure, whereas the jurisdiction to make inter partes orders for costs was a matter of substantive law.

Held, allowing the defendants” application in part and dismissing the plaintiff”s application:

Indemnity costs

(1) The court would order the plaintiff to pay indemnity costs in respect of his breach of contract claim. He had conducted that part of the proceedings ‘improperly, unreasonably or negligently’ within the meaning of that phrase in GCR, O.62, r.4(11), having advanced the claim knowing it to be false. This amounted to an abuse of the court”s process in a way which attracted moral condemnation. Although there were other examples of improper conduct, e.g. pursuing an action for some ulterior motive or maintaining it after realizing it was bound to fail, none had been established so as to justify indemnity costs in respect of the remainder of the present proceedings. The court”s finding that the plaintiff was not a credible witness was not by itself sufficient, as the outcome of litigation frequently turned on the court”s assessment of the credibility of witnesses (paras. 14–17; para. 27).

(2) The court further considered the related jurisdiction to make wasted costs orders under O.62, r.11. Whereas r.4(11) was aimed at substantive misconduct by a party and the order could be made only against that party personally, r.11 was aimed at procedural misconduct by a party or his attorney and the wasted costs order could therefore be made against that party personally under para. (2) or his attorney under para. (3). Further, wasted costs orders could be made against attorneys to compensate the opposing parties or their own clients (para. 9).

(3) The court was not concerned in the present case with whether the plaintiff”s misconduct caused the defendants financial loss. Whereas a

wasted costs order under r.11(2) compensated the applicant for additional expenditure incurred as a result of the opposing party”s procedural misconduct, causation and loss were not necessary elements of liability under r.4(11), which was penal in nature (para. 10).

(4) The court was not assisted by the English decisions. The English courts had a wider jurisdiction to grant indemnity costs, which was not limited to circumstances in which a party conducted his proceedings in a manner which was improper, unreasonable or negligent-it was therefore clear that the Grand Court Rules were not intended to replicate English law (para. 13).

Stay of taxation

(5) The court would not exercise its discretion to order a stay of taxation. Under the Court of Appeal Rules (2004 Revision), r.20, the plaintiff”s appeal did not automatically operate as a stay of taxation, but the court could grant a discretionary stay, having regard to the risk of injustice to either party if a stay were to be granted or refused. Given the plaintiff”s wealth, the refusal of a stay would not have adversely affected his ability to pursue the appeal; further, he would have had no difficulty recovering any sum paid to the defendants if his appeal were to succeed and the costs order be reversed. There were therefore no circumstances justifying a stay of taxation (para. 18; para. 27).

Interim payment

(6) The court had jurisdiction to order an interim payment of costs and would make directions to ensure that any such application was dealt with appropriately in this case. Rules dealing with the circumstances in which an interim payment could be ordered fell within the scope of the court”s inherent jurisdiction to control its own procedure. This jurisdiction could be invoked to supplement the GCR, but not to lay down any procedure which was inconsistent with them. As...