The Companies Act (2020 Revision) and Adenium Energy Capital, Ltd (in Official Liquidation)
| Jurisdiction | Cayman Islands |
| Judge | Justice Cheryll Richards |
| Judgment Date | 21 August 2023 |
| Docket Number | CAUSE NO. FSD 54 of 2020 (CRJ) |
| Court | Grand Court (Cayman Islands) |
The Hon. Justice Cheryll Richards KC
CAUSE NO. FSD 54 of 2020 (CRJ)
IN THE GRAND COURT OF THE CAYMAN ISLANDS
FINANCIAL SERVICES DIVISION
Section 6 (f) of the Court of Appeal Act (2023 Revision), Leave to Appeal
Mr. Brett Basdeo of Walkers on behalf of the Joint Official Liquidators
Mr. Laurence Aiolfi of Mourant on behalf of KSB Capital (Offshore) SAL
By Summons dated 27 th June 2022 the Applicant, KSB Capital (Offshore) SAL (“KSB”) seeks leave to appeal paragraph 5 of the Order of the Court made on the 13 th June 2022 and an order that this paragraph be stayed pending the conclusion of the appeal. Paragraph 5 of the Order required KSB to pay the costs of Adenium Energy Capital Ltd. (in Official Liquidation) (“the Company”) on the standard basis to be taxed if not agreed. This was in respect of costs arising from three Summonses dated 15 th October 2020, 20 th November 2020 and 15 th January 2021.
On the 12 th September 2022, the Company applied for taxation of its costs and an Interim Costs Certificate. The Taxing Officer issued this certificate on the 28 th September 2023. On the 12 th October 2022, the Applicant applied for the setting aside or review of the Interim Certificate.
The draft grounds of appeal are in summary that in the exercise of its discretion on the facts of the case the Court erred in two material respects. These are a failure to give proper weight to the usual principle that a successful party is entitled to its costs and in taking into account or giving too much weight to the conduct of the Applicant in respect of certain matters. It is said that there were three Summonses before the Court which were separate applications which could be regarded separately for the purpose of cost orders and that as the Applicant was wholly unsuccessful in only one aspect of one of the three Summonses, the Court was wrong to award costs against it.
The background facts are set out in the earlier judgment and are not rehearsed herein. In summary, by the October Summons, the Joint Official Liquidators of the Company (“JOLs”) sought declarations that three transfers made by the Company to the Applicant in May and June of 2020 are void pursuant to s.99 of the Companies Act. A winding up order placing the Company into liquidation was made on the 27 th July 2020. By the November Summons, the Applicant sought to be added as a respondent to the October Summons and declarations as to the non-applicability of s.99 of the Companies Act to the transfers. By the January Summons the Applicant sought the strike out of the October Summons and in the alternative that it be granted leave to bring Declaratory Applications. The underlying issue is the status of certain lenders who were parties to a Debenture Agreement with the Company dated 30 th May 2019 and thus whether s.99 of the Act was engaged.
There is no dispute between the parties as to the test for the grant of leave to appeal. Counsel for the Applicant refers to the case of Telesystem International Wireless Incorporated and Another v. Cvc/Opportunity Equity Partners L.P. and Three Others 1. It is whether the appeal has a realistic prospect of success. It was held:-
“ The general test of whether leave to appeal should be granted is: Does the appeal have a real (i.e. realistic, not fanciful) prospect of success? ( Swain v. Hillman, [1999] T.L.R. 745, dicta of Lord Woolf, M.R. applied). In exceptional circumstances, leave will be granted even where no such prospect exists if the appeal involves an issue which should be examined by the Court of Appeal in the public interest, e.g. when a public policy issue arises or a binding authority requires reconsideration. The relative significance of the issues and the costs necessary to examine them will be a relevant factor.”
The Order as to costs was made pursuant to the exercise of a discretion as provided for by s.24 of the Judicature Act (2021 Revision) and the Grand Court Rules (“GCR”) Order 62. Counsel for the Applicant relies on the decision of the Court of Appeal in the case of Traded Life Policies Fund (in Official Liquidation) and Others v. Jeremy Leach and Others 2 in which the Appellate Court said that in challenging the exercise of a discretion it will be necessary to show that the Judge erred in principle or omitted or considered some factor that should or should not have been considered or that the decision was wholly wrong.
Counsel also relies on the dicta of the English Court of Appeal in the case of Roache v. News Group Newspapers Limited and Others, 3 that the Appellate Court will in respect of an appeal as to costs adopt the same approach as on any other appeal against the exercise of a judge's discretion.
There is disagreement between the parties as to the inferences which may reasonably be drawn from the conduct of the Applicant prior to the hearing of the Summons. Counsel for the Applicant submits that the Court failed to take into account that the Applicant had endeavoured to avoid the need for issuing the January Summons by seeking the consent of the JOLs in relation to leave to bring the Applications. It is said that it is the action of the JOLs in refusing to agree to this and their opposition to the Leave Application which caused unnecessary costs to be incurred. Counsel submits that it was not appropriate for the Court to have had regard to the conduct of the Applicant in the way in which it did. It is submitted that:-
“23. To the extent that the Judge relied on KSB's failure to bring a validation application earlier, it was improper for the Judge to cast the failure to seek a validation order as misconduct such as to justify ordering that the Appellant pay the cost of all the applications. KSB has been granted leave to argue a position that would establish it was not required to seek a validation order as a matter of law and that the secured lenders were entitled to enforce their security outside the liquidation.
24. Furthermore, there is no evidence that the JOLs would have acceded to any validation application brought by KSB at an earlier time, or that it would be any less costly, particularly in circumstances where the JOLs have expressed their doubts as to the validity of the Debenture (without having formally challenged its validity).
25. It was also improper to rely on KSB's conduct in not responding substantively to the JOLs queries as a basis for depriving KSB of any costs in the proceedings. There is no obligation on KSB to do so and it was therefore not misconduct. In any event, there was no basis to conclude that this would have avoided the October Summons and the subsequent proceedings.”
In oral submissions by reference to the cases of Autumn Holdings v. Renova Resources 4 and Kupeli v. Kibris 5, Counsel said in summary that the exercise of the Court's discretion was not in keeping with the factual circumstances and that the Court failed to do justice between the parties.
In reply, Counsel for the Company noted the guidance provided by the English Court of Appeal in the case of Jolly and Jay 6. This is that the response to an application such as this should be limited to whether the proposed appeal would meet the relevant threshold test or to pointing out if there are material inaccuracies raised by the Applicant.
Counsel submits that there is no real prospect of success in the proposed appeal. The Applicant was not the successful party as the primary relief of strike out was refused. The leave obtained was to bring Declaratory Applications in circumstances where the Applicant should have but did not obtain leave to bring such an application beforehand. It is further argued that the appeal does not raise a point of general principle and is not of a significance which would justify the resulting costs. It is submitted that the costs of the leave to appeal hearing alone is wholly disproportionate to the issues on which the Applicant is seeking leave to appeal.
As to the facts, Counsel submits that the Applicant's contention as to the rationale for the filing of the October Summons is not supported by the evidence. It is further submitted that it is a material inaccuracy for the Applicant to say that it sought to avoid costs and the necessity for issuing an application for leave. It was the Applicant who refused to seek leave to make an application for validation. Thus, it is said that the circumstances of the conduct of the Applicant was a relevant consideration for the Court. Counsel submits that the inescapable inference on all the facts is that the Applicant conducted itself in an improper manner.
There is another factor which is raised by the Company. This is the factor of delay. Counsel on behalf of the Company submits that while the Applicant's Summons for Leave to Appeal was served on the 27 th June 2022, the Applicant took no steps to have the Summons listed until four months later, on the 14 th October 2022. In the intervening period the JOLs' bill of costs was served on the 8 th August 2022. It was only after the issue of the Interim Certificate on the 28 th
Given the position that I have ultimately taken, I have not set out the very full and detailed arguments of both Counsel and do not propose to set out a...
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