The Companies Act (2021 Revision) and Principal Investing Fund I Ltd and Long View II Ltd and Global Fixed Income Fund I Ltd Credit Suisse London Nominees Ltd Petitioner v Principal Investing Fund I Ltd Long View II Ltd Global Fixed Income Fund I Ltd First Respondents and Floreat Principal Investment Management Ltd LV II Investment Management Ltd Floreat Investment Management Ltd Second Respondents
| Jurisdiction | Cayman Islands |
| Judge | Justice Kawaley |
| Judgment Date | 27 July 2023 |
| Docket Number | FSD CAUSE NO. 268, 269, 270 OF 2021 (IKJ) |
| Court | Grand Court (Cayman Islands) |
In the Matter of the Companies Act (2021 Revision)
And in the Matter of Principal Investing Fund I Limited
And in the Matter of Long View II Limited
And in the Matter of Global Fixed Income Fund I Limited
and
The Hon. Justice Kawaley
FSD CAUSE NO. 268, 269, 270 OF 2021 (IKJ)
IN THE GRAND COURT OF THE CAYMAN ISLANDS
FINANCIAL SERVICES DIVISION
Costs of petition and reserved interlocutory costs orders-basis of taxation-when indemnity costs appropriate—whether the same standard of taxation should be applied to the proceedings as a whole-costs of abandoned allegations-costs of amendments-costs of successful recusal application—Companies Winding Up Rules Order 24 rules 7–8—Grand Court Rules Order 62 rule 4 (11) and Preamble—
Mr James Collins KC instructed by Mr David Lee and Mr David Lewis-Hall of Appleby (Cayman) Limited for the Petitioner and the Non-Party Applicant
Mr Michael Bloch KC instructed by Mr Alan Quigley of Forbes Hare for the Second Respondents
Winding-Up Orders were orally granted on the final day of the hearing of the Petitions in open Court in respect of two of the three Funds on the following dates:
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(a) Principal Investing Fund I Limited (“PIFL”): 12 May 2023;
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(b) Long View Fund II Limited (“Long View”): 12 May 2023. (The Orders were not filed until 30 May 2023 and were, whether by accident or design, dated 29 May 2023 when I approved the final form of the Orders).
The hearing of the Petition in relation to Global Fixed Income Fund I Limited (“GFIF”) was adjourned on 12 May 2023 to a date to be fixed. A Winding-Up Order was granted on a consensual basis without a further hearing in respect of GFIF on 12 June 2023, the date when I approved a final version of that Order and which counsel agreed should be assigned that date.
All applications in relation to costs were listed for hearing on 12 July 2023. The parties creditably agreed much of a proposed draft Order. I determined the following disputed issues in the course of the hearing:
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(a) the costs of Doyle J's 31 January 2022 Order adjourning the Petitioners' application for an injunction, which was effectively abandoned, I ordered should be paid by the Petitioners;
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(b) I ordered that the costs of the Petitioners' Confidentiality Summonses should be payable by the 2 nd Respondents as part of the costs of the Petitions on the grounds that the Petitioners' application was substantially successful; and
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(c) I approved the recovery of foreign lawyers (including paralegals) costs pursuant to GCR Order 62 rule 18 (1), (4) and (6) on the grounds that the financial and legal scale and multi-jurisdictional reach of these cases justified the deployment of foreign legal capacity.
I reserved judgment on the following issues which I now decide:
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(a) whether the costs of the Petition should be ordered to be taxed if not agreed on the standard basis, or on the indemnity basis;
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(b) whether the costs of the issues abandoned through re-re-amendments made by the Petitioner at trial should be recovered by the Petitioner or the 2 nd Respondents;
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(c) whether the costs of the Petitioners' amendment application reserved by Doyle J's Order dated 31 May 2022 should be paid by the 2 nd Respondents as part of the costs of the Petition, or whether there should be no order as to those costs;
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(d) (only because this item was in the same paragraph of the draft Order as (c)) whether the clearly de minimis costs of the 2 nd Respondents' extension of time application which were reserved by the Consent Order of 26 January 2023 should be in the Petition or paid by the Petitioner. I indicated during the hearing that I could see no reason why these costs should not be in the Petition; and
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(e) whether the costs of the 2 nd Respondents' recusal application reserved by Doyle J's Orders dated 19 August 2022 and 21 November 2022 should be paid by the Petitioners, or whether the 2 nd Respondents should pay 50% of the Petitioners' costs.
In the course of the hearing, I expressed anxiety about whether I was sufficiently well-placed to assess the appropriateness of ordering indemnity costs in relation to these proceedings as a whole. Doyle J had conduct of them between September 2021 and November 2022, and my active involvement began with a discovery application in December 2022 and culminated in presiding over the trial which commenced on 3 April 2023.
My preliminary view was that the case for indemnity costs was stronger in relation to the trial phase of the proceedings than it was in relation to the earlier phases of the proceedings, and that careful consideration was required to determine whether a composite or bifurcated approach should be taken to the costs of the Petition.
There was no significant dispute as to the governing general principles in relation to when costs may be awarded on the indemnity basis. It was common ground that GCR Order 62 rule 4 (11) applied. This provision provides:
“ (11) The Court may make an inter partes order for costs to be taxed on the indemnity basis only if it is satisfied that the paying party has conducted the proceedings, or that part of the proceedings to which the order relates, improperly, unreasonably or negligently.”
There was some nuanced debate as to whether, as Mr Bloch KC for the 2 nd Respondents seemed to suggest, unusual litigation conduct at trial which did not add to the length of the trial or the overall costs engaged this rule. Mr Collins KC submitted that any conduct which warranted the Court's condemnation would justify an indemnity costs award, even if the impropriety did not entail any wastage of costs. In the Petitioner's Skeleton Argument it was submitted:
“ 24. The principles governing the application of this test were recently reviewed by Richards J in ( KOA Capital LP v China Index Holdings Limited unreported, 14 April 2023) at [12] to [22]. The touchstone is whether there is something in the conduct or circumstances to take the case out of the norm. This includes (a) some element of the paying party's conduct of the case which deserves some mark of disapproval; (b) conduct which is either deserving of moral condemnation or is unreasonable to a high degree. It also includes the question of whether it was reasonable for the paying party to raise and pursue particular allegations and the manner in which they did so: Talent Business Investments Limited v China Yinmore Sugar Company Limited [2015] (2) CILR 113 at [41], citing English authority, Three Rivers D.C. v Bank of England [2006] 5 Costs L.R. 714. The discretion is ‘extremely wide’ (Ibid.).”
In the 2 nd Respondents' Skeleton Argument, essentially the same principles were recited:
“ 64. The principles regarding awards of indemnity costs under GCR O.62 were set out in ( Koa Capital L.P. & Anor. v. China Index Holdings Limited Unreported, FSD 235 of 2022 (CRJ), dated 14 April 2023) at §§13–22 by reference to the authorities. In particular, ‘when considering an application for the award of costs on the indemnity basis, the court is concerned principally with the losing party's conduct of the case, rather than the substantive merits of his position’: Koa §15. ‘It is important to avoid the wisdom of hindsight in this analysis’: ( In the Matter of Grand State Investments Limited Unreported, FSD 11 of 2021 (RPJ), dated 17 March 2023) at §34. Indemnity costs would be awarded where ‘There is some element of a party's conduct of a case which deserves some mark of disapproval’. In that regard, ‘If the conduct falls short of moral condemnation, it would need to be unreasonable to a high degree to justify an award of indemnity costs. Unreasonable in this context does not mean wrong or misguided in hindsight.’ (Koa §15)”
In the Petitioner's Skeleton Argument, reference was rightly made to the distinction between the CWR regime and the GCR Order 62 regime. However, the following point was on further analysis a partly misconceived one:
“ 14… The CWR expressly retain the Elgindata principle without the modification in GCR O. [62] r.4 (2) which was introduced in 2002 and which requires a party to show that he has conducted ‘proceedings in an economical, expeditious and proper manner’. The fact that the CWR did not make this change, and apply an unmodified version of the Elgindata principles to winding up, no doubt reflects the fact that just and equitable petitions often cover a multitude of issues, not all of which need to be addressed in disposing of a petition…”
In fact, CWR Order 24 has provision which corresponds to GCR Order 62 rule 4 (2), albeit surprisingly ‘hidden’ in an interpretation clause. CWR Order 24 rule 7 provides:
“ (1) ‘Costs’ shall mean the reasonable legal fees and expenses incurred by a person in conducting or participating in a liquidation proceeding in an economical, expeditious and proper manner.”
This highlights the need for a careful approach to the way in which CWR and the GCR intersect in relation to the costs' regime.
CWR Order 1 rule 4 makes general provision for the application of the GCR to winding-up proceedings without mentioning Order 62 at all. CWR Order 24 rule 7 (1) (reproduced above) defines costs in a way which implies that litigants are obliged to conduct winding-up proceedings “ in an economical, expeditious and proper manner.” These words must be read into CWR Order 24 rule 8 when it says:
“ (2) In the case of a...
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