The Companies Act (2022 Revision) and the Companies Winding Up Rules (2018) and Performance Insurance Company SPC (in Official Liquidation)

• Jurisdiction: Cayman Islands
• Judge: Raj Parker
• Judgment Date: 29 December 2022
• Court: Grand Court (Cayman Islands)
• Docket Number: CAUSE NO. 70 OF 2021 (RPJ)

In the Matter of the Companies Act (2022 Revision)

And in the Matter of the Companies Winding Up Rules (2018)

And in the Matter of Performance Insurance Company SPC (In Official Liquidation)

Before:

The Hon. Raj Parker

CAUSE NO. 70 OF 2021 (RPJ)

IN THE GRAND COURT OF THE CAYMAN ISLANDS

FINANCIAL SERVICES DIVISION

HEADNOTE

Costs determination-applications for approval of JOL remuneration and an additional JOL-s.24 Judicature Act (2021 Revision)-Part V (winding up of companies) and Part XIV (segregated portfolio companies) of Companies Act-(Companies Winding Up rules (CWR)) Order 24,11,20—GCR Order 62-ss 218–223 Companies Act — set off.

Introduction

1 I gave judgment in this matter on 10 November 2022.

2 I directed that the Court would deal with costs on the basis of written submissions. I have reviewed the written submissions of 8 December 2022 on behalf of the JOLs and on behalf of the shareholders of SSS Insurance SP (“SSS SP”).

3 The shareholders of SSS SP successfully challenged the amount of US$216,078.53 in fees and expenses claimed by the JOLs in the Amended Remuneration Summons on the basis that the JOLs had wrongly allocated certain fees and expenses to SSS SP. The Court approved under half (US$101,350.39) of the JOLs fees and expenses.

4 SSS SP and the shareholder of Bottini SP had also sought the appointment of an additional joint official liquidator (“AJOL”) in relation to SSS SP and Bottini SP. By the Judgment of this Court dated 6 April 2022 the shareholders of Bottini SP and SSS SP were also successful on that application. The Court directed that the parties also address the costs of the AJOL application as part of their written submissions.

The Legal Framework

5 Section 24(1) of the Judicature Act (2021 Revision) provides that, subject to the provisions of the Act or any other Law and rules of court, the costs of and incidental to all civil proceedings in the Grand Court shall be in the discretion of the Court. Sub-section 24(3) provides that the Court shall have full power to determine by whom and to what extent the costs are to be paid.

6 Whilst the Court's power is discretionary, the discretion must be exercised in accordance with well-established principles: see Doyle J in ( Re ICG I FSD 192 of 2021 (DDJ), 10 August 2021, unreported) at §5.

7 The statutory framework applicable to the official liquidation of the Company is comprised of Part V (Winding Up of Companies) and Part XIV (Segregated Portfolio Companies) of the Companies Act (2022 Revision) (“ Companies Act”) and the Companies Winding Up Rules (“CWR”). The Grand Court Rules are not of general application to liquidation proceedings.

8 The application made by the AJOL Summons is an application in the liquidation proceedings within the meaning of CWR Order 24, rule 2.

9 The application made by the Amended Remuneration Summons is a sanction application within the meaning of CWR Order 11, rule 1.

Rules as to costs of sanction applications

10 The general rules as to costs of sanction applications are set out in CWR Order 24, r.9:

(1) This Rule applies to every sanction application under Order 11, including any application for the approval of the official liquidator's remuneration.

(2) The official liquidator's costs of making a sanction application shall be paid out of the assets of the company unless the Court is satisfied that –

(a) the application ought not to have been made because the directions sought by the official liquidator were unnecessary and served no useful purpose;

(b) the directions sought by the official liquidator were wholly unreasonable; or

(c) the official liquidator has misled the Court or otherwise acted improperly in connection with the application.

……

(4) In the case of a sanction application which is made or opposed by a creditor or contributory, the general rule is that –

(a) his costs of successfully making or opposing the application should be paid out of the assets of the company, such costs to be taxed on an indemnity basis if not agreed with the official liquidator; and

(b) no order for costs should be made against a creditor or contributory whose application or opposition is unsuccessful, unless the Court is satisfied that his position was wholly unreasonable or he is guilty of having misled the Court or otherwise acting improperly in connection with the application.

(5) The Court shall make orders for costs in accordance with these general rules unless it is satisfied that there are exceptional circumstances and special reasons which justify making some other order or no order for costs.

Rules as to costs of non-sanction applications made in liquidation proceedings

11 As the application made by the AJOL Summons is an application in the liquidation proceedings which does not fall within one of the special costs rules under Part II of CWR O.24, the general costs rules under GCR Order 62 continue to apply by virtue of GCR Order 1, rule 2(4).

12 Kawaley J held in ( Re Oakrun Precious Metals Funds Ltd FSD 9 of 2019 (IKJ), 30 April 2019, unreported) at §45:

“The effect of these parallel provisions is that GCR Order 62 applies to winding up proceedings save to the extent that special costs rules under the CWR are engaged. Even where Order 62 does apply, the way in which the Court's discretion is exercised may be shaped by any distinctive characteristics of the winding-up context.”

13 Accordingly the general principles of GCR O.62, r.4 as to entitlement to costs apply. GCR O.62, r.4(2) provides that:

“The overriding objective of this Order is that a successful party to any proceedings should recover from the opposing party the reasonable costs incurred by him in conducting that proceeding in an economical, expeditious and proper manner unless otherwise ordered by the Court.”

14 GCR O.62, r.4(5) provides that:

“If the Court in the exercise of its discretion sees fit to make any...