Parker J
IN THE GRAND COURT OF THE CAYMAN ISLANDS
FINANCIAL SERVICES DIVISION
CAUSE NO: FSD 145 OF 2022 (RPJ)
IN THE MATTER OF SECTION 64 OF THE COMPANIES ACT (2022 REVISION)
AND IN THE MATTER OF THE AVIVO GROUP
Before:
The Hon. Raj Parker
Heard:
On the papers
Date of Judgment: 11 January 2023
Draft Judgment circulated: 13 January 2023
Judgment delivered: 25 January 2023
HEADNOTE
Appointment of Inspectors by the Court-s.64 Companies Act (2022 Revision)-costs-indemnity costs-s.24
Judicature Act (2021 Revision)-GCR Order 62, rule 4-exersise of discretion-focus on conduct of losing
party-unreasonable conduct to a high degree-conduct or circumstance which takes the case out of the
norm-settlement offers.
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Digitally signed by Advance Performance Exponents
Inc
Date: 2023.01.26 15:24:05 -05:00
Reason: Apex Certified
Location: Apex
Introduction
1.
Avivo Group (the “Company”) applies for indemnity costs following the Court declining to
appoint inspectors to examine the affairs of the Company pursuant to section 64 of the
Companies Act (2022 Revision). Agricultural Development Fund (“ADF”) resists the application.
2.
This decision deals with the order as to costs in respect of ADF’s notice of originating motion
dated 1 July 2022 for the appointment of inspectors pursuant to section 64 of the Companies Act
(2022 revision). The related Company’s costs of the directions and strike out and ADF’s evidence
summonses are to be treated as ‘costs in the proceedings’.
3.
The Court has determined this matter on the basis of written submissions.
Law
4.
It is trite law in the Cayman Islands that:
(a) the costs of and incidental to all civil proceedings in the Grand Court are in the
discretion of the relevant court1 and that the Grand Court has the full power to
determine by whom and to what extent the costs are to be paid2;
(b) the general rule is that costs should "follow the event’3.
5.
GCR O.62, r.4(2) and (11) provide as follows:
1 Judicature Act (2021 Revision), section 24(1)
2 Judicature Act (2021 Revision), section 24(3)
3 GCR Order 62, rule 4(5)
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"(2) The overriding objective of this Order is that a successful party to any proceeding
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 …
(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.”
6.
The usual costs order made against an unsuccessful party is that costs are taxed on the standard
basis. That is the usual rule: see e.g. GCR O.62 r.4(10); AHAB v Saad Investments Company
Limited4.
7.
It is only in exceptional cases that the Court should exercise its discretionary jurisdiction to order
costs on the indemnity basis: AHAB v Saad Investments Company Limited5. The Court should
have regard to all the circumstances of the case and the discretion to award indemnity costs is
extremely wide6.
8.
In considering the exercise of its discretion to make an order for indemnity costs, the Court
should focus on the conduct of the losing party not on the substantive merits of the case. To
justify such an award there should normally be an element in the losing party’s conduct which
deserved a ‘mark of disapproval’ which involved the conduct being unreasonable to a high degree
7.
4 [2012] 2 CILR 1 at §15
5 Ibid at [2012] 2 CILR 1 at §§ 9 and 15
6 Three Rivers D.C. v Bank of England [2006] 5 Costs L.R. 714 at §25 Tomlinson J
7 AHAB v SAAD [2013 (2) CILR 344]
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9.
GCR O.62, r.4(11) has been interpreted by the Court to mean that it must be satisfied that the
unsuccessful paying party has conducted the part of the proceedings to which the Order relates:
(a) improperly; (b) negligently; or (c) unreasonably ‘to a high degree’8.
10.
It is not improper to advance a genuine case in what could be said to be in the way of usual
litigation which fails as a result of the Court’s rejection of the evidence or its interpretation of the
law and in such a case, standard costs ought to be ordered9.
11.
If there is nothing unusually unreasonable about the paying party’s conduct, the appropriate order
is for standard basis costs10. Even if the paying party’s conduct can be rightly characterised as
unreasonable, if it is not so unreasonable as to be ‘out of the norm’, a standard basis costs order is
appropriate.11
12.
In the ordinary case even when the paying party has conducted its case unreasonably, unless it
has advanced a case outside the usual latitude afforded to parties to argue cases which may be
seen at the time to be without merit, speculative or weak, a standard basis order will be
appropriate12.
13.
There needs to be some conduct or circumstance which takes the case out of the ordinary which
warrants an order for indemnity costs13.
8 GCR O.62, r.4(11) as explained in AHAB v. Saad [2013] 2 CILR at 346 – 347 and cited
in Talent Business Investments Ltd. v. China Yinmore Sugar Co. Ltd [2015] 2 CILR 113 at §36.
9 Al-Sadik v. Investcorp[2012] 2 CILR 33; and Asia Pacific Ltd. v ARC Capital LLC[2015] 1 CILR 299, Chadwick
P at§56; both cited in Talent Business Investments Ltd. v China Yinmore Sugar Co. Ltd[2015] 2 CILR 113 at §38
10 Healy-Upright v Bradley & Another [2007] EWHC 3161 at §17§
11 Ritter v. Butterfield (unreported, 31 December 2018 at §69)
12 AHAB v SAAD [2013 (2) CILR 344]at § 5
13 Three Rivers ibid at §25
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14.
As Henderson J observed in Bennett v Attorney General14, § 6:
"Advancing a [case] which is merely weak or unlikely to succeed is to be distinguished
from maintaining a [case] which is manifestly hopeless. The latter can be characterized
as unreasonable. The former is a regular occurrence with which every barrister will be
familiar. Many litigants, even after receiving a warning from their legal advisers that the
claim or defence is likely to fail, prefer to have that determination made by the Court.
That is not, in the typical case, unreasonable. Weak cases will succeed from time to time.
The litigant is entitled to prefer a judicial determination based upon all of the evidence
over the predictions of his advisers which are limited, as they usually are, by not having
observed the other side's witnesses under cross-examination. There are also cases which
are hopeless and which appear that way to anyone with the requisite legal training. It is
open to a judge to determine that it was unreasonable to bring such a claim or advance
such a defence. The usual result of such a finding is that the unsuccessful party will pay
costs on the indemnity basis…..
The assessment of unreasonableness must avoid the wisdom of hindsight. The question is
whether it was unreasonable to advance the claim or maintain the defence taking into
account what should have been evident to the party concerned at the outset of the trial."
15.
In relation to settlement offers, even where it can be said, with hindsight, that a party was wrong
to reject a settlement offer, the mere rejection of the settlement offer will not amount to
unreasonable conduct sufficient to justify indemnity costs unless the case being pursued was
manifestly hopeless (to use the language of Henderson J), and demonstrably so at the time of the
making of the offer.
14 [2010 (1) CILR 478]
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16.
In Kiam v MGN Ltd (No 2)15 (referred to by Henderson J in Bennett (above)), the Court of Appeal
declined to award indemnity costs, and instead awarded standard costs, noting at §13:
“it will be a rare case indeed where the refusal of a settlement offer will attract... not
merely an adverse order for costs, but an order on an indemnity rather than standard
basis".
17.
Similarly in F&C Alternative Investments (Holdings) Ltd16, in response to a submission that the
mere rejection of a reasonable offer of settlement had itself been unreasonable conduct, the
English Court of Appeal said (at § 69):
“That is a non sequitur. The position has to be judged at the time of the offer not only by
reference to the maker of the offer but also by reference to the recipient. At that time, the
claimants were optimistic as to their prospects: and there was no finding by the judge
that that was an unwarranted or unjustified view to take. In the event, their high hopes
were dashed-a common-place of litigation generally. It transpired that the claimants had
assessed the position wrongly. But that is a hindsight call.”
Determination
18.
ADF’s application traversed novel ground in relation to section 64 of the Companies Act. The
Judgment delivered on 15 December 2022 set out some guidance17.
19.
The Court decided that the grounds which would lead to an order for inspection had not been
clearly established. ADF had not shown that its concerns had been ignored or that the Company
15 [2002] 1 WLR 2810
16 [2013] 1 WLR 548
17 §§45-62
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had concealed material matters18. The remedy of appointing inspectors was reserved for cases in
which there is a strong likelihood, well founded on a solid and substantial basis, of serious
misconduct and /or mismanagement, or concealment, which had not been clearly established by
ADF on the evidence.19
20.
Moreover, there was no demonstrable objective which the Court could see was to be achieved,
where alternative remedies were available to ADF20.
21.
The Company therefore successfully resisted the application and should have its costs paid by
ADF.
22.
The Court has considered the Company’s arguments in support of its case that these costs should
be awarded on an indemnity basis.
23.
In summary, these arguments were: ADF did not provide the Company sufficient time to respond
before filing; ADF did not adequately particularise its concerns so that the Company could
adequately respond to such concerns; ADF prosecuted the application unreasonably and
procedurally wrongly which led to the incurrence of unnecessary time and costs by the Company;
the Company provided fulsome responses to the concerns raised by ADF; ADF had access to all
information by virtue of the ADF nominee director; the Company made a number of offers in
open and without prejudice correspondence to appoint the inspectors ADF had proposed as
independent directors of the Company and to establish a subcommittee formed of directors
independent from Regulus to address ADF’s concerns; the application was calculated to exert
commercial pressure for a renegotiation of constitutional arrangements at the Company and was
fundamentally misconceived; and the appointment of inspectors was not the appropriate way in
which ADF should have sought relief and the application should not have been proceeded with.
18 § 67
19 § 73
20 §74
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24.
The Court has come to the clear view, having considered these arguments, that this was not an
application brought which was manifestly hopeless, or litigation conducted so unreasonably as to
warrant a ‘mark of disapproval’ from the Court by way of an indemnity costs order.
25.
Having reviewed the evidence concerning settlement offers made by the Company, the Court is
not persuaded that ADF behaved unreasonably to a high degree in failing to accept offers.
26.
As to the development of the affidavit evidence and the provision of particulars in relation to the
application, the basis of the application was not in the Court’s view manifestly hopeless, and it
was not advanced unreasonably to a high degree.
27.
ADF should therefore pay the Company’s costs, to be taxed on the standard basis.
THE HON. MR JUSTICE RAJ PARKER
JUDGE OF THE GRAND COURT
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