Re Bancredit Cayman
| Jurisdiction | UK Non-devolved |
| Judge | (Lord Scott of Foscote, Lord Rodger of Earlsferry, Baroness Hale of Richmond, Lord Neuberger of Abbotsbury and Sir Jonathan Parker) |
| Judgment Date | 04 November 2009 |
| Court | Privy Council |
| Date | 04 November 2009 |
(Lord Scott of Foscote, Lord Rodger of Earlsferry, Baroness Hale of Richmond, Lord Neuberger of Abbotsbury and Sir Jonathan Parker)
T. Lowe, Q.C. and Ms. C.J. Bridges for the appellants;
M. Crystal, Q.C. and M.J. Crawford for the respondents.
(1) British South Africa Co. v. Companhia de Mocambique, [1893] A.C. 602; [189194] All E.R. Rep. 640; (1893), 63 L.J.Q.B. 70; 10 T.L.R. 7, referred to.
(2) C.T. Bowring & Co. (Ins.) Ltd. v. Corsi & Partners Ltd., [1994] 2 Lloyds Rep. 567; [1995] 1 BCLC 148, considered.
(3) Electrotec Servs. Ltd. v. Issa Nicholas (Grenada) Ltd., [1998] 1 W.L.R. 202; (1997), 52 W.I.R. 134, considered.
(4) Gilbert v. EndeanELR(1878), 9 Ch. D. 259, considered.
(5) Pretoria Pietersburg Ry. Co. (No. 2), In re, [1904] 2 Ch. 359; (1904), 73 L.J. Ch. 704; 91 L.T. 285, dicta of Buckley J. followed.
(6) Savings & Inv. Bank Ltd. v. Gasco Invs. (Netherlands) B.V. (No. 2), [1988] Ch. 422; [1988] 2 W.L.R. 1212; [1988] 1 All E.R. 975, referred to.
(7) Semenza, Re, Ex p.Paget, [1894] 1 Q.B. 15; (1893), 63 L.J.Q.B. 278; 69 L.T. 703, considered.
(8) Taly N.D.C. Intl. N.V. v. Terra Nova Ins. Co. Ltd., [1985] 1 W.L.R. 1359; [1986] 1 All E.R. 69; [1986] 1 Lloyds Rep. 29, considered.
Companies Law (2004 Revision), s.74: The relevant terms of this section are set out at para. 7.
Grand Court Rules, O.23, r.1: The relevant terms of this rule are set out at para. 7.
Civil Procedure-costs-security for costs-inherent jurisdiction to order security for costs but to be exercised in accordance with settled practice of court and as circumscribed or extended by legislation-to look to substance of application as opposed to form and if in effect free-standing to determine new substantive, not procedural, rights court may order security
Companies-compulsory winding up-costs-security for costs-court may order security for liquidators costs on creditors appeal against rejection of proof of debt-appeal constitutes proceedings under Grand Court Rules, O.23, r.1 and Companies Law (2004 Revision), s.74-even though brought within existing winding up, in substance free-standing application to determine substantive, not procedural, rights of would-be creditor
Civil Procedure-costs-security for costs-given emphasis on substance in determining proceedings in which court can order security for costs (Grand Court Rules, O.23, r.1 and Companies Law (2004 Revision), s.74), court may be able to make order in respect of counterclaims, set-offs or applications for committal or to set aside compromise of action even if made within existing action
The appellants applied to the Grand Court to reverse the respondent liquidators rejection of their proofs of debt and the liquidators refusal to expunge the admission of other proofs of debt.
The liquidators were appointed in the Grand Court after a winding-up order was made against a Cayman company. The liquidators adjudicated upon a number of proofs of debt-refusing to admit those of the appellants, but admitting proofs of debt from two other companies, which
the appellants claimed were invalid. The appellants applied to overturn these decisions, and in reply the liquidators sought an order for security of costs.
The Grand Court (Levers, J.) dismissed (in proceedings reported at 2007 CILR 46) the liquidators application on the ground that the court had no jurisdiction to grant security for costs since this was not an originating application and the proceedings therefore did not fall within the Companies Law (2004 Revision), s.74 or the Grand Court Rules, O.23, r.1. The Court of Appeal (Zacca, P., Taylor and Mottley, JJ. A.) reversed the decision of the Grand Court, holding (in proceedings noted at 2008 CILR N [11]) that the court had jurisdiction to order security for a liquidators costs on a creditors appeal against rejection of proof of debt since such an appeal was within the phrase other proceedings under the Companies Law, s.74 and the Grand Court Rules, O.23, r.1.
On appeal, the appellants submitted that their application challenging the decision of the liquidators was not a proceeding within s.74 of the Companies Law and O.23, r.1 of the Grand Court Rules and therefore the court had no jurisdiction to order them to give security for costs in respect of their application.
Held, dismissing the appeal and affirming the courts jurisdiction to order security for costs:
(1) The challenge to the liquidators decisions to reject and approve the respective proofs of debts constituted an action suit or other legal proceeding under s.74 of the Companies Law (2004 Revision) and an action or other proceedings within the meaning of O.23, r.1 of the Grand Court Rules and the court therefore had jurisdiction to order security for costs on behalf of the respondent liquidators. The court had an inherent jurisdiction to order security for costs but it was to be exercised in accordance with the settled practice of the court-for example, an order would not be made against a defendant taking reasonable steps to resist a claim nor in general in respect of interlocutory applications-and as circumscribed or extended by the legislation. When determining whether a particular application constituted proceedings, the court would look at the substance of the application rather than its strict form. The applications here, while made in the context of the compulsory winding-up order, were in substance free-standing applications to determine new issues with regard to the substantive, rather than procedural, rights of would-be creditors and they were therefore originating proceedings in respect of which the court could make orders for security for costs and the appeal would be dismissed (paras. 2735).
(2) Given the emphasis on substance in determining what constitutes proceedings, the court should not be prevented from making orders for security of costs in respect of counterclaims, set-offs or applications for committal or to set aside a compromise of an action even though these
proceedings would often be made within an existing action (paras. 2224, per Lord Scott of Foscote).
1 LORD SCOTT OF FOSCOTE: On May 31st, 2004, a winding-up order was made against Bancredit Cayman Ltd. by the Grand Court of the Cayman Islands. Mr. James Cleaver and Mr. Richard Fogerty of Ernst & Young were appointed joint official liquidators. They are the respondents to this appeal.
2 The liquidators received and adjudicated upon a number of proofs of debt. These included:
(i) proofs of debt dated May 24th, 2005 and August 7th, 2006 from GFN S.A. (GFN) and Artag Meridian Ltd. (Artag) as alternative claimants for US$168,700,000;
(ii) a proof of debt dated October 30th, 2006 from GFN and Artag as alternative claimants for US$43,831,576 or, alternatively, US$30,984,486;
(iii) a proof of debt dated April 18th, 2006 from Banco Leon S.A. for US$76,341,609;
(iv) a proof of debt dated August 20th, 2004 from the Central Bank of the Dominican Republic for US$30,972,809; and
(v) a proof of debt dated August 3rd, 2004 from Caribbean Energy Co. Ltd. (CAREC) for US$41,613,810 odd.
3 GFN, Artag and CAREC are the appellants in this appeal. The proofs that had been submitted by them were rejected by the liquidators. The proofs that had been submitted by Banco Leon and by the Central Bank of the Dominican Republic were admitted by the liquidators.
4 Pursuant to r.4.83 of the Insolvency Rules 1986, each of the appellants applied to the Grand Court by summons for an order reversing the rejection by the liquidators of their respective proofs of debt and, pursuant to r.4.85, they each applied to the Grand Court by summons for orders expunging the liquidators admission of the proofs of debt of Banco Leon and the Central Bank.
5 The liquidators, by summonses dated December 1st, 2006 and December 28th, 2006, applied for orders requiring the appellants to provide security for their (the liquidators) costs of these applications. The security for costs applications were made on the grounds that each of the appellants was ordinarily resident out of the jurisdiction and had no substantial property within the jurisdiction.
6 On April 2nd, 2007, the Grand Court dismissed the liquidators security for costs applications on the ground that the court had no jurisdiction to grant them. However, on January 23rd, 2008, the Court of Appeal of the Cayman Islands reversed the Grand Courts decision on the jurisdiction issue and remitted the matter for the Grand Court to consider the security for costs applications on their merits. This appeal to the Privy Council is an appeal on the jurisdiction issue.
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