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Discontinued proceedings – a costly business

In the recent decision of Lam & CP Global v Tor Asia Master Fund & Ors, the Grand Court of the Cayman Islands ruled on the issue of costs following the discontinuance of proceedings.

The proceedings arose out of a loan from the first defendant, Tor Asia Master Fund LP (Tor) to the second plaintiff, CP Global Inc. (CP Global), which is part of the CP Homes Group, of which the first plaintiff is chairman. The loan was secured by the guarantee of the first plaintiff and by charges by CP Global and related entities. Following default by CP Global, Tor appointed receivers and managers. The plaintiffs dispute the appointment of the receivers, contending that there has been no valid event of default.

The plaintiffs discontinued the proceedings and all three defendants sought their costs pursuant to a rule of court which provides that upon a discontinuance, the other parties are entitled to their costs up to the time of receipt of the notice of discontinuance. Each of the defendants also contended that they were entitled to their costs under the terms of the loan agreement.

The Court awarded the first defendant its costs on the standard basis, holding that the plaintiffs had not conducted the proceedings improperly or persisted in a hopeless claim and on that basis, the first defendant was not entitled to indemnity costs. The receivers were awarded costs on the indemnity basis because no claim was advanced against them nor was relief sought and they ought not to have been parties to the proceedings, their appointment being a matter between the plaintiffs and the first defendant.

In making her decision, Ramsay-Hale J cited the leading Cayman Islands authority on the issue of costs on a discontinuance, Hemmings v P.M.C. Ltd, which adopts the guidance of the English Court of Appeal in Brooks v HSBC Bank Ltd. The Court also cited the Cayman Islands Court of Appeal decision in Weavering v Peterson and Ekstrom stating that as a matter of procedure, a claim for contractual costs should ordinarily be pleaded but that the Court nevertheless enjoys discretion to award indemnity costs where the contractual entitlement is clear. The same ground was covered by Ramsay-Hale J recently in Zhonghi Capital (UK) Company Ltd v Geoplay Holding Ltd.

The Court permitted the first plaintiff to represent CP Global in circumstances where he alleged that it was the appointment of the receivers which has resulted in CP Global being without funds to retain counsel and the first plaintiff was well placed to speak for it.

Harneys act for the first defendant in this proceeding.

Discontinued proceedings – a costly business

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