Grand Court reiterates pro-creditor approach to interim payments on account of costs
In our 12 April 2023 edition of the Offshore Litigation Blog, we wrote about two recent Grand Court decisions which confirmed the governing principles on interim payments on account of costs.
The two cases considered in that blog (In the Matter of the Poulton Family Trust (Unreported, 13 March 2023) and In the Matter of Performance Insurance Company SPC (In Official Liquidation) (Unreported, 24 March 2023)) demonstrate that the Cayman Islands court has a pro-creditor approach to interim payments and one of the key principles the court will consider when deciding whether or not to make an award is whether there is a good reason not to order an interim payment.
Since our last blog post, the Grand Court and the Cayman Islands Court of Appeal have considered further applications for interim payments on account of costs including In the Matter of Trina Solar Ltd, Cayman Islands Court of Appeal CICA (Civil) No.9 of 2021 (where Harneys - Nick Hoffman and Luke Fraser - acted for the company) and Ren CI v Nebula (Cayman) Ltd and Ors (Unreported, 1 August 2023) (where Harneys - Paul Smith and Caitlin Murdock - represented the first defendant).
Paragraphs 36-44 of the Court of Appeal's judgment discusses the principles of interim payments on account of costs under GCR O.62 r.4 (7)(h). The decision reiterates that courts in the Cayman Islands "will normally make such an order unless there is a good reason not to do so". The mere fact of an appeal is not such a reason (not to make the payment). In ordering an interim payment in this case representing 60 per cent of the costs incurred, Birt J emphasizes that this percentage is not to be taken as a generally acceptable figure (and noted this decision was confined to the facts of this case where the quantum was not argued or contested).
Ren Ci v Nebula (Cayman) Ltd & Ors
Earlier this year, the first defendant had been successful in an application before Justice Doyle to stay proceedings brought by the plaintiffs in the Cayman Islands in breach of an agreement to arbitrate in Hong Kong (Stay Application). Justice Doyle subsequently ordered the plaintiffs to pay the first defendant’s costs of its stay application on the indemnity basis. The first defendant then applied to the court for an interim payment on account of its costs incurred in the Stay Application (Interim Costs Application).
In support of its Interim Costs Application, the first defendant put evidence before the court that its costs exceeded US$970,000 and made an application for US$725,000 to be paid on account (representing approximately 75 per cent of its total costs incurred).
The Plaintiffs contested the application arguing:
- The Court should decline to order a payment on account when the Plaintiffs were pursuing an appeal;
- If any payment on account of costs were to be made it should be no more than US$155,000;
- The Court should suspend the order until after the determination of the plaintiffs’ outstanding application for permission to appeal and any subsequent appeal;
- The Court should make provision to secure repayment if the plaintiffs’ appeal is successful, for example by ordering any money to be paid into court rather than to be paid to the first defendant; and
- It was questionable whether the first defendant has sufficient assets to repay in the event the appeal is successful).
Justice Doyle determined that it was just and there was no good reason not to order an interim payment.
In respect of the quantum to award, his Lordship took a "broad brush cautious approach" and ordered a payment of US$450,000 (representing approximately 46 per cent of the first defendant's total costs in the proceedings).
This decision reiterates the court's pro-creditor approach to interim payments and demonstrates that it will ordinarily make an interim payment award unless there is good reason not to. Further, it suggests that in heavily contested, continuing cases the court may take a cautious approach, resulting in awards (even on the indemnity basis) of 40-50 per cent, whilst in other less heavily contested cases, the court may be less cautious and make awards of between 60-75 per cent.
The decision also raises a new point for applicants to consider, namely whether they need to adduce evidence of their ability to repay any costs order when there is an appeal on foot. The judge ordered the payment on account to be paid into court, or to an account agreed between the parties, in light of concerns raised by the plaintiffs as to the first defendant's financial position as a holding company, and whether it would be able to make any necessary repayment if the plaintiffs' appeal is successful and the costs order subsequently overturned. Whilst it is standard practice to put evidence before the court as to the costs incurred by the successful party (such as a draft bill of costs), previous authorities have not suggested that the successful party needs to provide evidence as to its financial position.
In future, where the case is continuing or being appealed, it may now be prudent for parties applying for interim costs to put forward evidence of their ability to repay.