Cayman Court Provides Clarity On Costs

• Published date: 08 April 2021
• Subject Matter: Corporate/Commercial Law, Litigation, Mediation & Arbitration, Corporate and Company Law, Trials & Appeals & Compensation
• Law Firm: Ogier
• Author: Ms Victoria King and Jean Lau

In a costs ruling delivered on 12 March 2021, the Honourable Justice Ramsay-Hale provided welcome clarity on the circumstances in which the Grand Court of the Cayman Islands will make a costs award on the indemnity basis.¹ A successful party can expect to recover a higher proportion of its costs when an award is made on the indemnity basis (rather than the standard basis) since only costs that are unreasonably incurred or are of an unreasonable amount will be disallowed on taxation, and any doubts as to reasonableness are resolved in favour of the successful party.²

In this case, Zhongzhi Capital (HK) Company Ltd ("ZZHK") had succeeded in its substantive application to rectify the register of members of Geopay Holding Limited ("Company") so as to register ZZHK as the holder of certain shares in the Company in place of Geoswift Holdings Limited ("Geoswift"). Geoswift had pledged its shares in the Company as security in return for a loan advanced to Geoswift by ZZHK. After defaulting on the loan, Geoswift resisted ZZHK's attempts to enforce its security. Pursuant to the terms of the loan, ZZHK also had a contractual entitlement to recover its costs of the rectification application from Geoswift.

Justice Ramsay-Hale concluded that: "the Court can, in the exercise of its discretion to award costs, where the contractual entitlement is self-evident, order costs on the indemnity basis"³ and indeed, in such circumstances, the Court's discretion "should ordinarily be exercised so as to reflect that contractual right".⁴ An indemnity costs award in these circumstances avoids the need for a successful party to pursue its litigation costs in a separate contractual claim.⁵

In reaching this conclusion, Ramsay-Hale J considered the Court of Appeal's decision in Weavering Macro Fixed Income Fund Ltd v Peterson⁶ in which the Court of Appeal made a standard costs award, notwithstanding that the successful parties - the directors of Weavering - had sought an indemnity costs order in reliance on an indemnity provision in the company's articles of association. Justice Ramsay-Hale explained that the Court of Appeal's decision was that "where the contractual entitlement to be indemnified is not clear, and there was no misconduct on the part of the unsuccessful party, costs should be taxed on the standard basis".⁷ In the present case, unlike in Weavering, ZZHK's right to be indemnified was clear and the Court therefore awarded ZZHK's costs to be taxed on the indemnity basis.⁸

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