Cayman Fund In Liquidation Ordered To Pay Costs Of Cayman And New York Proceedings On The Indemnity Basis

In a Ruling that will be of interest to users of the Cayman courts, the Grand Court has ordered a Cayman fund in liquidation to pay (i) as damages, the costs of foreign proceedings commenced in breach of contract and (ii) on the indemnity basis, the costs of the Cayman anti-suit proceedings brought to restrain the continuation of the foreign proceedings.

The Ruling provides further guidance as to the circumstances in which the Court will order costs of Cayman proceedings to be paid on the indemnity basis and is understood to be the first time that the Grand Court has awarded as damages the costs of foreign proceedings commenced in breach of contract.

Background

As we reported on 15 February 2018,[1] the Grand Court granted an anti-suit injunction sought by BDO Cayman to restrain the joint official liquidators of Argyle Funds SPC (in Official Liquidation) ("Argyle") from continuing litigation commenced by Argyle in the Supreme Court of New York against BDO Cayman (Argyle's former statutory auditors) and three related parties. Specifically, the Grand Court was satisfied that the New York proceedings had been commenced in breach of Cayman arbitration and exclusive jurisdiction clauses (among others) in the audit engagement letters between the parties.

In summary, BDO Cayman sought consequential orders including:

Its costs of the Cayman proceedings payable on the indemnity basis, to be taxed if not agreed, plus interest; Damages assessed by reference to its costs of the New York proceedings on a full indemnity basis, together with interest, and an indemnity in respect of its future costs of the New York proceedings; and A payment on account equal to 70% of its costs of the Cayman proceedings. Argyle contended that BDO Cayman was entitled only to its costs of the Cayman proceedings on the standard basis and opposed all of the consequential orders sought by BDO Cayman.

BDO Cayman's case

Indemnity costs

BDO Cayman argued that Argyle's conduct of the Cayman anti-suit proceedings was "improper, unreasonable or negligent" within the meaning of GCR O. 62, r. 4(11) such as to warrant the award of indemnity costs.

BDO Cayman's position was that, consistent with English authority, the commencement by a party of proceedings in a foreign jurisdiction in breach of an arbitration or exclusive jurisdiction clause is inherently unreasonable conduct deserving of an award of indemnity costs. Compounding this conduct, BDO Cayman said that there were additional...