Do As I Say, Not As I Pay!

The Privy Council denies recovery of internal costs incurred in preparation for compliance with Bermuda Supreme Court disclosure orders.

The Privy Council (Lord Neuberger, Lord Mance, Lord Sumption and Lord Collins; Lord Clarke dissenting) has recently handed down a judgment, on 17 November 2016, in long-running insolvency litigation between PricewaterhouseCoopers (PwC) and Saad Investments Company Limited (SICL) and between PwC and Singularis Holdings Ltd (SHL).

The Privy Council's recent decision concerns PwC's claim to recover $250,000 of internal costs allegedly incurred in preparing for compliance with disclosure orders that were made by the Supreme Court of Bermuda, but ultimately discharged by the Privy Council on appeal.

Background

The underlying litigation concerned challenges by PwC, a Bermuda exempted partnership, to orders made by the Bermuda Supreme Court on 4 March 2013 (and upheld inter partes on 15 April 2013) requiring PwC to produce documents relating to two Cayman incorporated companies, SICL and SHL (the "Companies"), both in official liquidation in Cayman. In the case of SICL, the disclosure order by the Bermuda Court was made in conjunction with an ancillary winding up order pursuant to section 195 of the Bermuda Companies Act 1981 (the "Act"), despite the fact that SICL was not engaged in or carrying on any trade or business in Bermuda. In the case of SHL, the production order had been made as a matter of cross-border insolvency assistance and judicial comity under the common law, "by analogy with the statutory powers" under section 195.

PwC applied inter partes to discharge those orders in the Supreme Court but Kawaley CJ refused the application. On hearing submissions regarding the timeframe for compliance, however, Kawaley CJ granted PwC an extension of time to comply with the orders (but not on the basis of any appeal) ultimately requiring compliance by 1 August 2013. The Court declined to require the Companies or their foreign Liquidators to give any undertakings regarding PwC's costs of compliance.

PwC applied to the Court of Appeal for Bermuda seeking to have the disclosure orders set aside and in its judgment of 18 November 2013, the Bermuda Court of Appeal set aside Kawaley CJ's production order in the case of SHL but upheld the disclosure order in respect of SICL on the basis that PwC had only appealed the production order and the Court could not impeach the winding up order in the context of an application...