Litigation 2024 - Trends & Developments

• Published date: 29 January 2024
• Subject Matter: Litigation, Mediation & Arbitration, Insolvency/Bankruptcy/Re-structuring, Insolvency/Bankruptcy, Trials & Appeals & Compensation
• Law Firm: Collas Crill
• Author: Mr Stephen Leontsinis and Annalisa Shibli

Security for Costs - Costs Recovery Protection for Litigants in the Cayman Islands

In Cayman Islands litigation the general rule is that costs "follow the event". In other words, the losing party is obligated to pay not only their own legal costs, but a portion of the costs of the successful party as well. The portion of the successful party's costs that is payable is determined by way of taxation, conducted based on the type of costs order awarded to the successful litigant by the court. Taxation on an indemnity basis would result in the successful party being entitled to 100% of their recoverable costs, whilst a standard taxation would normally lead to a recovery by the successful party of approximately 60-70% of their costs.

Therefore, a defendant to legal proceedings in the Cayman Islands may need to expend substantial resources in defending a claim brought against them but, if they are ultimately successful, they would be entitled to recover a significant portion of those costs from the plaintiff. However, if there is reason to believe that a plaintiff will be unable to satisfy an adverse costs award, the defendant is left in the unenviable position of being required to pay to defend a claim with little to no prospect of costs recovery.

A security for costs order can provide defendants (including counterclaim defendants) with some comfort in such a situation. However, there is no guarantee that security for costs will be awarded to either party in any given case.

Whether, how much, and in what form security is awarded is entirely at the discretion of the court based on the facts and circumstances of the particular case at bar. The Cayman Islands Grand Court (the "Court") is most concerned with ensuring the promotion of justice between litigants when considering whether or not to exercise its jurisdiction to make a security for costs order in the defendant's favour.

Commercial Litigation

Order 23, rule 1 of the Grand Court Rules (GCR) provides that where one of the stipulated preconditions (or jurisdictional thresholds) is met, the Court may in its discretion, and having regard to all of the circumstances of the case, order the plaintiff to give such security for the defendant's costs of the action or other proceedings as it thinks just.

The most commonly relevant jurisdictional threshold is that the plaintiff is ordinarily resident outside of the jurisdiction. Importantly, there is no presumption that the Court will ordinarily require a foreign plaintiff to give security for costs; rather the Court's discretion will be exercised on a case-by-case basis (Re Cybervest Fund [2006 CILR 80], per Smellie CJ at [23]).

Just in the circumstances

The relevant circumstances, and the respective weight given to them by the Court, will turn on the particular facts of any given case. Issues previously identified by the Court as being important in an assessment of whether it is "just" for a security for costs order to be made, include the following.

Assets of the plaintiff

The Court will often look at the extent to which the plaintiff provides information about the nature, value and location of assets that could potentially be enforced against when determining whether to order security for costs (In the Matter of Jafar v Abraaj Holdings and others, Justice Segal, Unreported, 10 August 2021).

Obstacles to enforcement

The Court would need to be satisfied that if a costs order is made against the plaintiff, enforcement of that order would not be an unduly onerous process for the defendant. In this regard, the Court will first consider whether the plaintiff has substantial assets within the jurisdiction to satisfy a costs award. Security will not normally be awarded against a foreign plaintiff with substantial assets in the jurisdiction. If there is no evidence that substantial assets are available in the jurisdiction, the Court will then consider how difficult it would be for the defendants to enforce the award in the relevant foreign country and, in particular, whether there is...