The Recoverability Of Foreign Lawyers' Fees

• Published date: 07 July 2022
• Subject Matter: Corporate/Commercial Law, Litigation, Mediation & Arbitration, Corporate and Company Law, Trials & Appeals & Compensation
• Law Firm: Forbes Hare
• Author: Fleur O'Driscoll

Introduction

The recoverability of foreign lawyers' fees is an issue which has frequently been considered by the British Virgin Islands Courts in recent years. This has resulted in a significant body of case law on the topic.¹

This issue has attracted less attention in the Cayman Islands though tangential issues, such as the limited admission of foreign lawyers, are frequently considered in the Grand Court. A recent Cayman Islands judgment has addressed the recoverability of foreign lawyers' fees and it is worthy of review, for the purpose of highlighting to prospective litigants the likelihood that foreign lawyers' fees will not be recoverable from their opponent.²

In this article, 'foreign lawyers' means lawyers who have not been admitted to practise Cayman Islands law but who are employed by an offshore firm based overseas which is affiliated with a Cayman Islands law firm.³

Overview of the 'Loser Pays' Principle and Cayman Islands Costs Regime

The 'loser pays' principle (also known as the 'English Rule') applies in Cayman Islands litigation. This is the policy that the losing party in litigation reimburses the winning party for its legal expenses (known as 'costs'), including lawyers' fees. This is a general rule only and as with every rule, there are exceptions.

The Cayman Courts have the power to make costs orders in favour of a party and give directions as to how those costs are 'taxed' (assessed) pursuant to section 24 of the Judicature Act (2021 Revision).⁴ The manner in which the Cayman Courts exercise this power is subject to Order 62 of the Grand Court Rules (the "GCR") and the relevant practice directions.⁵ This includes the power to make costs orders in favour of one party or another on the standard basis or the more generous indemnity basis.

A helpful summary of the Cayman Court's jurisdiction to award costs on the indemnity basis (and when it will be deemed appropriate to do so) may be found in a judgment delivered by Justice Parker in 2021.⁶ The relevant points are as follows:

1. The Court has the discretion to order costs on the indemnity basis "only if it is satisfied that a party has conducted the proceedings improperly, unreasonably or negligently Unreasonable or improper does not mean merely wrong or misguided in hindsight."⁷
2. Indemnity costs orders are the exception, not the rule, though the "jurisdiction to make such an order is wide and flexible."⁸
3. This is a punitive measure of taxation and the Court should ask itself whether the case was conducted "improperly unreasonably, or negligently to a sufficiently high degree to merit a mark of disapproval by the Court?"⁹(emphasis added).

When will Foreign Lawyers' Fees be Recoverable?

The net effect of the Cayman costs regime is that foreign lawyers' fees are likely to be recoverable on taxation in three scenarios only:

1. Expert Evidence of Foreign Law
   
   Where the foreign lawyer is engaged to give an opinion on a point of foreign law which is in issue in the proceedings, in which case those fees may be claimed as a disbursement.¹⁰
2. The Foreign Lawyer is Granted Limited Admission
   
   Where the foreign lawyer is granted admission for the purpose of appearing and advising in respect of a discrete cause or matter only ("Limited Admission").¹¹ In this scenario, the...