Grand Court of the Cayman Islands Reminds Practitioners of the Overriding Objective

In the recent decision of the Grand Court of the Cayman Islands In the matter of Global-IP Cayman (unreported, 21 July 2020) , Parker J took the opportunity to remind practitioners of their duty to conduct litigation efficiently, economically and on a reasonable basis.

By way of brief background, the petitioner presented a petition for the winding up of Global-IP Cayman ("the Company") on 12 March 2020, being the small balance of unpaid legal fees. On behalf of the Company a shareholder had paid $32,000 of a $32,175.84 debt, leaving $175.84 outstanding. This enabled the petitioner to petition as a "friendly" creditor, so as to allow the appointment of provisional liquidators to facilitate a restructuring. As the court noted, there was nothing improper in taking that course. However, prior to the formal issue of the petition the petitioner was advised that $27,957.97 was being wired to the petitioner by a different shareholder to pay what it thought was due under the invoices (and so stymie the petition). The petition was issued on 12 March 2020 and the wired sum, far in excess of the small sum due, was received by the petitioner the following day. As a result, the petition debt had been paid in full but an application to withdraw the petition was not made until 31 March 2020.

Court's Analysis and Decision

Parker J noted that in this case, a "somewhat unusual and a large body of affidavit evidence" had been filed, some of it very late. In addition, there had been a lot of correspondence involving the court, or at least copied to the court, both before and after the hearing. The court emphasised the importance of abiding by the Overriding Objective and Parker J also reminded the attorneys that it is not appropriate to involve the court in correspondence:

"The court does not sit as a running arbiter between parties preparing for hearings, or indeed after hearings have been concluded. I would remind the attorneys to also follow the principles behind the Overriding Objective to conduct litigation efficiently and economically and on a reasonable basis. At times in this litigation this has manifestly not been evident."

The Overriding Objective is set out in the Preamble to the Grand Court Rules (the "Rules"). It provides that the overriding objective of the Rules is to enable the court to deal with every cause or matter in a just, expeditious and economical way. As far as practicable the court should deal with matters in ways which are proportionate to the amount of money involved, the importance of the case and the complexity of the issues, and the parties are obliged to help the court to further this objective.

In its decision, the court held that the petition debt was not disputed but had been discharged. As such, the petition was dismissed.

This ruling concerned the issue of costs. It is usual for a petitioner to obtain its costs if the petition debt is not discharged until after the presentation of the petition, as happened in this case. However, the court refused to allow the petitioner's costs (said in the ruling to be $65,000). Although there was nothing wrong per se with filing a petition on the basis of a small outstanding amount with the real objective to appoint provisional liquidators, the attorneys for the petitioners did not apply to withdraw the petition until shortly before the hearing, even though they had been aware before the filing of the petition that amounts substantially in excess of the small outstanding sum had been wired to them. Parker J held that the petition could not be considered to have been "successful", since it had not been brought to pay a small debt, but instead it was to appoint provisional liquidators, which had not yet happened. Though it was not improper to have presented a petition for $175.84 with a view to enabling a restructuring, the delay in seeking to have the petition withdrawn shortly after the debt had been paid clearly counted against the petitioner.

Key Takeaways

This case highlights the importance of keeping in mind the Overriding Objective, in particular the obligation of the parties to assist the court to deal with matters in a just, expeditious and economical way. Allthough reaffirming the possibility of using a "friendly" creditor to facilitate the appointment of provisional liquidators, this case demonstrates that in certain circumstances the court may not allow the costs of the petitioner to be paid out of the assets of the company being wound up as a matter of course, particularly if things do not go according to plan. Furthermore, attorneys have been reminded not to involve or copy the court on extensive correspondence.

CAYMAN ISLANDS
Colette WilkinsPartnerT +1 345 914 4215colette.wilkins@walkersglobal.com

HONG KONG
Xia LiSenior AssociateT +852 2596 3431xia.li@walkersglobal.com