News

November 2009

Liquidators entitlement to Security for Costs

In GFN S.A. v The Liquidators of Bancredit Cayman Limited (in official liquidation), the Privy Council had to consider whether an application made in the Cayman Islands to expunge the proof of debts of an admitted claim and a challenge a liquidator’s decision to reject proofs of debt constituted proceedings in respect of which there is jurisdiction to order security for costs of those applications.

Lord Scott who delivered the lead judgment, held that the courts power to order security for costs “is not statutory but, rather, the inherent jurisdiction of the court to control proceedings”. Lord Scott went on to hold that what constitutes ‘proceedings’ is a matter of “substance” and not “form”. The applications to expunge proof of debts and challenge a liquidator’s rejection of proof of debts constituted proceedings for the purposes of the law of the Cayman Islands and therefore the court possessed inherent jurisdiction to order security of costs.

Interestingly Lord Neuberger, in one of his last judgments in the Privy Council before his appointment as Master of the Rolls took issue with Lord Scott’s observations that it was appropriate to order security of costs against a defendant who brings a counterclaim or defends by way of set-off. He said : -

“For my part, I would prefer to leave entirely open questions such as whether and if so when it is possible or appropriate to order security for costs against a defendant who brings a counterclaim or defends by way of set-off…and whether the decision of the Court of Appeal in C T Bowring & Co (Insurance) Ltd v Corsi Partners Ltd (1994) 2 Lloyd’s Rep 567 was correct….That is not meant to imply that I positively disagree with anything Lord Scott says on those issues in his admirable option: it is merely that I prefer to leave them for determination when they have been subject to fuller argument.”

To read the full judgment visit http://tiny.cc/JCPC

Glovers acted for the Appellants.

Please note that this information is provided for general knowledge only and therefore specific advice should be sought for individual cases.

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