Hinch Invest and Finance S.A v Ansis Sormulis

BRITISH VIRGIN ISLANDS IN THE COURT OF APPEAL CIVIL APPEAL NO. 8 OF 2007 BETWEEN: NORGULF HOLDINGS LIMITED INCOMEBORTS LIMITED Appellants and MICHAEL WILSON & PARTNERS LIMITED Respondent Before: The Hon. Mr. Denys Barrow, SC Justice of Appeal The Hon. Mr. Hugh Rawlins Justice of Appeal The Hon. Ms. Ola Mae Edwards Justice of Appeal [Ag.] Appearances : Mr. John Jarvis QC and Mr. Paul Dennis for the Appellants Mr. James Drake for the Respondents --------------------------------------------- 2005: September 24; October 29. -------------------------------------------- -Costs – Costs to be assessed – Bases for assessment – Costs of applications – Costs of proceedings – Costs of appeals Interim payment of costs – jurisdiction of court to order The appellants having succeeded on their appeal, the Court of Appeal ordered that the respondent “shall pay to the appellants the costs on this appeal and in the High Court proceedings, to be assessed if not agreed”. Costs were not agreed. The appellants made no application for the assessment of costs. The appellants applied to the Court of Appeal for an order that the respondent should pay one half of the sum of US$1, 322,564.85 that the appellants claimed they should be awarded as costs. The respondent resisted the application on the ground that the court had no jurisdiction to order interim payment of costs and, while agreeing that the costs that the appellants should be awarded were to be assessed pursuant to rule 65.11 of the Civil Procedure rules 2000, the respondent also argued that the amount that the court could award as costs was capped by rule 65.11(7) at ten percent of the sum that could be awarded as prescribed costs. The appellants pointed to the provision in the last mentioned rule that permits the court to exceed that cap when the court considers that there are special circumstances of the case justifying a higher amount and argued that the fact that this was a commercial case placed this case within that class of cases. Held, refusing the application: (1) The court had both an inherent jurisdiction to order interim payment of costs and jurisdiction conferred by rule 17.1(1)(g) to grant interim remedies including “an order for interim costs”. (2) An award of costs to be assessed did not necessarily mean that costs were to be assessed pursuant to rule 65.11, which provided for an award of discretionary costs on the hearing of applications, whether procedural or other than procedural. In conducting an assessment of costs the court or judicial officer carrying out the assessment is to be guided by rule 65.3, which identifies the bases for assessment and how to determine which basis to apply. (3) Rule 65.12 established the procedure for carrying out an assessment of costs when the assessment was not made at the hearing of the application or other proceedings in which costs were awarded. (4) The costs of an appeal, as distinct from the costs of an application, were specifically provided for by rule 65.13. The costs of an appeal will generally be prescribed costs. (5) A necessary step before making an order for interim costs is for the court or judicial officer to determine the value of the claim, regardless of which basis for quantification would ultimately be used. The value of the claim had not been determined in this case and it remains for the appellants to apply for this to be done. It would be as simple or perhaps simpler for the appellants to procure the assessment of the prescribed costs of the appeal as to apply for interim costs. (6) The application is dismissed with costs of the application to the respondent to be assessed, pursuant to rules 65.11 and 65.12, if not agreed within 21 days of this decision. DECISION

[1]BARROW, J.A.: This is an application by the appellants for an order for an interim payment to account of costs, to be assessed, that this court awarded to the successful appellants. Among the issues to decide are whether the Civil Procedure Rules 2000 (CPR 2000) confer jurisdiction on the court to make an order for interim payment of costs and, if they do not, does the court have an inherent jurisdiction to do so. If the court can do so, should it order interim payment in this case, and, if the court decides to make an order, what sum should it order to be paid? But before this court decides any of those issues it is necessary to clarify the basis upon which costs are to be quantified on the appeal.

The costs order

[2]The appeal was against the order of Hariprashad-Charles J, in proceedings that were brought against seven defendants in all, appointing a receiver over the entire assets, undertakings and shareholdings of the two appellants. At the stage when the application for interim costs was made this court had issued an order, dated 22nd August 2007, allowing the appeal, which stated that the order would be followed by a written judgment, but no written judgment had been issued at that point. After allowing the appeal and consequentially setting aside the order appointing the receiver, the order stated: “(4) The Respondent shall pay to the Appellants the costs on this Appeal and in the High Court proceedings, to be assessed if not agreed, in accordance with rule 64.7 of the Eastern Caribbean Supreme Court Civil Procedure Rules 2000.”1

[3]No distinction was drawn on this application between costs in the court below and costs in this court. Counsel for the applicant seemed to proceed on the basis that as both sets of costs were to be assessed this court should simply consider the appellants’ draft schedule of costs covering proceedings in both courts, amounting to US$ 1,322,564.85, and order an interim payment of one half that amount. No reason was suggested to us as to why this court should assume the outcome of the assessment of costs in the court below and make an order based on that assumption. As will be discussed below, a court assessing costs is required to consider a number of factors that may significantly reduce the quantum of its award, even though it makes a net award to a successful party. In my view it would be quite wrong for this court to proceed on any assumption as to the assessment of costs in the court below and, accordingly, I consider the application only in relation to costs in this court.

Quantification of costs

[4]Counsel on both sides thought that the proper basis for quantifying costs was rule 65.11 of the CPR 2000. It appears that the word “assessed” in the court’s order led counsel to think that costs in both the High Court and this court were to be assessed in accordance with that rule. Perhaps it would have been better to use the neutral word “quantified”. Whatever impression may have been conveyed, the question is, what rule applies to the assessment or quantification of costs of the appeal? It is a question that is appropriately answered on this application, which directly raises that question, especially given that the court heard no argument and received no submissions on the quantification of costs when it heard the appeal.

Assessment pursuant to rule 65.11

[5]It is fitting to begin with an examination of rule 65.11, because that is the rule both counsel thought applied. That rule provides: Assessed costs – procedural applications 65.11(1) On determining any application except at a case management conference, pre-trial review or the trial, the court must – (a) decide which party, if any, should pay the costs of that application; (b) assess the amount of such costs; and (c) direct when such costs are to be paid. (2) In deciding which party, if any, should pay the costs of the application the general rule is that the unsuccessful party must pay the costs of the successful party. (3) The court must take into account all the circumstances including the factors set out in rule 64.6(6) but where the application is – (a) an application to amend a statement of case; (b) an application to extend the time specified for doing any act under these Rules or an order or direction of the court; (c) an application for relief under rule 26.8 (relief from sanctions); or (d) one that could reasonably have been made at a case management conference or pre- trial review; the court must order the applicant to pay the costs of the respondent unless there are special circumstances. (4) In assessing the amount of costs to be paid by any party the court must take into account any representations as to the time that was reasonably spent in making the application and preparing for and attending the hearing and must allow such sum as it considers fair and reasonable. (5) A party seeking assessed costs must supply to the court and to all other parties a brief statement showing – (a) any counsel’s fees incurred; (b) how that party’s legal representative’s costs are calculated; and (c) the disbursements incurred. (6) The statement under paragraph (5) must comply with any relevant practice direction. (7) The costs allowed under this rule may not exceed one tenth of the amount of the prescribed costs appropriate to the claim unless the court considers that there are special circumstances of the case justifying a higher amount.

[6]A good starting point for appreciating this rule is not to be misled by its heading. The rule clearly applies to more than just procedural applications because paragraph (1) of the rule says that “on determining any application” other than at a case management conference, pre-trial review or at the trial, the court must: decide whether to award costs of that application and which party should pay them; assess the amount of such costs; and direct when they are to be paid. These are decisions the court must make for applications generally, and not just for procedural applications. Paragraph (2), similarly, is of general application in providing that the general rule is that the unsuccessful party must pay the costs of the successful party.

[7]Even paragraph (3), which mentions certain specific types of procedural applications – to amend a statement of case, to extend time, to be relieved from sanctions, or an application that could reasonably have been made at a case management conference or pre-trial review – has as its major premise the operation of a well-known requirement that is applicable to applications generally. That requirement is that the court, in deciding which party, if any, should pay costs, must take into account all the circumstances of the case. The circumstances to be so taken into account include the factors set out in rule 64.6(6), such as the conduct of the parties both before and during the proceedings and the manner in which a party has pursued allegations or issues or the case, among others.

[8]The object of mentioning the specific procedural applications in paragraph (3) is to create an exception in favour of those specific procedural applications. It is worth emphasising that the paragraph does not refer to procedural applications generally; it identifies specific procedural applications or types of applications. The exception that paragraph (3) creates is to the general rule that the successful party should be awarded costs, by providing that an applicant who makes one of the specified applications or types of applications must pay the costs of the respondent. This is to avoid the anomaly of awarding costs to an applicant whose own conduct has caused the need to apply to amend his statement of case, or to extend time, or to be relieved from sanction, or to make an application that he could reasonably have made at a scheduled hearing. The success of such an applicant on his application, which, by its very nature, will normally have been avoidable, should not be rewarded by the benefit of the general rule that costs follow success. It is, therefore, to create a different general rule in respect of such applications -- a rule that the applicant should pay costs -- that the specific procedural applications are mentioned. That, it appears, is the sole object of referring to those specific procedural applications.

[9]Paragraph (4) of rule 65.11 again applies to applications generally and not only to procedural applications in stating that when the court assesses the amount of costs the court must consider time reasonably spent in making the application and preparing for and attending the hearing. The second part of this paragraph is of even more general application, in stating that the court must allow such sum as it considers fair and reasonable.

[10]Paragraphs (5) and (6) direct parties seeking assessed costs that they must supply a statement of costs to the court and to all other parties, showing counsel’s fees, legal representatives’ costs and disbursements. Paragraph (7) places a cap on the costs allowed under this rule of one tenth of the amount of the prescribed costs appropriate to the claim, unless the court considers that there are special circumstances justifying a higher amount. Those are the provisions of rule 65.11.

[11]Rule 65.11 is often not fully appreciated and so it may be helpful to summarize its broad effects. The rule applies to all applications except for two categories of applications. One category consists of those applications that are made at a case management conference, pre-trial review and trial. There are specific rules that apply to such applications2 and hence they are excluded. The other category of applications to which rule 65.11 does not apply consists of the specific applications listed – to amend, to extend time and to obtain relief from sanctions – and applications that could have been made at case management or pre-trial review (and which would therefore have fallen into the first category). Rule 65.11 does not apply to the second category of applications because of the need to exclude such applications from the general rule that costs are awarded to the party who succeeds on his application.

[12]The object of rule 65.11 is to establish a norm that the court hearing an application “must” decide the issues of costs, including who is to pay, how much and when. Notably, it makes the amount of costs to be awarded a matter for the discretion of the court. Rule 65.11 states the principles by which the court must guide itself in exercising that discretion and assessing costs. The rule specifies the documentation that the party seeking costs must provide. And, finally, it caps the amount of costs that normally may be awarded on the determination of an application.

Assessment of costs pursuant to rule 65.12

[13]The other rule that deals with the assessment of costs is rule 65.12, which reads: Assessed costs – general 65.12(1) This rule applies where costs fall to be assessed in relation to any matter or proceedings, or part of a matter or proceedings, other than a procedural application. (2) If the assessment relates to part of court proceedings it must be carried out by the judge, master or registrar hearing the proceedings. (3) If the assessment does not fall to be carried out at the hearing of any proceedings then the person entitled to the costs must apply to a master or the registrar for directions as to how the assessment is to be carried out. (4) The application must be accompanied by a bill or other document showing the sum in which the court is being asked to assess the costs and how such sum was calculated. (5) On hearing any such application the master or registrar must either – (a) assess the costs if there is sufficient material available to do so; or (b) fix a date, time and place for the assessment to take place. (6) The master or registrar may direct that the party against whom the bill is assessed pay the costs of the party whose bill is being assessed and, if so, must assess such costs and add them to the costs ordered to be paid.

[14]Rule 65.12 complements and overlaps rule 65.11 but it is much broader in scope. Rule 65.12 applies to all assessments of costs, not just costs of an application. The rule opens by stating in paragraph (1) that this rule applies where costs fall to be assessed in relation to any matter or proceedings, or part thereof, other than a procedural application. These two words, “matter” and “proceedings”, both terms of art, together extend the rule to virtually every proceeding that could come before the court. In the Eastern Caribbean Supreme Court (British Virgin Islands) Act3, in the interpretation section, section 2, “‘matter’ includes every proceeding in court not in a cause”; “’proceeding’ includes action, cause or matter”; and “’cause’ includes any action, suit or other original proceeding between a plaintiff and defendant, and any criminal proceeding by the Crown”. The effect of paragraph (1), in stating that this rule applies to any matter or proceedings or part thereof, is to apply this rule to proceedings generally, not just applications. But the rule does cover applications generally, which are necessarily parts of proceedings, save for procedural applications, which are specifically excepted. Put another way, by excluding only procedural applications this rule includes all other applications.

[15]The amplitude of its operation having been established in paragraph (1), the rule proceeds in its other paragraphs to set out the procedure to be followed for an assessment to be carried out. That is what rule 65.12 does – it lays down the procedure for assessment. This is in contrast with the provisions of rule 65.11, which lay down the principles to guide the court in making an assessment of costs on determining applications.

[16]Thus, paragraph (2) of rule 65.12 extends to proceedings generally the proposition relating to applications that appears in rule 65.11(1)(b), which was that on determining an application the court must assess the amount of costs. Paragraph (2) of rule 65.12 states that if the assessment relates to part of court proceedings it must be carried out by the judge, master or registrar hearing the proceedings. In other words, if the assessment relates to part of court proceedings it must be carried out “at the hearing” (see rule 65.12(3)). By identifying the range of judicial officers who would be ‘hearing the proceedings’ paragraph (2) also confirms that this rule applies to the whole range of proceedings that can come before a court. The rule applies to proceedings that are heard by the registrar, which are minor applications; to proceedings that are heard by the master, which are almost all applications that a judge could hear in chambers; and to proceedings that are heard by judges, which are “any” proceedings, whether in chambers or open court, including trials.

[17]Paragraphs (3), (4) and (5) of rule 65.12 provide the procedure for obtaining an assessment of costs when the assessment does not fall to be carried out at the hearing of proceedings. These paragraphs provide that an application must be made for an assessment to be done, to whom the application must be made, the documentation to be filed and the way in which the master or registrar must proceed. It is only when the assessment is not carried out “at the hearing of any proceedings” (r. 65.12 (3)) that the procedure contained in these paragraphs becomes applicable. If the assessment of costs is carried out at the hearing of an application then, as seen earlier, the procedure contained in rule 65.11(5) and (6) applies. If the assessment of costs is carried out at the hearing of the claim, that is, at the trial, then the assessment the court must make is of the costs of the claim. Pursuant to rule 65.3 the costs of proceedings will be fixed costs or prescribed costs or budgeted costs or, if none of the foregoing is applicable, costs assessed in accordance with rules 65.11 and 65.12.

Assessment

[18]As used in the rules the words “assessed costs” and “assessment” have the meanings given them by rules 65.11 and 65.124 but even in those rules there are variations in meanings. It will have emerged from considering rule 65.11 that this rule confers a discretion on the court to determine the amount of costs5 to award on hearing an application.6 Therefore, as used in rule 65.11, “assessed costs” means discretionary costs and the “assessment” that the court conducts pursuant to that rule is to quantify such costs. On the other hand, rule 65.12 neither confers nor takes away discretion as to amount but is almost purely procedural, as has been seen, and the procedure applies to proceedings generally, including trials. That rule, therefore, speaks to how an assessment may be procured regardless of the basis upon which costs are to be quantified. All too often trials will conclude and prescribed costs will be awarded but will not be quantified. In such instances the procedure by which a successful litigant must procure the quantification of the award of prescribed costs in his favour is that provided by rule 65.12. Thus, notwithstanding that a distinction is drawn between fixed costs, budgeted costs, prescribed costs and assessed costs7 it is no solecism to refer to the assessment of prescribed costs.

[19]A clear instance of the awarding of prescribed costs to be assessed is the case of Grenada Electricity Services Ltd. v Isaac Peters8 in which this court upheld an award of damages to be assessed and awarded prescribed costs, also to be assessed.9 As that example shows, because prescribed costs are calculated, in the case of a claimant, based on the amount ordered to be paid10, it will not be possible for the court to quantify the 4 Rule 64.2(1) 5 Rules 65.11(1)(b) and 65.11(4). In paragraph (4) it is provided that the court “must allow such sum as it considers fair and reasonable”. 6 This is subject to a normal cap of one tenth of the amount of the prescribed costs appropriate to the claim amount of prescribed costs when the amount ordered to be paid remains to be assessed, and in that situation it will be the norm for the court to award prescribed costs, to be assessed. Similarly, in the case of a successful defendant, the court at the conclusion of the proceedings will sometimes not have stipulated the value of a claim11, and the court will then be forced to award prescribed costs to be assessed. Accordingly, when in this case this court awarded costs to be assessed, the use of the word “assessed” encompassed more than an assessment of discretionary costs.12 Costs of an appeal

[20]The examination of rules 65.11 and 65.12 reveals nothing that makes rule 65.11 applicable to the costs of the appeal. As the analysis of paragraph (1) of rule 65.11 revealed, that paragraph requires the court to assess costs on determining applications and the rest of rule 65.11 provides the guidelines and principles by which the court must make its assessment of costs. Rule 65.12 lays down the procedure to be followed for obtaining an assessment when the assessment is not carried out at the hearing – regardless of whether it was the hearing of an application or the substantive proceedings.

[21]It follows that it is only if the appeal that this court decided is treated as an application that rule 65.11 could apply, because that rule applies only where the court determines an application. It is quite clear that the appeal that this court determined was an appeal and not an application, so rule 65.11 cannot apply. The appeal was a complete appeal in itself; it was not an application made in the course of proceedings that were pending before the Court of Appeal.

[22]It would have been otherwise if, before this court determined the appeal, either party had made an application to this court for some interim order, for example, for security for costs or the lodging of share certificates in court or for the receiver to give security or to introduce fresh evidence. On making its hypothetical determination of any of those applications this court would have been required to assess costs in accordance with rule 65.11 and, if it did not do so at the hearing, in accordance with the procedure established by rule 65.12. It would have been in such circumstances that rule 65.11 would have applied. The discretionary costs of such an application would have been required to be assessed. But that is not what happened. There was no application. There was an appeal and the appeal was determined. A particular rule applies to appeals. That rule is rule 65.13, which reads: Costs in Court of Appeal 65.13 Unless the – (a) Court of Appeal on an application made in accordance with rules 65.8 and 65.9 makes an order for budgeted costs; or (b) parties to the appeal agree otherwise; the costs of any appeal must be determined in accordance with rules 65.5, 65.6 and 65.7 and Appendix B but must be limited to two thirds of the amount that would otherwise be allowed.

[23]In the appeal there was no order for budgeted costs and the parties had no agreement as to costs. Therefore, pursuant to rule 65.13, the costs of the appeal must be determined in accordance with the specified rules, which are the rules that provide for prescribed costs, how those costs are quantified and what they include. In short, the appellants are entitled to prescribed costs in the court of appeal. Therefore, it is by reference to prescribed costs that the application for an interim payment of costs must be considered.

Jurisdiction to order interim payment of costs

[24]A close reading of the applicants’ submissions reveals that the applicant can point to no specific provision in CPR 2000 for making an order for an interim payment of costs to a successful defendant. The closest counsel came to finding a rule was rule 17.6(1)(c) which provides: “Interim payments – conditions to be satisfied and matters to be taken into account “17.6(1) The court may make an order for an interim payment only if – (a) the defendant against whom the order is sought has admitted liability to pay damages or some other sum of money to the claimant; (b) the claimant has obtained an order for an account to be taken as between the claimant and the defendant and for judgment for any amount certified due on taking the account; (c) the claimant has obtained judgment against that defendant for damages to be assessed or for a sum of money (including costs) to be assessed; (d) (except where paragraph (3) applies), it is satisfied that, if the claim went to trial, the claimant would obtain judgment against the defendant from whom an order for interim payment is sought for a substantial amount of money or for costs; or (e) the following conditions are satisfied – (i) the claimant is seeking an order for possession of land (whether or not any other order is also being sought); and (ii) the court is satisfied that, if the case went to trial, the defendant would be held liable (even if the claim for possession fails) to pay the claimant a sum of money for rent or for the defendant’s use and occupation of the land while the claim for possession was pending.”

[25]Counsel acknowledged the absence of any provision similar to the English rule 44.3(8), which states: “(8) Where the Court has ordered a party to pay costs, it may order an amount to be paid on account before the costs are assessed.”

[26]Although counsel tried to argue for a construction that could extend the benefit of rule 17.6(1)(c) to the applicants it proved an impossible task, because the definition of an “order for interim payment” given in rule 17.1(1)(m) makes it clear that the power to order interim payment is intended to provide for payment by a defendant on account of any sum which the court may find the defendant liable to pay. In this case, the applicants are the defendants and they seek an order against the claimant, for which the rule does not provide. In the end, counsel fell back on the inherent jurisdiction of the court. Counsel found assistance in an extract from the English White Book13 that reads: “Quite apart from the specific rule, the Court has an inherent jurisdiction to control its own processes.” Counsel buttressed this statement by reference to the court’s case management power, expressed in rule 26.1(2)(w) as including the power: “to take any other step, give any other direction, or make any other order for the purpose of managing the case and furthering the overriding objective.”

[27]Counsel for the respondent rested his argument against the existence of the jurisdiction to order an interim payment of costs on the uncertainty I had expressed in IPOC International Growth Fund Limited v LV Finance Group Limited.14 With the benefit of more assistance than the circumstances of that case permitted counsel to provide, and guided by the previous decision of this court in Grenada Electricity Services Ltd. v Isaac Peters15 and an express provision in CPR 200016, both of which escaped the attention of counsel in this case, I am satisfied that the Supreme Court has both a statutory and an inherent jurisdiction to make an order for interim costs.

[28]The two sources of jurisdiction are not mutually exclusive and there will be instances when the conditions for the exercise of the jurisdiction stated in the rules will not be satisfied and resort will have to be made to the inherent jurisdiction, so it is helpful to consider both sources. In Halsbury’s Laws of England17 appears the following treatment on the inherent jurisdiction of a court: “Unlike all other branches of law, except perhaps criminal procedure, there is a source of law which is peculiar and special to civil procedural law and is commonly called “the inherent jurisdiction of the court”. In the ordinary way the Supreme Court, as a superior court of record, exercises the full plenitude of judicial power in all matters concerning the general administration of justice within its territorial limits, and enjoys unrestricted and unlimited powers in all matters of substantive law, both civil and criminal, except insofar as that has been taken away in unequivocal terms by statutory enactment. The term “inherent jurisdiction” is not used in contradistinction to the jurisdiction of the court exercisable at common law or conferred on it by statute or rules of court, for the court may exercise its inherent jurisdiction even in respect of matters which are regulated by statute or rule of court. The jurisdiction of the court which is comprised within the term “inherent” is that which enables it to fulfil itself, properly and effectively, as a court of law. The overriding feature of the inherent jurisdiction of the court is that it is a part of procedural law, both civil and criminal, and not a part of substantive law; it is exercisable by summary process, without a plenary trial; it may be invoked not only in relation to parties …; it must be distinguished from the exercise of judicial discretion; and it may be exercised even in circumstances governed by rules of court. The inherent jurisdiction of the court enables it to exercise (1) control over process by regulating its proceedings, by preventing the abuse of process and by compelling the observance of process, (2) control over persons, as for example over minors and mental patients, and officers of the court, and (3) control over the powers of inferior courts and tribunals. In sum, it may be said that the inherent jurisdiction of the court is a virile and viable doctrine, and has been defined as being the reserve or fund of powers, a residual source of powers, which the court may draw upon as necessary whenever it is just or equitable to do so, in particular to ensure the observance of the due process of law, to prevent improper vexation or oppression, to do justice between the parties and to secure a fair trial between them.”

[29]That jurisdiction is supplemented by the provision of rule 26.1(2)(w), quoted above, which says the court may make any order for furthering the overriding objective which, as rule 1 states, requires the court to deal with cases justly. Confirmation of the court’s jurisdiction in relation to costs is also gathered from the previously considered rule 65.11(1) which requires, when the court assesses the costs of an application, that it should direct when such costs are to be paid. Further confirmation of the jurisdiction comes from the decision of this court delivered by Chief Justice Byron in Grenada Electricity Services Ltd. v Isaac Peters18 in which, in ordering the interim payment of costs, he stated19 that the concept of interim or provisional orders is not addressed in the rules of court but it was not novel and referred to the decision in the case of Mars UK Ltd v Teknowledge Ltd20 as an example of an order for the interim payment of costs. In addition, counsel for the applicant pointed to an order that the judge in the High Court proceedings made for the interim payment of costs in the sum of US$ 250,000.00 to show that the jurisdiction to make such an order seems an accepted fact.

[30]In fact rule 17.1(1)(g) confers express jurisdiction by providing: “17.1 (1) The court may grant interim remedies including – … (g) an order for interim costs; “ Interim payment to account of prescribed costs

[31]Satisfied that the jurisdiction exists, the question that I must next consider is whether this court should make an order. In the Grenada Electricity Services Ltd. Case, Byron CJ made the order on the following basis: “[36] It is open to us to mirror the order of the learned trial Judge and order that the costs be assessed when the damages are assessed. The concern I have is that the process of assessment may take a long time and the respondent could be forced into a situation where, although he had the benefit of a judgment in his favour, he has to fund several further stages of litigation before a stage is reached where he can be put in costs. This could create a difficulty as he is an individual litigant opposed to a statutory corporation whose means are substantially greater than his, and there is the obvious risk of his inability to continue funding litigation indefinitely, as opposed to the appellant whose financial position is much better. It seems to me that in the interests of justice, and in pursuance of the overriding objective, even if the court is unable at this time to finally assess the costs that will become due an order ought to be made.”

[32]That order was made, it is seen, in a case where costs could not be assessed21 until damages had been assessed since prescribed costs, in the case of a claimant, as the respondent had been in the lower court proceedings, are calculated based on the amount of damages awarded. That is the fundamental difference with this appeal. The quantification of costs in this appeal does not need to await any assessment of damages because costs on the appeal were awarded to the defendants, who claimed no damages. Prescribed costs in favour of a defendant are determined based on the value of the claim; see rule 65.5(2)(b). In the case of a defendant, that value is the amount claimed in the claim form; or, if the claim is for unquantified damages, the value of the claim is such sum as the parties agree or if they do not agree, a sum stipulated by the court as the value of the claim; or, if the claim is not for a monetary sum – the amount of EC$50,000.00 unless the court places a different value; rule 65.5(2)(b)(i), (ii) and (iii). The amount of prescribed costs will reflect the stage the proceedings have reached.

[33]It seems to me that it would have been easier and more dispositive for the appellants to apply to assess their costs rather than apply for an interim payment of costs. The application for interim payment was unnecessary. Counsel responded to the court’s inquiry by indicating that the appellants had made no application to assess or quantify costs. I think it would be a salutary thing if the appellants were to proceed in the normal way to have their costs quantified, both in the court below and in this court, rather than to skip stages and, unwittingly no doubt, overreach the court’s consideration of a number of factors that may be relevant and, if they are, may impact the quantum of costs awarded.

[34]A prime relevant factor is the value of the claim, and in that regard I observe that on the material that comprised the record of appeal, I am not aware of what was the value of the claim, in the court below, against these two appellants as distinct from the value of the claim against the other five defendants. As regards the value of the appeal, because the appeal was confined to the limited aspect of whether or not the judge should have continued the receivership, it seems highly arguable that the value of the appeal should be significantly different from the value of the claim. It seems to me that until the values of both the claim against these two appellants and the appeal that they brought are agreed or stipulated there can be no assessment of either discretionary or prescribed costs. Neither could there have been any reliable estimation of the minimum amount of costs likely to be awarded so as to have determined a safe amount to order as interim costs. It will therefore be appreciated that the ascertainment of values (of the claim and the appeal, respectively) that would have established the bases for interim costs would have equally established the basis for the assessment of costs, both discretionary and prescribed. With those values established it would have been a straightforward matter to assess both discretionary and prescribed costs. It is for this reason that I take the view that the appellants should have proceeded with the assessments of costs rather than apply for interim costs.

[35]I would dismiss the application for an order for an interim payment of costs with costs of the application to the respondents, to be assessed pursuant to rules 65.11 and 65.12, unless agreed within 21 days of the date of this decision. If these costs need to be assessed perhaps they may be assessed at the same time as the costs of the appeal.

Hinch Invest and Finance S.A v Ansis Sormulis BRITISH VIRGIN ISLANDS IN THE COURT OF APPEAL CIVIL DIVISION) CIVIL APPEAL NO. 26 OF 2006 BETWEEN: HINCH INVEST and FINANCE S.A. Appellant and ANSIS SORMULIS Respondent Before: The Hon. Mr. Michael Gordon, QC Justice of Appeal The Hon. Mr. Denys Barrow, SC Justice of Appeal The Hon. Mr. Hugh A. Rawlins Justice of Appeal Appearances Mr. John Carrington for the Appellant Mr. Paul Webster Q.C. with Ms Willa Liburd for the respondent 2007: February 15; November 26. JUDGMENT

[1]GORDON, J.A.: On 18th August 2006, the respondent filed both an amended statement of claim and an application for an interim injunction. the application for the interim injunction was heard inter partes on the 20th September 2006 and, on 21st September 2006 the trial judge gave an oral ruling granting the interim injunction. At the request of the parties (I suspect principally the appellant) the trial judge gave full written reasons for her judgment on 25th September 2006.

[2]The facts giving rise to the application for and grant of an interim injunction can be shortly stated. The respondent alleges that some time in 2001 he sought to purchase a shelf International Business Company (IBC) which was a bearer share company. He tasked Mr. Rudolf Meroni, a Swiss lawyer, who, though a party to the proceedings in the High Court, is not a party to this appeal (he having not been served with the proceedings), with the commission of acquiring the shelf company. The shelf company purchased by Mr. Meroni was Hinch Invest and Finance SA, the appellant. The transaction would appear to have taken place in July 2001.

[3]It is the respondent’s case that he funded the purchase and operation of the appellant acting always through Mr. Meroni and that he had invested a considerable sum of money in so doing. It is admitted that the respondent was never in physical possession of the bearer shares which had been issued by the appellant. According to the respondent, the relationship between himself and Mr. Meroni deteriorated In the autumn of 2005. it is the case of the respondent that in December 2005 he asked Mr. Meroni to deliver the bearer shares issued by the appellant to him, but this was never done. Notwithstanding the alleged failure of Mr Meroni, the respondent says he injected a further US$300,000.00 working capital into the appellant under a loan agreement dated 6th April 2006.

[5]It is the respondent’s case that on 31st May 2006, Mr. Meroni, without instructions from the respondent, caused the entire board of the appellant to resign as of the 25th May 2006 and prior to their resignation to revoke the power of attorney in favour of Mr. Jakob Hirschbaeck as of the 23rd May 2006 and, further, caused a company known as Eurocom International Limited, a company under the control of Mr. Meroni to be appointed the sole director of the appellant. The respondent alleges that since the matters referred to in this paragraph took place, Mr. Meroni has refused to acknowledge the respondent as the beneficial owner of the appellant.

[4]Due to the deteriorating relations between the respondent and Mr. Meroni the respondent asked that Mr. Meroni arrange for the appellant to give to a Mr. Jakob Hirschbaeck of London a power of attorney to manage the affairs of the appellant. This was apparently done. However, the respondent alleges that in May 2006, Mr. Meroni instructed the directors of the appellant to issue a power of attorney in favour of Mr. Meroni and/or Dr. Stefan Schmid, and/or Adrian Kunzler and thereby prevented him from exercising control over the appellant. This would appear to have taken place between the 17th and 19th of may 2006. On the 23rd of May 2006 the respondent says that he instructed the directors of the appellant to revoke the latter power of attorney and that they (the directors) forwarded the revocation of the power of attorney to Mr. Meroni under cover of a letter dated 23rd May 2006. The letter of transmission which was exhibited with the affidavit of the respondent accompanying the application for the interim injunction was addressed to Meroni & Schmid and is worthy of repetition in full: “Dear Dr. Meroni, HINCH INVEST &FINANCE S.A., B.V.I. (“the Company”) We have received written instructions from the beneficial owners of the Company requesting that the Directors of the Company refrain from taking further instructions from you and that all powers of attorney issued in your favour by the Company be revoked. Pursuant to the above said we hereby give you notice that the Directorship Agreement dated 23rd June, 2000 entered into by your Company and our Company is terminated with immediate effect. Enclosed please find Consent Actions of the Board of Directors revoking with immediate effect the power of attorney dated 17th May, 2006 issued to you, Mr. Kϋnzler and Dr. Schmid. Kindly send to us by courier all the corporate documents in your possession pertaining to the Company. We should be grateful if you would kindly acknowledge receipt of this letter. Best regards”

1.in any manner whatsoever, whether by themselves or by their servants, agents or otherwise from, inter alia transferring or delivering the bearer share certificates representing the entire issued share capital of the First Defendant to any person other than the Claimant, issuing any additional shares in, or taking any steps to sell, transfer, charge, mortgage or otherwise dispose of the assets of the First Defendant and any of its subsidiaries including but not limited to Regina Developments Limited, a company incorporated under the laws of British Virgin Islands (“Regina”) and any subsidiary of the First Defendant or of Regina;

[6]It is in those circumstances that the respondent sought an interim injunction against the appellant and Rudolf Meroni in the following terms: “That each of [Hinch Invest and Finance SA] and [Rudolf Meroni] be restrained until further order of this court from-

[7]The learned trial judge made an order granting the interim injunction in almost the exact terms requested by the respondent save that paragraph 1 of the prayer was amended to apply to the Second Defendant only. The trial judge had this to say at paragraph 5 of the judgment: “During the hearing learned Queen’s Counsel for Mr. Sormulis surprisingly indicated that having regard to the written submissions of Hinch he would not pursue his claim for relief in terms sought in paragraph 4(2) above1. However, I note That for completeness that immediately before I delivered my oral ruling learned counsel sought leave to rely on and argue for this relief. I denied leave at that late state as I felt it would prejudice Hinch who was taken completely off guard but in the interests of saving costs granted leave to use the supporting Affidavit if an application were made subsequently. 1 At paragraph 4(2) of The judgment the trial judge set out the prayer of the appellant as seeking “[an] injunction prohibiting Hinch from taking steps to issue any additional shares or to sell, transfer, charge, mortgage or otherwise dispose of its assets and that of its subsidiaries;”

[8]The appellant filed a Notice of Appeal appealing on a number of grounds against the decision of the trial judge. A subsequent Amended Notice of Appeal was filed by leave of the court. As I understand the burden of the appellant’s case, it is that The trial judge wrongfully exercised her discretion in the granting of the interim injunction in that she acted: under a mistake of law; in disregard of principle; under a misapprehension of the facts of the case; taking into account irrelevant considerations and acted unreasonably. the errors catalogued in the written argument of the appellant are taken directly from Quillen and others v Harney, Westwood & Riegels (No. 2)2 a decision of this court.

[9]The so-called errors of the learned trial judge resolved themselves into three main arguments, the first of which was that no cause of action was shown to exist against the appellant. the appellant based its argument on two cases, Palm Island Resorts Limited v Arts Friends Limited3 and the Siskina4. The former case, Palm Island Resorts is a decision of this court in which Alleyne JA, as he then was, delivered the leading judgment with which Redhead JA concurred. The third judge, whilst agreeing with the decision of Alleyne JA arrived at his conclusion by a very different route. Learned counsel for the appellant sought help and sustenance from the judgment of Georges JA.

[10]The Siskina, a case commonly cited for the proposition that there can be no interim injunction granted against a party without an underlying cause of action against that party, is of greater assistance to the appellant. However, the issue is whether the raw proposition in The Siskina, as expressed above is the applicable law in this jurisdiction. In Commercial Injunctions5 the learned author says the following: “The English requirement [of an underlying cause of action] is based on the Siskina and Lord Diplock’s analysis of the remedy as an interlocutory injunction granted under what was section 45 of the Supreme Court of 2 (1999) 58 W.I.R. 147 at page 150 3 Civ. App. No. SVGHCV 005/2002 delivered 6th March 2003 [1977] 3 All ER 803 5 Steven Gee, 5th edition at page 19 Judicature (Consolidation) Act 1925. Under that analysis the injunction could only be granted in proceedings against the defendant based on a cause of action – the remedy was only ancillary to that cause of action. That analysis has been rejected as the source for jurisdiction in Cardile6 and logically its constraints do not apply to preventing abuse of the process of the court or interfering with the due administration of justice. It is no less a frustration of possible future process of the court or an interference with the due administration of justice whether a man disposes of his assets to defeat a future judgment moments before his debt becomes due or moments afterwards.”

[11]I find The logic in Cardile compelling. Indeed, Lord Goff of Chieveley and Lord Browne-Wilkinson in Channel Tunnel Group v Balfour Beatty Ltd7 both expressed reservations on The strictures placed on injunctive relief by The Siskina. In the same case Lord Mustill who gave the lead judgment also expressed his discomfort with the strictures of what is referred to as the Siskina principle. After rehearsing the argument in the Siskina line of cases he said the following: “My Lords I cannot accept this argument. I prefer not to engage the question whether the law is now firmly established in terms of Lord Brandon’s statement or whether it will call for further elaboration to deal with new practical situations at present unforeseen. For the present purposes it is sufficient to say that the doctrine of the Siskina, put at its highest, is that the right to an interlocutory injunction cannot exist in isolation, but is always incidental to and dependant on the enforcement of a substantive right, which usually, though not invariably takes the shape of a cause of action”

[12]The allegation in this case is that Mr. Meroni is the physical holder of the bearer shares in the appellant and that Eurocom International Limited, a company under Mr. Meroni’s control, is the sole director. If the respondent were to succeed in his case against Mr. Meroni and if in the meantime the appellant were, for example, to issue a large number of shares so as to dilute the disputed shares to the position of a minority, then there would certainly be a frustration of possible future process of the court. In this case, the appellant has been joined as a defendant and has, 6 Cardile v LED Builders Property Ltd (1999) 198 C.L.R. 380 (Australia) [1993] 1 All ER 664 in fact, filed a defence and I find is a proper party to be joined in search for ancillary relief.

[13]The second main argument of the appellant revolved around the Articles of Association of the appellant and in particular Article 3.3 and 3.7 which I reproduce hereunder: “3.3 Subject to the provisions of the Act and of these Articles the bearer of a bearer share certificate shall be deemed to be a member of the Company and shall be entitled to the same rights and privileges as he would have had if his name had been included in the share register of the Company as the holder of the shares.

[14]I understood learned counsel for the appellant to be arguing that in the face of the Articles of Association, and in the light of the respondent’s admission not only that he was never in possession of The share certificates but that the certificates were in the hands of Mr. Meroni the ineluctable conclusion which ought to have been drawn by the court was that there was no serious issue to be tried. I am afraid that I cannot agree. The simple answer to the argument of the appellant is that whilst the Articles of Association of a company are in the nature of a contract between the company and a shareholder, the rights and obligations so governed do not exclude The overseeing jurisdiction of the court. to hold otherwise would be to drive a stake through the heart of the concept of a trust.

[15]The trial judge went to the heart of the matter when she posed this question: “However, are the Regulations [Articles of Association] conclusive of the rights of ownership in bearer shares as between the holder and a third person who has come to the court for relief?”8 From what I have said above it is clear that I agree with the answer that the trial judge found for herself, that they are not.

[16]the third main issue taken by the appellant with the judgment being appealed from is that the trial judge, wrongly exercised her discretion In the context of the American Cyanamid v Ethicon Ltd9. The main string to the bow of the appellant is that where a quia timet injunction is granted, the court must be satisfied, on the basis of the evidence adduced, that there is a threatened invasion of rights. With respect to learned counsel for the appellant, where there is an allegation by a claimant that a person in a position of trust for his benefit acts in such a way as denies the existence of that trust, then a court. is perfectly entitled to draw the inference, as did the claimant/respondent that there was a threat to his alleged rights.

[17]I can find no wrong principle used by the trial judge in exercising her discretion in favour of granting the interim relief as prayed for such as would permit this court substituting its own discretion for that of the court of first instance. in the circumstances I would dismiss the appeal with costs to the respondent to be agreed or, in the absence of agreement, to be the subject of separate written submissions by the parties. Michael Gordon, QC Justice of Appeal I concur. Denys Barrow, SC Justice of Appeal I concur. Hugh A. Rawlins Justice of Appeal 8 At paragraph 23 of the judgment [1975] AC 396

2.In any manner whatsoever whether by themselves, their servants, agents or otherwise from holding out any person other than the Claimant as a shareholder of the First Defendant or otherwise being entitled to represent the First Defendant in any way;

3.In any manner whatsoever, denying that the Claimant is the holder of the entire issued and outstanding share capital in the First Defendant; and

4.Further and other relief as the Court deems fit.”

3.7 The bearer of a bearer share certificate shall for all purposes be deemed to be the owner of such shares comprised in such certificate and in no circumstances shall the Company or the Chairman of any meeting of the members of the Company ….. or any authorized person be obliged to enquire into the circumstances whereby a bearer share came into the hands of the bearer thereof or to question the validity or authenticity of any action taken by the bearer of a bearer share certificate……..”