Adrianus Johannes Heinen v Pieter Le Comte - Ruling

¶ ```markdown # IN THE GRAND COURT OF THE CAYMAN ISLANDS ## FINANCIAL SERVICES DIVISION ### IN THE MATTER OF THE COMPANIES LAW (2007 REVISION) ### AND IN THE MATTER OF FREERIDER LTD. (IN OFFICIAL LIQUIDATION) #### BETWEEN: - **ADRIANUS JOHANNES HEINEN** APPLICANT #### AND: - **PIETER LE COMTE** RESPONDENT #### Coram: - The Hon. Mr. Justice Angus Foster #### Parties: - For the Applicant: Mr. Jeremy Walton and Ms. Katie Brown of Appleby - For the Respondent: Mr. Guy Manning of Campbells #### Application: - Determined on the papers by request of the parties --- ## RULING

¶ [1] By order dated 13 th May 2010, I ordered that Freerider Ltd. ("the Company") should be wound up on the just and equitable ground ("the Winding-Up Order") on the petition of the Applicant ("Mr. Heinen"), which was strongly contested by the Respondent ("Mr. Le Comte"). I also ordered that the costs of the petition be reserved to a future hearing.

¶ [2] By Summons dated 11 th June 2010, Mr. Le Comte applied for an order that his costs of the Indemnity application be paid by Mr. Le Comte on the Indemnity basis. This application was also strongly resisted by Mr. Le Comte. After reviewing the affidavit evidence submitted in --- **CAUSE NO:** 4801/2009 ```
```markdown support of and in opposition to the application, the parties’ skeleton arguments and hearing the oral submissions of counsel (to all of which I shall refer in more detail below) on 25th June 2010, I ordered that Mr. Le Comte should pay Mr. Heinen’s costs of the petition to be taxed, if not agreed, on the standard basis, (and not on the indemnity basis) (“the Costs Order”).

¶ [3] Mr. Le Comte appealed to the Court of Appeal against the Winding-Up Order and Mr. Heinen cross-appealed against the Costs Order, contending that his costs of the petition should have been awarded on the indemnity basis and not the standard basis.

¶ [4] The appeals were heard by the Court of Appeal on 23rd and 24th August 2010 and immediately following the hearing the Court of Appeal dismissed Mr. Le Comte’s appeal and said it would give its reasons for doing so at a later date. The Court of Appeal reserved its decision on Mr. Heinen’s cross-appeal on costs. In its subsequent Reasons released on 4th August 2011 the Court of Appeal remitted one ground of Mr. Heinen’s cross-appeal back to me for determination and on 31st August 2011 a Certificate of the relevant Order of the Court of Appeal was issued by the Registrar of the Court of Appeal in the following terms: "I HEREBY CERTIFY that an Order was made as follows: 1. Citation brought in dated basis be 17 June 2010 for costs indemnity omitted t Hon the Notice dated 10 July 2010. 2. Mr. Le Comte pay Mr. Heinen’s costs of the appeal, to be taxed forthwith on the standard basis if not agreed, save for those costs relating solely to Mr. ``` This transcription faithfully reproduces the content and structure of the provided page, using Markdown for headings and paragraph structure. The text is transcribed as it appears, without any invented content.
```markdown Heinen’s cross-appeal against the Order of Mr. Justice Foster dated 25 June 2010 (the “Cross-Appeal”); 3. The costs of the Cross-Appeal be reserved to the decision of Mr. Justice Foster on the Cross-Appeal as remitted to him by order of the Court.”

¶ [5] The allegation in paragraph 4(d) of Mr. Heinen’s Amended Respondent’s Notice dated 16th July 2010 referred to in paragraph 1 of the said order of the Court of Appeal (which was one of the four grounds on which Mr. Heinen relied in his Amended Respondent’s Notice in support of his Cross-Appeal, the other three grounds having been rejected by the Court of Appeal) provided as follows: (d) The Appellant [Mr. Le Comte] has now disclosed in the New York proceedings correspondence between him and 733 Properties which demonstrates that the Appellant deliberately concealed the transaction with 733 Properties from the Respondent, [Mr. Heinen] and that the Appellant offered the security to 733 Properties voluntarily in a deliberate attempt to ensure that if a winding-up Order was made, 733 Properties, rather than the liquidators, would have control of the Company’s assets. As this correspondence was only disclosed on 28 June 2010, the Respondent was unable to put it before the judge on 25 June 2010.

¶ [6] Accordingly, the Court of Appeal has remitted back to me the application by Mr. Heinen for his costs of the petition on the indemnity basis so that I may consider whether the Costs Order should be varied in light of the allegation at paragraph 4(d) of Mr. Heinen’s Amended Respondent’s Notice as set out above. Since the correspondence referred to was only disclosed on 28th June 2010, it was obviously not before me on 25th June 2010.

¶ [7] In essence, therefore, the Court of Appeal has remitted to me the question whether the Costs Order should now be varied in light of this correspondence which I had not seen when making the Costs Order. I am now being asked whether I would have awarded Mr. Heinen his costs of the petition on the indemnity basis, rather than on the standard basis (as was the case), had I seen this correspondence on 25th June 2010 before I made the Costs Order.

¶ [8] By agreement between the parties, as approved by myself, this matter has been dealt with "on the papers" and the parties submitted written submissions in accordance with an agreed timetable also approved by myself. In particular, Mr. Heinen's counsel submitted written submissions dated 30th August 2011 in support of his application for variation of the Costs Order, Mr. Le Comte's counsel submitted written submissions in reply dated 8th September 2011 and Mr. Heinen's counsel submitted further written submissions dated 16th September 2011 in response to the written submissions by counsel to Mr. Le Comte.

¶ [9] At the hearing on 25th June 2010 Mr. Heinen supported his application for indemnity costs with the First Affidavit of Ms Katie Brown of Appleby, Mr. Heinen's attorneys, sworn on 16th June 2010 ("the Brown Affidavit").

¶ [10] The Brown Affidavit expressly stated that it was made in order to inform the court which awarded the Winding Up Order in Mr. Heinen's application for indemnity costs. The Brown Affidavit then set out in considerable detail ``` This transcription faithfully reproduces the content and structure of the provided page, using Markdown for headings and paragraph structure. The text is transcribed as it appears, without any invented content.
```markdown how Mr. Le Comte, after the presentation of the winding-up petition in March 2009 and prior to the Winding-Up Order, without the consent or even the knowledge of Mr. Heinen, had granted security over the entirety of the Company’s assets to a New York company, 733 Properties Inc., owned by a friend of his, by way of two Promissory Notes (“the Security Arrangement”). The Brown Affidavit set out the circumstances in which this had come to Mr. Heinen’s attention and made reference to certain exhibited correspondence from the New York attorneys representing 733 Properties Inc., all in support of the statement in the affidavit that this appeared “to be a cynical attempt to subvert the very purpose of the winding-up and to ensure that the Company’s assets remain under Le Comte’s control or that of his associates, rather than under the control of the Liquidators appointed by this court”.

¶ [11] The Brown Affidavit also referred in some detail to the two Promissory Notes which Mr. Le Comte had procured the Company to enter into constituting the Security Arrangement in furtherance of what was stated to be Mr. Le Comte’s “attempt to ensure that if [a winding-up order] was made, the assets of the Company would fall into the hands of 733 Properties Inc. rather than those of the Liquidators appointed by the Court, and that the Liquidators would not be able to have conduct of the on-going litigation in New York and elsewhere on behalf of the Company. Mr. Le Comte did not disclose the security interest vinculated an event of a or “that mip-ofker cejaui [und oner the Promissfonlea by “i at y] despiest ory Notes’g~ n€ ‘coRfe a elicited dio his own Counsel [at the hearing of the petition] that should have encheuld hsh’tijorina6n”. These ``` The text has been transcribed faithfully, with headings and paragraph structures preserved as markdown. The content is exactly as visible in the image, without any invented or missing information.
```markdown and related allegations relating to the Security Arrangement made up the most substantial part of the Brown Affidavit.

¶ [12] In opposition to Mr. Heinen’s application on 25 th June 2011, Mr. Le Comte also submitted an affidavit (his Eleventh Affidavit) sworn on 21 st June 2010 in which he acknowledged that he had caused the Company to enter into the Security Arrangement and that Mr. Heinen had deliberately not been informed of it.

¶ [13] Counsel for Mr. Heinen and counsel for Mr. Le Comte both submitted skeleton arguments for the hearing on 25 th June 2010. Mr. Heinen’s skeleton argument rehearsed the evidence given in the Brown Affidavit concerning the Security Arrangement and emphasized and relied heavily on that evidence in support of Mr. Heinen’s application for his costs of the Petition on the indemnity basis.

¶ [14] In his oral submissions at the hearing on 25 th June 2010, counsel for Mr. Heinen argued strongly that there was what he described as a sophisticated scheme by Mr. Le Comte by which, without informing Mr. Heinen, the entire assets of the Company were intended in the event of a winding-up order to pass to a third party company in New York owned by a friend of Mr. Le Comte and which, counsel contended, was intended to defeat the purpose of the winding-up. I recall these submissions well (arising from the hearing) at the time of the hearing. Mr. Heinen contended that the Security Arrangement was the principal basis upon which he contended that he should be awarded his costs of the petition on the indemnity basis.

¶ [15] In the circumstances, I do not consider that the production to me of the correspondence between Mr. Le Comte and 733 Properties Inc., which was subsequently disclosed in the New York proceedings, as referred to in paragraph 4(d) of Mr. Heinen’s Amended Respondent’s Notice, would have significantly added to the weight or persuasiveness of the argument or have affected my eventual decision to award Mr. Heinen his costs of the petition in the standard basis. The Security Arrangement was, as I have said, very strongly emphasized to me as the principal reason for an award of costs to Mr. Heinen on the indemnity basis and I clearly recollect giving anxious consideration at the time to whether I should, in all the circumstances, exceptionally award costs to Mr. Heinen on the indemnity basis rather than the standard basis in accordance with the usual rule prescribed by the Companies Winding-up Rules, O.24, r 8(2). However, ultimately I did not consider that there were sufficiently exceptional and special circumstances relevant to the issues arising on the hearing of the Petition to take the award of costs to Mr. Heinen out of the usual rule. It did not seem to me that the conduct of Mr. Le Comte in relation to the Security Agreement was directly relevant to the ultimate issue arising on the hearing of Mr. Heinen’s petition, namely whether it was just and equitable in the circumstances that the Company should be wound up. As J6 oso Avortneviern Passons for the Winding Up Order and ne the Court of Appeal aamding-U the Court of Appeal agreed in p Cess in L p.Lonp. questions on the hearing of the Petition were, n’tition.wry3r’wdunJ there had been a relationship of mutual trust and confidence between Mr. Heinen and Mr. Le ```
```markdown Comte; whether that relationship, as reflected in the corporate and partnership structure which was set up, of which the Company was part, was for these purposes to be treated as if it was in effect a joint venture/quasi-partnership between them in the sense identified in the relevant authorities; whether that relationship had broken down irretrievably; whether there was a justifiable loss of confidence in Mr. Le Comte’s management of the Company due to a lack of probity on his part; whether the substratum of the Company had failed; whether in all the circumstances, applying equitable principles to the facts, it was just and equitable that the Company should be wound-up and whether any of the alternative remedies provided for in the Companies Law were appropriate in the circumstances. It did not seem to me that Mr. Le Comte’s conduct in procuring the Company to enter into the Security Arrangement was or would have been directly relevant to my determination of these questions. In fact, in the event, the Official Liquidators, who were appointed following the hearing of the Petition, subsequently successfully applied for and obtained a declaration from the court that the Security Arrangement was void under Section 99 of the Companies Law (Ruling dated 16th September 2010). In my view it was at that time, namely after the appointment of Liquidators by the court, that the Security Arrangement, and the circumstances surrounding it, was clearly directly relevant. 20 inferred both at in the circumstances 21 ore considered June 2010 costs should be 22 Mr. Heinen was. I am satisfied that, even if the correspondence referred to at paragraph 4(a) of Mr. Heinen’s Amended Respondent’s Notice dated 16 July 2010 had been put before me at ``` This transcription captures the text as it appears on the page, maintaining the original structure and formatting. The page number "8" at the bottom is also included.
```markdown the hearing on 25th June 2010, I would not have exercised my discretion any differently from the way in which I did in making the Costs Order. I was made very well aware by the Brown Affidavit, by the skeleton argument submitted on behalf of Mr. Heinen and by the oral submissions of his counsel that the Security Arrangement and its apparent intention was being relied on heavily as the principal ground for an order for costs on the indemnity basis. I gave full consideration to this and I do not accept that production at the hearing on 25th June 2010 of the correspondence concerned would have made any significant difference to my view of the matter or the conclusion which I reached. Accordingly, I refuse the application by Mr. Heinen as subsequently remitted to me by the Court of Appeal and I decline to vary the Costs Order.

¶ [18] As is clear from paragraph 3 of the Registrar’s Certificate set out at paragraph 3 above, the Court of Appeal also ordered that the costs of Mr. Heinen’s cross-appeal should be reserved to my decision on the cross-appeal as remitted to me by the Court of Appeal. Having now declined to vary the Costs Order on Mr. Heinen’s application, I can see no good reason why costs should not follow the event in the usual way. The issue remitted to me by the Court of Appeal was whether I consider that the Costs Order should be varied in light of the allegation in paragraph 4(d) of Mr. Heinen’s Amended Respondent’s Notice. As it seems to me, that is a discrete question which I have now determined adversely, notwithstanding the written submissions submitted on behalf of Mr. Heinen and his costs of and incidental to the cross-appeal and his costs of and incidental to the remission. ```
```markdown of the issue remitted to me by the Court of Appeal, such costs to be taxed, if not agreed, on the standard basis. Dated 28 th September 2011 --- **The Hon. Mr. Justice Angus Foster** Judge of the Grand Court