DD Growth Premium 2X Fund v. RMF Market Neutral Strategies (Master) Ltd.

¶ 1 THE COURT OF APPEAL OF THE CAYMAN ISLANDS 2 HOLDEN AT GEORGE TOWN, GRAND CAYMAN 3 4 ON APPEAL FROM THE GRAND COURT 5 6 7 8 9 Cause No. FSD 33 of 2011 C.I.C.A. No. 24 of2014 10 IN THE MATTER Ol? TIm COMPANms LAW (2010 REVISION) 11 BETWEEN: DD GROWTH PREMIUM 2X FUND (In Official Liquidation) 12 (Defendant) Appellant 13 AND: RMF MARKET NEUTRAL STRATEGmS (MASTER) LIMITED 14 (Plaintiff) Respondent 15 16 IN CHAMBERS 17 18 19 20 21 22 23 24 25 26 27 28 29 30 Appearances: Before: Heard: Mr. Nigel Meeson QC, Mr. Ben Hobden and Mr. Ryan Charles of Conyers Dill and Pearman for the Applicant/Respondent to the Appeal. Mr. Peter McMaster QC and Mr. Jeremy Snead of Appleby for the Appellant/Respondent to the application. THE HON. JUSTICE MANGATAL (Sitting as a single Judge of the Court of Appeal) 22"<1 April & 29th May 2015 JUDGMENT (REASONS FOR) _. DD Growth Premium 2X Fund (In Official Liquidation) v. RMF Market Neutral Strategies (Maste!~ Limited - Cause No. FSD 33 0[2011 & C.I.C.A. No. 24 0[2014 29.05.15 Pagel of 23 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 REASONS FOR JUDGMENT Civil Practice and Procedure- application for security for costs of an appeal-Sub-section 19(2) of the Court of Appeal Law (2011 Revision) - Section 74 of the Companies Law (2013 Revision)

¶ [1] This is ffil application by RMF Market Neutral Strategies (Master) Limited, the Respondent ("RMF') seeldng against DD Growth Premium 2X F'lmd (In Official Liquidation) ("the Appellant"), security for costs of the appeal in respect of which Notice of Appeal was filed December 23,2014.

¶ [2] The application was made ptlTSUffilt to Rule 19(2) of the Court of Appeal Law (2011 Revision) (" the Law") which provides as follows: " Appeals in civil proceedings. 19 .... (2) The appellant shall, at the time of lodging the notice of appeal required by subsection (1), deposit in the Grand Court the sum of fifty dollars as security for the due prosecution of the appeal together with such further sum as security for costs of the appeal as a Judge of the Grand Court may .JUDGMENT (REASONS 110R) - DD Growth Premium 2X Fund (In Official Liquidation) v. RMF Market Neutral Strategies (Master) Limited - Cause No. FSD 33 of2011 & C.LC.A. No. 24 of2014 29.05.15 Page 2 of23 , .• 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 direct, and such security for costs may be giveu by the appellaut entering into a bond by himself and such sureties and in such sum as the Judge of the Grand Court may direct, conditioned for the payment of any costs which may be awarded against the appellant and for the due performance of the judgment of the Court."

¶ [3] By virtue of section 33 of the Lawall powers conien'ed on a single Judge of the Court of Appeal may be exercised by a Judge of the Grand Court.

¶ [4] This application was sought by way of SUl'nmons filed January 21,2015. Originally, RMF had also sought security for costs incurred at first instance. However, on the eve of the hearing before me, learned Queen's Counsel Mr. Meeson indicated a withdrawal of that aspect of the application. Having had an opportunity to consider the authority of Cay Realty V Ha(l<phatic International Limited [1952-79 CILR 185], which was an authority referred to in the Appellant's skeleton argument, RMF decided that it would not pursue that part of its application regarding the costs at first instance, and would instead limit its application to costs of the appeal alone. This, as well as revised costs estimates for the appeal provided by RMF, resulted in a substantial reduction in the security for costs initially sought, from a total of US $1,020,728 to US$249,500.

¶ [5] Before turning to the evidence and arguments, I will set out the background to this application very briefly. JUDGMENT (REASONS FOR) - DD Growth Premium 2X Fund (In Official Liquidation) v. RMF Market Neulral Strategies (Masler) Limited - Cause No. FSD 33 of2011 & C.I.C.A. No. 24 0[2014 29.05.15 Page 3 of23 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 Background

¶ [6] The Appellant was a feeder fund, incorporated in the Cayman Islands on 2 February 2007 as an exempted company with limited liability to operate as a private investment fund. The Appellant was placed in official liquidation on 29 May 2009.

¶ [7] RMF is a fund of hedge funds incorporated in the Cayman Islands on 12 March 2001. RMF held, and now to a lesser extent, continues to hold redeemable shares in the Appellant.

¶ [8] In response to 111e Appellant writing to RMF to suggest that certain redemption proceeds should be repaid, RMF conmlenced proceedings by way of originating summons dated February 21 2011 seeking a declaration iliat it was not required to repay monies to the Appellant.

¶ [9] It was agreed that the parties would put forward their respective cases in Statements of Grounds. It was further agreed between the parties and Consent Orders were entered before Smellie CJ, with directions being given, on 11,e 18 December 2013 and 15 August 2014, by which certain issues would be tried first, namely a claim referred to as the Section 37 Claim (in relation to certain provisions of section 37 of the Companies Law (2007 Revision), and Claims referred to as Mistake and Preference Claims. By consent certain other claims and/or issues were ordered stayed until further order of the Court.

¶ [10] The trial in relation to the agreed issues took place before the Honourable Chief Justice between the 24-26 September, 2014, and a written judgment was handed down on the 17 November 2014. The Order dated 17 November 2014 reflects the judgment of Smellie CJ and by Notice of Appeal dated 23 December 2014, l11e Appellant has appealed against this Order. Grounds of Appeal have JUDGMENT (REASONS FOR) - DD Growth Premium 2X Fund (In Official Liquidation) v. RMF Market Neutral Strategies (Master) Limited - Cause No. FSD 330[2011 & C.J.C.A. No. 24 0[2014 29.05.15 Page 4 of23 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 not yet been filed as the time provided for in the Rules for the drawing up of the Grounds had not up to the time of this application commenced nmning. RMF's Evidence II. The affidavit of Mr. Michael Beurer, was filed on March 102015 in support of the application. Mr. Beurer is the Head of Secondaries, Workout and Transitions at FRM, a division of Man Group pIc, which manages RMF. Part of his duties, he indicated, include overseeing this litigation on behalf ofRMF. At paragraphs 15 of his Affidavit, Mr. Beurer states as follows: "DD Growth is Insolvent and has Insufficient Assets to Pay Costs

¶ [15] RMF was concerned that DD Growth has what was in essence a 'free shot' against it in FSD 33 of 2011. DD Growth has nothing to lose given that it would be uuable to meet any costs award made agaiust it (as was proved to be the case) and was not responsible for its lawyers who were funding the litigation and sharing in the proceeds of the litigation on a contingency fee arrangement. RMF continues to be concerned that this remains the position, and in essence means that DD Growth has nothing to lose by pursuing its appea\. The parties to this litigation are therefore not on an even playing field. Pnt simply, RMF considers this sitnation to be unfair and nnjust."

¶ [12] Mr. Beurer at paragraphs 16 and 17 indicates that there have been limited attempts to agree security as the Appellant had made its position clear from the outset, including in its letter to the JUDGMENT (REASONS FOR) - DD Growth Premium 2X Fund (In Official Liquidation) v. RMF Market Neutral Strategies (Master) Limited - Cause No. FSD 33 0[2011 & C.I.C.A. No. 24 0[2014 29.05.15 Page 5 of23 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 Registrar of the Court of Appeal, Mrs. Audrey Bodden, dated 23 December 2014. In that letter it was opined by the Appellant's Attorneys Appleby that it would not be appropriate to provide security at all. The Appellant's Evidence

¶ [13] The application for security for costs has been opposed. The second Affidavit of Tammy Karma Fu, dated 26 March 2015 was filed on behalf of the Appellant. Ms. Fu is a partner of Zolfo Copper, who together with her fellow partner Gordon Ian Mac Rae, are 111e Joint Official Liquidators, the "JOLs", of 111e Appellant. In paragraph 21 of tins Affidavit Ms. Fu refers to the fact that 111e parties have agreed to provisionally list the appeal for the November session of 111e Court of Appeal. Whereas 111e Appellant's Attorneys have estimated that the appeal will take a day, RMF's Attorneys estimate a day and a half. Miss Fu refers to and exhibits 111e letter to the Registrar of the Court of Appeal, Mrs. Audrey Bodden, as well as an email from the Registrar, listing the appeal for the 10-11 November 2015. In the letter to the Registrar, the Appellant's Attorneys stated, amongst other matters, that security in excess of CI $50 would not be appropriate because the Appellant quite simply does not have any assets available from which substantial security conld be paid and that therefore such an order would stifle a meritorious appeal.

¶ [14] In a number of paragraphs of her Affidavit, Miss Fn makes the pomt that the it has never been denied that the Appellant is wholly insolvent and devoid of cash. She refers to the initial funding arrangements and subsequent conditional fee arrangement with Appleby and other evidence to show the Appellant's financial status. Sec in particular paragraphs 25-28. ,JUDGMENT (REASONS FOR) - DD Growth Premium 2X Fund (In Official Liquidation) v. 11MI' Market Neutral Strategies (Master) Limited - Cause No. I'SD 33 of2011 & C.I.C.A. No. 24 of2014 29.05.15 Page 6 of 23 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 21 22 23

¶ [15] At paragraphs 29 and 30 Miss Fn claims that it is the Appellant's very lack of cash that caused it to claim that the payments should be recovered and that RMF is liable to repay them to the Appellant.

¶ [16] At paragraphs 30 and 31 Miss Fu speales to the nature of the appeal and the advice that has been received from Appleby. The advice is, and it has been so argued before me, that the appeal turns in part on a disputed issue of construction of a Statute and the question whether, if the Appella11t's construction is correct, there is a remedy in restitution to recover money paid in contravention of the Statute. Further, that the appeal is an appeal with genuine merit and that it would therefore be wrong to make an order that would stifle the appeal by imposing a condition of payment that could not be met.

¶ [17] At paragraphs 33-38 Miss Fu then discusses the topic "The ability of the 2X Fund to obtain further funding". Mr. Meeson QC has described this as "the crux ofthe matter." Miss Fu states as follows: "33. As indicated above, the 2X Fund has $15,027.60 funding remaining, which is insignificant in proportion to the award sought. This was advanced for the specific purpose of fundiug claims against early redeemers and accordingly has not been used for the Non RMF Debts.

¶ [34] The funding arrangement, as approved by the CFA Judgment, has a strict repayment waterfall indicating how any recoveries must be paid (the Waterfall): .... JUDGMENT (REASONS FOR) - DD Growth Premium 2X Fund (In Official Liquidation) v. RMF Market Neutral Strategies (Master) Limited - Cause No. FSD 33 of2011 & C.I.C.A. No. 24 of2014 29.05.15 Page 7 of23 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23

¶ [35] The above waterfall was sanctioned by the Court, .... And has the effect of subordinating all of (a) the Provisional Liquidators' fees and expenses; (b) the Liquidators' fees and expenses; and (c) any adverse costs award, to the above.

¶ [36] The Liquidators cannot unilaterally amend the Waterfall. For the 2X Fund to obtain further funding to pay RMF's requested costs would require the stakeholders in the above waterfall to agree to subordinate their interests to any new funder .....

¶ [37] As the Court will be aware, the 2 X Fund recently settled an unrelated claim against another redeeming investor for $350,000. This sum fell to be paid in accordance with the Waterfall. This money cannot be used to provide security for costs of the appeal without the consent of the Lender and Petitioner A. Although the Liquidators have raised this issue with them, their consent to use this money for security has not been forthcoming. Had consent been given, then the other stakeholders would have had to have been consulted.

¶ [38] The Liquidators have unsuccessfully investigated further sources of funding. No fUJl(ler is prepared to provide funding for the Costs below and the Appeal Costs." JlIDGMENT (REASONS FOR) - DD Growth Premium 2X Fund (In Official Liquidation) v. RMF Market Neutral Strategies (Mastel~ Limited - Cause No. rSD 33 of2011 & C.l.C.A. No. 24 of2014 29.05.15 PageS of23 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 I~F's Arguments Mr. Meeson QC provided written and oral submissions. Reference was made to section 19(2) of the Law. Reference was also made to section 74 of the Companies Law (2010 Revision) (which is in the same terms as the current 2013 Revision) which states as follows: "Where a company is plaintiff in any action, suit or other legal proceeding, any Judge having jurisdiction in the matter, if he is satisfied that there is reason to believe that if the defendant is successful in his defence the assets of the company will be insufficient to pay his costs, may require sufficient security to be given for such costs, and may stay all proceedings until such security is giveu."

¶ [19] It was submitted that whilst in the context of an appeal RMF is a 'respondent' as opposed to a 'defendant' the provisions of section 74 continue to apply. Mr. Meeson relied on paragraph 24 of the decision of the Judicial Committee of the Privy Council in Re Bancredit Cayman Limited

¶ [2009] CILR 578, where it was stated, though not in the context of an appeal, that: "[T]he applicant would be in the position of a plaintiff and the respondent in the position of a defendant whatever their respective roles in the instant action. The ability of the court to entertain an application by the respondent for security for costs of the applicant's application to set aside the compromise could snrely not be denied on the ground that the application was not in form an originating process and so did not constitute "proceedings" for s.74 or O. 23 purposes." JUDGMENT (REASONS FOR) - DD Growth Premium 2X Fund (In Official Liquidation) v. RMF Market Neutral Strategies (Master) Limited - Cause No. FSD 33 0[2011 & C.I.C.A. No. 24 0[2014 29.05.15 Page 9 of23 1 2 3 4 5 6 7 8 9 10 11 16 17 18 19 20 21 22 23 24

¶ [20] The submission continues that it therefore follows that the circumstances within which the Court can grant security pursuant to section 74 are exceptionally wide and applies to appeals, the important consideration being one of substance, and not of form.

¶ [21] It was argued that where a claim is brought by an insolvent company in liquidation it follows that section 74 is engaged and prima facie security should be provided by the liquidator because the company has insufficient assets to pay the respondent's costs.

¶ [22] It was also submitted that, unlike a Court at first instance, in deciding whether to award security for the costs of an appeal, the Court of Appeal has to take into account the fact that the Appellant has already had the issue concerned determined against it, and it is prima facie an injustice to a respondent to allow au appeal to the Court of Appeal to proceed without security for costs being furnished in circumstances where the respondent will be unable to enforce a costs order against the appellant. There is accordingly, it was argued, a heavy burden on an insolvent appellant to clischarge in order to resist an order for security for costs on an appeal.

¶ [23] Importantly, RMF submitted that where an appellant suggests that an order for security would prevent it pmsuing an appeal, it is necessary for the appellant to establish not only that it is unable to furnish security for costs from its own resomces, but also that it is lmable to raise the money elsewhere.

¶ [24] Reference was made to the oft-cited decision of Peter Gibson LJ, sitting in the English Court of Appeal, in J(eary Developments Ltd. v Tarmac Construction Lttl [1995] 3 All E.R. 534 at page 540, g-j. JUDGMENT (REASONS FOR) - DD Growth Premium 2X Fund (In Official Liquidation) v. RMF Market Neutral Strategies (Master) Limited - Cause No. FSD 33 0[2011 & C.I.C.A. No. 24 of2014 29.05.15 Page 10 of23 1 2 3 4 5 6 7 8 9 10 11 12 13 14 19 20 21 22 23

¶ [25] Learned Queen's Counsel also referred to the decision of Barma J, as he then was, in the Hong Kong decision in Easy Watch Products Manufacturing Co. Ltd. [2003] HKCFI 325, where at paragraphs 15 and 16 Barma J stated: "15. In this case, the Plaintiff has seen fit only to make the bare assertion that its shareholders and directors are unable or unwilling to fnnd the litigation. No attempt has been made to indicate what assets the shareholders have available to them, or as to the sources of finance that might be available to them ........

¶ [16] Moreover, it seems to me that Mr. Chan is right in saying that in general, unwillingness of the backers of a company to put up funds to enable it to proceed with a claim which it is maldng should he afforded littie, if any, weight when considering whether or not a claim will probably be stifled if security for costs is ordered. This is particularly so where, as here, it would seem that the Plaintiff is no longer operating and that the only person likely to benefit from a successful claim are its shareholders. In such a case, their professed unwillingness to fuud the claim should not, in my view, be regarded as an impediment to the maldng of an order for security, particularly where the court, as here, cannot be satisfied on the evidence presented that they are actually unable to do so" (Emphasis provided by COllTIsel) JUDGMENT (REASONS FOR) - DD Growth Premium 2X Fund (In Official Liquidation) v. RMF Market Neutral Strategies (Master) Limited - Cause No. FSD 33 of2011 & C.I.C.A. No. 24 of2014 29.05.15 Page 11 of23 1 2 3 4 5 6 7 8 9 10 11 12 13 18 19 20 21 22 23 24

¶ [26] Indeed, in Global Fixed Income Limited and Euro Fixed Income Limited v HSBC Bank Cayman Limited (unreported), delivered 24 March 2009, Smellie CJ, in his ruling refusing leave to appeal an earlier ruling he had made granting security for costs, cited the Easy Watch case with approval. -see paragraph 7. The [2008 CILR Note 7] regarding the security for costs decision states as follows: "In an application for security for costs by a defendant, the court has to balance the risk of stifling a valid claim by an impecunious plaintiff against the risk of that impecuniosity being used as a weapon against the defendant if the plaintiff is allowed to pursue a cause of little merit, at no financial risk to himself. While the plaintiff only has to demonstrate some prospect of success in order to satisfy the court that an order for secnrity will be oppressive to it, proprietary connections to richer parties, (eg., investors, where the plaintiff is a company), who are clearly unprepared to fund the claims of the plaintiff, will give rise to concerns about the geunineness of the action, and security may be granted, pnrsuant to section 74 of the Companies Law (2007 Revision), which is designed specifically to prevent the risk of snch abnse. (Pearson v Naydler [1977] lW.L.R. 899 applied; Keary Devs Ltd ..... applied."

¶ [27] It was submitted that in the present case, the Court is not dealing with investors who are without means. Mr. Meeson submits that it is beyond question that they would be able to put up the funds, they are just simply unwilling to do so. Mr. Meeson made the point that after being paid out the subject sums, bis client RMF still remains the largest investor in the Appellant. Learned Queen's Counsel says that the other investors are Banks and other institutions like his client, or there are JlIDGMENT (REASONS FOR) - DD Growth Premium 2X Fund (Tn Official Liquidation) v. RMF Market Neutral Strategies (Master) Limited - Cause No. FSD 33 of2011 & C.LC.A. No. 24 0[2014 29.05.15 Page 12 of23 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 also some very wealthy individuals. In other words, COlmsel indicated, we me not dealing here with, to use his descriptive language, "orphans and widows". In any event, it was posited that Ms. Fu's Second Affidavit fails to disclose which investors the JOLS consider will potentially benefit from the appeal (RMF itself being the largest unpaid investor), and the ability of said investors to provide security.

¶ [28] Further, that the fact that the Appellant cmmot get third party Fmlders to invest and to indicate willingness to provide security speaks volumes about the merits of the appeal.

¶ [29] It was submitted that the Appellant cannot come close to suggesting that its appeal is so likely to be successful that it would justify the risk of exposing RMF to the injustice of having to bem its own costs of an appeal, even if successful. In all of these circumstances, RMF asks that the Court exercise its discretion to order security for costs. The Appellant's Arguments

¶ [30] Learned Queen's Counsel MI'. McMaster also provided both written and oral submissions. He mgued against the order for security for costs upon mnltiple bases. Queen's COMsel submitted that impecuniosity alone is not sufficient reason for the Court to exercise its discretion to awmd security. Itl considering whether to exercise its discretion, it was urged that the Court should consider: (1) The stage in proceedings at which security is sought. Although it was admitted that the security for costs application in respect of the appeal was JUDGMENT (REASONS FOR) - DD Growth Premium 2X Fund (In Official Liquidation) v. RMF Market Neutral Strategies (Master) Limited - Cause No. FSD 33 0[2011 & C.I.C.A. No. 24 0[2014 29.05.15 Page 13 of23 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 being made at the very earliest stage, it was pointed out that no attempt had been made to obtain secmity in respect of the costs below. (2) Whether the security will stifle a meritorious claim. (3) Whether the plaintiff s want of means has been brought about by any conduct of the defendant.

¶ [31] Learned Queen's Counsel stated that the Appellant seeks recovery of sums paid to RMF at a point in time when the Appellant was insolvent (as found, it was submitted, by the Court below). The argument continued, that if those monies had not been paid to RMF, the Appellant would not now be impeclmious. It was submitted that the Appellant's impecuniosity is therefore caused, in part, by the actions of the Respondent.

¶ [32] Counsel highlighted the fact that the Liquidators have explored sources of funding but that none are cmrentiy available. Any order for security would, Mr. McMaster posited, therefore stifle the appea\.

¶ [33] It was submitted that the appeal is meritorious for the following reasons: (1) The Grand Court was wrong to reject the Appellant's construction of the relevant provisions of the Companies Law, and hence tile payment was in fact unlawful. (2) In reaching its own construction, the Grand Court had regard to material on which it did not give the Appellant an opportunity to be heard, in breach of natmal justice and the audi ate ram partem rule. JlIDGMENT (REASONS FOR) - DD Growth Premium 2X Fund (In Official Liquidation) v. RMF Market Neutral Strategies (Master) Limited - Cause No. FSD 33 0[2011 & C.I.C.A. No. 24 of2014 29.05.15 Page 14 of23 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 (3) The Grand Court did not go on to find whether (had it found a breach of the statutory prohibition) tilere was a good claim in restitution or by way of constructive trust, but that that should be determined by the Court of Appeal and determined in favour of ilie Appellaut.

¶ [34] Mr. McMaster also traced the history of the application, and the val'ious transformations it has gone through. This included what he submitted was au unprecedented attempt to obtain as a condition of being allowed to take the matter to the Court of Appeal, an order securing the costs in the Court below. Learned Queen's Cowlsel classified the application as a crude attempt to stifle a genuine appeal.

¶ [35] hl all of the circumstances, it was argued that the Court should exercise its discretion by refusing the application for security for costs. In the alternative, if the Court were minded to graut the application, Mr. McMaster argued that the amount sought for costs is excessive. He reminded the Court of the old case of Abertlare and Plymouth Co. v Hankey (No.2) (1887-1888) 32 Sol J. at 644, which is often cited for the proposition that the court never orders au amowlt as security that would cover the entire costs of the appeal, but only orders security of a reasonable amowll. Resolution of The Issues

¶ [36] I start my consideration of the issues by noting that section 19(2) of the Law does not provide any guidance or set ont any specific basis upon which secnrity for ilie costs of an appeal may be directed. This may be contrasted, for example, with section 74 of the Companies Law (2013 Revision) which deals with compauies aud speaks to a basis of reason to believe that the company will have insnfficient assets to pay the successful defendant's costs. However, I agree with Mr. JUDGMENT (REASONS FOR) - DD Growth Premium 2X Fund (In Official Liquidation) v. RMF Market Neutral Strategies (Mastet~ Limited - Cause No. FSD 330[2011 & C.LC.A. No. 24 0[2014 29.05.15 Page 15 of23 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 25 Meeson QC that where, as here, it is plain that the party pursuing the appeal is an insolvent company, and one in liquidation, section 74, or indeed, the rationale behind it, should enter into the Court's consideration when an application is made under section 19(2) of the Law. I find that the decision in Re Bancredit Cayman is supportive of such reasoning. Section 19(2) of the Law is also to be contrasted with Order 23 of the Grand Court Rules which provides more detailed guidance as to when the Grand Court may order security for costs in respect of an action or other proceedings at first instance in the Grand Court. It would in my judgment seem clear that Mr. Meeson is right that RMF's application gains considerable strength and traction from the fact that it has already secured a win in the Court below, and that in the circumstances that prevail there is reason to believe that the appellant will not be able to, and its assets will be insufficient to pay RMF's costs were RMF to succeed on appeal. However, it is also plain that when an appeal is filed there are no a priori asswnptions, and the question of whether to order security for costs remains a matter involving the exercise of the Court's discretion.

¶ [37] In the circumstances it does seem to me that the principles governing the exercise of the jurisdiction to order security for costs against a plaintiff company under the English Company Law provision discussed in Keary provide useful guidance. Though the English section wlder consideration is differently worded from section 74 of the Cayman Companies Law, it is sufficiently similar for present purposes to inform the Court as to some of the considerations that should enter the analysis wlder section 19(2) of the Law in the present circmnstances. These principles may be summarized as follows (see pages 539-542 of Keary):

¶ [1] The Court has a complete discretion whether to order security, and accordingly it will act in light of all the relevant CirCll111stances. JUDGMENT (REASONS FOR) - DD Growth Premium 2X Fund (In Official Liquidation) v. RMF Market Neutral Strategies (Master) Limited - Cause No. FSD 33 0[2011 & C.I.C.A. No. 24 of2014 29.05.15 Page 16 of23 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

¶ [2] In considering all of the circumstances, the Court will have regard to the appellant's chances of success, though it should not go into the merits in detail unless it can be clearly demonstr'ated that there is a high degree of probability of success or failure.

¶ [3] The possibility or probability that the appellant will be deterred from pursuing its claim by an order for security is not without more a sufficient reason for not ordering security. Indeed, in relation to companies govel'l1ed by the Companies Law, Parliament having worded section 74 the way it did, it must have been envisaged that the order might be made in respect of a company that would fmd difficulty in providing security.

¶ [4] In considering the application for security for costs, the Court must carry out a balancing exercise. On the one hand, it must weigh the possibility of injustice to the appellant if prevented from pursuing a proper appeal by an order for security. This must be placed against the possibility of injustice to the respondent if no security is ordered and the appeal fails and the respondent finds itself unable to recover from the appellant the costs incurred in resisting the appeal. The Court will properly be concerned not to allow the power to order security to be used as an instrument of oppression, such as by stifling a genuine claim by an indigent company against a more prosperous company. This is particularly the case when the failure to meet the claim might in itself have been a material cause ofthc plaintiffs impecuniosity. But it will also be concerned not to be so reluctant to order security that it becomes a weapon whereby the impecunious company uses its inability to pay costs as unfair pressure on the more prosperous company. JUDGMENT (REASONS FOR) - DD Growth Premium 2X Fund (In Official Liquidation) v. RMF Markel Neutral Strategies (Master) Limited - CaLise No. FSD 33 0[2011 & C.I.C.A. No. 24 0[201429.05.15 Page 17 of 23 1 2 3 4 5 6 7 8 13 14 15 16 17 18 19 20 21 22 23 24 25

¶ [5] Before the Court refuses to order security on the grounds that it would unfairly stifle a valid claim, the court must be satisfied that, in all the circumstances, it is probable that the claim would be stifled. There may be cases where this can properly be inferred without direct evidence. However, such a case is likely to be far rarer than those cases in which the Comt will require evidence from the appellant to make good the assertion that the claim would probably be stifled by an order for secmity for costs. Further, the Court should consider in the case of an appellant company, not only whether the company can provide secmity out of its own resomces to continue the appeal, but also whether it can raise the amount needed from its directors, shareholders or other backers or interested persons. As this is likely to be peculiarly within the knowledge of the appellant company, it is for the appellant to satisfy the comt that it would be prevented by an order for secmity from pursuing the appeal.

¶ [6] The lateness of the application for security is a circlUlistance which can properly be taken into account, however, what weight to give it must depend upon the circumstances. It is proper to take into account the fact that costs have already been incmred without there being an order for security. Nevertheless, it is appropriate for the Comt to have regard to what costs may yet be incurred.

¶ [7] The Court in considering the amount of the security that might be ordered will bear in mind that, provided it is more than simply a nominal amount, the amount ordered is not bound to be substantial.

¶ [38] Guided by those principles, I start with the prospects of snccess of the appeal. I am satisfied, particularly given that the grounds involve matters oflaw, including the construction of' a Statute, JUDGMENT (REASONS FOR) - DD Growth Premium 2X Fund (In Official Liquidation) v. RMF Market Neutral Strategies (Master) Limited - Cause No. FSD 330[2011 & C.LC.A. No. 24 0[2014 29.05.15 Page 18 of23 1 2 3 4 5 6 7 8 13 14 15 16 17 18 19 20 21 22 23 24 that tlIis is not an appeal of which it can be said that there is no real prospect of success. Further, it cannot be demonstrated clearly that there is either a high degree of probability of success or failure. It would therefore be wrong to delve any further into the merits in order to decide whether it would be just or appropriate to make an order for security for costs. I therefore move on to consider other aspects of the matter.

¶ [39] I renIind myself that the possibility or probability that the Appellant might be deterred from pursuing its appeal is not without more necessarily a sufficient reason for not ordering security. Indeed, when orders are made under section 74 of the Companies Law in so far as they are made in circumstances where the Court has reason to believe that the company's assets will be insufficient to satisfy the defendant's costs, it must be the case that a company that is in severe financial straits may be exposed to such an order being made against it.

¶ [40] In terms of the timing of the application, in my view, the appeal stage is quite different from the first instance stage in the sense that new considerations and factors may apply. Thus, upon reflection, I do not think that the fact that RMF did not apply for security for costs in respect of the proceedings below sways the matter one way or the other. It does not, in any event, make this an application at a late stage. It simply means that RMF had no security for costs in the Court below. That in my view ought not to count against it with regard to the making of the application at the appeal stage, Round 2, so to speak.

¶ [41] In carrying out the balancing exercise, I have examined the Appellant's claim that the actions of RMF may in part havc contributed to the Appellant's impecuniosity. I a6'l'ee with Mr. Meeson that this does appear to be a circular argLUnent. The Appellant relies on its very state of JUDGMENT (REASONS FOR) - DD Growth Premium 2X Fund (In Official Liquidation) v. RMF Market Neutral Strategies (Master) Limited - Cause No. FSD JJ of2011 & C.I.C.A. No. 24 of2014 29.05.15 Page 19 of23 1 2 3 4 5 6 7 8 9 10 11 12 13 14- 15 16 17 18 19 20 21 22 23 24 impecuniosity as the reason why it makes its claim against RMF, i.e.one of the main planks of its claim is that the payments it made to RMF were made at a time when the Appellant was unable to pay its debts as they fell due-see paragraphs 29-30 of Ms. Fu's affidavit. Further, RMF, like others put in its redemption request. Even if the Court of Appeal were to find that the funds should not have been paid out to RMF, it is not immediately apparent to me that this would mean that RMF even caused the payment. Without more, it would seem that it would have been, as Mr. Meeson submitted, the Directors of the Appellant who would have directed the payment out. I do agree with Mr. McMaster that the wording in Keary does not suggest that the deed or misdeed needs to be as direct or serious as to be of the nature of tortious or other wrongdoing on the part of the applicant. However, on the basis of the instant case as pursued thus far, and in respect of the matters the subject of the appeal, it appears to me that, without more, any actions or inactions of RMF fall short of the mark as being a material cause of the Appellant's impecuniosity. In any event, they are not such as to weighing against RMF and its application for security.

¶ [42] However, perhaps the most decisive factor in this application is the question of whether an order for security for costs would stifle the Appellant's case because it is financially unable to furnish security. In my view, tins is not a case where the Court could properly draw such an inference without direct evidence. Thus, I must scrutinize the evidence with care. I appreciate that at the time that Ms. Fu swore her Affidavit, RMF had not yet abandoned a substantial aspcct and amount of the sum claimed for security. However, there is no evidence about the investors' inability to pay security for costs, in any sum whatsoever, whether the original sum or the reduced sum. Further, in their written submissions at paragraph 41, the Appellant's Attorneys make the bare statement, unsupported by sufficient evidence, that even the sum ofU.8.$147,907.25 would JUDGMENT (REASONS FOR) - DD Growth Premium 2X Fund (In Official Liquidation) v. RMF Market Neutral Strategies (Master) Limited - Cause No. FSD 3301"2011 & C.I.C.A. No. 24 0[2014 29.05.15 Page 20 of 23 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 stifle the Appeal. In relation to other sources of funding, Ms. Fu has said that no funder is prepared to provide funding for the Appeal Costs. She has not said that they cmmot afford to provide the funding. Mr. McMaster candidly conceded that there is a certain lack of evidence regarding the willingness of funders or investors to provide the reduced amOlUlt of security sought. However, he asked the Court to protect the Appellant against this attempt to stifle the Appeal.

¶ [43] hl my judgment, the Appellant has not provided snfficient information as to the identity of its investors or backers. Nor has it provided sufficient evidence as to the inability, as opposed to the unwillingness, of its investors to put up funds in respect of security for costs. It is not enough to show that the Appellant has no ability to furnish security from its own resources. Nor is it sufficient to show that investors or funders are unwilling to fund. Indeed, if they are unwilling to fnnd that may carry negative c01111otations for the gennineness or merits of the Appeal.

¶ [44] As to the suggestion that RMF is deliberately attempting to stifle the appeal, I do not tilink that is a view I conld properly or lightly take. It does seem to me that it would be quite a leap for me to find that that is the siluation. RMF is in fact a party in whose favour a judgment has been given and an order for costs made. Further, although there was a chaJ1ge in the nature aJ1d quantum involved in the application over time, including on the eve of the hearing, I do not consider that there is a sufficient evidential basis upon which I could find that there has been a deliberate attempt to stifle the appeal, whether by way of an express finding or by way of the drawing of a fashion. JUDGMENT (REASONS FOR) - DD Growth Premium 2X Fund (In Official Liquidation) v. RMF Market Neutral Strategies (Master) Limited - Cause No. FSD 33 0[2011 & C.I.C.A. No. 24 0[2014 29.05.15 Page 21 of23 1 2 3 4 5 6 7 8 9 10 11 12 17 18 19 20 21 22 23 24 25

¶ [45] However, in any event, the onus is on the Appellant to satisfy the Court that a genuine appeal may probably be stifled. If that is not shown, then RMF's intentions are less significant. It is for the Appellant to go further than it has done and to show that its investors are unable to put up the funds. The Appellant would have these matters peculiarly within its knowledge and it has failed to satisfy me that it would be prevented from pursuing the appeal if I were to make an order for security for costs. In my view, the reasoning on this point in Keary, Easy Watch and Global Fixed Income (discussed above) is applicable to the instant case.

¶ [46] In my judgment, it would be appropriate in all of the circumstances to order security for costs. The qnestion remaining is as to the amount. I agree with Mr. McMaster that the figures quoted do appear excessive. For example, the estimated number of hours of correspondence, up to and including the Court of Appeal hearing, 40 hours for Mr. Meeson QC, 60 for Mr. Hobden, and 20 for Mr. Bodden, seems far from reasonable. That amounts to nearly a third of the total US$249,500 sought. I bear in mind that all I need order is a reasonable amount for security. The cases demonstrate that this aspect of the exercise of the Com'!'s discretion is not a particularly scientific exercise. MI'. McMaster had suggested what he considered a more realistic range of $75,000-$100,000.

¶ [47] In all of the circl11nstances, it seems to me that an appropriate snm for security for costs would be US $80,000.00. As regards the costs of this application itself, I have taken into account the stage at which the application for the first instance costs was withdrawn and the reason for so doing. As a result, I will reduce the successful party RMF's costs to 75% - see paragraph 24 of the decision of the Judicial Committee of the Privy Council ill Seepersad v. Persad [2004] UKPC 19. JUDGMENT (REASONS 1<'OR) - DD Growth Premium 2X Fund (In Official Liquidation) v. RMF Market Neutral Strategies (Master) Limited - Cause No. FSD 33 of2011 & C.I.C.A. No. 24 0[2014 29.05.15 Page 22 0[23 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17

¶ [48] After consultation with Counsel as to the terms ofthe Order, it is hereby ordered and directed that-

¶ [1] The Appellant shall provide secmity for costs of the appeal in the sum of US $80,000 by depositing in the Grand Court that sum (the Security) within 28 days of the date of this Order.

¶ [2] The Appellant shall be at liberty to apply for any extension of time before the expiry of the said 28 days.

¶ [3] In the absence of any application for extension of time or the provision of the Security within the said 28 days, this appeal shall stand dismissed.

¶ [4] The Appellant shall pay 75% of the Respondent's costs of this application, to be taxed if not agreed. Dated this 29th day of May, 2015 J-~~~ Mangatal J. Judge of the Grand Comt JUDGMENT (REASONS FOR) - DD Growth Premium 2X Fund (In Official Liquidation) v. RMF Market Neutral Strategies (Master) Limited - Cause No. rSD 33 of2011 & C.I.C.A. No. 24 of2014 29.05.15 Page 23 of23