Jersey Unreported Judgments

Companies re: costs.

[2022]JRC215

Royal Court

(Samedi)

13 October 2022

IN THE MATTER OF THE REPRESETATION OF HWA 555 OWNERS, LLC

AND

IN THE MATTER OF REDOX PLC S.A.

AND

IN THE MATTER OF AN APPLICATION FOR A CREDITORS' WINDING UP PURSUANT TO ARTICLE 157A OF THE COMPANIES (JERSEY) LAW 1991

Advocate J. M. Dann for the Representor

Advocate J. M. P. Gleeson for the Second Respondent

judgment

the commissioner:

1.        By its judgment of 30^th August 2022, the Court declined to make a winding up order in respect of Redox PLC S.A. and I have now received skeleton arguments and heard oral submissions on the issue of costs.  I will use the same definitions as in the judgment.

2.        The familiar guidance given in the cases of Watkins v Egglishaw [2002] JLR 1 and Flynn v Reid [2012] JCA 169 was cited to me. 

3.        The Luxembourg Trustee seeks his costs on the standard basis on the ground that he was the winning party.  HWA concedes that in broad terms, the Luxembourg Trustee was the winning party, but Advocate Dann makes the point that the Luxembourg Trustee unsuccessfully challenged the standing of HWA to make the application and he says a significant proportion of the skeleton arguments and hearing were concerned with this issue.  If the Luxembourg Trustee had accepted HWA's standing, then he says the hearing and associated costs would have been substantially reduced.  As the Luxembourg Trustee had only succeeded on part of his case, looking at the situation in the round, Advocate Dann submitted that it would be unjust for HWA to be ordered to pay the entirety of the Luxembourg Trustee's costs.  An appropriate order, he submitted, would be that the Luxembourg Trustee should have 60% of its costs on the standard basis.  

4.        Advocate Gleeson responded by raising two matters which he said should influence the exercise of my discretion.  Firstly, he said that the proceedings could have been avoided altogether, once HWA was in receipt of the Luxembourg's Trustee's confidential affidavit, explaining the progress that had been made on the process of réhabilitation.  Secondly, he drew my attention to the serious allegations that had been made against the Luxembourg Trustee, including an allegation that he was acting in bad faith, and had given false evidence about allegedly acting in concert with IWG.  He said that these serious allegations made in what was a foreign court to the Luxembourg Trustee had to be countered and this increased the costs.  These allegations were pursued in the skeleton argument by Advocate Dann (paragraph 108) although Advocate Gleeson acknowledged that, at the outset of the hearing, Advocate Dann had made it clear that HWA was not alleging fraud or dishonesty on the part of the Luxembourg Trustee.  Its complaint was that the Luxemburg bankruptcy proceedings were slow moving, opaque and secretive. Furthermore, the Luxembourg Trustee was not a qualified insolvency practitioner.

5.        Advocate Gleeson submitted that this was in reality a one issue case.  There was only one cause of action, and one relief sought, namely a winding up order under Article 157A of the Companies (Jersey) Law 1991.  Furthermore, he said that HWA was not wholly successful on the issue of standing, as the Luxembourg Trustee prevailed on the question of what constituted a liquidated claim for the purposes of Article 157A.  He was also critical of the fact that much of the evidence of Professor Dodson was irrelevant to the issue before the Court, and HWA had cited numerous authorities that had no bearing on the case.  In his view, Advocate Dann had in any event overstated the impact of the standing issue, which only played a small part amounting to 20% at most.

6.        Advocate Dann pointed out that in paragraph 11 of Advocate Gleeson's skeleton argument he had stated that there were two issues before the Court, namely the standing of HWA to make the application and if so, whether it would be appropriate for the Court to grant it.  The proper course for the Luxembourg Trustee was to rest on the wisdom of the Court on this issue of standing, and not to oppose it.  Whilst he acknowledged that HWA had asserted bad faith on the part of the Luxembourg Trustee, this was not in the sense of dishonesty.  The allegations were the subject of concise exchanges of affidavit evidence and had not materially increased costs. 

Decision

7.        As the Court of Appeal stated in Flynn v Reid at paragraph 40, there are two major considerations in the award of costs, namely the merits of the case as adjudicated upon by the Court and the conduct of the parties as appraised by the Court.  Advocate Gleeson's submissions about HWA potentially avoiding the hearing altogether and the allegations of bad faith and other criticisms relate to the conduct of HWA and it would be more relevant to the issue of whether costs should be awarded against HWA on the indemnity as opposed to standard basis, something which the Luxembourg Trustee is not pursuing. 

8.        In my view, there were two distinct issues before the Court as submitted by Advocate Dann and as stated in Watkins v Egglishaw the Court should be ready to make separate orders to reflect the outcome of different issues. 

9.        HWA was successful on the issue of its standing to make the application, although as Advocate Gleeson points out, it was the Luxembourg Trustee's submissions as to what is meant by the expression "liquidated sum" in Article 157A that the Court adopted. 

10.      As against that, I have some reservation as to whether it was necessary for the Luxembourg Trustee to actively argue against the standing of HWA, as opposed to resting on the wisdom of the Court and dealing with the application on its merits as he successfully did, bearing in mind HWA's clear interest in the bankruptcy and its involvement in the Jersey proceedings in September 2021.  The Court would still have had to be satisfied as to HWA's standing and to have received the submissions of the parties to assist it.  

11.      Taking all of this into account and taking an overview of the litigation as a whole, I conclude that rather than making separate orders on the two issues, I should award the Luxembourg Trustee 80% of his costs to reflect HWA's success on the standing issue. 

12.      In conclusion, I therefore order HWA to pay to the Luxembourg Trustee 80% of the costs he has incurred of and incidental to the application on the standard basis to be taxed if not agreed.   

Authorities

Companies (Jersey) Law 1991.

Watkins v Egglishaw [2002] JLR 1.

Flynn v Reid [2012] JCA 169.