Peter Maxymych v (1) Global Convertible Megatrend Ltd; (2) FE Global Undervalued Investments Ltd

• Jurisdiction: British Virgin Islands
• Judge: Joseph-Olivetti, J.,JOSEPH-OLIVETTI, J.
• Judgment Date: 09 May 2007
• Neutral Citation: VG 2007 HC 10
• Court: High Court (British Virgin Islands)
• Docket Number: CLAIM NO. 246 OF 2006
• Date: 09 May 2007

IN THE HIGH COURT OF JUSTICE

CLAIM NO. 246 OF 2006

BETWEEN

Peter Maxymych

Claimant

and

Global Convertible Megatrend Ltd.

FE Global Undervalued Investments Ltd.

Respondents

Appearances:

Mr. Christopher Young of Harney Westwood & Riegels for the Applicants/Respondents

Mr. Stephen Dougherty of Appleby Hunter Bailhache for the Respondent/ Claimant

(Insolvency Proceedings — Costs — application by Defendant to value non-monetary claim under CPR 65.6 (1) (a) — principles to be considered — whether court should exercise its discretion to value the claim)

JUDGMENT ON COSTS

Joseph-Olivetti, J.

1 The issue of costs once again rears its Hydra-like form. This time we are concerned with an application by the Defendants (together, ‘the Funds’) to determine the value of a non-monetary claim for the purpose of ascertaining the amount of the prescribed costs order made in their favour by this court on the 5 ^th December 2006.

2 In its written decision of 5 ^th December the Court ordered as follows:—

‘For the foregoing reasons I have determined that Mr. Maxymych is not a member of either of the Funds and accordingly that he has no standing to bring the action under section 162(2) of the Insolvency Act and therefore his action is dismissed. This matter, for the purposes of costs is deemed to have been concluded at case management. The Respondents are to have their prescribed costs. They have made an application for the court to determine the value of the claim and the court will hear counsel on this application at a convenient time to be fixed by the court if agreement cannot be reached.’

3 The decision also sets out what was before the Court in detail and I fail to see how there could be any dispute about that. In summary, Mr. Maxymych issued proceedings as a member for the appointment of a liquidator of both Funds on the just and equitable basis. Whilst that was awaiting a hearing he applied for the appointment of a provisional liquidator ex parte. That was deferred to an inter partes hearing.

4 At that hearing, the Funds appeared and the court gave directions for the hearing of that interim application. On the date fixed for the hearing the Funds made application to strike out the entire action on the primary basis that Mr. Maxymych had no locus standi as he was not a member of either of the Funds. The Funds succeeded in their primary challenge and the Court dismissed the entire action and made the costs order referred to.

The Funds' Submissions

5 Mr. Young, learned counsel for the Funds concedes that the default value of the claim is $50,000.00. However, he argues that if that value is employed here the costs recovered are likely to be substantially inadequate as they would amount to $21,000.00. He arrived at that figure by treating the matter as 6 distinct applications, being 3 identical applications in respect of each Fund—(1) Claim for the appointment of a liquidator, (2) Application for the appointment of a provisional liquidator, (3) Application for the claim to be struck out. (Let me say that this interpretation of the court's order is creative. The court certainly did not envisage that Mr. Young would seek to calculate costs on each separate application on the prescribed costs basis. Perhaps it was not abundantly clear and I take the opportunity to clarify. The order was made on the basis that the whole action was dismissed and the costs ordered was for the whole action treating same as having been concluded at case management. It certainly was not intended to be an order for prescribed costs on each application or even assessed costs. If it were intended that each application would attract separate costs then the order would have been for costs of each application to be assessed separately as this is the appropriate regime for applications which are not made at case management).

6 Counsel emphasized that his application to value was made pursuant to CPR 2000 65.6(i) (a) and that none of the considerations in sub-rules (2) and (3) apply. He is asking the court to ascribe a value of $90M to the claim on the basis that the proceedings in which he was successful was an application to wind up the Funds and that according to Mr. Maxymych they had assets of that value. This would result in a costs order of $201,575.00. However, Mr. Young most magnanimously indicated that he was prepared to accept not that figure but only the costs actually incurred in the sum of $66,496.98 plus costs of this application. He posited that those were reasonable costs having regard to all the circumstances including the nature and complexity of the matter. However, he adduced no evidence in support of the reasonableness of his fees, not even so much as the hourly rate charged or the time spent or a copy/copies of his firm's invoices.

7 Alternatively, counsel submitted that the court should adopt the approach embarked on in Asiacorps Development Limited v. Green Salt Group Limited and Firstlink Investments Corporation Limited1 and ascribe a value to the claim which would result in the Funds receiving full indemnity as the costs they actually incurred were reasonable.

The Claimant/Respondents' Submissions

8 Learned Counsel for the Respondent, Mr. Dougherty, submitted that in determining whether the court should fix a value to the claim which is greater than the $50,000 ordinarily ascribed to such a claim by CPR 65.5 (2) (b) (iii), it must take into consideration that (1) the value that the court fixes will determine the amount of costs that Mr. Maxymych will have to pay to the Funds, (2) the principal objective of Mr. Maxymych's application was to appoint a provisional liquidator for the purpose of reviewing the books and records of the Funds, (3) there was no claim to recover any sum of money, the intent was to ascertain if a fraud had occurred, (4) the court did not consider the substantive arguments of Mr. Maxymych as the court decided that he did not have the necessary locus standi to bring the action and his application was dismissed, (5) the course of the

proceedings and the nature of the evidence filed by both sides, and (6) that the matter itself was relatively straightforward and was determined with dispatch.

9 Mr. Dougherty urged that Asiacorps should not be followed as the case was distinguishable from the case at bar. In Asiacorps there were a number of hearings over a protracted period of time, additional parties were added to the proceedings, other pertinent evidence came to light which resulted in further hearings and the applicant conducted itself in such a way as to cause undue delays and repeated hearings.

10 Counsel in conclusion submitted that the court should not exercise its discretion to value the claim but should retain the value fixed by CPR for non-monetary claims. He relied on Rochamel Construction Ltd v. National Insurance Corporation Ltd.2 and RBG Resources PLC (In Liquidation) v. RBG Global S.A.3

Analysis

11 This application to value the claim is made pursuant to CPR Part 65.6 (1) (a). Now CPR 65.5 (2) (b) (iii) provides that for the purposes of prescribed costs in the case of a defendant in whose favour costs have been awarded the value of a claim which is not a claim for a monetary sum is EC $50,000 unless the court makes an order under rule 65 6(1) (a). (I note en passant that under 65.5 (2) (a) in the case of a successful claimant in a non-monetary claim the value of the claim is, ‘the amount agreed or ordered to be paid’ and that there is no provision for the value to be fixed at $50,000.00 or for the court to value the claim under r. 65.6 (1) (a). However, to cure this seeming omission the practice seems to have arisen of applying the same rules as governs a defendant under 65.5(2) (b) (iii) as this seems to be what was contemplated by CPR when one reads 65.5 and 65.6 together as 65.6 (1) (a) allows either party to make an application to determine the value of a claim.)

12 CPR 65.6 provides:—

• ‘(1) A party may apply to the court at a case management conference–

  • (a) to determine the value to be placed on a case which has no monetary value; or

  • (b) if the likely value is known, to direct that the prescribed costs be calculated on the basis of some higher or lower value.

• (2) The court may make an order under paragraph (1) (b) only if it satisfied that the costs as calculated in accordance with rule 65.5 are likely to be either—

  • (a) excessive; or

  • (b) substantially inadequate;

  taking into account the nature and circumstances of the particular case.

• (3) If an application is made for costs to be prescribed at a higher level, rules 65.8(4) (c) and 65.9 apply.’

13 Unfortunately, the rule itself gives no guidance as to the circumstances in which a defendant may apply to have the value of a claim determined under para. (1) (a) or the matters which the court should take into account in determining the value, as clearly the considerations adverted to in paragraph (2) only apply to an application under para. (1)(b). However, both parties referred to several authorities and I will examine them to determine what if any assistance can be derived from them.

14 In Rochamel the Court of Appeal were concerned with two costs orders made in a case in which the claimant corporation commenced proceedings to recover monies due by Rochamel under the National Insurance Act. The claim was made jointly and severally against Rochamel as the employer and principal debtor and against two of its directors. The corporation entered judgment in default of defence against all three. Subsequently, the directors obtained leave to defend and at the case management conference it was ordered that the trial proceed only on the defence of due diligence as raised by the directors. At the hearing the corporation adduced no evidence against one director and the case against him was dismissed. The court ordered that...