Re Electric Mutual Liability Insurance Company Ltd 1995 Civil Jur. No. 436

• Jurisdiction: Bermuda
• Judgment Date: 19 February 1997
• Date: 19 February 1997
• Docket Number: Companies (Winding-up) No. 436 of 1995,Companies (Winding-Up) No. 436 of 1995
• Court: Supreme Court (Bermuda)

In the Supreme Court of Bermuda

Ground, J

Companies (Winding-Up) No. 436 of 1995

Re Electric Mutual Liability Insurance Company Ltd

Ms. E. Gloster QC, Mr. G. Bell QC and Mr. A. Griffiths for the Company;

Mr. K. Rokison QC and Ms. R. Mayor for General Electric Company; and

Mr. J. Higham QC and Mr. J. Cooper for Kemper Reinsurance Company.

Goldsmith v Sperrings Ltd.WLR [1977] 1 WLR 478

Re Lympne InvestmentsUNK [1972] 2 All ER 385

American Cyanamid v Ethicon [1975] AC

Bryanston Finance Ltd v De Vries (No. 2)ELR [1976] 1 Ch 63

Colonial Bank of Australia v WillasELR (1874) LR 5 PC 417

Opposition by reinsurer to winding up — Insolvency — Abuse of process — Redomestication — Balance of convenience — Judicial review

The full text of this judgment is not currently available.

In the Supreme Court of Bermuda

Ground, J

Companies (Winding-up) No. 436 of 1995

Re Electric Mutual Liability Insurance Company Limited

Ms. E. Gloster QC, and Mr. G. Bell QC for the Company;

Ms. R. Mayor for General Electric Company; and

Mr. J. Higham QC and Mr. J. Cooper for Kemper Reinsurance Company.

Great Western Railway Co v Carpalla United China Clay Co Ltd. (No. 2)ELR [1909] 2 Ch 471

McCullie v ButlerELR [1962] 2 QB 309

Church of Scientology of Calfornia v SmithUNK [1972] 2 all ER 353

Costs — Winding up order — Kemper neither creditor nor contributory — Basis of taxation — Out of court preparation

RULING ON COSTS

This ruling deals with the costs of the Petition to wind up Electric Mutual Liability Insurance Company Limited (‘the Company’), which I ordered to be wound up by the Court under the provisions of the Companies Act on 26th July 1996.

The hearing of the Petition was unusual, because of the intervention of Kemper Reinsurance Company (‘Kemper’), who appeared at the hearing pursuant to leave given by me on 15th April 1996. Kemper were neither creditor nor contributory of the Company, but appeared as a debtor to advance allegations of fraud concerning the manner in which the Company redomesticated itself from Massachusetts to Bermuda. Details of those allegations are set out in my judgment of 26th July 1996.

The Award of Costs

Kemper sought to resist any order for costs against them on the basis that the normal rule should apply, and the Company's costs should come from the estate. In view of the course this matter took, I do not think that that would be appropriate. Kemper sought to intervene in this matter to advance their own interests, as a direct result of which the hearing was prolonged to 12 days, whereas it would otherwise have been disposed of in a matter of minutes. In the event, Kemper were unsuccessful in their intervention. I do not see why the estate, and hence eventually the creditor, GE, should bear the costs occasioned by that intervention. I therefore propose to treat this matter as if it were an action between Kemper and the Company, with the consequence that the costs should follow the event unless it appears some other order should be made as to the whole or part of the costs: see Ord. 62, r. 3(2).

Kemper next contends that I should award the Company part only of its costs, as it lost on the issue of fraud to the extent that I found that there was a serious issue to be tried in that respect. Kemper therefore invite me to disallow so much of the costs as are attributable to that factual issue, as opposed to legal argument, and put before me a necessarily rough and ready analysis to show that two thirds of the hearing was concerned with that issue.

In my view the factual issues cannot be hived off in this way. They are inextricably involved with the legal arguments that were advanced, and lay at the heart of the intervention. Kemper lost on its intervention, and I see no reason why the normal rule as to actions should not apply, and costs follow the event.

The costs are to be those of and occasioned by Kemper's intervention. I express it that way so that the taxing officer will realise that it does not include the costs of the Petition which would have been incurred in any event, which may be paid from the estate in the normal way.

Basis of Taxation

The Company then urges me that I should order that they have their costs taxed on the common fund basis, that being more generous than the normal party and party basis. They seek this on the grounds that Kemper's intervention as a debtor was unprecedented and wholly misconceived.

I do not think that it would be appropriate to depart from the normal basis of taxation. On the facts, I have found that Kemper raised a serious issue. The issues of law may have ultimately been decided against them, but they were by no means clear from the outset. The fact that Kemper's intervention may have been novel does not of itself mean that it was wrong, and the fact that I permitted them to be heard at all represents an initial finding that their position was arguable. I therefore decline to order a taxation on the common fund basis, with the effect that, pursuant to Ord. 62, r. 28(2), the costs are to be taxed on the party and party basis.

Subsidiary Points

The Company also raised further points in respect of taxation, being—

(a) whether any special direction or certificate is necessary in order for the Registrar to allow preparation by attorneys in the Company's Bermuda law firm, Appleby Spurling & Kempe (‘AS&K’) other than Mr. Bell QC (who appeared at the hearing as counsel), and for their attendance in court, although not as counsel.

(b) that I should certify the matter as fit for three counsel;

(c) that I should give a direction that this is a special case within Ord. 62, r. 32(2) and that accordingly on taxation the Registrar can allow items not mentioned in the scales and exceed the allowances prescribed in the...