Gottex v New Stream [2012] SC (Bda) 66 Civ
The Plaintiffs had successfully obtained an order to put the Defendant into receivership, with liberty for the Plaintiffs to apply for their costs
The point arose as to whether the costs should be paid only out of the general account or out of the segregated accounts (including the Plaintiff's own segregated account).
Kawaley CJ held that provided the litigation was linked to a segregated account, then it may be liable for costs. In the present case, the managers of the segregated accounts had pro-rated the company's costs to each account, and it was more likely than not that the directors had approved of such allocation. The company's bye-laws provided for such pro rating. There was no rational basis for inferring that the company would embark on litigation with such commercial significance without considering who might foot the bill.
Kawaley CJ also held that the costs should be pro rated also against the Plaintiff's own segregated accounts. All of the accounts are accounts of the company. The action had been brought against the company, challenging the validity of a transaction purportedly entered into by the company on behalf of all share classes. The costs therefore are expenses which were contemplated to be allocated across all accounts. This is part of the bargain that an investor makes when setting up a segregated account.
Unlike shareholders, segregated accounts do not have a seperate legal personality to the company but is merely an extension of the company's personality.
There might be circumstances where an account owner could claim that litigation charges were improperly charged, which might be a claim against the managers or directors.
The Chief Justice was careful to say that his findings were subject to refinement in future cases, given that this was a very novel area of law.
The Plaintiffs had successfully obtained an order to put the Defendant into receivership, with liberty for the Plaintiffs to apply for their costs
The point arose as to whether the costs should be paid only out of the general account or out of the segregated accounts (including the Plaintiff's own segregated account).
Kawaley CJ held that provided the litigation was linked to a segregated account, then it may be liable for costs. In the present case, the managers of the segregated accounts had pro-rated the company's costs to each account, and it was more likely than not that the directors had approved of such allocation. The company's bye-laws provided for such pro rating. There was no rational basis for inferring that the company would embark on litigation with such commercial significance without considering who might foot the bill.
Kawaley CJ also held that the costs should be pro rated also against the Plaintiff's own segregated accounts. All of the accounts are accounts of the company. The action had been brought against the company, challenging the validity of a transaction purportedly entered into by the company on behalf of all share classes. The costs therefore are expenses which were contemplated to be allocated across all accounts. This is part of the bargain that an investor makes when setting up a segregated account.
Unlike shareholders, segregated accounts do not have a seperate legal personality to the company but is merely an extension of the company's personality.
There might be circumstances where an account owner could claim that litigation charges were improperly charged, which might be a claim against the managers or directors.
The Chief Justice was careful to say that his findings were subject to refinement in future cases, given that this was a very novel area of law.
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