Costs incurred in preparing to comply with disclosure orders
not payable by liquidators
Protection for wasted costs should have been sought earlier in
The liquidators of two companies wound up in the Cayman Islands
(SICL and SHL) sought disclosure of documents
relating to those companies from PwC in Bermuda. Orders were made
at first instance and then set aside, in the case of SICL by the Court of Appeal of Bermuda and in
the case of SHL by the Privy Council.
This judgment deals with the costs incurred by PwC in preparing to
provide documentation prior to the orders being set aside.
The Privy Council (Lord Clarke dissenting) held that the costs
which had been sought (but not obtained) by PwC during the course
of proceedings were only the costs of compliance and not the costs
of preparatory work which later proved to be unnecessary due to the
disclosure orders being set aside. Protection in relation to such
wasted costs could have been achieved (if at all): "by
appealing, seeking an extension of time for compliance or a stay of
execution pending determination of the appeal and, if this is
resisted insisting, as a condition of the refusal, on an
undertaking in damages to cover costs wasted." PwC's
application was therefore dismissed.
The position on costs of compliance with a disclosure order in
an insolvency scenario (in the English context pursuant to, for
example, section 236) is not entirely settled but case law favours
costs not being met out of the insolvency estate. Nevertheless, in
relation to the costs of compliance which are later wasted (because
orders are set aside), this case is a clear statement to seek
appropriate protection on such costs at the outset. Whether or not
such protection will ultimately be granted remains a separate
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