PricewaterhouseCoopers v SAAD Investments Company Limited (In Official Liquidation) and another

A final inter partes disclosure order does not ordinarily carry an implied cross-undertaking to pay a third party’s compliance costs merely because it may later be set aside on appeal. The party facing the order should seek an extension or stay pending appeal. The court may make that protection conditional on an undertaking to cover wasted preparatory costs. An outright order for internal management costs is not automatic. Costs may instead be considered after compliance, particularly by analogy with insolvency information orders. The Board dismissed the costs application. Lord Clarke dissented on the recoverability of reasonable costs after the orders were discharged.

These Privy Council appeals concerned costs incurred by PwC, a Bermuda registered exempted partnership, in preparing to comply with disclosure orders made by Kawaley CJ on 15 April 2013.

The orders arose from Cayman Islands liquidations. The Court of Appeal of Bermuda quashed the order made in favour of SHL and, by a majority, dismissed the appeal concerning SICL. The Board later set aside both disclosure orders in [2014] UKPC 35 and [2014] UKPC 36. PwC then sought about USD250,000 for preparatory internal staff work, relying on implied or express undertakings, the principle against officers benefiting from their own error, and analogies with disclosure and insolvency cases. The central question was whether the Board should order or recognise recovery of those preparatory costs.

Majority judgment delivered by Lord Mance

1. Application dismissed. Undertakings are voluntary. Although practice may imply a cross-undertaking in certain interim injunction contexts, no such undertaking arises in relation to a final disclosure order made inter partes merely because the order may later be overturned on appeal. The analysis in SmithKline Beecham Plc v Apotex Europe Ltd [2005] EWHC 1655 (Ch); [2006] 1 WLR 872 accurately described the interim position.
2. PwC sought an order for compliance costs in any event, rather than protection against costs wasted if an appeal succeeded. Once it decided to appeal, the proper course was to seek an extension of time or a stay. The court could make continuation of the order conditional on an undertaking covering wasted preparatory costs. PwC did neither, and the Board could not retrospectively impose equivalent protection.
3. The Norwich Pharmacal Co v Comrs of Customs and Excise [1974] AC 133 analogy did not govern because PwC was not alleged to be involved in tortious wrongdoing. The wider and more stringent order was nevertheless a factor favouring costs protection. In re Aveling Barford [1989] 1 WLR 360 and In re Bank of Credit and Commerce International SA [1997] BCC 561 indicated, at least by analogy, that costs consideration might be deferred until compliance. The Board was not persuaded that outright costs should have been ordered, particularly after the underlying orders under the Bermudan Companies Act 1981 had been discharged.

Dissenting judgment of Lord Clarke

Lord Clarke agreed that the undertaking and error-based grounds failed. He considered that the court had jurisdiction to order reasonable compliance costs after they had been incurred. In his view, the reasoning in In re Aveling Barford and In re Bank of Credit and Commerce International SA applied equally to the analogous SHL order. PwC had acted reasonably under orders later declared unlawful. He would have allowed the appeal and remitted quantum to the courts below.

• Privy Council: The majority dismissed PwC’s application for an order covering costs incurred preparing to comply with the disclosure orders. Lord Clarke dissented and would have allowed the appeal and remitted quantum.
• Court of Appeal of Bermuda: It quashed the SHL disclosure order, dismissed the SICL appeal by a majority, and refused to order or require an undertaking for compliance costs. The citation is not stated in the judgment.
• Supreme Court of Bermuda: Kawaley CJ refused to discharge the disclosure orders on 15 April 2013 and extended the compliance period to 1 August 2013 without making a costs order or requiring an undertaking.