The Court of Appeal has reduced the costs payable by six petitioners after their bid to place OpenHydro Group Limited and its subsidiary into examinership was refused. It set aside the High Court order requiring them to pay the opposing creditors’ costs in full and substituted an order for 50% of those costs, subject to adjudication if the parties cannot agree the amount.
The appeal concerned costs only. The petitioners’ appeal against the refusal to appoint an examiner did not proceed after investor interest in the companies disappeared and court protection ended in September 2018. The Court of Appeal had previously made no order for the costs of that abandoned appeal.
The High Court had refused the examinership petition in September 2018, finding that the petitioners had not established a reasonable prospect of survival for the companies. It discharged an interim examiner and ordered the companies wound up, appointing the provisional liquidators as joint liquidators. The costs of the examinership proceedings were decided later: in February 2019, the High Court ordered the petitioners to pay the costs of Naval Energies SAS and Naval Group SA, the creditors who had opposed the petition.
The Court of Appeal said the High Court had not adequately explained why it rejected the petitioners’ arguments for making no costs order. Those arguments included the public interest purpose of examinership and the earlier ruling that the appeal had been bona fide until late September. The appeal court said that the lack of reasons limited the weight it could give the High Court’s decision, so it had to exercise its own discretion while still giving that decision some weight.
The appeal court held that examinership proceedings differ from ordinary disputes between private parties. Their statutory purpose includes trying to preserve businesses and employment, and the prospect of substantial costs after an unsuccessful petition could deter meritorious applications. The court also rejected the creditors’ characterisation of the case as essentially a dispute between majority and minority shareholders: the creditors appeared as creditors, and the court had been deciding whether the statutory conditions for examinership were met.
The court did not find the petition frivolous or doomed to fail. It noted that an independent expert had supported it and that the interim examiner had considered the company to have a reasonable prospect of survival until after the Bay of Fundy turbine failure. The petition’s failure remained relevant, but the court said the outcome should not be decisive by itself when assessing costs in examinership proceedings.
For the appeal costs, the court’s provisional view was that the petitioners should receive 50% of their costs. Either side was given 14 days to seek a brief further hearing on that issue. If no application is made, the proposed order will be made. The source judgment does not establish whether such an application was made or what final appeal-costs order followed.