As the Grand Court of the Cayman Islands reopens for 2024, we reflect on 2023 and some of the large-scale cross-border insolvency and restructuring proceedings, and complex commercial disputes dealt with in the jurisdiction over the past year.

Statistics from the Grand Court

There were approximately 1,579 filings made in the Grand Court, which can be broken down as follows:

  • 409 filings in the Financial Services Division, which is an increase from 332 new filings in 2022;
  • approximately 323 filings in the Family Division;
  • 123 applications for the admission of new attorneys, which was a mix of limited admission and general admission applications;
  • 257 filings in the Civil Division;
  • 267 filings in relation to probate matters; and
  • over 200 filings in the Summary Court.

A search of the Grand Court register shows that, as at 20 December 2023, approximately 129 judgments were delivered this year by Grand Court Judges in the Financial Services Division. In total, across the different divisions, approximately 182 judgments were delivered by the Grand Court this year. The Court of Appeal (civil division) delivered 26 written judgments and 8 written judgments in the criminal division during the same period.

Significant cases handled by Conyers

Conyers Cayman Islands litigation and restructuring attorneys were involved in a raft of complex and novel cross-border engagements. A few particularly noteworthy cases are highlighted below

HQP Corporation Ltd (in official liquidation) FSD 190 of 2021

The Grand Court was asked to determine whether certain Preferred Shareholders can assert claims for damages for misrepresentation in relation to their subscription for shares in a company in liquidation and how such claims rank in the liquidation of the company.

The Grand Court of the Cayman Islands held, for the first time, that shareholders who subscribed for shares in a Cayman company be permitted to prove in the liquidation for misrepresentation claims and that such claims will rank as unsecured debts of the company, ahead of redemption creditors and other members’ claims. In reaching this decision, the Grand Court departed from the decision of the House of Lords in Houldsworth v City of Glasgow Bank (1880) 5 App Cas 317. This matter is currently on appeal and will be heard by the Cayman Islands Court of Appeal in 2024.

This issue also arises in Re Direct Lending Income Feeder Fund Ltd (in official liquidation) FSD 108 of 2019 (NSJ), where a different Judge of the Grand Court has been asked to render a decision on the point.

Conyers acts for a major stakeholder in HQP Corporation Ltd.

Virginia Solution SPC Ltd FSD 005 of 2022 and CICA (Civil) Appeal 4 of 2022

In an unprecedented ruling, the Grand Court of the Cayman Islands ordered that a captive insurance company be wound up on grounds that (i) the Company is a quasi-partnership and (ii) a relationship of mutual trust and confidence between the two members had irretrievably broken down.

On appeal, the Cayman Islands Court of Appeal determined that the Company should not have been placed in liquidation. The Court of Appeal held, inter alia, that the Company was not a quasi-partnership at the material time and that alternative remedies were available to the petitioner. The Court of Appeal also gave reasons for dismissing an application for a stay and permission to appeal to the Judicial Committee of the Privy Council.

Conyers acts for the successful appellant.

Aubit International FSD 240 of 2023

This case involved a petition for the appointment of Restructuring Officers under section 91B of the Companies Act. The Grand Court found that the petitioning company did not meet the threshold test. Whilst the Company was unable to pay its debts, it failed on the basis that there was “extremely limited information concerning the proposed ‘restructuring plan’”.

The Judge provided detailed reasons clarifying the position as it relates to discretionary considerations for the appointment of Restructuring Officers; including the importance of a clear restructuring plan before asking the Court to engage its jurisdiction to appoint Restructuring Officers. The judgment set out a non-exhaustive list of factors to be considered in future Restructuring Officer applications of this kind. The Company was ultimately wound up in short order in subsequent proceedings (FSD 271 of 2023).

Conyers acted for a group of creditors in the Restructuring Officer Petition proceedings and the successful petitioning creditors in the winding up proceedings.

Changyou.com Limited v Fourworld Global Opportunities Fund Ltd & others 2023/0018

These proceedings relate to a ‘short-form’ merger (i.e. a merger between a parent company and its subsidiary company) and raises issues of constitutional and statutory interpretation relating to Part XVI (Mergers and Consolidation) of the Cayman Islands’ Companies Act and other legislation. Specifically, where a merger between a parent and subsidiary company is effected pursuant to section 233(7) of the Companies Act, whether a member of the subsidiary company is entitled to payment of the fair value of their shares pursuant to section 238 (Dissenters Rights) of the Companies Act. The matter is currently on appeal before the Judicial Committee of the Privy Council.

Conyers acts for the Company.

RBH Holdings v Juniper Life Sciences Ltd FSD 59 of 2023

This matter relates to a resolution passed by the board of directors of Juniper exercising a power under the Articles of Association to redeem shares held by a founding shareholder.

RBH commenced proceedings in the Grand Court seeking rectification of the Register of Members. Juniper sought a stay of the proceedings. The Grand Court was asked to determine whether Juniper was entitled to a stay in favour of arbitration or on the grounds of forum non conveniens. The stay application was dismissed in its entirety. Juniper’s application for leave to appeal from a single Judge of the Court of Appeal was also dismissed and a fresh application for leave is now pending before the full Court of Appeal. As things stand, the Grand Court is likely to determine the narrow rectification issue in 2024.

Conyers acts for the applicant shareholder.

Various restructuring mandates

Conyers’ Cayman Islands office has advised on various complex and high-profile cross-border restructuring matters, including in relation to Cineworld, Inversiones Latin America Power and GenesisCare.

Conyers has acted for directors, companies, trustees, creditors and shareholders on all manner of restructuring mandates.

Other noteworthy decisions

Shinsun Holdings (Group) Company, Ltd FSD 192 of 2022

The Grand Court determined that the ultimate beneficial owner of bonds did not have legal standing or authority to progress a winding up petition as a contingent creditor. This case is to be contrasted with the recently decided British Virgin Islands (BVI) case In Cithara Global Multi-Strategy SPC v Haimen Zhongnan Investment Development (International) Co Ltd, which is currently being appealed.

The BVI Commercial Court held that ultimate beneficial interest holders of notes are ‘creditors’ under the BVI Insolvency Act and so have standing to issue liquidation applications against defaulting note issuers.

In Re Leading Holdings Group Limited [2023] HKCFI 1770, the Hong Kong Court made an order striking out a winding-up petition on the basis that the petitioning bondholder did not qualify as a contingent creditor.

FamilyMart China Holding Company Ltd v Ting Chuan (Cayman Islands) Holding Corporation [2023] UKPC 33

The Cayman Courts were asked to consider whether an agreement to settle disputes by arbitration might prevent a party from pursuing a petition to wind up a company on the just and equitable basis and, if so, in what circumstances. In the Grand Court, Justice Kawaley granted a mandatory stay of the winding up petition under section 4 of the Cayman Islands’ Foreign Arbitral Awards Enforcement Act (1997 Revision). He held that it was “clear beyond sensible argument” that the allegations in the petition related to the subject matter of the shareholders’ agreement, which contained the arbitration agreement. The Cayman Islands Court of Appeal overturned Justice Kawaley’s decision, holding that the Court had exclusive jurisdiction to determine whether a company should be wound up on the just and equitable ground and that, as a result, the underlying disputes were not subject to arbitration, nonetheless that they fell within the scope of the arbitration agreement contained in the shareholders’ agreement.

Ting Chuan appealed to the Privy Council, which unanimously allowed the appeal. However, the Privy Council makes it clear that an arbitration agreement does not amount to an automatic contractual prohibition against the initiation of winding up proceedings. In its judgment, the Privy Council (i) defined the boundaries of the doctrine of non-arbitrability; (ii) clarified certain aspects of the long-debated relationship between arbitration agreements and company winding-up petitions; and (iii) established the applicable test to identify what is a ‘matter’ in respect of which legal proceedings are brought when a party seeks a mandatory stay of legal proceedings in favour of arbitration.

The FamilyMart case was heard in the Cayman Islands. The Privy Council’s visit to the Cayman Islands symbolised the importance of this jurisdiction among the many commonwealth countries whose highest court of appeal is the Privy Council.

Primeo Fund (in Official Liquidation) v Bank of Bermuda (Cayman) Ltd and another [2023] UKPC 40

This appeal concerned proceedings arising from the infamous multi-billion-dollar Ponzi scheme perpetuated by Bernard Madoff. This long-awaited ruling from the Privy Council provides welcome clarity on a variety of legal issues, including strict liability, causation, limitation and contributory negligence, as well as procedural issues concerning the principle of finality of litigation. The judgment represents the final dismissal of Primeo’s claims against the Respondents after more than a decade of litigation.

Significant events in 2023

There were various other notable events in 2023.

  • The Grand Court of the Cayman Islands welcomed the Hon Justice Marlene Carter and Mr Jalil Asif KC as judges of the Grand Court in October 2023. Madam Justice Carter has a wealth of legal experience in both the public and private practice. Her Ladyship previously served as an Acting Judge from 2017 to 2023 and was a Puisne Judge of the Eastern Caribbean Supreme Court, residing in St. Kitts from 2014 to 2016. Mr Asif KC was the Managing Partner of Kobre & Kim (Cayman) and is a recognised and respected leader among the offshore litigation community. Prior to joining Kobre & Kim, Mr Asif KC was a barrister for more than two decades and was appointed King’s Counsel in 2010.
  • On 15 November 2023, the INSOL Cayman one-day conference was very well attended by insolvency and restructuring professionals in the region and beyond.
  • The Beneficial Ownership Transparency Act 2023, not currently in force, was passed by Parliament at the sitting on 23 November 2023 and provides for the Consolidation and Enhancement of the Beneficial Ownership Legislative Framework in the Islands.
  • The Cayman Islands Monetary Authority (CIMA) published its Rule on Corporate Governance for Regulated Entities (the “Corporate Governance Rule”). The Corporate Governance Rule applies to regulated entities such as Mutual Funds and Private Funds and requires, among other things, that each regulated entity establish a corporate governance framework. CIMA also published the Rule and Statement of Guidance – Internal Controls for Regulated Entities and updated its regulatory measures. A more detailed explanation of the new CIMA Rules and Statement of Guidance is provided in our alert “Cayman Islands Corporate Governance Rule and Internal Controls Guidance and Rule”.
  • On 27 October 2023, the Financial Action Task Force (FATF) announced its decision to remove the Cayman Islands from its list of jurisdictions subject to increased monitoring (the “Grey List”). The FATF announcement confirmed that the Cayman Islands maintains a robust and effective anti-money laundering/counter terrorist financing (AML/CFT) monitoring regime.

Conclusion

The Conyers team is looking forward to the year ahead, as we continue to serve both new and existing clients. There were a number of important legal developments in the jurisdiction in 2023, and we anticipate that the Cayman Islands will continue to lead the charge in breaking new ground in 2024.
We wish to take this opportunity to thank all of our peers, clients and colleagues for their continued support and for presenting new challenges to overcome each year.

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