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Judge calls for law change on free-standing freezing injunctions in Cayman – August 2011

August 2011 Nigel K. Meeson QC

In a landmark decision, the Grand Court of the Cayman Islands has rendered short-lived the recently-heralded availability of free-standing injunctive relief in Cayman, following the judgment of the Hon. Mr Justice Quin in Gillies Smith v Smith earlier this year.

In an urgent ex parte hearing, the Hon. Mr Justice Cresswell heard detailed and extensive legal arguments over two days in mid-August 2011, which included a full review of all relevant authorities in Jersey, the Isle of Man and BVI. The Judge reached the conclusion that Quin J had been wrong in the Gillies Smith case, in granting leave to serve the writ in that case out of the jurisdiction. Nevertheless, Cresswell J did himself make a groundbreaking decision in granting a free-standing freezing injunction against Cayman companies against whom the Plaintiff asserted no cause of action. In doing so, he followed the lead of Bannister J in the BVI case of Black Swan Investment I.S.A v Harvest View Limited and Sablewood Real Estate Limited (2010).

Nigel Meeson QC and Bernadette Carey of Conyers Dill & Pearman represented an English bank (“the Plaintiff”) which sought to freeze the assets of a defendant resident in Russia (“the Defendant”) and the assets of two Cayman Islands companies which the Plaintiff alleged were under the control of the Defendant. In its application to the Grand Court, the Plaintiff, who had already obtained a worldwide freezing order from the English Courts in support of ongoing litigation in the UK, claimed no substantive relief in Cayman other than a free-standing freezing injunction in support of the proceedings in the UK.

In considering the Plaintiff’s application, the Court had particular regard to the decision in Gillies-Smith v Smith, which held that the Court has jurisdiction to grant leave to serve out in respect of free standing injunctive relief in the absence of substantive proceedings in the Cayman Islands. However, Cresswell J found himself unable to follow Quin J and held that an injunction in support of proceedings abroad was “interlocutory” and, accordingly Order 11 of the Grand Court Rules specifically prohibited the granting of permission to serve out of the jurisdiction a writ seeking only such an injunction. He granted permission to appeal the denial of leave to serve out.

However, the Court confirmed that it does have jurisdiction to award freezing orders over the assets of “non-cause-of-action” defendants domiciled in the Cayman Islands, and freezing orders were granted in respect of the assets held by the two Cayman companies. These Defendants could be served in the jurisdiction, and the court having jurisdiction over them it was appropriate to exercise the so-called Chabra jurisdiction whereby a freezing order could be granted over the assets of a party against whom no cause of action is asserted, on the basis that those assets may ultimately be available to satisfy a judgment obtained against the defendant against whom a cause of action is asserted. What was novel was that only the non-cause of action defendants were before the Court. However, the court would grant the injunction in support of the English proceedings and a prospective judgment of the English court which would be enforceable in the Cayman Islands.

In reaching its decision denying leave to serve out, the Court noted that legislation in England and the Channel Islands expressly provides for the grant of free standing injunctive relief in aid of foreign proceedings and that it is regrettable that Cayman legislation has not yet evolved in this manner. The Court supported the policy considerations which have led to changes in the foreign legislation, and noted that this lacuna in Cayman legislation, and the outdated nature of the Rules, require the urgent attention of the Rules Committee.

A written judgment, along with Conyers’ full case commentary, will be released shortly.



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