Cayman judge says injunction legislation outdated

(CNS): Following the recently lauded decision by a local judge regarding free-standing injunctive relief in the Cayman Islands, another judge from the financial court has said the decision was wrong but that the law needs to be changed. In the recent Gillies Smith v Smith case in the Grand Court Justice Charles Quin granted a free standing Mareva injunction, freezing assets in Cayman despite there being no action in the local courts. Last week, however, Justice Peter Cresswell concluded that the decision was wrong but nevertheless granted a free-standing freezing injunction against Cayman companies, despite there being no action here, and pointed out that Cayman legislation was outdated.

Following an urgent ex parte hearing in the financial court last month, Justice Cresswell considered Justice Quin’s earlier ruling, 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. Cresswell said he was unable to follow Quin as he found 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.

However, he said the Court did 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 two Cayman companies.

Cresswell noted that legislation in England and the Channel Islands provides for the grant of free standing injunctive relief in aid of foreign proceedings and it was regrettable that Cayman legislation had not yet evolved in this manner.  He said the court supported the policy considerations which have led to changes in the foreign legislation, and noted “this lacuna in Cayman legislation and the outdated nature of the Rulesrequire urgent attention.”

In the case, Nigel Meeson QC and Bernadette Carey of Conyers Dill & Pearman represented the plaintiff, which is an English bank seeking to freeze the assets of a defendant resident in Russia 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 there, claimed no substantive relief in Cayman other than a free-standing freezing injunction in support of the UK proceedings.

Cresswell’s decision means that these defendants could be served in the jurisdiction via the so-called Chabra jurisdiction, where 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 about Cresswell’s decision, the attorneys involved said, was that only the non-cause of action defendant was 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.