CAYMAN ISLANDS Law and Practice Contributed by: Sam Dawson, Peter Sherwood and Denis Olarou, Carey Olsen
The law on third-party funding had previously devel- oped incrementally to a point where it was fairly com- mon outside of winding-up proceedings; however, placing funding agreements on a statutory footing is a welcome development. 2.2 Third-Party Funding: Lawsuits Even prior to the introduction of the Act, third-party funding of liquidations (with court sanction) had been fairly common for some time, and third-party funding of non-insolvency proceedings was gradually becom- ing more common. It is anticipated that large institu- tional funders will become much more active in the jurisdiction over the coming years. 2.3 Third-Party Funding for Plaintiff and Defendant There is no specific rule of law preventing a defend- ant from obtaining third-party funding. However, third- party funders normally seek to fund claims rather than defences, since claims are most likely to offer opportunities to make a profit. Defendants are there- fore unlikely to be able to procure third-party funding without a counterclaim of sufficient merit and value to justify investment by a third party. 2.4 Minimum and Maximum Amounts of Third-Party Funding This depends on the particular third-party funder. 2.5 Types of Costs Considered Under Third- Party Funding In principle, funding may be secured for any type of costs. 2.6 Contingency Fees Save in certain limited circumstances, the Act also permits contingency agreements between clients and attorneys. This is true whether or not the contingency fee agreement includes a success fee, and a success fee can (subject to relevant caps on recovery dis- cussed below) be a function of either costs incurred or recoveries in the action. Where a contingency fee agreement provides that an attorney is entitled to a success fee, the success fee must not exceed more than 100% of the attorney’s normal fees. In addition, in the case of claims sound-
ing in money, the total of any success fee payable by the client to the attorney must not exceed one third (33.3%) of the total amount awarded or any amount obtained by the client as a consequence of the pro- ceedings (excluding costs). Where a contingency fee agreement involves a per- centage of the amount or of the value of the prop- erty recovered, the amount to be paid to the attorney must not exceed one third (33.3%) of the value of the property (save where a joint application is made to the court. These caps may be varied by joint application to the court, depending on factors such as the nature and complexity of the proceedings, the expense or risk involved or any other relevant factors. The court will not, however, approve any contingency fee exceed- ing 40% of the total amount awarded, of any amount obtained by the client or of the value of any property recovered. 2.7 Time Limit for Obtaining Third-Party Funding There are no formal time limits. In practice, it is wise to consider the possibility of third-party funding from the outset. However, a third-party funder is unlikely to commit until the case is developed to a stage where a meaningful assessment of merits and prospects of recovery can be undertaken. In appropriate cases, some funders will agree to advance “seed capital” required to progress investigations and/or the legal analysis to the point where a meaningful assessment of the merits and prospects of recovery can be under- taken.
3. Initiating a Lawsuit 3.1 Rules on Pre-Action Conduct
Save in judicial review proceedings (in respect of which there is a pre-action protocol), the court does not impose any rules of pre-action conduct on the parties. The Grand Court has indicated that pre-action protocols in respect of personal injury, clinical negli- gence, defamation and repossession proceedings will be published in due course.
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