CAYMAN ISLANDS Law and Practice Contributed by: Alan Bercow and Jae Shin, Appleby
4. Overseas Parties in Fraud Claims 4.1 Joining Overseas Parties to Fraud Claims As a leading international financial centre, fraud pro - ceedings in the Cayman Islands almost invariably involve seeking relief against parties from other juris - dictions, and the ability to join overseas parties is a long-established and vital part of Cayman Islands law and practice. The Cayman Islands courts may grant leave to serve proceedings on parties outside the Cayman Islands where the court is satisfied that: • there is a serious issue to be tried against the rel - evant defendants; • there is a good arguable case that the claim falls within at least one of the jurisdictional gateways set out in Order 11, rule 1 of the Grand Court Rules; and • the Cayman Islands is clearly or distinctly the appropriate forum where the case can be tried in the interests of all parties and for the ends of justice and the court ought to exercise its discre - tion to permit service of the proceedings out of the jurisdiction (see, for example, the helpful summary of these principles in MYF Maximus Limited v DNB Bank ASA and others – 3 June 2024) . The jurisdictional gateways typically relevant to fraud cases include: • a claim for an injunction ordering the defendant to do or not to do acts within the Cayman Islands; • a claim to which the defendant is a necessary or proper party where another party has been or will be served within or outside the Cayman Islands; and • a claim for tort, fraud or breach of duty where the damage was sustained or resulted from an act committed in the Cayman Islands. The defendant against whom leave to serve out of the jurisdiction has been granted can challenge the grant - ing of leave and may challenge the jurisdiction of the Cayman Islands courts on the grounds of forum non conveniens – namely, that the Cayman Islands is an inappropriate forum.
The Cayman Islands Court of Appeal noted in Walkers v Arnage Holdings Ltd [2021] 1 CILR 347 that a deci - sion to lift the corporate veil is one that involves an intense scrutiny of the facts and that the exceptional circumstances that permit disregard of the separate legal personality of a corporation are highly sensitive to the facts of the particular case. Alternative ways of seeking remedies against UBOs include claims on the basis that: • the UBO acted as a shadow director of the compa - ny – ie, was a person whose directions or instruc - tions the directors of the company were accus - tomed to acting in accordance with (Section 89 of the Companies Act); • the UBO was involved in an unlawful means con - spiracy; • the UBO was liable in knowing receipt or dishon - est assistance or for restitution (as described in 1.3 Claims Against Parties Who Assist or Facilitate Fraudulent Acts ). 3.3 Shareholders’ Claims Against Fraudulent Directors The Cayman Islands allows shareholders to bring derivative claims on behalf of companies against fraudulent directors, subject to obtaining permission from the court to continue the claim once a defendant has given notice of intention to defend. The Cayman Islands court confirmed in Renova Resources Private Equity Ltd v Gilbertson (see 1.1 General Characteristics of Fraud Claims ) that share - holders may bring claims under the “fraud on the minority” exception to the rule in Foss v Harbottle . The court in Renova agreed with the principle stated in Gower’s Modern Company Law that where such an action is allowed, the shareholder is not really suing on their own behalf nor on behalf of the members gener - ally, but on behalf of the company itself. For shareholders pursuing such claims, the Cay - man Islands court may order interim relief, including injunctions restraining directors’ actions or appointing receivers over company assets pending resolution.
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