CAYMAN ISLANDS Law and Practice Contributed by: Alan Bercow and Jae Shin, Appleby
1. Fraud Claims 1.1 General Characteristics of Fraud Claims Fraud claims under Cayman Islands law are governed by principles of equity and common law. They gener - ally involve the need to prove deliberate or reckless deception and loss sustained as a result. Civil fraud claims can be framed in various ways and are not confined to a single cause of action. False Statements The making of a false statement can give rise to a claim in the tort of deceit when a false representa - tion has been made knowingly (ie, without belief in its truth) or recklessly (as to whether or not it is true), with the intent that the other party will rely on that false rep - resentation. The party making the false representation will be liable for loss and damage caused to the other party in reliance on that false representation. Claims based on misrepresentations that induce a contract can also be brought under the Contracts Act (1996 Revision) without the need to prove fraud, with the added advantage that the burden of proof is reversed in that party who made the representa - tion must prove that they had reasonable grounds to believe that the facts represented were true. Conspiracy As fraud often involves people acting together either wrongfully or to achieve wrongful ends, a conspiracy claim may arise that gives rise to liability. Conspiracy is an economic tort. There are two different types of conspiracy: unlawful means conspiracy and lawful means conspiracy. These are addressed in 1.3 Claims Against Parties Who Assist or Facilitate Fraudulent Acts . Misappropriation/Breach of Fiduciary Duty Claims for breach of fiduciary duty are common in commercial fraud cases. Someone who is entrusted with looking after another person’s property and with authority to make discretionary decisions on that per - son’s behalf owes fiduciary duties in respect of that property. In 1998, the relationship was described by the English Court of Appeal in Bristol and West Build- ing Society v Mothew as follows: “A fiduciary is some - one who has undertaken to act for or on behalf of
another in a particular matter in circumstances which give rise to a relationship of trust and confidence. The distinguishing obligation of a fiduciary is the obligation of loyalty... A fiduciary must act in good faith; he must not make a profit out of his trust; he must not place himself in a position where his duty and his interest may conflict; he may not act for his own benefit or the benefit of a third person without the informed consent of his principal”. The Cayman court agreed with this formulation in Renova Resources Private Equity Ltd v Gilbertson [2009] CILR 268. Typical relationships in which a fiduciary duty is owed include a trustee (to the beneficiary), a company director (to the company), an attorney (to the client), a partner (to the other partner(s)) and an accountant (to the client). Fiduciary duties may also be owed by one joint venturer to another where one joint venturer has control of the assets of the joint venture. It should be noted that fiduciary duties may be found to exist in contexts other than these normally recognised rela - tionships, though such cases will be exceptional and rare. Unjust Enrichment A claim in unjust enrichment arises where a defend - ant has been enriched at the expense of the claimant in circumstances where the enrichment was unjust, and where no defences arise. “Enrichment” entails receipt of something of value, such as money, shares or the discharge of an obligation. “At the expense of the claimant” means suffering a loss – namely, that the claimant has given up something of value. Factors that are recognised as unjust include mistake, failure of consideration, duress, and undue influence. Failure of consideration is not consideration in the contractual sense, but essentially the failure of a promise to do something in return. The remedy is restitution. Failure of consideration is not consideration in the contractual sense, but essentially the failure of a promise to do something in return. The remedy is restitution. Fraudulent Disposition Fraudulent dispositions of property can be set aside under the Fraudulent Dispositions Act, whereby a dis - position of property made with intent to defraud and at an undervalue is voidable at the instance of a party to whom an obligation is owed who was thereby preju -
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