CAYMAN ISLANDS Law and Practice Contributed by: Alan Bercow, Jae Shin and Ross McLeod, Appleby
1.7 Prevention of Defendants Dissipating or Secreting Assets A victim of fraud can, in appropriate circum - stances, obtain a freezing injunction from the Cayman Islands courts to restrain a defendant from disposing of or dealing with assets. This remedy – one of the “nuclear weapons” of civil litigation – provides an effective mechanism for the preservation of assets throughout the dura - tion of the order until judgment can be obtained or enforced. It is necessary to show a good arguable case that: • the defendant has assets within or (in the case of a worldwide freezing order) outside the Cayman Islands (although the court will generally exercise greater caution in grant - ing relief in respect of assets overseas unless there is a clear connection with the Cayman Islands); • a real risk of dissipation of assets that would otherwise be available to meet any judgment that the claimant might obtain; and • it is just and convenient for the court to make the order. Where the claimant asserts a proprietary claim to the assets sought to be frozen, there is no requirement to show a risk of dissipation. A freezing injunction can be sought in support of foreign proceedings where there are no substan - tive proceedings in the Cayman Islands (Sec - tion 11A of the Grand Court Act, the equiva - lent power to that provided for in England and Wales by Section 25 of the Civil Jurisdiction and Judgments Act). The Cayman Islands court can also grant a worldwide freezing order. A freez - ing order operates in personam, but binds third
parties, such as banks, who are given notice of the order. Court fees are on a sliding scale where a claim for a debt or a liquidated sum is made, up to a maximum of KYD15,000 (USD18,000), but where the freezing injunction is sought in respect of foreign proceedings and no substantive claim is made in the Cayman Islands, the fee would be KYD5,000 (USD6,000). Sanctions for non-compliance include contempt proceedings leading to a possible fine, seques - tration of assets, or imprisonment, as well as the appointment of a receiver to police the freezing injunction. The claimant is also required to give a cross- undertaking in damages. As applications for freezing injunctions are almost always made without notice, the claimant is under a duty of full and frank disclosure or fair presentation, whereby the claimant must disclose all matters that are material to the court in deciding whether to grant the injunction and, if so, on what terms. An order (a Chabra order) can be made against third parties where they hold assets that are ben - eficially owned by the main defendant. The Cayman Islands courts also have the juris - diction to grant “notification injunction” as an alternative to a freezing injunction. Where a freezing injunction is intrusive to the extent that it is not just and convenient to grant one, a noti - fication injunction may still be available, pro - vided the grounds for a freezing injunction are established. Once a notification order is made, if the defendant wishes to dispose of an asset, they must first notify the claimant so as to give the claimant the opportunity to seek an order preventing the notified disposition (Arcelormittal
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