Anti-Suit Injunction Safeguards The Universality Of Insolvency Proceedings

The Grand Court of the Cayman Islands has granted an anti-suit injunction restraining a creditor (the "Creditor") of a Cayman fund in Official Liquidation under the Companies Law (2013 Revision) (the "Fund") from instigating duplicative winding up proceedings in a foreign jurisdiction (the "Application").

In preventing the Creditor from instigating a parallel liquidation in another jurisdiction the Cayman Court upheld the central tenet of modified universalism that the assets of an insolvent company should be administered by a single proceeding to avoid the inevitable free for all that would ensue if creditors were able to commence competing proceedings in other jurisdictions in order to serve their own interests.

Background

The Fund was established as an open-ended investment Fund. In early 2016 the directors of the Fund became concerned that the Fund's investments and assets were impaired. This ultimately led to the appointment of Michael Pearson and Andrew Childe of Fund Solution Services as the Joint Official Liquidators ("JOLs") to the Fund on 26 April 2016.

Following their appointment, the JOLs took steps to bring the assets of the Fund under their control, to notify creditors of the Fund of their appointment and called for proofs of debt to be filed. On 19 May 2016 the Creditor, the largest creditor of the Fund, filed a proof of debt in the Cayman insolvency Prior to filing its proof of debt, the Creditor issued a winding up petition to commence a winding up of the Fund in Barbados (the "Barbados Proceedings"). The Creditor had not given any prior indication that it had any concerns regarding the Cayman liquidation or the appointment of the JOLs, nor had the Creditor served on or given notice of the Barbados Proceedings to the JOLs. There were no assets in Barbados, there were no debtors located within that jurisdiction and it was not clear on what basis the duplicative costs of commencing the Barbados Proceedings could be justified.

The JOLs brought the Application to restrain the Creditor from continuing the Barbados Proceedings, and prevent any analogous proceedings being instigated.

The Law

The two issues before Chief Justice Smellie QC were:

1. whether the Cayman court should grant an anti-suit injunction preventing a creditor from taking action another jurisdiction; and

2. did the Cayman Court have personal jurisdiction over the Creditor.

In answering the first question in the affirmative, Smellie CJ upheld the principles...