Cayman Islands Case Notes, October 2014

The following case notes outline two significant recent developments in the Cayman Islands. Caribbean Islands Development Ltd. (in Official Liquidation) v First Caribbean International Bank (Cayman) Limited (unreported) In a ruling handed down on 8 October 2014, the Cayman Islands Court sent a strong reminder to litigants of the importance of providing security for costs in a form appropriate for enforcement by a Cayman resident defendant and, in doing so, highlighted the dangers of proposing alternative solutions without the prior approval of the Court. The plaintiff, a Cayman Islands company in court-ordered liquidation and acting through its joint official liquidators at Rawlinson & Hunter (the JOLs), had issued proceedings against a local bank alleging that it had failed to fulfill its duties to the plaintiff in selling a property on its behalf. On 7 March 2014 the Court had ordered that the plaintiff provide security for the defendant's costs of the litigation within 21 days, in the amount of US$100,000. Although the plaintiff had sufficient money in its bank account, the JOLs claimed they had been unable to post security by way of cash deposit since the liquidation estate had obligations in the form of unpaid accrued professional fees, aside from which tying up the amount in question would have left insufficient cash to run the liquidation. Since further funding would be needed in any event if the litigation were to go ahead, the JOLs also approached investors for assistance, but were unable to obtain the necessary financial backing. The date for compliance with the security order came and went. On an application by the defendant, the Court proceeded to make an 'unless order', the terms of which stated that, unless the plaintiff complied within a further 90 days, its claim would be struck out and the action dismissed. The JOLs used the additional time to seek litigation funding and 'after the event' (ATE) insurance in the London market to enable them to proceed with the claim and, with only a day to spare before the deadline in the unless order, approached the defendant with a proposal of security in the form of a deed of indemnity from a respected London insurer, QBE Insurance (Europe) Limited. The proposal was rejected by the defendant, but only after the time for compliance with the unless order had expired. The defendant immediately issued a summons for dismissal of the action with costs. In the event, the indemnity was in place two days after the deadline for compliance with the unless order, with the result that the JOLs made a retrospective application for a two-day extension of time so as to bring the plaintiff in line with the order. That application was rejected. The Court was dismissive of the proposed form of security, which it said was unsatisfactory because it would not allow the...