Cayman Islands Litigation Guides 2023

• Published date: 01 February 2023
• Subject Matter: Litigation, Mediation & Arbitration, Arbitration & Dispute Resolution, Trials & Appeals & Compensation
• Law Firm: Carey Olsen
• Author: Mr Sam Dawson, Peter Sherwood and Denis Olarou

GENERAL

General Characteristics of the Legal System

The Cayman Islands is a common law jurisdiction. Litigation is primarily adversarial and is conducted through both written submissions and oral argument.

Sources of Law

Sources of law include primary legislation passed by the Parliament of the Cayman Islands, secondary legislation made on the basis of authority found in primary legislation, and residual common law found in judicial precedent.

The Cayman Islands is a British Overseas Territory and, as such, the UK may, by Order in Council, extend certain laws to have effect in the Cayman Islands.

Judicial Precedent

Where there is no binding Cayman Islands judicial precedent, decisions of the English courts, as well as decisions of the courts of other common law jurisdictions, are persuasive. In practice, except in areas where there is a difference in the underlying legislation or public policy, it would be unusual for the Cayman Islands courts to take a different view of the common law than the UK Supreme Court. Decisions of the UK's Judicial Committee of the Privy Council on appeals from the Cayman Islands courts are binding.

As a consequence, there are extensive areas of substantive Cayman Islands law which are identical or very similar to English law, especially in fundamental areas such as contract, tort, equitable principles, basic trust concepts, foundations of company law, and general concepts of corporate insolvency. However, there are also numerous important areas where, notwithstanding the overall kinship of the two legal systems, substantive Cayman Islands law differs materially from that of England, including, in particular, in certain specialist aspects of company and insolvency law that have developed independently to help make the Cayman Islands a leading jurisdiction for international financial services.

Procedure

The Grand Court Rules, which govern the conduct of most high value litigation in the Cayman Islands, mirror closely the Rules of the Supreme Court that governed High Court litigation in England prior to the introduction there in 1999 of the Civil Procedure Rules. However, the Grand Court Rules also incorporate a statement of governing principles - the Overriding Objective - which is in some respects similar to the Overriding Objective adopted in the English Civil Procedure Rules after 1999.

Insolvency proceedings are governed by their own bespoke set of Companies Winding Up Rules, which displace most of the provisions of the Grand Court Rules.

There are also separate rules for probate, matrimonial, personal bankruptcy, and small claims.

Court System

First Instance

Civil matters up to the value of KYD20,000 are heard by the Summary Court, which also hears certain other matters such as affiliation and maintenance applications. However, the principal court of first instance for all civil matters is the Grand Court, which also hears appeals from the Summary Court and certain quasi-judicial tribunals.

The Grand Court's civil case-load is broadly divided between the Civil Division, the Family Division, the Admiralty Division, and the Financial Services Division. The overwhelming majority of litigation concerned with international financial services takes place in the specialist Financial Services Division. Among other things, the Financial Services Division is the mandatory division for:

• proceedings relating to Cayman Islands investment funds;
• most trust proceedings;
• certain actions under the Companies Act (including all winding-up proceedings);
• all proceedings to enforce foreign judgments and arbitral awards; and
• most actions for breach of contract or duty by or against a professional services provider.

A particular feature of proceedings in the Financial Services Division of the Grand Court is that, ordinarily, the judge who is assigned to a matter at the outset remains assigned to it all the way until trial. Therefore, the same judge will hear all the interlocutory applications and will preside over the trial. This facilitates a high level of familiarity with the case.

Judges of the Grand Court are invariably eminently qualified and, in the Financial Services Division, possess extensive experience of financial services, corporate, and insolvency disputes.

Appeal

The Cayman Islands Court of Appeal hears appeals from the Grand Court. Unlike the Grand Court, which sits throughout the year, the Court of Appeal generally sits three sessions of three weeks, approximately in April, September, and November each year. All judges of the Court of Appeal have previously held high judicial office in the Cayman Islands, England, or elsewhere in the Commonwealth.

Appeals from the Cayman Islands Court of Appeal are heard by the Judicial Committee of the Privy Council in London.

Court Filings and Proceedings

All originating process documents filed with the Grand Court - such as writs, originating summonses, originating motions and petitions - are placed on a public register.

Other documents filed by the parties in court proceedings - such as summonses, pleadings, affidavits, witness statements, and skeleton arguments - are placed on the court file relating to the relevant proceeding. This file is not open to public inspection by default. However, any member of the public may apply to the court for permission to inspect or take a copy of any document on the court file.

A party to proceedings may apply to the court for an order that any document or part thereof filed with the court should be sealed from the public. Such sealing orders are not made lightly and require proper justification. However, in appropriate circumstances, the court can and does seal sensitive documents, and the court is highly experienced in dealing with sealing applications.

Insolvency Proceedings

In respect of documents filed with the court in insolvency proceedings, the default position is that, in addition to the company's liquidator, the entire court file may be inspected by:

• any former liquidator or controller of the company;
• any person who was a director or professional service provider to the company immediately before commencement of liquidation;
• any person claiming in writing to be a creditor or contributory of the company; and
• in cases of regulated businesses, the Cayman Islands Monetary Authority.

The court may order the sealing of a document on the court file of an insolvency proceeding for a specific period of time or until the happening of a specified event (usually the final dissolution of the company). However, it must be shown that the information in question is confidential and will not enter the public domain unless the document is filed with the court and the publication of this information will harm the economic interests of the creditors or contributories of the company. Any document sealed on this basis may be unsealed on the application of the liquidator, creditor, or contributory.

Trials and winding-up petitions are generally heard in open court, unless the court directs, for some special reason, that they should be heard in chambers. Interlocutory summonses, both in insolvency proceedings and in general litigation, are usually heard in chambers, unless the court directs a hearing in open court. Proceedings in chambers are generally considered private, although the judge may allow members of the public to attend.

The courts are guided by the principle of open justice, but are also prepared to conduct hearings (or parts of hearings) in private where this is properly justified.

Legal Representation in Court

Natural persons may represent themselves and conduct court proceedings as litigants in person. However, save in exceptional circumstances, companies must always be represented by an attorney-at-law.

Only persons admitted to practice as attorneys-at-law in the Cayman Islands have unrestricted rights of audience before the courts. The legal profession in the Cayman Islands is not divided between solicitors and barristers in terms of rights of audience, as is the case in England. All local attorneys have equal rights of audience.

Foreign Lawyers

Foreign lawyers have no rights of audience and cannot conduct cases before the Cayman Islands courts.

However, a foreign lawyer may be granted "limited admission" to appear before the Cayman Islands courts for the purposes of a specific proceeding, if instructed to do so by a local attorney. In principle, such limited admission may be granted to any suitably qualified overseas senior advocate and, in practice, it is regularly granted to English King's Counsel in proceedings that are sufficiently complex or high value to justify the appointment of such expert advocates. Junior counsel and solicitors might be granted "limited admission" in only very unusual circumstances.

LITIGATION FUNDING

Third-Party Litigation Funding

On 1 May 2021, the Private Funding of Legal Services Act, 2020 (the Act) came into force in the Cayman Islands. The Act removed the traditional prohibitions against champerty and maintenance and provided for third-party funding agreements to be used in civil litigation without court sanction, subject only to a small number of formalities and well-defined conditions.

The law on third-party funding had previously developed incrementally to a point where it was fairly common outside of winding up proceedings; however, placing funding agreements on a statutory footing is a welcome development.

Third-Party Funding: Lawsuits

Even prior to the introduction of the Act, third-party funding of liquidations (with court sanction) had been fairly common for some time, and third-party funding of non-insolvency proceedings was gradually becoming more common. It is anticipated that large institutional funders will become much more active in the jurisdiction over the coming years.

Third-Party Funding for Plaintiff and Defendant

There is no specific rule of law preventing a defendant from obtaining third-party funding. However, third-party funders normally seek to...