Exclusive Jurisdiction Clauses - Are They Really Exclusive?

Background

Argyle Fund SPC Inc. ("Argyle") is a Cayman Island Mutual Fund which went into insolvent liquidation on 26 April 2016, purportedly due to significant exposure to debt factoring via investments made through two credit advisors which each perpetrated major frauds at Argyle's expense.

Argyle's auditor, BDO Cayman Ltd. ("BDO Cayman"), was its statutory auditor for the audit years ending 31 December 2006 - 2014, as a result of which audits of the investments held by certain of Argyle's classes would necessarily have had to have been properly scrutinised.

Between 2010 - 2013, Argyle and BDO Cayman entered into four separate audit engagement letters, none of which BDO Cayman's affiliates were a party to.

In 2016, it was discovered that large sums had been misappropriated through fraudulent actions under the control of one of the credit advisors in which it had invested (and which had purportedly been audited).

First Instance - The Anti-Suit Injunction

On 21 June 2017, Argyle commenced the New York proceedings against BDO Cayman as well as BDO Trinity Limited, BDO USA LLP and Schwartz & Co LLP (the "Affiliates") for their alleged failure, over the period of four audits during the years of 2010 to 2013, to bring to Argyle's attention that they were, or may have been a victim to what should have been unmistakable frauds which ultimately brought about its demise. In the New York proceedings, Argyle sought compensatory damages of over US$86 million and punitive damages of not less than US$260 million.

In August of 2017, BDO Cayman filed an ex parte application in the Grand Court of the Cayman Islands for an anti-suit injunction to prevent Argyle from being permitted to continue its New York proceedings against BDO Cayman and its Affiliates. Their basis for this application relied on the engagement letters entered into by Argyle, which contained five key clauses under which Argyle was obligated to have any and all disputes arising out of an audit governed by the engagement letters determined by arbitration in the Cayman Islands and, also, solely against BDO Cayman. These clauses where namely (i) The Applicable Law Clause; (ii) Exclusive Jurisdiction Clause (iii) Dispute Resolution Clause (iv) Assignment Clause; and (v) Sole Recourse Clause.

In the first instance, Justice Parker granted the anti-suit injunction, ruling that the New York proceedings were in breach of a number of the clauses in the engagement letters, and the proper forum for...