Normal Service Resumed? Another Look At Cayman Freezing Orders

Introduction

No sooner than Gillies-Smith1 appeared to rewrite the Cayman courts' approach to free-standing freezing orders (or Mareva injunctions), considerable doubt has been thrown on that decision. The recent judgment in VTB Capital Plc v Malofeev2 reemphasises the traditional principled objections to the grant of such free-standing freezing orders, particularly the issue of whether leave may be granted to serve a defendant outside the jurisdiction where there is no substantive cause of action against it in the Cayman Islands. The refusal to allow service on a non-resident defendant directly contradicts the decision in Gillies-Smith and signals a return to earlier jurisprudence.

The decision in VTB Capital also raises further important questions in relation to whether free-standing so-called 'Chabra orders' may be awarded in the Cayman Islands. The judgment leaves open the question of whether such orders may be awarded. However, this has not yet been tested on an inter partes basis.

Facts

In VTB Capital the plaintiff – a bank registered in London – had issued proceedings and obtained a worldwide freezing order in England against a Russian national, Mr Malofeev, and various corporate entities. The plaintiff's substantive claim in England was for deceit or, in the alternative, conspiracy to defraud.

The plaintiff then sought a freezing order in the Cayman Islands against Malofeev (the first defendant) and two companies incorporated in the Cayman Islands (the second and third defendants).

The plaintiff relied on Gillies-Smith for authority that enforcement of the English freezing order constituted a cause of action against the first defendant in the Cayman Islands. No substantive cause of action was asserted against the second and third defendants. They were not defendants to the English proceedings and there was no English freezing order against them. However, it was asserted that they had assets which might be used by the...