OFFSHORE CASE DIGEST: - Conyers Dill & Pearman

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CAYMAN ISLANDSto set aside. In this case, the Plaintiff had, by its blatant andcontinuous breaches of the rules of the Grand Court shownwhat could only be described as a contemptuous disregard forthe Court’s practice and procedure. The Plaintiff failed to fileany substantive evidence which either carries some degreeof conviction or demonstrates a real likelihood that its draftdefence to the counterclaim could succeed. Given that thePlaintiff had conducted this part of the proceedings improperly,unreasonably and negligently, the application to set aside thejudgment was dismissed and costs were ordered against thePlaintiff on an indemnity basis.PROCEDURE – SECURITY FOR COSTS FOREIGNRECEIVER – STAYCigna Worldwide Insurance Company (by and through itsCourt appointed receiver, Josie Senesie, and in respectof the assets, undertakings and affairs of its licensedLiberian branch and business) v. Ace Limited, GrandCourt of the Cayman Islands Financial Services Division,Cause FSD 96 of 2011 (Originally Cause No. 39 of 2008),per Creswell J. (27 January 2012)Background: Cigna Worldwide Insurance Company is aDelaware insurance company with operations in variouscountries around the world. Ace, a Swiss insurer originallyincorporated in Cayman, acquired by agreement certainassets and assumed certain liabilities of Cigna’s property andcasualty business, including liabilities pertaining to Cigna’sLiberian business. Competing and conflicting judgments havebeen issued in the United States and in Liberia with respectto Cigna’s liability for certain policy claims from the time of theLiberian civil wars. Complex issues of sovereign immunity,conflicts of laws, enforcement of foreign judgments, discoveryand the legal status of foreign receivers are being considered invarious proceedings. Assorted stays and anti-suit orders havebeen issued. Against this backdrop, the Cayman action wascommenced by the Liberian court appointed receiver of whatis described as Cigna’s registered branch insurance businessin Liberia. In this action, the Plaintiff seeks recognition of hisappointment and indemnification for two judgments renderedby the Liberian Court in favour of the insureds. It is allegedin various proceedings that the receivership appointment isinvalid and the Plaintiff in fact acts at the behest of privateindividuals who had purchased the claims. This application isbrought by Ace for, inter alia, an order that the Plaintiff providesecurity for costs and for an order that the Cayman action bestayed pending the final determination of the proceedings, andany appeals therefrom, in the U.S. matters.Security for costs: It was uncontested that the Court hadjurisdiction to make an order for security for costs in thissituation, but the Plaintiff argued that the Court should notexercise its discretion to do so in this case on the basis ofinpecuniosity. The Court disagreed. A plaintiff who allegesthat an order for security for costs will stifle the claim mustadduce satisfactory evidence that the plaintiff does not havethe means to provide security and that the plaintiff cannotobtain appropriate assistance to do so from any third party whomight reasonably be expected to provide such assistance ifthey could. The affidavit evidence provided by the Plaintiff inthis case was not satisfactory, as it did not set out the groundsof the affiant’s statement of information or belief. As such, itwas appropriate to make an order for security for costs. Indetermining the amount of security, the court must take intoaccount the amount the respondent is likely to be able to raise.The court should not normally make a continuation of theclaim dependent upon a condition which it is impossible for therespondent to fulfil. Where a respondent opposes the makingof an order for security or seeks to limit the amount of securityby reason of impecuniosity, the onus is on the respondent toput proper and sufficient evidence before the court, and makefull and frank disclosure. If the respondent gives an incompleteor misleading account of its resources, the court may, inexercising its discretion, set an amount which represents theCourt’s best estimate of what the respondent can afford. In thiscase, the Court considered that the Plaintiff had not made fulland frank disclosure, nor had he given anything approachinga complete account to the Court. Given the complexity ofthe issues, the length of time required to hear them, and theconyersdill.com • 20
CAYMAN ISLANDSretaining of leading counsel from London, security for coststo the end of the five days scheduled for hearing was set at$850,000. The Defendant’s impromptu request that the Courtorder that the receiver identify the persons who are fundinghim in these proceedings so that any unsatisfied order forcosts could be enforced against them was deflected on thebasis that there was no formal application for such an orderbefore the Court.Stay of proceedings: The Court should only in the mostcompelling circumstances (if at all) exercise its casemanagement powers to impose a temporary stay onproceedings commenced as of right in the Cayman Islands, inorder to force the plaintiff to commence parallel proceedings ina foreign jurisdiction in which he would not otherwise choose tolitigate. The Court has a duty to further the overriding objectiveof the Rules of Court by actively managing proceedings,and regard may be had to the existence of litigation in otherjurisdictions, to the extent appropriate in the circumstances. Inthis instance, it was appropriate to issue a stay until the Plaintiffcomplies with the order for security for costs, following which acase management conference will be held to set the timetableof these proceedings and in doing so the Court will haveregard to any developments and anticipated developments inthe other proceedings.FebruaryCOMPANIES – INSOLVENCY – S. 103 COMPANIES LAW– ORDER FOR DELIVERY UP OF DOCUMENTS AGAINSTAUDITORIn the Matter of the Companies Law (2010 Revision) andIn the Matter of ICP Strategic Credit Income Funds Ltd(In Liquidation) and In the Matter of ICP Strategic CreditIncome Master Fund ltd. (In Liquidation), Grand Court ofthe Cayman Islands Financial Services Division, CauseNo. FSD 82 of 2010 and FSD 269 of 2010, per Jones, J.(3 February 2012)An application was brought by the joint official liquidators ofcertain hedge fund companies for an order pursuant to section103(3) of the Companies Law requiring the funds’ auditor todeliver up all property or documents belonging to the fundsin their possession, custody or control. For the liquidators tosucceed with an order under section 103(3) for the productionof documents, the Court must be satisfied that the auditor isa “relevant person” within the meaning of section 103(1) andthat it has in its possession documents which can fairly be saidto belong to the funds. The liquidators argued that the auditorwas a relevant person on the basis that it was a “professionalservice provider” within the meaning of section 103(1)(c). Inits ordinary business usage, this expression has a very widemeaning which probably does include auditors. However,the statutory power to compel persons to co-operate withofficial liquidators for the ultimate benefit of the creditors and/or shareholders is intended to apply only to those who wereinvolved in the company’s promotion or management. TheCourt is not empowered to make such orders against outsiderswhose only relationship with the company is that they havedone business with it or contracted to provide it with goodsor services. For this reason the expression “professionalservice provider” is narrowly defined by section 89 of theCompanies Law to mean “a person who contracts to providegeneral managerial or administrative services on an annualor continuing basis”. Auditors fall outside of that definitionbecause they are not engaged to provide general managerialor administrative services. The auditor could also not becharacterized as an “advisor” within the meaning of sub-section103(1)(d). This sub-section in this context relates to personswho are appointed under section 30(3)(d) of the Mutual FundsLaw to advise funds on the proper conduct of their affairs. Bydefinition, an auditor cannot be an advisor within the meaningof section 103(1)(d). The court has no jurisdiction to make theorder sought and the summons is dismissed.conyersdill.com • 21
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OFFSHORE CASE DIGEST: - Conyers Dill & Pearman

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