Freezing injunctions: Judge calls for change

In a landmark decision, the Grand Court of the Cayman Islands has rendered short-lived the recently-heralded availability of free-standing injunctive relief in Cayman, following the judgment of Justice Quin in Gillies Smith v Smith earlier this year. 

In a landmark decision, the Grand Court of the Cayman Islands has rendered short-lived the recently-heralded availability of free-standing injunctive relief in Cayman, following the judgment of Justice Quin in Gillies Smith v Smith earlier this year.  

In an urgent ex parte hearing Justice Cresswell heard detailed and extensive legal arguments, which included a full review of all relevant authorities in Jersey, the Isle of Man and BVI. The Judge reached the conclusion that Quin J had been wrong in the Gillies Smith case, in granting leave to serve the writ in that case out of the jurisdiction. Justice Cresswell did make a groundbreaking decision in granting a free-standing freezing injunction against Cayman companies against whom the plaintiff asserted no cause of action. In doing so, he followed the lead of Justice Bannister in the BVI case of Black Swan Investment I.S.A v Harvest View Limited and Sablewood Real Estate Limited (2010). Nigel Meeson QC and Bernadette Carey of Conyers Dill & Pearman represented an English bank which sought to freeze the assets of a defendant resident in Russia and the assets of two Cayman Islands companies the plaintiff alleged were under the control of the defendant. In its application to the Grand Court, the plaintiff, who had already obtained a worldwide freezing order from the English courts in support of ongoing litigation in the UK, claimed no substantive relief in Cayman other than a free-standing freezing injunction in support of the proceedings in the UK. In considering the plaintiff’s application, the court had particular regard to the decision in Gillies-Smith v Smith, which held that the court has jurisdiction to grant leave to serve out in respect of free standing injunctive relief in the absence of substantive proceedings in the Cayman Islands. Justice Cresswell found himself unable to follow Justice Quin and held that an injunction in support of proceedings abroad was “interlocutory” and, accordingly Order 11 of the Grand Court Rules specifically prohibited the granting of permission to serve out of the jurisdiction a writ seeking only such an injunction. He granted permission to appeal the denial of leave to serve out. However, the court confirmed that it does have jurisdiction to award freezing orders over the assets of “non-cause-of-action” defendants domiciled in the Cayman Islands, and freezing orders were granted in respect of the assets held by the two Cayman companies. These defendants could be served in the jurisdiction and the court having jurisdiction over them it was appropriate to exercise the so-called Chabra jurisdiction whereby a freezing order could be granted over the assets of a party against whom no cause of action is asserted, on the basis that those assets may ultimately be available to satisfy a judgment against the defendant against whom a cause of action is asserted. What was novel was that only the non-cause of action defendants were before the court.  

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