Exploring Offshore Litigation

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Exploring Offshore Litigation

Exploring Offshore Litigation is a captivating podcast series containing audio of written blog content that dives deep into the intriguing world of offshore litigation, including the BVI and Cayman. Each episode sails through complex legal waters, bringing you up-to-date analysis of recent high-stakes cases and expert commentary from the leading minds in this specialised field. Our episodes demystify legal jargon and break down complex cases to make them accessible to all. Harneys, an international law firm with entrepreneurial thinking, brings each episode to you.

  1. HÁ 3 DIAS

    What law governs a silent contract? The Cayman approach to contractual claims

    When a contract lacks an express choice of governing law, determining the applicable legal framework can feel like navigating uncharted waters. Case law underscores the need to carefully map the differing approaches across common law jurisdictions. This first blog in a two-part series examines governing law in contractual claims. Determining the governing law When assessing the governing law of a particular claim, the nature of the claim itself is crucial. Broadly, claims can be classified into two categories: 1. Contractual claims 2. Non-contractual claims - such as tortious or proprietary claims Each category involves a different approach for determining the applicable law. Contractual claims In the absence of specific legislation governing contractual claims in the Cayman Islands, the courts rely on English common law principles. When a contract does not contain an express governing law clause, a two-stage analysis is followed to ascertain the applicable law: 1. Intention of the parties: The first step is to analyse whether the parties' intentions regarding the governing law can be derived from the contract itself or other related circumstances. This could be done by looking at: Express provisions: any clauses in the contract that directly state the choice of law. Implied terms: factors such as the location of performance or the subject matter of the contract may indicate an implied choice of law. 2. Closest and most real connection test: If the express or implied intention is not sufficiently clear, the court applies the "closest and most real connection" test to determine the appropriate governing law. This test considers which jurisdiction had the most substantial connection to the contract at the time it was made. Relevant factors include: The location where the contract was made; The place of performance; and The location of the parties or the subject matter of the contract. In applying these factors, the Cayman courts aim to ensure the contract is governed by the law most relevant to its formation and execution, while ensuring fairness in the application of legal principles. In the Cayman Islands, the leading authority on this subject is the 1995 Court of Appeal judgment in Insurco Intl Ltd v Gowan Co, which has been cited more recently by Chief Justice Smellie (as he was then) sitting in the Grand Court in Unilever v ABC International. Both Insurco and Unilever reference the Privy Council case of Bonython v Commonwealth of Australia, which remains a key authority on the issue of determining the governing law where no explicit choice is made. The question of how to determine the governing law of a contract without an explicit written term has not come before the Cayman courts recently. This raises an interesting consideration: if such a case were to arise, would the courts take the opportunity to review the Cayman position and ensure consistency with other Commonwealth jurisdictions? Comparing the Cayman and UK positions A notable difference exists between Cayman and the UK due to their respective approaches to international and cross-border contractual disputes. UK position: The UK was a signatory to Rome Regulation (EC) No 593/2008 (Rome I) and Rome Regulation (EC) No 864/2007 (Rome II), which govern the applicable law in cross-border disputes within the European Union. Following Brexit, the UK incorporated these regulations into its domestic legislation, meaning that much of the UK case law now reflects principles derived from the Rome Regulations. Cayman position: The UK did not extend the Rome Regulations to the Cayman Islands so they do not apply in Cayman. As a result, Cayman continues to follow the common law position, relying on English cases that pre-date the Rome Regulations or recent cases unaffected by them. Therefore, while English case law remains influential, it is crucial to distinguish between decisions based on the Rome Regulations and those based on common law principles. This distinction should

    5min
  2. To stay or not to stay? Granting a stay pending determination of parallel proceedings

    24 DE OUT.

    To stay or not to stay? Granting a stay pending determination of parallel proceedings

    blogs Offshore Litigation Blog What law governs a silent contract? The Cayman approach to contractual claims blogs Offshore Litigation Blog The prudent-ish investor: determining fair rate of interest in s238 fair value proceedings blogs Offshore Litigation Blog Cyprus celebrates Independence Day on 1 October!

    1min
  3. The prudent-ish investor: determining fair rate of interest in s238 fair value proceedings

    7 DE OUT.

    The prudent-ish investor: determining fair rate of interest in s238 fair value proceedings

    In iKang Healthcare Group Inc, the Grand Court of the Cayman Islands has released its judgment on the issues of the fair rate of interest under section 238(11) of the Companies Act and the costs of the proceedings. The Court's fair value judgment was released back in June 2023. The court has a broad discretion to determine what is a fair rate of interest, balancing any disadvantages suffered by the dissenters against any benefits received by the Company. The Court's preferred methodology in section 238 cases is the 'mid-point approach', derived from pre-2007 Delaware law, which takes the mid-point between the company's borrowing rate and the 'prudent investor rate'. In iKang, the main contested issue in relation to interest concerned the 'prudent investor rate'. The dispute concerned whether the hypothetical prudent investor is purely objective in nature or should adopt subjective characteristics of the dissenters themselves. The Company favoured objectivity, while the dissenters preferred a subjective approach incorporating higher rates of return available to them as hedge funds. The Court held that the correct approach is to start from a presumption that the 'prudent investor rate' should be assessed objectively on the basis of returns available to an average retail or professional investor. However, the presumption can be rebutted if the dissenters show that this would be unfair to them having regard to their position. Justice Segal observed that the evidence filed by the iKang dissenters regarding their own investment strategies was "sketchy and too limited", and so the presumption of objectivity was not displaced. He further held that the dissenters' expert's approach - based on hedge fund returns - was inconsistent with a prudent investment strategy, which he characterised as a conservative investment strategy with low to moderate risk. On this basis, the Court adopted an asset allocation of 45 per cent equities, 45 per cent bonds and 10 per cent cash, preferring the Company's expert's data and methodology. As summarised by Justice Segal, the core objective is to compensate the dissenters for the loss of the use of their money during the relatively short section 238 proceedings, and the Court retains the discretion to treat as unfair returns assumed to be generated by a very long term investment strategy. Harneys acts for the Company.

    3min
  4. Cyprus celebrates Independence Day on 1 October!

    1 DE OUT.

    Cyprus celebrates Independence Day on 1 October!

    On 1 October 2024, our Cyprus office will celebrate Cyprus' independence from British colonial rule. This is a national holiday, observed with various ceremonies, including parades, speeches, and cultural events. Military parades are held in major cities across the island, with participation from units of the National Guard, the police, the fire services, and civil defence. Cyprus became a British colony in 1878. In 1955, EOKA (Ethniki Organosis Kyprion Agoniston), meaning the National Organisation of Cypriot Fighters, was formed to fight for the end of British colonial rule in Cyprus. After four years of struggle, the Treaty of Zurich was signed between Greece, Turkey, Britain, and representatives of Cyprus, establishing the framework for Cyprus as an independent state. On 16 August 1960, pursuant to the Treaty of Establishment, Cyprus was officially declared an independent state, with full sovereignty. Cyprus Independence Day symbolises the birth of Cyprus as a sovereign nation. Its historical significance reminds Cypriots of their national sovereignty, independence, and the challenges faced in achieving it. Cyprus has been a member of the EU since 1 May 2004.

    1min
  5. The BVI expands list of designated countries for court-assisted recognition and assistance to foreign insolvency officeholders

    30 DE SET.

    The BVI expands list of designated countries for court-assisted recognition and assistance to foreign insolvency officeholders

    In a significant development, the BVI Financial Services Commission has expanded the list of "relevant foreign countries" under Part XIX of the Insolvency Act 2003. Part XIX allows the BVI Court to provide assistance in relation to foreign insolvency proceedings from designated countries. A foreign proceeding being a collective judicial or administrative proceeding, including an interim proceeding, where the affairs of the debtor are subject to control or supervision by a foreign court, for the purpose of reorganisation, liquidation or bankruptcy. Until recently, the designated countries were limited to only nine jurisdictions: Australia, Canada, Finland, Hong Kong, Japan, Jersey, New Zealand, United Kingdom, and United States of America. The FSC has now added over 20 additional countries to the list, including several major offshore and onshore jurisdictions. The newly added jurisdictions are: 1. Bahamas 2. Barbados 3. Belize 4. Bermuda 5. Cayman Islands 6. Guernsey 7. Guyana 8. Ireland 9. Isle of Man 10. Jamaica 11. Member States and Territories within the Organisation of Eastern Caribbean States (the OECS, comprising Anguilla, Antigua and Barbuda, Dominica, Grenada, Guadeloupe, Martinique, Montserrat, Saint Kitts and Nevis, Saint Lucia, and Saint Vincent and the Grenadines) 12. Nigeria 13. Singapore 14. Trinidad and Tobago 15. Turks and Caicos Islands This designation means that personal bankruptcies, judicial managements and foreign liquidations from these countries can now access streamlined assistance from the BVI Court, which has the jurisdiction to grant a wide range of orders including the power to deal with the foreign company's BVI assets, exercise functions in relation to the company, and examine individuals connected to the company. Given that the BVI Court of Appeal has previously held that Part XIX provides a complete code for foreign representatives from designated countries to apply to the BVI Court for assistance, the expansion of the list of countries is significant. For foreign officeholders from non-designated countries, the common law right of recognition survives and the BVI Court will recognise a foreign office holder as having status in the BVI in accordance with their appointment by the foreign court. However, it is a more convoluted process and without the jurisdiction to grant assistance there is often limited benefit in obtaining recognition from the BVI Court on its own. Given the common economic and legal ties between the BVI and many of the newly added countries - in particular Bermuda, Cayman, the OECS and Singapore - these changes will significantly improve outcomes for cross-border restructurings and insolvencies involving the BVI. By expanding cooperation under Part XIX, complex multi-jurisdictional proceedings involving offshore jurisdictions and beyond will benefit from easier coordination between local courts and officeholders.

    3min

  6. 27 DE SET.

    A "Black Swan" takeover: a new decision under the statutory dissenting shareholder regime in the Cayman Islands

    The Grand Court of the Cayman Islands delivered an unusual judgment in section 238 proceedings to determine the fair value of merger dissenters' shares in an unlisted company, Xingxuan Technology Ltd. Unlike typical management buy-outs where the majority shareholders acquire the shares of the minority, Xingxuan was acquired by a competitor. The trial was uncontested as Xingxuan neither appeared nor had legal representation. The dissenter's valuation expert gave oral evidence without being cross-examined - described by Justice Kawaley as a "Black Swan" event. The dissenter's expert opined that the merger price was unreliable and a discounted cash flow impracticable. Therefore, the primary valuation methodology should be based on the valuation investors had placed on Xingxuan in financing rounds, a methodology not previously considered in any section 238 proceedings. The dissenter contended that the fair value of its shares was US$354.1 million compared to the value derived from the merger price of US$42 million, more than eight times the merger price. Justice Kawaley found that the merger process supported the dissenter's position that Xingxuan was sold at an undervalue, with Xingxuan having abandoned any effort to justify the merger price during the proceedings. Further, the expert's valuation of Xingxuan (US$2.5 billion) fell within the range of values implicitly assigned to Xingxuan and its competitors by those who participated in various financing rounds pre- and post-merger. Even where there is only one expert, the Court must critically evaluate the expert valuation evidence and determine whether and to what extent it accepts that expert's evidence and substitute its own view if it is found to be unsatisfactory. An analogy can be drawn between a joint expert and a single expert whose evidence is uncontested: fairness dictates the trial judge should only accept expert evidence which can withstand scrutiny and be slow to reject the unchallenged evidence of an expert witness. The function of an expert in fair value proceedings is to assist the Court in assessing complex financial information; not to deliver a definitive fair value calculation. Like general civil litigation, the Court's determination involves factual findings applied to determine liability or quantum of loss and evaluative findings to measure general damages. The Court's statutory adjudicative function is not extinguished merely because only one party presents expert evidence. However, unchallenged expert evidence should not be rejected unless it is unsustainable on its face or having regard to the underlying facts, or it relates to an issue the expert has been given an opportunity to address before or at the trial. The Court must consider the commercial rationality of the appraisal result contended by the expert as a whole. In these proceedings, Justice Kawaley held the evidence of the dissenter's expert, whom he questioned at length, was neither unsustainable on its face or inherently improbable, when viewed commercially. He accepted the methodology adopted by the dissenter's expert, being the EV/GMV (multiple Enterprise Value to Gross Merchandise Value viz the total number of transactions on the company's platform) - notably a methodology not previously considered in any fair value case. Justice Kawaley considered it appropriate to apply a five per cent minority discount plus a five per cent share rights discount, reducing the fair value contended for by the dissenter to US$318.69 million. While this uncontested fair value hearing was characterised as a 'Black Swan' event, it is still a helpful reminder to legal practitioners of the principles and duties of an expert valuer and that the valuation process in any given case will depend on the particular facts and circumstances.

    4min

  7. 26 DE SET.

    How to get an injunction in the BVI

    This guide sets out answers to frequently asked questions on obtaining injunctive relief in the British Virgin Islands. What is an injunction? An injunction is a court order prohibiting a person from doing something (a prohibitory injunction) or requiring a person to do something (a mandatory injunction). Specific injunctions include search orders, Norwich Pharmacal (third party disclosure) orders and freezing orders (or Mareva injunctions). Injunctions can be final (permanent), interlocutory (until the final hearing or trial) or interim (until further order, which may be before the final hearing). Injunction applications are frequently sought in the BVI, with the BVI courts readily granting them in appropriate circumstances. Do I have a right to an injunction? An injunction is granted at the court's discretion: it is not available as a remedy as of right. An injunction will usually be granted where it appears to be just and convenient to the court. The BVI court derives its power to grant injunctions from section 24 of the Eastern Caribbean Supreme Court (Virgin Islands) Act (SCA). Whether the court will exercise its discretion to grant an injunction will depend on several factors, including delay, whether the injunction can be appropriately monitored, and whether the applicant has "clean hands", ie, no misconduct or illegality is linked to the relief sought. There must also be an actual or threatened breach of the applicant's rights. When considering the grant of an interim injunction, the court must exercise its discretion under guidelines set down in the seminal case of American Cyanamid Co v Ethicon Limited. What are the American Cyanamid guidelines? The court's primary objective is to follow the course which presents the lowest risk of irreparable prejudice if, after a trial, the decision to grant an interim injunction is subsequently found to be incorrect. In American Cyanamid, the House of Lords set out a three-stage test for granting an interim injunction. Serious question to be tried: The court must be satisfied that there is a serious question to be tried; ie the underlying claim itself must not be frivolous or vexatious. Adequacy of damages: The court must consider the adequacy of damages. This involves two steps: If the claimant were to succeed at trial, from the claimant's point of view, would damages be an adequate remedy? If so, and the defendant would be financially able to pay them, no interim injunction would typically be granted. If the defendant were to succeed at trial, would they be adequately compensated by the claimant's undertaking in damages for the loss caused by applying the interim injunction? If they would be adequately compensated, then an interim injunction should be granted. Balance of convenience: If there is doubt about the adequacy of damages to the claimant or the defendant, the court must consider the "balance of convenience". This involves the court assessing all factors and taking the course of action which presents the lowest risk of injustice; ie whether it would do more significant damage to the applicant if the injunction were wrongly refused than it would do to the respondent if the injunction were improperly granted. In performing this exercise, the court will consider any factors relevant to the facts of the case, which will necessarily be case-specific. If the factors are evenly balanced, then the court should act to preserve the status quo. The courts typically exercise the discretion to grant an interim mandatory injunction more sparingly than an interim prohibitory injunction since, given that it is an order which requires a party to do something, there is generally a higher risk of injustice and irredeemable harm to the respondent if the decision is subsequently found to be incorrect. When can I apply for an interim injunction? Part 17 of the Eastern Caribbean Supreme Court Civil Procedure Rules (Revised Edition) 2023 (EC CPR) sets out the procedure for interim remedies,

    17min
  8. Cayman Islands Court of Appeal holds that it has no jurisdiction to perfect an imperfect gift, even when sympathy would require it

    26 DE SET.

    Cayman Islands Court of Appeal holds that it has no jurisdiction to perfect an imperfect gift, even when sympathy would require it

    In the world of trust law, the principle that "equity will not assist a volunteer by completing an imperfect gift" has endured for over a century. This principle was established in the historical case of Milroy v Lord (1862) 2 GF & J 264 and continues to be instructive in trust and estate disputes to this day. This principle was recently brought before the Cayman Islands Court of Appeal (CICA) in the case of Frederick and Smith v Smith and Anor, CICA No. 10 of 2023, in which the Court was tasked with considering land transfers in a probate and trust context, specifically addressing the question of when a gift of property is considered "complete" when the transfer has not been effected. First Instance Decision The main proceedings concerned a dispute involving the transfer of property once owned by the deceased, Olice Estermae Smith (Mrs Smith). The property, known as West Bay Northwest, Block 4B, Parcel 322 (the Property) was intended to be transferred from her sole name to the names of herself and her granddaughter, Hilary Shenika Frederick (Ms Fredrick) by way of Form RL1 - a Cayman Islands statutory form for land transfer. The form was executed in 2012 by both Mrs Smith and Ms Fredrick but was never registered with the Land Registry, as required by the Registered Land Act (2018 Revision) (the Act). Upon Mrs Smith's death in 2015, her estate (including the Property) passed to her two daughters. Ms Fredrick, who had lived in the property her entire life, claimed ownership through the unregistered transfer and sought a declaration from the Grand Court that the transfer was valid despite the failure to register Form RL1. In April 2023, Justice Walters applied the principle that equity will not perfect an imperfect gift at first instance, finding that the purported transfer was legally ineffective on the basis that (i) the relevant transfer form was incomplete as it did not specify whether the property was to be held as joint tenants or tenants in common and (ii) in any event, the transfer was not perfected as it was not registered in accordance with the Act. Decision on Appeal On appeal, Ms Frederick argued that (i) Mrs Smith had done all that was required to effect the transfer and the lack of registration should not invalidate the transfer, which should be registered by rectification of the Land Register, (ii) equity should intervene to recognise the transfer, as Mrs Smith clearly intended to gift Ms Frederick the property, (iii) the defendant, Mrs Smith's daughter, was estopped from denying the validity of the transfer as she had allowed Ms Frederick to rely on it, (iv) the beneficial interest in the property had passed to Ms Frederick, despite the lack of registration, (v) the transfer should be construed as a declaration of trust, with Mrs Smith holding the property in trust for herself and Ms Frederick, and (vi) the failure to specify whether the property was to be held as joint tenants or tenants in common should not affect the validity of the transfer. In considering the appellants' arguments, the CICA considered the development of the principle set out in Millroy which had softened following the English case of Rose v Inland Revenue Commissioners [1952] Ch. 499 such that an exception can be made if a party can demonstrate that they "have done all that was necessary to complete the gift, short of registration of the transfer." In Rose, the transferor had done all in his power to register the transfer (in this case, the transfer of shares), meaning that the failure for the transfer to be affected was no longer within his power. The CICA distinguished the present appeal from Rose on the basis that Mrs Smith and Ms Frederick had not completed nor registered the transfer forms. In further considering the Milroy principle, the CICA found the Canadian case of MacLeod v Montgomery Estate [1979] A.J. No. 857 analogous as it involved the failure to deliver the necessary documents (a duplicate title) required to register a lan

    7min
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Sobre

Exploring Offshore Litigation is a captivating podcast series containing audio of written blog content that dives deep into the intriguing world of offshore litigation, including the BVI and Cayman. Each episode sails through complex legal waters, bringing you up-to-date analysis of recent high-stakes cases and expert commentary from the leading minds in this specialised field. Our episodes demystify legal jargon and break down complex cases to make them accessible to all. Harneys, an international law firm with entrepreneurial thinking, brings each episode to you.

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