Vol 13 (2016) - Issue 6

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Cayman Islands Upholds Universality of Insolvency Proceedings with Anti-suit Injunction

In the matter of Ardent Harmony Fund Inc. the Grand Court of the Cayman Islands has upheld the principle of modified universalism in granting an injunction to restrain foreign proceedings which threatened to interfere with the winding up of a Cayman company. More importantly the Cayman Court has taken the position that the statutory stay of proceedings which takes effect upon winding up has extra-territorial application and applies to proceedings worldwide.

Background
Ardent Harmony Fund Inc (the 'Fund') was established as an open-ended investment Fund in October 2010. Following an acquisition of the Fund’s Investment Manager in early 2016, the new management became concerned that the Fund’s investments and assets were significantly and terminally impaired and resolved to place the Fund into voluntary liquidation. On 10 May 2016 the liquidation was brought under the supervision of the Court and Michael Pearson and Andrew Childe of Fund Fiduciary Partners were appointed Joint Official Liquidators ('JOLs') to the Fund.
Following their appointment, the JOLs took steps to bring the assets of the Fund under their control and called for proofs of debt to be filed. On 27 April 2016 all creditors of the Fund were put on notice that the voluntary liquidation of the Fund was to be brought under the supervision of the Court as an Official Liquidation. The JOLs had made regular attempts to contact the largest creditor of the Fund (the 'Creditor'), and notified it of the steps being taken to realise the Fund’s assets.
On 19 May 2016 the Creditor filed a proof of debt in the Cayman liquidation. However, prior to doing so, and without notice to the JOLs, the Creditor issued a winding up petition to commence a winding up of the Fund in Barbados (the 'Barbados Proceedings').
There were no relevant connections with Barbados – there were no assets in Barbados, there were no debtors located within that jurisdiction, and not even the Creditor was located in Barbados. The only connection appeared to be that the former manager of the Fund had a presence in Barbados, which of course was no longer material to the operations of the Fund. The JOLs sought an anti-suit injunction (the 'Application') to restrain the Creditor from continuing the Barbados Proceedings on the basis that there was no apparent benefit to the Fund or its creditors in duplicative proceedings being commenced in Barbados. More importantly, it was argued that if the Barbados Proceedings had been allowed to proceed there would have been two separate office holders in two different jurisdictions. This would of course result in confusion for creditors and debtors and the potential for conflicting actions being taken by the two sets of representatives. It would also lead to increased costs to the Fund’s estate and the potential undermining of recovery action which was already underway against the debtors to the Fund.

The law
The two issues before the Chief Justice were: (a) whether the Cayman court should grant an antisuit injunction preventing a creditor from taking action in another jurisdiction; and (b) did the Cayman Court have personal jurisdiction over the Creditor.