Vol 20 (2023) - Issue 1

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Learning from Mistakes: Imposing Constructive Trusts over Mistaken Payments

Synopsis
In the recent judgment of Re Premier Assurance Group SPC Ltd. (in Official Liquidation) (unreported, Smellie C.J., Cause No. FSD 264 of 2020 (ASCJ), 7 April 2022), the Grand Court of the Cayman Islands sanctioned a decision by the joint official liquidators ('JOLs') of Premier Assurance Group SPC Ltd (in Official Liquidation) (the 'Company') to return (or procure the return of) certain payments held by or on behalf of the Company referable to one of its segregated portfolios, Premier Assurance Segregated Portfolio ('PASP'), to the respective payers on the basis that such sums were paid by mistake.
In that case, the Grand Court provided helpful guidance of the principles on which a constructive trust may be imposed in respect of payments made by mistake, which will be of fundamental importance in the context of insolvency where there are competing claims to money between the general body of creditors of an insolvent company and a person making a proprietary claim over the money. This article provides an overview of that decision and, in particular, a summary of factors to consider where payments are made to a company by mistake after the commencement of its liquidation.