Cayman Joins the Club

By Andrew Rogerson LLB (Hons) TEP

STEP Journal – August 2011

On 10 May 2011, the Cayman Islands Grand Court joined Jersey, The Isle of Man and the British Virgin Islands by granting a ‘free-standing’ Mareva injunction, in the case of Gillies-Smith v Smith (Cause #0173/2011). By so doing, Quin J refused to follow earlier Cayman authority and effectively increased the standing of Cayman as a legal and financial centre. The free-standing Mareva enables assets located in Cayman to be frozen, in aid of overseas proceedings, even though there is no separate cause of action in Cayman.

The Facts

On 6 May 2011, Thompson J, sitting as the Superior Court of Ontario, granted Catharine Margaret Gillies-Smith (the wife) a worldwide Mareva injunction, restraining her husband from disposing of the matrimonial estate, which was not inconsiderable in value1. The evidence presented to the court was as follows. The assets, located in Canada and the Cayman Islands, included a significant quantity of diamonds, large amounts of cash, several houses, a boat and a number of vehicles. Most of the family wealth in this long marriage had been acquired fairly recently, following a multimillion-dollar lottery win. It was alleged that the husband advised the wife that the marriage was over, left her very little and departed for the Cayman Islands. This precipitated the successful application for a Mareva injunction in Ontario.

Worldwide Marevas cannot, in practice, have direct effect in an overseas jurisdiction. Accordingly, Cayman attorneys were requested to obtain a Cayman Mareva, in aid of the Ontario Order2. The decision of the Cayman Grand Court judge not to follow previous Cayman authority and, therefore, to grant a free-standing Cayman Mareva injunction, has set a welcome precedent, which was telegraphed across the financial world.

The Legal Context

In 1975, Lord Denning, Master of the Rolls, sitting with Roskill and Ormrod LJJ, upheld the interim injunction, granted by Sir John Donaldson, which became known as the first Mareva injunction3. It was made in the context of the court refusing to be constrained where there was a need for providing a swift, just remedy. In his judgment, Lord Denning quoted his predecessor, Lord Jessel MR, thus:

‘I have unlimited power to grant an injunction in any case where it would be right or just to do so…’ (Beddow v Beddow (1878) 9 Ch D 89 at 93).

‘The first Mareva injunction was made in the context of the court refusing to be constrained where there was a need for providing a swift, just remedy’

His Lordship continued by approving the following opinion, from the learned editors of Halsbury’s Laws:

‘…now, therefore, whenever a right, which can be asserted either at law or in equity, does exist, then, whatever the previous practice may have been, the Court is enabled by virtue of this provision, in a proper case, to grant an injunction to protect that right.4’

As often sadly occurs in the common-law world, groundbreaking decisions become constrained by subsequent precedent. A line of cases subsequently purported to impose a necessity for a specific cause of action, justiciable in the offshore or third-party jurisdiction, as opposed to simply acting in aid of the overseas court, where there was a justifiable case.

In Cayman, that regime was exemplified by the decision of Sanderson J in Bass v Bass [2001] CILR 317, in which he held that the plaintiff was not entitled to a Mareva injunction merely to assist her in proceedings in Texas, as there was no case of action in Cayman. In 2010, however, Henderson J in Deloitte and Touche v Felderhof (Cause #845/1997) opined, obiter, that Bass v Bass was no longer good law in Cayman.

In his decision granting the Mareva in Gillies-Smith v Smith, Quin J referred to the Deloitte case, then adopted with approval the dissenting judgment of Lord Nicholls in Mercedes Benzv Leiduck [1996] 1 AC 284, where His Lordship analysed the situation thus:

‘…his assets are in Hong Kong, so the Monaco court cannot reach him; he is in Monaco, so the Hong Kong court cannot reach him. That cannot be right. This is not acceptable today. A person operating internationally cannot so easily defeat the judicial process. There is not a black hole into which a defendant can escape out of sight and become unreachable.’

In language reminiscent of the groundbreaking judgment of Lord Denning, His Lordship continued:

‘The court habitually grants injunctions in respect of certain types of conduct. But that does not mean that the situations in which injunctions may be granted are now set in stone for all time. The grant of Mareva injunctions itself gives the lie to this. As circumstances in the world change, so must the situations in which the courts may properly exercise their jurisdiction to grant injunctions. The exercise of the jurisdiction must be principled, but the criterion is injustice. Injustice is to be viewed and decided in the light of today’s conditions and standards, not those of yesteryear.’

Granting the wife’s application for a free-standing Mareva injunction in Cayman, Quin J expressed the following sentiment:

‘It is clear that the Courts in Jersey, the BVI and the Isle of Man have accepted and adopted Lord Nicholls’ reasons in the Mercedes Benz v Leiduck decision. This is very persuasive case law. Indeed, applying the dicta of the Jersey Court of Appeal, if I were not to assist the Ontario Court, it could be interpreted as a serious breach of the principles of judicial and international comity.’ The author expresses his grateful appreciation to Moira Visoiu of Rogerson Law Corporation and Rachael Reynolds of Ogier for their help in reviewing this article.

The wife was represented by the writer’s law firm
The Cayman office of Ogier acted for the wife’s Ontario lawyers
[1980] 1 All ER 213
FNa 21 Halsbury’s Laws (3rd ed) 348, para 729