Law & Courts

Cayman Islands Grand Court orders the repayment of redemption monies

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  1. the six December Redeemers paid, in full, on 19 December 2008 were preferred to the balance of the December Redeemers;
  2. the December Redeemers who received their redemption payments, in full,
  3. Every...payment...made in favour of any creditor at a time when the company is unable to pay its debts within the meaning of section 93 with a view to giving such creditor a preference over other creditors shall be invalid if made… within six months immediately preceding the commencement of a liquidation.
  4. confirmed that the cause of action is founded in the statute itself; recovery of a payment declared to be invalid is not reliant on principles of restitution and a claim for unjust enrichment;
  5. dismissed the availability of common law defences to a statutory preference claim and confirmed that, when made out, the court has no discretion as to the order to be made – unlike the position in England where the equivalent section grants the court a wide discretion9. In the Cayman Islands the payment is invalid and must be re-paid; and
  6. an investor who participates in a fund in a mere nominee or custodian capacity is to be treated no differently to an investor who holds the beneficial interest in its investment; as the registered shareholder, a nominee or custodian is liable to re-pay monies which are shown to constitute a preference. Whether or not the nominee investor is, in turn, able to look to its principal for reimbursement or indemnification is a matter for it, and is unrelated to the question of preference.

Published December 22, 2015

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