JURISDICTION UPDATE - ISSUE NO. 2

BERMUDABRITISH VIRGIN ISLANDSCAYMAN ISLANDSDUBAIHONG KONGLONDONMAURITIUSMOSCOWSINGAPORESO PAULOconyersdi l l .com

n MAY 2012 SEPTEMBER 2012n ISSUE NO. 2

OFFSHORECASEDIGEST: BERMUDA BRITISH VIRGIN ISLANDS CAYMAN ISLANDS

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TheDigestattemptstogivethereaderahighlevelsummaryofthemajorcommercialcasesdecidedinBermuda,theBritishVirginIslandsandtheCaymanIslandsinthelastfivemonths.WehopethattheDigestwillbeausefulreferencetoolforclientsandpractitionerswhoareinterestedinthedevelopmentofcaselawineachofthesejurisdictions.

Thecasesaredigestedbyjurisdiction,foryoureaseofreferencewehavealsocreatedacasesubjectmatterindexonpage15.

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Bermuda 3CaymanIslands 4BritishVirginIslands 6

Wewouldwelcomeanyfeedbackandsuggestionsfromreadersonthecontent.IfyouwouldliketoobtainfurtherinformationonanyofthecasesfeelfreetocontactanyoftheConyersDill&Pearmanlitigationteam.

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SupremeCourt

May

COMPANIES-WINDINGUPJPLsAPPLICATIONFORALETTEROFREQUESTSTATUTORYBASISOFJURISDICTION

IntheMatterofSeaContainersLtd.[2012]SC(Bda)26Com(10May2012)

Inthiscase,theCompanyinquestionwaswound-upbyGroundCJinJanuary2010.TheCompanyistheparentoffourUKcompaniesundergoingliquidationproceedingsintheEnglishHighCourt.Assuch,thesettlementoftheseclaimsturnsonissuesofEnglishlaw.

TheJPLssoughtanapplicationforaLetterofRequesttoseekassistancefromanoverseascourt.TheCourttooktheopportunitytomakeclearthestatutorybasisofjurisdictiontodirectthatliquidatorsmayseekassistancefromanoverseascourtundertheCompaniesAct1981andthecommonlawprinciplesgoverningtheexerciseoftheCourtsdiscretiontosanctionthatassistance.

First,theCourtacknowledgedthatthereisnodirectauthorityrelatingtotheCourtsjurisdictiontoissueaLetterofRequest.Assuch,thecourtreferredtosection175(1)(a)oftheCompaniesAct1981whichallowsfortheJPLstoseekthepermissionoftheCourttobringany action or other legal proceeding in the name and on behalf of the company.Further,itwasnotedthatitisknownpracticeforliquidatorstobringproceedingsbothlocallyandabroad,andthatinsolvencyproceedingsoverseasmaybemotivat-edbyamorepracticalapproachofhavingtheappropriateforumdeterminetheissuesathand.

Second,theCourtpointedoutthattheexerciseoftheCourtsdiscretionwhenpermittingoverseasassistancefromaforeigncourtisbaseduponcommonlaw.TheCourtfurthernotedthatwhilelettersofrequestinrelationtoobtainingforeignevidenceinlocalcourtsisprovidedforunderOrder39Rule3oftheRulesoftheSupremeCourt,thereishowevernostatutoryequivalentunderinsolvencylaw.Whatismore,theCourtexpressedthattheissueshouldalsobedeterminedbypracticalcasemanagementandthattheCourtshouldtakeintoaccountthemostsuitableforumfordeterminingtheissues.Assuch,theCourtgrantedtheapplicationmade.

June

POSSESSIONORDERSTRIKE-OUTAPPLICATIONRESJUDICATAFRAUDULENTINVASION-ABUSEOFPROCESS

LJunosvHSBC&KTaylor[2012]SC(Bda)33Civ(29June2012)

Thiscaseconcernedanobjectionbyamortgageeinproceed-ingsissuedbytheBankseekingpossessionandsaleagainstthePlaintiffmortagee.ThePlaintiffsoughtastrike-outapplicationforthefollowingreasons:firstthattheSecondDefendantobtainedapossessionorderintheactionbyfraudulentmeans;secondtheBankobtainedthepossessionorderfraudulently;thirdthepossessionorderwasunenforceablebecauseitfailedtospecifyadateofcompliance;andlastlytheWritofPossessionandallstepstakentoenforceitwereunlawfulandanullitybyvirtueofthefailuretospecifyadateofcompliance.Further,thePlaintiffissuedaSummonsforinterimrelieftorestraintheBankfromexercisingitsrightsofpossessionpursuanttothepossessionorder.

InregardstotheSecondDefendant,alawyer,theCourtstruckouttheclaimunderOrder18rule9(1)(b)oftheRulesoftheSupremeCourt1985and/orundertheinherentjurisdictionoftheCourt,theCourtheldthattheallegationthatthepossessionhadbeenob-tainedfraudulentlybytheSecondDefendantwasboundtofail.TheCourtconsideredwhetherthedoctrineofres judicatawouldapplytotheallegationthatthepossessionorderhadbeenobtainedbyfraudandrefusedtostriketheclaimoutonthatbasis.Howev-er,itdidstrikeouttheclaimagainsttheFirstDefendantonthebasisthatitwasboundtofailandrefusedthePlaintiffsinjunctionapplicationtorefraintheBankfromexercisingitsrights.Thecasecontainsahelpfulstatementoftheprinciplesofthedoctrineofresjudicatawhenthattermisusedinitswidersense.

July

COMPANIESWINDINGUPPETITIONINSOLVENCY-NON-AS-SIGNMENTCLAUSECOLLATERALPURPOSE

IntheMatterofGerovaFinancialGroup[2012]SC(Bda)35Com(6July2012)

Thiscaseconcernedthewinding-uppetitionofthenamedCompany,whichwassoughtbyoneofitscreditors(Maxim).InMarchofthisyeartheSupremeCourthadheldthatMaximhadstandingtopeti-tion.TheCompanyarguedthatMaximsproceedingsweretainted

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byimpropermotives.FurthermuchoftheCompanysargumentwasdependentuponthefactthattheothercreditorssupportedtheirmotion;thattheapplicationforwinding-upshouldbere-fused.ThePetitionersoughtawinding-uporderonthebasisthattheCompanyisinsolventonacash-flowandbalance-sheetbasisandthatasanunpaidcreditorisentitledtoawinding-uporderasofright.

ItwasheldthatthePetitionerwasentitledtoanorderthattheCompanybewound-up,butsolelyonthebasisthattheCompanywasunabletopayMaximsdebtwhichwasdueandpayableanditgavetheCompanythecompanytimetosecurethepetitiondebt.

TheCourtfirstlyconsideredthethreereasonswhythepetitionshouldbedismissed,asarguedbytheCompany:1)becausetheCompanyhasacross-claimbasedonbreachbyMaximofanon-as-signmentclause;2)becauseMaximlackedsufficientinterestintheproceedinghavingassigneditsclaimtoanotherentity;and3)becausetheproceedingsarebeingpursuedforacollateralpur-pose.Withregardtothebreachofthenon-assignmentagreement,theCourtdidnotfindtheargumentextensiveenoughtodismissthepetition.InrelationtotheargumentofsufficientinteresttheCourtfoundthatMaximdidinfacthavesufficientinterestintheproceedingsastheywereanunpaidcreditorwithapresentlyduedebt.Additionally,onthecollateralpurposeargument,theCourtconcludedthattherewascircumstantialevidencewhichsug-gestedthatthePetitionerwasactingforanimproperpurpose.WhendealingwithsuchallegationstheCourtadoptedananalogywiththeapplicationofthecleanhandsdoctrineincaseswhereinjunctivereliefissought.ItheldthatthePetitionershouldnotbeaffordedreliefwhichgoesbeyondthescopeofthepetitionandtheovertstandinguponwhichthePetitionerrelieswhichwasthenonpaymentofadebtduetothepetitioner.

Furthertotheabove,theCourtdeclinedtomakefindingsastobalancesheetinsolvencywithoutanyexpertevidence.Italsodeclinedtomakeanorderonthebasisofthelossofsubstratumissuesraisedbythecreditorsindicatingthatitwasusuallytheshareholderswhoraisesuchcomplaintsandnotcreditors.TheCourttookintoaccountthefactthatsomeofthecreditorsopposedthepetition.TheCourtfurtherheldthatapaymentunderpressureoflegalproceedingsbytheCompanytoMaximwouldnotconsti-tuteafraudulentpreference.

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July

COMPANIESINVESTMENTFUNDSCONSTITUTIONALDOCUMENTS-SIDELETTERSPRIVITYOFCONTRACT

IntheMatterofMedleyOpportunityFundLtd.GrandCourtoftheCaymanIslands(FinancialServicesDivision),CauseNo.FSD23of2012,QuinJ.,June21,2012

FintanMasterFund(Fintan)investedinMedleyOpportunityFund(theFund)throughitsnominee,NauticalNominees(Nautical).Nauticalwastheregisteredshareholder.Fintanhad,initsownrightandname,enteredintoanagreement(theSideLetter)withtheFund.TheSideLetterprovidedthatalldistributionstoFintanuponredemption,liquidationorotherwiseshallbepaidincashand,ifcashisnotimmediatelyavailable,throughsecuritiesheldinaseparateliquidationaccountonFintansbehalf,theproceedsofwhichwillbedistributedtoFintanincashassuchsecuritiesareliquidated.

DuringthefinancialcrisistheFundfacedarunonredemptionsandpresenteditsinvestorswithtwosuccessiverestructuringplans.Inbothcases,Nautical,onbehalfofFintan,electedtostayinitsshareclass,rescindallpreviousredemptionrequests,andbenefitfromorderlypayoutsthroughquarterlydistributions.

FintanbecamedissatisfiedwiththepaceofthewindingdownoftheFundandNauticalsubmittedaredemptionrequestonbehalfofFintanrequestingtheredemptionofallitsshares.FintantookthepositionthattherestructuringshadnotmodifieditsredemptionrightsundertheSideLetter.TheFundarguedthatNauticalwasnotapartytotheSideLetterandthuscouldnotrelyonit.TheFundfurtherarguedthattheeffectofenteringintotherestructuringagreementswastoreplaceanypre-existingredemptionrights.

TheCourtdeterminedthatwhileNauticalwasthenomineeforFintanandFintanwastheultimatebeneficiary,Nauticalwastheshareholder.TheSideLetter,towhichNauticalwasnotaparty,didnotprovideNauticalwithanyenhancedrightsorfavouredstatusasaregisteredmemberoftheFund.NauticalhadthesamerightsandobligationsasanyotherregisteredshareholderundertheArticles.

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TheunderlyingcommercialpurposeoftherestructuringwastorequireNauticaltoexchangeitsexistingredemptionrightsforperiodiccashdistributionseffectedproratawithallotherinves-torsacceptingthisoption.ThisallowedtheFundtominimizealiquiditysqueezeandavoidedafiresaleofassetsandallowedthememberstobenefitfromtheexpectedrecoveryinassetpricesandavoidadisorderlyscrambleforassetsunderliquidation.Nauticalunderstoodthesetermsandoptedtoacceptthemandisthereforeboundbythem.Theredemptionrequestwasdeclaredinvalidandofnoeffect.

COMPANIESINVALIDISSUEOFSHARESMISTAKERECTIFICATONOFREGISTER

IntheMatterofS.46oftheCompaniesLaw(2011Revision)andintheMatterofFulcrumUtilityInvestmentsLimited,GrandCourtoftheCaymanIslands(FinancialServicesDivision),CauseNo.FSD82of2012,QuinJ.30July2012

Fulcrumestablishedashareincentiveschemetomotivateitsmanagementteamtoachievecertaintargets.However,anadministrativeerroroccurredwhentheincentiveshareswereissued.Fulcruminadvertentlypurportedtoissuecertainsharesatlessthanparvalue,anddidnotfollowtheproceduresetoutinsection35oftheCompaniesLawtolawfullyissuethesharesatadiscount.Sometimepassedbeforetheerrorwasdis