In the case of Silk Road Funds Ltd, recently released from embargo, the Grand Court of the Cayman Islands confirmed its common law power to recognise receivers appointed by a foreign Court and distinguished the principle of modified universalism.
Receivers were appointed in Bermuda over a fund operated by a Bermudian segregated accounts company. The receivers sought recognition from the Grand Court for the purposes of bringing, amongst others, a Norwich Pharmacal application against certain parties in the Cayman Islands to assist with locating assets of the fund.
In his judgment, Chief Justice Smellie examined the principle of modified universalism as discussed in China Agrotech Holdings Ltd and Singularis Holdings Limited v Pricewaterhouse Coopers and concluded that the principle of universality of insolvency for facilitating the orderly winding up of a company’s affairs on a world-wide basis did not apply where the fund itself was not in liquidation. Nor did the provisions relating to international co-operation in Part XVII of the Companies Law apply, as the receivers were not appointed over a separate legal entity.
Chief Justice Smellie applied the common law principles established in Kilderkin v Player, which sets out the tests to establish whether there is a “sufficient connection” between the subject of the receivership and the jurisdiction in which the receiver was appointed being:
- Whether the entity over which receivers were appointed has been made a defendant in the foreign Court;
- Whether the entity was incorporated where the receivers are appointed;
- Whether the Courts of the entity’s country of incorporation would recognise a foreign appointed receiver; and
- Whether the entity carried on business in the jurisdiction of appointment or its central management and control was located there.
In granting the receivers’ application for recognition, the Grand Court ruled that:
- The Grand Court has a common law jurisdiction to assist in the context of receivership proceedings under the supervision of the Bermuda Court.
- The scope of the jurisdiction is subject to the local law and public policy of the Cayman Islands, such that it can only act within the limits of its statutory and common law powers.
- There exists a common law power to order disclosure orders pursuant to a legal principle such as modified universalism, but that principle does not apply in this case.
- The exercise of the power is necessary and the receivers are not asking for any powers that could not be exercised in Bermuda.