Cayman Islands Grand court recognises appointment of US receiver over Cayman company: Seiden v Link Motion Inc
By reference to a line of common law authority concerning its inherent power to recognise receivers appointed by foreign courts, including Schemmer v Property Resources Ltd, Kilderkin v Player and In re Silk Road, the Grand Court has recently granted recognition to a temporary receiver appointed in the US over a Cayman Islands incorporated company.
The Court’s jurisdiction to recognise overseas appointed receivers may be exercised where the court is satisfied there is a sufficient connection between the defendant and the jurisdiction in which the receiver was appointed.
There are four tests, not all of which have to be answered affirmatively, for establishing whether a sufficient connection exists:
- Has the company subject to the receivership been made a defendant to the action in the foreign court?
- Was the company incorporated in the country where the receiver has been appointed?
- Would the courts of the company of incorporation recognise a foreign appointed receiver?
- Has the company carried on business in the jurisdiction of the appointment or is the seat of its central management located there?
In addition, following the Chief Justice’s decision in In re Silk Road, the court should also consider:
- The reasons or necessity for seeking recognition.
- Whether the receiver is seeking to do something which he/she could not do in the appointing jurisdiction.
- Whether the receiver seeks powers that would not be granted under Cayman law.
- Whether recognition would raise public policy concerns.
On the facts, the court held that whilst the fact that the company was a Caymanian company “would ordinarily weigh against the recognition of a foreign receivership order”, it was satisfied that a sufficient connection existed, on the basis that the company had submitted to the jurisdiction of the US courts. The learned Judge was also satisfied that the additional Silk Road requirements had been met.
Under Section 11A of the Grand Court Law (2015 revision), the Grand Court has the power to appoint a receiver or grant other interim relief in relation to proceedings which have been or are to be commenced in a court outside of the Cayman Islands, or which are capable of giving rise to a judgment which may be enforced in the Islands. The procedure for applying for the appointment of a receiver, which includes a discretionary power on the part of the court to order security to be provided by the receiver in order to cover any liability for his acts and omissions, is governed by the Grand Court Rules. It is noteworthy that the Section 11A regime was not used in this case and that, instead, the receiver chose to seek recognition of his US appointment.