The Plaintiffs are venture capital entities that invested significant funds of about US$31.5 million pursuant to a subscription agreement signed among the Plaintiffs, the Defendant, Artem Ibragimov and a Cayman Islands company XanGroup holdings Corp (XanGroup). The Plaintiffs allege that their investment was induced by the Defendant through fraudulent misrepresentation – namely, they were led to believe that the investment funds would be used to further XanGroup’s business when in fact the funds were diverted from XanGroup’s bank account to an account in the Defendant’s name for his personal benefit.

Holding dual Dutch and Hong Kong citizenship, the Defendant is an individual with worldwide connections who seems to also have residency and employment rights in Singapore. Further, the Defendant provided an address in China and stayed in Vietnam during the periods in question.

Among other questionable behaviours, the Defendant purportedly signed a false share repurchase agreement on behalf of XanGroup to disguise the payment transfer from XanGroup’s account to his own.

The Plaintiffs, having obtained a worldwide freezing order against the Defendant in Singapore, now brought suit in the Cayman Court seeking a freezing injunction against the Defendant’s worldwide assets and a proprietary injunction against specific assets.

At the outset, Justice Doyle noted that a worldwide freezing order is “a very big step to take” and the court must “scrutinise the basis for such an injunction with the utmost care”. The central question in granting such an injunction is a requirement that there be a real risk of dissipation of assets, ie, that absent an injunction, the defendant will deal with such assets with the result of leaving the judgment unsatisfied.

The legal test for a freezing order is set out in the recent decision of the Court of Appeal of England and Wales in Dos Santos v Unitel SA, which is followed by Cayman courts. Specifically, the applicant must show:

• A good arguable case on the merits (which in effect is equivalent to a “serious issue to be tried”, and does not necessarily have to have a better than 50% chance of success);
• A real risk of dissipation of assets (defined as “something which is more than fanciful”, with no requirement to show a high probability thereof or that dissipation is more likely than not); and
• That it would be just and convenient to grant the order.

The plaintiff has the burden of satisfying the threshold of a real risk of dissipation, and in making this determination, the court evaluates the totality of the evidence, looking at the relevant factors cumulatively.

As regards proprietary injunctions, it is well within the court’s power to grant such injunctions, provided that there is a serious issue to be tried (meaning that the facts alleged, if proven, would afford the claimant a proprietary remedy), the balance of convenience comes down in favour of granting the proprietary injunctive relief, and it is just and convenient to do so.

Noting that the application for freezing injunctions was dealt with at an interlocutory stage without complete discovery and any cross-examination of witnesses, the Court was satisfied that all three limbs of the test for freezing injunctions were met.

In particular, the totality of the circumstances in this case shows that there was a real risk, judged objectively, that a future judgment would not be satisfied because of dissipation of assets. In so ruling, Justice Doyle had regard of the following factors:

• The Defendant’s sophistication, his worldwide connections, and ability and ease of transferring monies in the crypto currency world;
• The Defendant appeared to be content to have authored a false document and signed false declarations;
• The Defendant’s disappearance and loss of contact with the Plaintiffs;
• The Singapore court’s grant of a worldwide freezing order, which indicates that the court there found a real risk of dissipation;
• The terms of the Defendant’s late undertaking were insufficient to assuage the Court’s serious concerns of the risk of dissipation;
• The delay raised by the Defendant had been adequately explained by the Plaintiffs.

Similarly, Justice Doyle agreed with the Plaintiffs that the test for a proprietary injunction had been met and a court order was needed to preserve the status quo.

The court therefore granted a worldwide freezing injunction up to a value of US$35 million, along with a proprietary injunction against the Defendant’s specific assets.

This judgment will serve as valuable precedent in the Cayman Islands in future cases involving freezing injunction applications, especially as regards the circumstances that a court should take into consideration when deciding whether there is a real risk of dissipation of assets.