The fall and rise of the clawback claim
under Cayman Islands law
Published in Global Restructuring Review, April 2017
Appleby partner Jeremy Walton, senior associate Jeremy Snead and associate Andrew Jackson discuss the future of voidable preference claims under Cayman Islands law and the implications for custodians, in light of a recent judgment from the Cayman Islands Court of Appeal.
Until recently, voidable preference claims had not met with much success in the Cayman Islands, but following the November 2016 judgment in Weavering Macro Fixed Income Fund Ltd v Skandinaviska Enskilda Banken, liquidators may have a renewed interest in pursuing these claims. This trend will cause concerns for custodians who have received and long since paid-on redemption proceeds from investment funds that become insolvent.
The voidable preference claim, as it is construed under Cayman Islands law, enables liquidators to have the court invalidate a payment that was made to a creditor within the six months preceding the commencement of a liquidation, where they can establish that the payment was made while the company was unable to pay its debts as they fell due (ie, that it was cash flow insolvent) and with the dominant intention of preferring the paid creditor over other creditors.