Historically, the Cayman Islands has addressed this through the allocation of liability for the costs of legal proceedings. In this regard, it is like many common law jurisdictions, with the notable exception (for most purposes) of the United States. But when it comes to the right of creditors of insolvent Cayman companies to challenge decisions by the appointed liquidators, a recent amendment to the Companies Winding Up Rules changes all that. The amendment appears to be a gift to those claiming to be creditors, but may actually leave genuine creditors worse off than before. In this article, the authors call for this change to be reconsidered, rather than leaving true creditors of an insolvent estate vulnerable to the unmeritorious claims of false creditors.

Costs follow the event

The Cayman Islands follows the England and Wales approach that the loser in litigation pays – or “costs follow the event.” Subject to the principles governing the nature and extent of costs that may be claimed, this means that the party that has (by definition, wrongly) forced the other side to court, pays the other side’s costs of the action in addition to its own.

Those costs recoveries are important. In jurisdictions where plaintiffs are able to bring claims with impunity, this can be combined with “no-win no-fee” arrangements to make speculative claims more common and result in settlements that are leveraged as a result of nuisance value rather than merit. For a plaintiff, the risk of having to bear the other side’s costs of being unsuccessful is a powerful deterrent to bringing claims that do not have real merit. In a system where the costs of pursuing legitimate rights are recovered, access to justice is preserved.

Read More

Type

Insight

Locations

Cayman Islands

Share
Twitter LinkedIn Email Save as PDF
More Publications
13 Sep 2021 |

Loans & Secured Financing in the Cayman Islands 2021

First published in Getting the Deal Through 2021. This practice guide provides topical analysis of L...

Contributors: Alexandra Simpson
21 May 2021 |

2021 - A Jekyll and Hyde Year for SPACs

In this article we offer our views on why this has happened and look ahead to the future for SPACs a...

Contributors: Dean Bennett
13 May 2021 |

The 2021 Cayman Islands Real Estate Guide

The Real Estate 2021 guide provides the latest legal information on the impact of disruptive technol...

Contributors: Norman Klein
13 May 2021 |

British Virgin Islands: Mergers & Acquisitions Comparative Guide

This country-specific Q&A provides an overview to Mergers & Acquisitions laws and regulati...

Contributors: Brittany Cummings
13 May 2021 |

Cayman Islands: Mergers & Acquisitions Comparative Guide

This country-specific Q&A provides an overview to Mergers & Acquisitions laws and regulati...

Contributors: Dean Bennett, Vance Power
15 Apr 2021 |

6 months on: Temporary relocation and residency by investment continues to increase in popularity

Six months on from the new digital nomad programmes, did the predicted upward trend reflect the real...

25 Mar 2021 |

Full Steam Ahead at the Jersey Ships Registry

Against a backdrop of uncertainty surrounding Brexit and the difficulties created by the global pand...

24 Mar 2021 |

Economic Substance update Q1 2021

Economic Substance update Q1 2021

12 Mar 2021 |

Material adverse change clauses in light of the Covid-19 pandemic

Experts from each of our key global offices provide jurisdiction specific advice and answer question...