Knowledge

In the Cayman Islands ("Cayman"), the courts look at previously decided cases to inform their decision-making on the common law of Cayman, including cases decided by English courts. In two recently decided Cayman cases, the question has arisen as to whether an English court decision on a particular point of law, later overridden by legislation in England, should be followed in Cayman, where no equivalent legislation exists in Cayman that negates the decision.

The two recent Cayman cases appear to have inconsistent outcomes, despite agreeing on the principle that where English (but not Cayman) legislation has overridden an English decision on a particular point of law, that decision should still be followed by Cayman courts.  Where the decision is that of the English Court of Appeal, it remains highly persuasive, and Cayman courts will only depart from the decision where there is a good reason to do so.

Despite the inconsistencies, we consider that the two recent decisions can be reconciled and, in fact, help to advance certainty on the Cayman courts' approach to following English appellate court decisions.

HQP/Direct Lending

On 7 November 2025, the Cayman Court of Appeal ("CICA") handed down its judgment in the joint proceedings of In the matter of HQP Corporation Ltd (in Official Liquidation) and In the matter of Direct Lending Income Feeder Fund Ltd (in Official Liquidation) [2025] CICA (Civ) 19 ("HQP/Direct Lending"). The proceedings concerned whether shareholders of a company that was in liquidation, who claimed they were misled into subscribing for their shares, could make claims for damages in the Cayman liquidation, and if so, what priority those claims should have relative to other creditor and redemption claims.

The case required the CICA to determine whether the decision in the English case of Houldsworth v City of Glasgow Bank (1880) 5 App Cas 317 ("Houldsworth") (a case which established a common law rule that a shareholder who had been induced by misrepresentation into subscribing for shares could not claim damages in the company's liquidation) was a bar on such claims, even though the UK Parliament had legislated to disapply that common law rule.

The CICA held that:

• the bar on shareholders claiming damages in a company's liquidation arising from Houldsworth remains good law and should be followed in Cayman; and
• the Houldsworth principle prevents any person claiming damages for misrepresentations inducing subscription for shares from proving in a liquidation in respect of that claim until all non-member creditors have been paid or provided for, but permits them to prove thereafter.

The CICA emphasised the persuasive weight of English appellate decisions on Cayman courts and confirmed that a compelling reason is required for Cayman to abandon the underlying common law principle decided by an English case, even where English legislation has negated the decision.

The CICA noted that the Houldsworth rule was abrogated in England by statute in 1989, but that this was driven by a need to avoid potential inconsistencies arising from new legislation, rather than by a settled conclusion that the rule was wrong. The enactment of a statute in England, abolishing the rule in Houldsworth, was not, in itself, a compelling reason for the CICA to depart from the common law rule, particularly where the legislation was driven by a desire to avoid inconsistencies in the law, rather than a substantive policy rationale.

IGCF proceedings

Before HQP/Direct Lending was decided, the CICA handed down its decision in the case of Al Jomaih Power Limited and Denham Investment Ltd v IGCF SPV 21 Ltd [2025] CICA (Civ) 001 (the "IGCF proceedings"), in which Bedell Cristin acted for the Appellants. The CICA considered whether the English common law principle of Henry v Geoprosco International Ltd [1976] QB 726 ("Geoprosco") (where the English Court of Appeal held that a party taking steps in foreign proceedings beyond merely contesting jurisdiction is deemed to have voluntarily submitted to the foreign court's jurisdiction) should be applied in Cayman, where English legislation negated the decision but Cayman legislation has not. IGCF SPV 21 Ltd ("SPV 21") sought an anti-suit injunction and a stay of proceedings in Pakistan, arguing that the Appellants breached an exclusive jurisdiction clause in a shareholders' agreement. The Appellants appealed the Cayman Grand Court decision to grant the anti-suit injunction and argued that SPV 21 submitted to the jurisdiction of Pakistan by seeking a stay of those proceedings.

The CICA considered the question of whether Geoprosco represents Cayman law and therefore whether SPV 21 submitted to the jurisdiction of Pakistan. In reaching its conclusion that Geoprosco should not be followed in Cayman, the CICA emphasised (inter alia) that:

• the English Court of Appeal decisions are "highly persuasive" and "respected", however they are not binding on Cayman courts. Cayman courts will depart where there is a good reason to do so;
• while "Geoprosco had not been overruled" by another court decision in England, it had also not "been expressly approved by a higher court in England";
• the introduction of legislation superseding Geoprosco "supported the view that the policy underlying the reasoning in Geoprosco was unsound";
• the English Court of Appeal itself in Geoprosco "recognised the tautology of its reasoning but felt constrained to follow a settled…line of authority";
• Geoprosco has been widely criticised "by judges, textbook writers and academics"; and
• it is "open to the Grand Court" to consider whether Geoprosco "had been doubted…by having been nullified or superseded by legislation in England, or otherwise".

Applying the above reasoning, the CICA rejected the application in Cayman of the rule in Geoprosco, concluding that an application for a foreign stay of proceedings does not, by that fact alone, amount to submission to the foreign jurisdiction. SPV 21's anti-suit injunction was therefore upheld.

The CICA decision in the IGCF proceedings was appealed to the Judicial Committee of the Privy Council (the "JCPC"), which handed down its judgment on 24 November 2025 (IGCF SPV 21 Limited v AL Jomaih Power Limited and another [2025] UKPC 54, the "JCPC Appeal"). The JCPC upheld the CICA's decision in rejecting the application of Geoprosco in Cayman and reiterated the general principles discussed in the Grand Court decision of In the matter of HQP Corporation Limited (in Official Liquidation) [2023] (2) CILR 203 ("HQP"), which in turn are set out in the HQP/Direct Lending decision, that Cayman courts should follow English Court of Appeal decisions (even where English legislation had negated the decision) but can decline to follow them where there is a good reason to do so. The JCPC referenced the Grand Court decision in HQP in which HHJ Doyle had reviewed the existing court decisions in which a good reason had been found to exist and considered that a good reason existed in this case because Geoprosco:

• has been negated by English legislation;
• is "much criticised" and "affront[s] common sense"; and
• is "obsolete" and has "ceased to be authoritative in England and Wales".

The JCPC concluded that: "Geoprosco has rightly been reversed in England and Wales and, by statute or case law, it has been reversed or not followed in other common law jurisdictions. It should form no part of Cayman law".

Conclusion

Both Cayman decisions affirm the principle that English common law appellate decisions remain highly persuasive in Cayman, and that departure requires a good reason. The JCPC Appeal establishes that in some circumstances, a good reason can exist where the English legislation has negated the common law established by the decision.

Although the JCPC did not expressly endorse the reasoning in HQP/Direct Lending (that the introduction of English legislation which negates an English appellate decision does not constitute a good reason for Cayman to depart from the decision if the legislation was introduced for administrative rather than policy reasons) it had the benefit of considering HQP/Direct Lending, which was handed down before its judgment. It is therefore reasonable to infer that the JCPC was content with the CICA’s approach. Accordingly, Cayman courts should apply an additional layer to the "good reason" test by examining the purpose behind the legislation.

The ultimate takeaway is that Cayman courts must follow English appeal court decisions unless there is good reason not to. One good reason may be where English legislation has negated the English court decision. However, based on the CICA decision in HQP/Direct Lending, Cayman courts should consider why the English Legislation was introduced, to determine if the enactment of the legislation alone is a "good reason". If legislation in England is being introduced to abolish outdated, unsound or criticised English common law, a good reason for Cayman to depart from the common law will likely exist.

The fact that these issues have reached the CICA and the JCPC on appeal within the past two years underscores their practical importance and highlights how they may arise in far more situations than one might expect.

If you have any questions relating to this briefing please contact one of the authors.