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Knowledge

Let's stay together – Cayman and English courts agree on test for a stay of proceedings

26 June 2024

A recent decision of the Cayman Islands Grand Court sets out helpful guidance on what circumstances proceedings can be stayed to allow separate proceedings to run their course – the judgment clarifies and adopts the tests as set out in various cases decided in English courts.

In Abraaj SPV 108 & Limited & another v IGCF SPV 21 Limited (FSD 237 of 2023 (IKJ)) and Shan-e-Abbas Ashary & others v KES Power Limited & others (FSD 262 of 2023 (NSJ)) (Unreported, 14 June 2024), the Cayman Islands Grand Court (the "Grand Court") considered an application by certain of the defendants (the "Applicants") in two sets of proceedings (the "Proceedings") to stay both sets of proceedings pending determination of a winding up petition (the "Petition") presented pursuant to section 92(e) of the Companies Act (2023 Revision), which case is also before the Grand Court. 

It was the Applicants' position that the Proceedings should be stayed by the Grand Court because they would be rendered nugatory if the Petition case was successful.  The Applicants contended that making a stay in the terms sought would represent sensible case management and be in accordance with the overriding objective of efficient case conduct. In advancing this argument, the Applicants relied upon (in particular):

  • the English Court of Appeal decision in Reichhold Norway ASA v Goldman Sachs [2000] 1 WLR 173 ("Reichhold") where Lord Bingham CJ had said that it was necessary to show "very strong reasons [for granting a stay of proceedings properly commenced] and [that] the benefits which were likely to result from doing so clearly outweighed the disadvantages to the Plaintiff"; and
  • the Grand Court decision in Re New Silk Route Advisers LP (FSD 278 of 2021 (DDJ)) (Unreported, 10 February 2022) ("New Silk") where, at [70]-[71], Justice Doyle said: 

    "I should add that active judicial case management has moved on considerably since … Reichhold. It may be that Lord Bingham's 'rare and compelling circumstances' comments in Reichhold need to be read in light of the more modern litigation culture in 2022 which requires more active judicial case management than was in its infancy in 1999 … The law and practice of case management stays has been developing since the 1990s. With much more cross border international litigation in 2022 as compared with 1999 it is inevitable that the circumstances which justify a temporary case management stay in 2022 will not be as rare as the circumstances prevailing in 1999 … each case must of course be decided on its own facts and circumstances … there needs to be a good reason. At the very least the determinations in the foreign court must be considered to be likely to have 'an important effect' on the proceedings in the Cayman Islands, if not actually determinative of them. Moreover, case management stays may be imposed where imposing such would 'better serve the interests of justice.' The Court has a wide discretion which must be exercised cautiously with regard to the relevant facts and applying the relevant principles outlined in the authorities…"

On the basis of Reichhold and New Silk, which had been considered and applied by Justice Parker sitting in the Grand Court in The Port Fund LP et al v Walkers (Dubai) Limited Liability Partnership (FSD 383 of 2021 (RPJ)) (Unreported, 27 June 2022) ("Port Fund") (see [26]-[46]), the Applicants argued that the Grand Court should no longer only order a case management stay in "rare and compelling circumstances" and that the test was now (or, alternatively, was previously) whether the stay would further the ends of justice.  

In a helpful and concise confirmation of the test that the Grand Court will apply when considering an application for an order staying one case in favour of another, Justice Segal held:

  • that it had been "clearly established" that the test to be applied by the Grand Court on case management stays is "whether the stay is, in the relevant circumstances, in the interests of justice";
  • that the Grand Court's discretion to stay proceedings should be exercised "with caution and only for a very good reason (where there are strong reasons)", relying on Justice Doyle's judgment in the Grand Court in Enigma Diagnostics v Boulter (Unreported, 8 February 2022).  Justice Segal noted that it was the "strong reasons" test that had been applied by the Grand Court in Re Nanfong International Investments [2018] (2) CILR 321 and Tianrui (International) Holding Company Limited v China Shanshui Cement [2020] (2) CILR 6 at [141] and that the same point had been made by the English Court of Appeal in Athena Capital Fund v Secretariat of State for the Holy See [2022] EWCA Civ 1051;
  • that there is no separate requirement of "rare and compelling circumstances"; and
  • that the Grand Court had not intended in Port Fund or New Silk to reformulate or lower the threshold to be satisfied in the core test for granting a case management stay, with Justice Segal noting (at [96]): 

    "The Court will be proactive and will not hesitate to order a stay in an appropriate case. But in order to show that the interests of justice are satisfied in denying a party the right to proceed to trial with proceedings properly commenced in this jurisdiction strong reasons must be shown."

The Grand Court dismissed the Applicants' stay application on the basis that they had failed to establish that a stay of the Proceedings pending determination of the Petition was in the interests of justice, in the circumstances.  

It was not discussed, as it was not relevant to the nature of the applications before the Grand Court, so it remains an open question, whether the Grand Court would apply a different threshold for staying a winding up petition to allow other proceedings to advance (i.e., the reverse of what was argued in this instance), given the public policy grounds for petitions to be advanced expeditiously. 

If you have any questions in relation to the matters addressed in this briefing or on any other aspect of Cayman Islands litigation and insolvency law, please contact your usual Bedell Cristin contact or one of the contacts listed.