Judgment on Declaratory Judgment in the Cayman Islands Liquidation Proceedings



A recent decision by Judge Kawaley sitting in the Grand Court of the Cayman Islands (the “Grand Court”) provided helpful clarification on what he described as a “legally significant” and “important point of jurisdiction”. The issue was one of the jurisdiction of the Grand Court to grant declaratory relief in formal winding-up proceedings in circumstances where there is no express provision in the Companies Act (as amended) (the “ Companies Act”) or the Company Winding-Up Rules (as amended) (the “CWR”) giving jurisdiction to the Great Court to make representations in court-ordered winding-up proceedings. Kawaley J held that he had jurisdiction to do so, whether under the Grand Court Act, implicitly under the jurisdiction of the Companies Act to control the exercise of a liquidator’s powers, pursuant to its inherent jurisdiction to fill a gap in the existing framework proceedings, or to enforce its own prior order in the liquidation proceedings.


The Cayman Islands parent company (the “Company”) has incorporated subsidiaries around the world. It was initially placed in provisional liquidation in order to effect a restructuring which then continued on an insolvent basis when the Company was placed in compulsory liquidation and joint official liquidators (“JOL”) were appointed. This decision was made because the JOL required that its powers in official liquidation be formally affirmed by the Grand Court in order to obtain regulatory approval in a jurisdiction unfamiliar with Cayman Islands insolvency law to put implement a commercial agreement related to a transfer of the assets of the company.

The Ordinance appointing the JOLs (the “JOL Ordinance”) provided a broad sanction allowing the JOLs to exercise all powers available under Schedule 3, Part I of the Companies Act without further sanction from the Great Court. However, for the sake of good order, the JOLs filed a motion with the Grand Court in December 2021 (the “Sanction Application”) requesting that they be granted a sanction under Rule 110(2)(a) of the Companies Act and paragraph 8 of Schedule 3, Part I to execute a share purchase agreement for and on behalf of the Company in November 2021 (the “SPA”) in order to dispose of the shares it held in one of its subsidiaries (the “Target”). The Court duly sanctioned the execution of the SPA by the Company in December 2021 and authorized “the taking of such additional actions and the execution of such additional documents by the JOLs which are necessary or desirable to discharge any obligation therein” (the “SPA Penalty Order”).

One of the commercial aspects of the sale of the shares of the Target Company was the acquisition by the Company of the shares held by the Target Company in a foreign company (respectively the “Foreign Shares” and the “Foreign Company”) in accordance with the terms of the SPA. Given the broad clearance granted to the JOLs by the SPA Sanction Order, the acquisition of the Foreign Shares by the Company had already been approved by the Grand Court. However, confirmation of the authority of the JOLs to authorize the acquisition of the foreign shares by the company was a regulatory requirement of the jurisdiction of the foreign company.

Accordingly, the JOL filed an application with the Court for, among other things, a declaration that it was authorized to acquire the foreign shares “pursuant to the terms of a [share] purchase agreement… to be concluded by the Company and [the Target] …and to take such additional steps and execution of such additional documents by the JOL as are necessary or desirable to effect the transfer of the Foreign Shares” (the “Declaration Request”).

The law

The Grand Court noted that the legal content of the declarations requested in the request for declaration was entirely uncontroversial under Cayman Islands law. Indeed, the Grand Court accepted counsel’s arguments that the JOLs clearly had the authority to cause the company to acquire the foreign shares under the SPA Approval Order and recognized that the need of the statement was to respond to a quirk in the foreign regulatory landscape.

The Court took note of counsel’s argument that there was no express provision giving the Court jurisdiction to grant declaratory relief in a winding-up context in the CWR or the Civil Rules of the Court. Grand Court (“GCR”) (and that Order 15, Rule 16 of the RME did not apply to winding-up proceedings). The Court then referred to direct judicial support in HSH Cayman I GP Limited et al [2010 (1) CILR 114] that the inherent jurisdiction of the Court may properly be invoked to fill the gaps in the CWR rather than overriding its express provisions.

With respect to the power to grant declaratory relief generally, the Court referred to Insurco Intl Ltd v Gowan Company [1994 CILR 210] where it was noted that such a power is apparently as broad as that of the English courts. The Court held that, although these observations were not made in a liquidation context, it was clear that they would apply with equal force in such a scenario – primarily because such relief was not inconsistent with the Companies Act or CWR regime.

Further, the Court went on to note that it has express general statutory power to grant declaratory relief under section 11(2) of the Grand Court Act (2015 Revision) (the “Grand Court Act”) which, by its wording, is not limited to a particular class of proceedings and has therefore been found to apply to liquidation proceedings.

In arriving at his decision, Judge Kawaley also referred to section 110(3) of the Companies Act which provides that the exercise by the liquidators of the powers conferred by Part V is subject to the control of the Court, noting that it is common law that any statutory provision should be interpreted, so far as possible, in a manner that is consistent not only with the purpose of the statute as a whole, but also determined by reference to the broader legislative context. In support of this proposition, Kawaley J has observed that although the parameters of the Grand Court’s jurisdiction to oversee official liquidators are cast in somewhat compressed terms, its scope can be most clearly discerned by the powers expressly conferred on hear requests from voluntary liquidators. In this regard, Kawaley J referred to the jurisdiction of the Grand Court under section 129(2) of the Companies Act, under which the Grand Court may, when called upon, “ decide any question” relating to a voluntary liquidation. Kawaley J said it would lead to absurd results if section 129(2) of the Companies Act were interpreted as conferring broader jurisdiction to grant relief to voluntary liquidators seeking ad hoc assistance from the Court than that that it could grant to official liquidators appointed specifically to benefit from a permanent control of the Great Court.

The Grand Court found that the declarations requested in the request for declaration fell within the broad ambit of section 11(2) of the Grand Court Act, which empowers the Court “to make declarations of law binding in any subject”. If this analysis were incorrect, in the alternative, Kawaley J would in any event have granted the request for declaration under the jurisdiction of the Court to review the exercise of the powers of the JOLs under Article 110 (3) of the Companies Act. Alternatively, the Court was held to have inherent jurisdiction to grant the declarations under Section 11(1) of the Grand Court Act to fill a gap in Caymanian law or for the purpose of make its own order (i.e. by implementing the SPA Sanction Order).


The request for declaration was based on the principle that the Grand Court must have jurisdiction to grant declaratory relief in formal windings under the supervision of the Grand Court despite the absence of express power in the Companies Act or the CWR. His Lordship’s attention has been drawn to Section 11(2) of the Grand Court Act, which Judge Kawaley also helpfully clarified and which applies to liquidation proceedings. The request for declaration was an unusual request in that it sought the indulgence of the Grand Court to confirm the authority of the JOLs to do something they were already authorized to do and as such it does not it was not – by definition – a request for a sanction. In doing so, Kawaley J maintained the jurisdiction’s reputation for pragmatism and provided office holders with practical legal assistance (within the limits of Cayman Islands law) to support the effective liquidation of an international group of companies.


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