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Merkanti Holding PLC and 1128349 BC Ltd v Raiffeisen Bank International AG

Wednesday 16 March 2022

  1. On 16 March 2022 the Cayman Islands’ Court of Appeal (“CICA”) handed down judgment following a one-day rolled up hearing in November 2021 (as to permission and the substance of the appeal), refusing leave for two of the defendants to appeal orders made by Parker J in May 2020 granting leave that they be served out of the jurisdiction (“D3” in Malta, and “D6” in Canada). The issues before the CICA all went to whether the Judge was right to find that the plaintiff Raiffeisen Bank International AG (“RBI”) had established a serious issue to be tried against each of D3 and D6: (a) in the tort of unlawful means conspiracy and/or (b) under the Cayman Fraudulent Dispositions Act (1996 Revision) (“FDA”) (known until 3 December 2020 as the ‘Fraudulent Dispositions Law’ or ‘FDL’).
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  2. The sole reasoned judgment is given by Moses JA, with whom Birt and Morrison JJA agreed at ¶73-4. A related appeal concerning the two ‘anchor’ defendants (“D1” and “D5”) is summarised here, to which Moses JA cross-refers.
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  3. Although only decided to the strike out standard (¶¶19, 48) the judgment provides helpful guidance (as follows) in a number of respects as to the proper scope of the FDA, on which it is now one of if not the leading case(s):
    1. First, when applying the FDA (like the English Insolvency Act 1986, s423) it is open to the Court to treat a series or sequence of transactions as a single “disposition”, especially when those have been planned in advance (¶8-19).
    2. Secondly, that once (i) intent to defraud creditor ‘X’ (of debtor ‘A’) and (ii) undervalue have been established as to an initial transaction ‘A’-‘B’, there is no need to establish anything further in order to set aside subsequent transactions ‘B’-‘C’ or ‘C’-‘D’ etc under the FDA, save that s5 of the FDA may afford some protection to (e.g.) C, where (again e.g.) C has not acted in bad faith (¶32-49). The CICA held both parties had reasonable arguments on this point (¶48), D3 having contended the FDA extended only to the initial transfer A-B, with the position thereafter being a matter for Common Law, and seeking to draw an analogy to Skandinaviska v. Conway [2019] UKPC 36.
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  4. Beyond the above, there is limited guidance in the Cayman caselaw as to the proper application of this potentially important piece of legislation. To the authors’ knowledge:  (a) the CICA decision mentioned above as to D1 and D5 considers some further points (see at ¶¶60, 112-3, 167-184 and 199-204), in particular as to extent of the relief that can be granted per FDA, s6, albeit similarly only to good arguable case standard; (b) Parker J also considered some further points at first instance against D1 and D5 (and ‘D4’) (see at ¶¶108-115, 120-121, 160, 172-3 and 178-180) as summarised here, again to interlocutory standards; (c) in Johnson v. Cook-Bodden [1999 CILR 399] an FDA claim succeeded at trial before Kellock, Ag. J, and (d) in re Parmalat [2004-05 CILR 22], Henderson J provided some guidance as to the FDA in the context of deciding other issues.
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  5. The judgment of Moses JA also provides helpful guidance as to a number of more familiar aspects of the tort of unlawful means conspiracy, in circumstances in which it is alleged that assets were stripped out of one company by the primary actors and then transferred on, at least in part, to other SPV-corporate defendants within the same group. The case provides a helpful illustration in this respect of (a) what it is and is not necessary to establish to demonstrate that such SPV-defendants joined and/or participated in the conspiracy (¶¶20-23, 55-63); (b) whether and the point in time from which causative loss could be shown to have arisen concerning such defendants (¶50-60); and (c) the ‘directing mind and will’ test for the attribution of knowledge to such defendants, in effect distinguishing the English case of Tsareva v. Ananyev [2019] EWHC 2414 (Comm) (¶24-31).
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  6. Moses JA also repeated and relied upon the well-established guidance that Courts will be reluctant to make findings that in effect strike out what is alleged to be a complex fraud prior to a full trial and cross-examination (¶64-70).

Tim Penny QC, Jamie Holmes and Caspar Bartscherer acted with Ogier and Mishcon de Reya for the respondent RBI.  John Wardell QC and Jia Wei Lee acted with Mourant and LK Law for the appellants D3 and D6.

You can download the full judgment here.

 

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