A Company v A Funder
In A Company v A Funder decided in late 2017, the Grand Court of the Cayman Islands approved third party funding of a non-insolvency related commercial litigation matter. The Plaintiff sought to have recognised and enforce a New York arbitration award and related judgments, and pre-emptorily sought approval of the funding agreement it had entered into, to determine whether it would contravene champerty and be unenforceable.
Mr Justice Segal decided that it was not unenforceable in Cayman as a matter of public policy. Although not binding on future courts because this was an ex parte application, this is a helpful development in the expansion of funding in Cayman outside the insolvency context.
While previous courts had suggested that statutory reform might be the only way to introduce funding in Cayman, the Chief Justice had also indicated that the Court would develop the common law so as to permit exceptions to the general prohibition, where that was necessary in the interests of justice. Segal J considered the Cayman Islands’ authorities and the English and commonwealth decisions and decided to follow the Chief Justice’s lead to develop the common law.
The Cayman Islands Law Reform Commission (LRC) drafted a Private Funding of Legal Services Bill in December 2015, also discussing CFAs, which is still waiting approval.
Contingency fee agreements
Contingency fee agreements are void and unenforceable for litigation conducted in Cayman, however contingency agreements governed by Cayman Islands law are enforceable when performed in a foreign country. In ICP Strategic Credit Income Fund Ltd  the Grand Court of the Cayman Islands approved a CFA for a New York law firm to bring proceedings in the US courts on behalf of the Joint Official Liquidators of two Cayman domiciled funds against Barclays Bank Plc and DLA Piper LLP. Therefore, as they are permissible under New York law, it was open to the court to sanction the agreement, which it did.
In the context of liquidation proceedings, when a liquidator wishes to enter into a CFA with a foreign law firm, the liquidator should therefore ensure that:
- the proposed agreement complies with the requirements of the Cayman Islands’ Companies Winding Up Rules;
2. the performance of the agreement is permitted by the law and professional conduct rules of the country in which the litigation is to be conducted; and
3. he does not fetter his fiduciary power to control the litigation.