Financial Crime World

Cayman Islands Court of Appeal Upholds Fraud Judgment Against Maltese and Canadian Defendants

The Cayman Islands Court of Appeal (CICA) has upheld a judgment against two defendants, D3 from Malta and D6 from Canada, in a financial fraud case brought by Raiffeisen Bank International AG (RBI).

Background

  • The case involved allegations of unlawful means conspiracy and breaches of the Cayman Fraudulent Dispositions Act (FDA) by the defendants.
  • Judge Parker made orders against the defendants in May 2020, which were denied leave to appeal.

Key Points from the Judgment

Moses JA, delivering the sole reasonsed judgment, determined:

  1. The FDA allows a court to treat a series of transactions as a single disposition when they have been planned in advance.
  2. Once intent to defraud and undervalue have been established for an initial transaction, subsequent transactions within the same sequence do not require further proof under the FDA, except in cases where the third party has not acted in bad faith.
  3. D3’s argument that the FDA applied only to the initial transfer and subsequent transactions were a matter for Common Law was not accepted.
  4. The FDA provides more comprehensive protection against fraudulent dispositions compared to the UK case Skandinaviska v. Conway.

Other Important Aspects Covered in the Judgment

The judgment provided guidance on various aspects of the tort of unlawful means conspiracy, specifically:

  • What is necessary to demonstrate that SPV-defendants joined and participated in the conspiracy
  • When causative loss can be shown to have arisen for such defendants
  • The ‘directing mind and will’ test for attributing knowledge to corporate defendants

RBI was represented by Tim Penny KC, Jamie Holmes, and Caspar Bartscherer from Ogier and Mishcon de Reya. D3 and D6 were represented by John Wardell KC and Jia Wei Lee from Mourant and LK Law.

Significance of the Decision

Despite being made to the strike-out standard, the CICA’s judgment offers significant insight into the proper application of the FDA, particularly in the context of unlawful means conspiracy. The case is now considered one of the leading cases on the application of the FDA.

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