In Vento and Others v Westminster Hope & Turnberry, Ltd (unreported, 25 November 2015) The Honourable Anthony Smellie, C.J., sitting in the Financial Services Division of the Grand Court clarified the grounds on which judgment creditors may seek to use charging orders to enforce judgment debts. Readers will note that typically charging orders are made in respect of immoveable property (eg. Land); Vento will be of particular interest to corporate litigators because the Grand Court endorsed the practical application of the extension of the remedy to shares which is set out in the Cayman Islands Judicature Law (2013 Revision) (the "Law").
The case in question concerned an action to enforce three foreign arbitral awards against Westminster, Hope & Turnberry Ltd, the defendant company. The Plaintiffs were successful in obtaining an order pursuant to the provisions of the Cayman Islands Arbitration Law 2012 and the Foreign Arbitral Awards Enfor cement Law (1997 Revision). The Defendant was a Nevisian company with the assets in the form of shares (the “Shares”) and the proceeds thereto which were held in the Cayman Islands on its behalf by Concord Capital SPC Fund. The Plain- tiffs had previously obtained a Mareva (or freezing) injunction in relation to the Shares and proceeds up to the value of the arbitral awards of US$9.7 Million. The Plaintiffs then applied for a charging order over the same .
How charging orders are made and the question for the Court to determine
An application for a charging order is made in two stages. Normally an applicant applies ex parte (or in the ab- sence of the defendant) to the Court for a charging order nisi (or initial order). A return date is then set for all parties to be heard on whether the charging order should be made absolute (or final). In the instant case, the Plaintiff had been successful in obtaining an order nisi and it fell to the Court to decide whether an absolute or- der should be granted. In determining that such an order was appropriate, the Court noted that while the typi- cal applications for charging orders concern immovable property, the class of assets which can properly be the subject of a charging order (set out in paragraph 2 to Third Schedule to the Law) is extensive. They include in- terests held by the debtor beneficially in land, securities such as Cayman Islands government stock, stock of any body incorporated within the Cayman Islands, shares in a mutual fund and funds in Court. “Stock” is defined in paragraph 5(1) to include “shares, debentures, and any securities of the body concerned.” Further the Court noted that paragraph 2(3) provides that the Court may also extend the charge to include any interest or divi- dend payable in respect of the relevant asset.
The factors which the Cayman Court will take into account in considering whether to grant a charging order absolute
The Court referred to paragraph 1(2) of the Third Schedule to the Law which provides that in exercising its dis- cretion as to whether to make a charging order the Court must consider all of the circumstances of the case and, in particular, any evidence before it as to (a) the personal circumstances of the debtor; and (b) whether any other creditor of the debtor would be likely to be unduly prejudiced by the making of the order. The Court held that whilst there does not appear to be any Cayman authority on the applicable principles to be ap- plied in exercising the Court’s discretion, the “classic statement” of Lord Brandon at page 690 in the E nglish au- thority of Roberts Petroleum Ltd v Bernard Kenny (in liquidation)  1 All ER 685 should apply. Lord Bran- don held that:
"In cases where a charging order being made absolute is not precluded by a winding-up order, those principles can, in my view, be summarised as follows:
- The question whether a charging order nisi should be made absolute is one for the discretion of the court.
- The burden of showing cause why a charging order nisi should not be made absolute is on the judgment debtor.
- For the purpose of the exercise of the court’s discretion there is, in general at any rate, no material dif- ference between the making absolute of a charging order nisi on the one hand and a garnishee order nisi on the other.
- In exercising its discretion the court has both the right and the duty to take into account all the circum- stances of any particular case, whether such circumstances arose before or after the making of the order nisi.
- The court should so exercise its discretion as to equity, so far as possible, to all the various parties in- volved, that is to say the judgment creditor, the judgment debtor, and all other unsecured creditors.
- The following combination of circumstances, if proved to the satisfaction of the court, will generally justify the court in exercising its discretion by refusing to make the order absolute:
- the fact that the judgment debtor is insolvent; and
- the fact that a scheme of arrangement has been set on foot by the main body of creditors and has a reasonable prospect of succeeding.
7. In the absence of the combination of the circumstances referred to in (6) above, the court will generally be justified in exercising its discretion by making the order absolute.