A recent decision by the Third Circuit in the Nortel Group bankruptcy reinforces the worldwide reach of the automatic stay and the narrow scope of the police power exception under section 362(b)(4) of the Bankruptcy Code.  In Nortel Networks, Inc. v. Trustee of Nortel Networks U.K. Pension Plan, No. 11-1895 (3d Cir. Dec. 29, 2011), the Third Circuit held that the automatic stay barred U.K. pension claimants from participating in U.K. proceedings meant to determine the debtors’ liability for their affiliate’s pension funding shortfalls.

What role does business common sense play in the interpretation of commercial contracts? This issue was recently addressed by the Supreme Court of the United Kingdom in Rainy Sky S.A. v. Kookmin Bank. The answer: “where a term of a contract is open to more than one interpretation, it is generally appropriate to adopt the interpretation which is most consistent with business common sense”. Since there is currently some uncertainty in Canada on the point, Rainy Sky is an important case to consider.

Decision

2007 BCSC 267 (B.C. Supreme Court, Feb. 28, 2007)

Trustee in bankruptcy must affirm swap contracts to take advantage of them but is not personally liable if the contracts end up being out of the money - While contract gave buyer a termination right on bankruptcy, it could choose not to exercise this option and leave it to the trustee to decide whether or not to affirm the swap and take the risk that the estate will end up out of the money

Adopting the analysis of the United Kingdom Jurisdictional Task Force ('UKJT") on the proprietary status of crypto currencies, a recent decision of the English High Court, AA v Persons Unknown,^[1] has found that crypto assets such as Bitcoin are "property" and therefore capable of being the subject of a proprietary injunction or freezing order.

Introduction

Each year, legal disputes over assets worth billions of dollars worldwide are resolved in courtrooms and boardrooms in the Cayman Islands. The jurisdiction has a reputation for dealing with complex financial services and commercial litigation based on:

A recent decision of the Privy Council dismissing the claim of liquidators of an insolvent hedge fund to claw back redemption payments made to an investor leaves lingering uncertainties for investors generally.

Claw backs post 2008 crisis

In three recent decisions the courts have examined the limits on a liquidator’s ability to obtain court orders compelling third parties to provide documents held by them, as well as deciding on the recoverability of costs incurred by third parties complying with production orders that are made against them.

Key Points

• A trust can be created and enforceable in respect of assets sited in a jurisdiction that does not recognise the concept of a trust
• In circumstances where the owner of a beneficial right goes into liquidation, the transfer of legal rights held by a third party to a bonafide purchaser for value is not a disposition within the meaning of s127.

The Facts

The recent judgment of the Cayman Islands Court of Appeal ("CICA") in Asia Pacific Limited v ARC Capital LLC¹ explains the approach that the Court will take when considering an application to strike-out a contributory's just and equitable winding up petition which is based on an offer to purchase the petitioner's shares at fair value. 

A recent decision of the Grand Court, Primeo Fund (in official liquidation) v Herald Fund SPC (in official liquidation)¹, is another win for investor certainty in the Cayman Islands.  In previous updates, we have written about Cayman Islands and BVI decisions which illustrate the various challenges associated with bringing clawback actions in the Cayman Islands against innocent arm's length mutual fund investors who have validly redeemed their shares.²  That message has been further reinforced, on different grounds, by Jones J in P