Court of Appeal clarifies effect of filing a proof of debt in a Cayman liquidation

The Cayman Islands Court of Appeal has clarified that filing a proof of debt in a Cayman liquidation constitutes submission to the jurisdiction of the Cayman court for matters arising within that liquidation, including for fraudulent trading claims under section 147 of the Companies Act.

In its decision in the matter of Air Arabia PJSC v Conway & Others, handed down on 12 May 2026, the Cayman Islands Court of Appeal has delivered an important judgment concerning the consequences for creditors of filing a proof of debt in the liquidation of a Cayman Islands company.  

While the judgment arose from an application for leave to appeal (which was refused), the Court of Appeal endorsed the Grand Court's conclusion that a foreign creditor who submits a proof of debt in a Cayman liquidation will generally be taken to have submitted to the jurisdiction of the Cayman court for matters arising within that liquidation. Cayman liquidators may therefore serve those defendants outside of the jurisdiction without the need to apply for leave.

Fraudulent trading claims under section 147 of the Cayman Companies Act

The decision arises from the liquidation of Abraaj Holdings, where the joint official liquidators brought a claim against Air Arabia PJSC (Air Arabia) for what is said to be at least US$700 million under section 147 of the Companies Act. The Companies Act provides that:

(1) If in the course of the winding up of a company it appears that any business of the company has been carried on with intent to defraud creditors of the company or creditors of any other person or for any fraudulent purpose the liquidator may apply to the Court for a declaration under this section.  

(2) The Court may declare that any persons who were knowingly parties to the carrying on of the business in the manner mentioned in subsection (1) are liable to make such contributions, if any, to the company’s assets as the Court thinks proper.

The liquidators served the proceedings on Air Arabia using the address listed on the proof of debt it filed in the Abraaj Holdings' liquidation. Air Arabia subsequently challenged the Cayman Islands Court's jurisdiction, arguing that filing a proof of debt did not constitute submission for the purposes of a fraudulent trading claim under section 147.

Submission to jurisdiction by filing a proof of debt

At first instance, Justice Asif held that by filing two proofs of debt in the liquidation of the company:  

1. Air Arabia submitted to the Court’s personal jurisdiction

2. the liquidators did not require leave to serve proceedings out of the jurisdiction, and

3. claims under section 147 of the Companies Act form part of the insolvency process and could properly be pursued against the creditor on that basis 

Air Arabia sought leave to appeal on a number of grounds, including on the basis that a distinction should be drawn between sections 145 and 146 (avoidance provisions tied to specific transactions) and section 147 of the Companies Act. Air Arabia submitted that section 147 was a broader, discretionary remedy capable of imposing a new liability on any person without any implicit limitations.  

The Cayman Islands Court of Appeal accepted that there were differences between the provisions but rejected the contention that those differences affect the question of submission to the jurisdiction. It confirmed that:

1. by filing a proof of debt, a foreign creditor submits to the Court’s jurisdiction, even if it has no physical presence in the Cayman Islands

2. a creditor should not be allowed to benefit from the insolvency proceeding without the burden of complying with the orders made in that proceeding

3. that principle extends to all questions of whatever kind arising within the winding up, including claims brought against the creditor itself

4. there is no principled basis to exclude fraudulent trading claims under section 147 from the scope of submission as they form part of the same statutory insolvency regime as avoidance claims under sections 145 and 146 of the Companies Act

5. once submission is established, the Court’s jurisdiction derives from that conduct so issues such as leave to serve out of the jurisdiction or extraterritorial reach do not arise 

Key considerations for liquidators and creditors in Cayman liquidations

The judgment makes clear that liquidators do not need to seek leave to serve a defendant outside of the jurisdiction to the extent that they have filed a proof of debt in the liquidation. It also serves as a reminder to foreign creditors to assess jurisdictional consequences carefully before submitting a proof of debt in a Cayman liquidation.  

How Ogier can help 

Ogier has one of the largest Dispute Resolution teams in our jurisdictions, advising on technical, strategic and procedural aspects across the spectrum of contentious commercial issues and disputes.

Our cross-practice restructuring and insolvency experts bring their creativity, knowledge and experience to provide a practical perspective on rapidly evolving cross-border assignments. For further insights or tailored legal advice, contact a member of our team.

About Ogier

Ogier is a professional services firm with the knowledge and expertise to handle the most demanding and complex transactions and provide expert, efficient and cost-effective services to all our clients. We regularly win awards for the quality of our client service, our work and our people.

Disclaimer

This client briefing has been prepared for clients and professional associates of Ogier. The information and expressions of opinion which it contains are not intended to be a comprehensive study or to provide legal advice and should not be treated as a substitute for specific advice concerning individual situations.

Regulatory information can be found under Legal Notice