Landmark Ruling: Rights Granted to Proprietor of Strata Lot to Inspect Books and Records

On 18 September 2024, the Honourable Justice Jalil Asif KC delivered a notable judgment in the Grand Court of the Cayman Islands requiring a strata corporation to produce its books and records to a proprietor within the strata, on the grounds that the strata had:

a)??? breached its obligations under the Strata Titles Registration Act (2013 Revision) (the “Act”); and

b)??? failed to comply with its byelaws to make its books and records available to the proprietor for inspection.

The strata corporation is entitled to be reimbursed for reasonable costs of producing the books and records.

The Judgment marks the first of its kind in Cayman, setting an important precedent for proprietors seeking greater transparency and accountability over the financial management of strata corporations. This is particularly helpful in a jurisdiction such as Cayman where strata legislation has been criticised for needing ‘comprehensive reform’ by the Law Reform Commission in 2016.

John Royle , Managing Director in Grant Thornton Specialist Services (Cayman) , highlights the significance of the Judgment:

This Judgment provides a clear precedent to compel strata corporations registered in Cayman to provide financial records in circumstances where a strata has violated their obligations under the Act and/or failed to comply with a proprietor’s requests for books and records under their byelaws? It also provides that the books and records for production must be sufficient to allow a proprietor to obtain a true and fair view of the financial status of the strata, comprising bank statements, ledgers, contracts, invoices and expense records.

Importantly, where any negligence is suspected, the books and records required to be produced is sufficient for a thorough forensic examination to be conducted to uncover any unlawful activity. By having access to the financial information, which this Judgment permits, we can better identify misrepresentations, discrepancies and deficiencies in cash, to review whether financial management has been conducted properly, in accordance with the strata corporation’s fiduciary duty to its principal proprietors. Further, where fraud, misappropriation or financial misconduct is suspected, our forensic accounting team has extensive experience in cash tracing exercises to identify the beneficiaries of any wrongdoing.

We at Grant Thornton have extensive experience and skillsets to review, investigate and carry out asset recovery initiatives and our services include, among others:

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• Assisting with Information Requests:? Our team will work with you to determine the nature and extent of books and records required in order to carry out a complete investigation – under the authority of a Court Order.
• Collating Evidence: We have digital solutions capable of processing a high volume of evidence to efficiently and cost effectively extract the necessary data for forensic examination.
• Cash Tracing Exercises:?We can identify the source and destination of incoming and outgoing funds within strata corporations.
• Forensic Investigations:?Our experts conduct thorough investigations to detect fraud, providing detailed analysis and evidence to support any findings.
• Regulatory Compliance:?We offer guidance on adhering to relevant regulations, helping strata corporations avoid legal issues and maintain trust with proprietors.
• Enhancing Transparency:?By implementing robust financial management systems and conducting regular audits, we ensure that strata corporations operate with the highest standards of integrity.
• Reporting: We can prepare a comprehensive report detailing the outcome of our investigations, identifying the parties who have ultimately benefited from any wrongdoing and outlay the options available towards relief.

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This Judgment marks a significant shift, allowing strata corporations to function with increased transparency and build greater trust among stakeholders. These developments will lead to stronger, more accountable strata corporations in Cayman.

For more information on the opportunities this Judgment presents, please contact John.