Further Developments in Black Swan Relief
Harneys successfully acted for an individual seeking free
standing relief in aid of foreign proceedings brought in Cyprus.
The Cyprus proceedings were a derivative claim brought by the
claimant in the name of a Cypriot company. Relief sought included a
declaration that the relevant BVI company held property on trust
for the Cypriot company and a judgment against the BVI company and
others for US$3million. The Cypriot courts granted the applicant
interim injunctive relief restraining the BVI company from dealing
with the relevant property.
On the application to the BVI Court for "mirror" relief,
the applicant successfully argued that the Black Swan
jurisdiction applies to prevent non-cause of action defendants from
disposing of identified assets – as long as those assets
might be available to satisfy a future judgment of a foreign court,
in proceedings in which the owner, or arguable owner, of the assets
is a defendant.
The BVI Court held that in the circumstances it was just and
convenient to make an order restraining the BVI company from giving
effect to any dealing that might be attempted in breach of the
Cyprus injunction.
Previously, the BVI Court had granted a Black Swan freezing
injunction in support of a foreign claim in which part of the
relief abroad was sought derivatively. Harneys acted for the
successful BVI applicant. This is believed to have been the first
example in the BVI of the Black Swan jurisdiction being used to
support a foreign derivative action.
BVI Insolvency Assistance to Foreign Office Holders
Harneys successfully appeared on behalf of a foreign liquidator
seeking urgent recognition in order to assert control over BVI
assets at risk of dissipation.
Previous BVI case law (Picard v BLMIS, BVI HC (Com) 140 of
2010) suggested that Parts XVIII and Part XIX of the Insolvency Act
2003 provided an exhaustive statutory code by which a foreign
appointee could seek recognition or assistance in the BVI.
Part XVIII largely mirrors the UNCITRAL model law for cross-border
insolvencies but has not been enacted and Part XIX, whilst giving
prescriptive powers to foreign appointees, is limited to those
appointed in a small number of "designated"
countries. This had the effect of limiting the ability of
foreign office holders from non-designated jurisdictions to operate
in the BVI and, for example, to secure assets and investigate the
affairs of related entities or individuals.
However, here, following argument from counsel that there still
existed a common law power to recognise office holders from
non-designated jurisdictions, the BVI court recognised the foreign
appointee's entitlement to the BVI assets (a majority holding
in a BVI vehicle). Reasons for the decision are pending.
Harneys' Cyprus team worked simultaneously with the BVI team to
take control of the underlying Cypriot entity through which
the ultimate assets (based in the CIS) were secured.
Economic Torts and Unjust Enrichment
Maruti Holdings PTE Limited v Sinclair Strategies Limited and othersBVIHC (Com) 2012/0130
Harneys successfully applied to set aside service of a US$21
million claim brought in the BVI against a professional corporate
services provider based in Guernsey. The claim alleged a series of
economic torts (intimidation, duress, conspiracy) and unjust
enrichment.
The application succeeded on the basis that the claimant did not
have a good cause of action against the defendants, of which the
Guernsey service provider was one. The claimant had argued
that the defendants intended to harm a third party, Mr. O and/or
Mr. O's "economic interests", of which the claimant
formed a part. On that basis the claimant said it had a cause of
action against the defendants in tort.
The defendants successfully argued that where it was not alleged
that they had intended to harm the claimant itself directly, the
claimant had no cause of action. The Court accepted this
view.
The Court also found that even if the defendants had committed the
alleged torts against Mr. O, the claim would still have failed
because the defendants had not been unjustly enriched at the
expense of the claimant. The claimant might have some form of claim
against Mr. O but there was no restitutionary claim available to
the claimant against the defendants.
The Meaning of "Member" under the BVI Company Law
Comodo Holdings Ltd v (1) Renaissance Ventures Ltd; and (2) Joseph Katz (executor for the estate of Eric D Emanuel Dec'd) BVIHC (Com) 2013/0045Harneys recently acted for successful respondents in a dispute
relating to how the Court should determine membership of a BVI
company.
The factual matrix was complex: the applicants sought a stay in
favour of arbitration in New York. The respondents argued the stay
should be refused as the applicants were not members of the
relevant company under the Articles and/or the BVI Business
Companies Act 2004, as a result of which they had no standing to
invoke the relevant arbitration clause. The applicants sought to
prove their standing as members of the relevant company by relying
on share certificates in their names. However, they were unable to
demonstrate that their names were recorded on the share register,
nor that they had paid for the share certificates.
In short, Bannister J. held that prima facie evidence of
title is not the same as membership of a company; and that
corporate membership can only be proven by entry of a name on the
company's share register. He followed the recent English
Supreme Court ruling Enviroco Lt v Farstad
Supply A/S [2011] 2 BCLC
165 which held that membership is determined by entry
in the register of members. Bannister J. held that the BVI position
was the same as that in England & Wales, and the legislation
would otherwise be unworkable.
Harneys also successfully argued on behalf of the respondents that
in any event, an arbitration was not the appropriate forum to
decide the question of locus to arbitrate, as had been
erroneously argued by counsel for the applicants.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.