This article first appeared in Volume 20, Issue 5 of International Corporate Rescue and is reprinted with the permission of Chase Cambria Publishing - www.chasecambria.com
Jan Golaszewski, Andrew Chissick, Jennifer Maughan, and Daniel Hayward-Hughes, from the Insolvency and Dispute Resolution Group at Walkers, discuss the recent decision in the case of Parles A.S. et al v Winsley Finance Limited.
Synopsis
In the recent case of Parles A.S. et al v Winsley Finance Limited,1 ('Parles') the British Virgin Islands High Court (the 'BVI Court') has confirmed that it has the necessary jurisdiction to grant Chabra relief (i.e. a freezing injunction over the assets of a person against whom the claimant has no cause of action) on the application of unsecured creditors in aid of intended or extant foreign insolvency proceedings.
In her first written judgment following her appointment as a
Judge to the BVI Court, the Honourable Justice Mangatal conducted a
careful and detailed analysis of the powers available to the BVI
Court to grant injunctive
relief in support of foreign proceedings following the recent
statutory changes and the landmark decision of the Judicial
Committee of the Privy Council in Broad Idea International Ltd v
Convoy Collateral Ltd2 ('Broad Idea'). Amongst other
things, the judgment considers whether foreign insolvency
proceedings constitute 'proceedings' for the purposes of
British Virgin Islands ('BVI') law; the extent to which
relief should be granted on the application of a creditor, rather
than an officeholder; and the relevance of whether the foreign
insolvency proceedings are or will be located in a jurisdiction
which falls outside of the BVI statutory recognition and assistance
regime.
Traversing a number of commonwealth authorities, the BVI Court
noted that it would only be in exceptional cases that freezing
orders would be made at the behest of creditors rather than
officeholders. Mangatal J found
that the proper party to seek interim relief in support of
insolvency proceedings would typically be the officeholder, usually
a provisional liquidator, who, as the guardian of the interests of
the insolvent company's stakeholders, is best placed to make an
independent judgment as to the wisdom of such proceedings.
This is an important decision for the BVI and other common law jurisdictions, as it demonstrates the growing power and willingness of courts to actively intervene and protect the interests of parties, in both commercial and insolvency proceedings. It also however hints at the difficulties an officeholder from a country that falls outside the BVI statutory assistance regime may face when seeking interim relief.
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