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Recent Commercial Court cases - International Law Office

International Law Office

Litigation - British Virgin Islands

Recent Commercial Court cases

July 13 2010

Events of default and appropriation
Costs of an office holder
Norwich Pharmacal review

Events of default and appropriation

The BVI Commercial Court recently concluded its trial in the long-running Alfa Telecom v Cukurova litigation. This case concerned the important subject of appropriation under English law. The detailed judgment in this major trial was delivered in just three weeks, proving that the new rules and concept of a Commercial Court are producing dividends.

Costs of an office holder

The Commercial Court recently provided clarity on the ability of an office holder to recover fees before an order placing the company into provisional or full liquidation. The Insolvency Act provides that remuneration of an insolvency practitioner will be fixed by reference to time properly incurred while carrying out his or her duties in the insolvency proceedings. As the proceedings may commence only after an appointment, fees incurred before that date should not be considered for recovery.

Practitioners should be aware of this provision when undertaking pre-liquidation investigations and preparation.

This case is the latest in a line of cases on the costs of insolvency proceedings. For example, in Rich Victory v Sino Union the court reviewed the English case of Mirror Group Newspapers v Maxwell ([1988] BCC 324) and decided not to follow its guidance. The BVI court indicated that in applying the criteria in Section 432 of the Insolvency Act, the court would not apply a test that a reasonably prudent person, faced with the same circumstances in his or her own affairs, would have laid out or hazarded his or her own money in doing what the office holders had done. Accordingly, it is now easier for office holders to recover their fees.

Norwich Pharmacal review

As the British Virgin Islands does not have pre-action disclosure in its court rules, Norwich Pharmacal orders have been an important tool for claimants. In Al Rushaid v TSJ Engineering Consulting Company Limited the Commercial Court took the opportunity to restate the relevant principles. Al Rushaid concerned allegations that former directors had set up a BVI company to receive secret commissions and a BVI disclosure order was sought in support of English proceedings to trace assets.

The court reviewed the authorities and emphasized that the key to the jurisdiction was to enable a claimant to obtain legitimate redress for a wrong which otherwise would be unavailable to the claimant. In granting a tracing disclosure order, the court set out the following general conditions to be satisfied:

  • There must be an apparent wrong carried out, or arguably carried out, by the ultimate wrongdoer.
  • There must be the need for an order to enable an action to be brought against the ultimate wrongdoer.
  • The person against whom the order is sought must (i) be so involved as to have facilitated the wrongdoing, and (ii) be able or likely to be able to provide the information necessary to enable the ultimate wrongdoer to be sued.
  • As an alternative to the above, the court would order disclosure under Bankers Trust v Shapira ([1980] WLR 1274) where a claimant was legitimately seeking evidence against known defendants.
  • If the above conditions are satisfied, the court has a residual discretion to decide whether an order should be made. One of the most important factors was whether there were any other means available of finding out the information.

For further information on this topic please contact Phillip Kite or Andrew Thorp at Harney Westwood & Riegels by telephone (+1 284 494 2233), fax (+1 284 494 3547) or email (phillip.kite@harneys.com or andrew.thorp@harneys.com

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