Revisiting and Resisting Freezing Orders in the BVI
Freezing orders are one of the most important weapons inacourt’s arsenal to prevent parties from disposing of or dissipating assetsto ensure they will be available to satisfy a potential future money judgment.
In the British Virgin Islands, the court is empowered to grant a freezing order under the provisions of the Eastern Caribbean Supreme Court and the Civil Procedure Rules.This includes the so-called“Black Swan”jurisdiction—the power to grant freezing orders against a respondent domiciled in the Virgin Islands in support of litigation taking place in another forum.Freezing orders are particularly useful in claims of fraud. However, a sampling of Court of Appeal decisions over the pastfiveyears demonstrates the expansion of their use beyond fraud cases to a range of disputes, including divorce proceedings, unfair prejudice arbitration, and probate litigation.
As a preliminary point, it is worth noting that freezing orders have two subcategories. The first is a Mareva type order which may be granted, normally to prevent frustrating a possible damages award in the future. A variant on this type of order is one which is granted where a vested or proprietary ownership interest is asserted to an asset.The BVI court will grant either type of order, although some of the protections which the court regularly requires on the grant of Mareva order may be less likely required if a strongly arguable proprietary interest can be shown. While freezing orders are therefore useful in a variety of cases, they are not always appropriate. Follows are some examples where freezing injunctions were involved.
Deceased Shareholder Estate
In November 2018, the Court of Appeal delivered judgment in the case of Liao Hwang Hsiang v Liao Chen Toh. O’Neal Websterlitigation partnerNadine Whyte successfully appealed the order of the lower court on the hearing of an application for a freezing injunction.At that hearing, the court made orders restraining theadministrator of a deceased shareholder’s estate from taking any steps to distribute the assets of the estate until after the conclusion of related proceedings in Taiwan.
The substantive dispute concerned entitlement to the estate of the deceased sole shareholder of a BVI Business Company. Interlocutory applications were made for directions, and for a freezing injunction.Despite finding that the applicant for the freezing injunction had not met the requirements to obtain it, the Court proceeded to give directions substantially in the same terms as the freezing injunction that had been applied for. The Court set aside the judge’s order, holding that the judge had taken improper considerations into account and had erred in her discretion in making the directions order at the hearing of the freezing injunction—that hearing should have been concernedprimarilywith whether or not there was a real risk of dissipation of assets.
In its June 2018 judgment in Donna Union Foundation v Koshigi Limited & Svoboda Corporation—a London Court of Arbitration unfair prejudice case brought against the BVI companies which were majority shareholders of a Maltese company—the BVI Court of Appeal held thata freezing injunction may be continued against a company domiciled outside of the BVI where:
The BVI Court of Appeal also held that section 43 of the Arbitration Act is wide in its scope and should not be given a restricted interpretation. Therefore, there is no basis upon which a court can properly read into the express wording of the Act the need for assets to be in the Virgin Islands in order for the court to be able to grant interim measures in aid of a foreign arbitration.
Rustam Yusufovich Gilfanov & Sergey Aleksandrovich Tokarev v Maxim Valeriovich Polyakov, Valeriy Oleksandrovich Polyakov & Phoenix Holdings Limited was an investment fraud case. In its February 2017 judgment, the BVI Court of Appeal found that:
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