Trial on preliminary issues
One of the largest cases in the BVI Commercial Court this year is the litigation brought by the liquidators of Fairfield. Fairfield is a BVI fund which was a major feeder fund into Bernie Madoff’s company. The liquidators commenced actions against multiple defendants including a who’s who of financial institutions alleging that redemptions ought to be refunded to the liquidators as they were made based on mistaken net asset values. On 20 April Bannister J handed down a judgment ordering a hearing of certain preliminary issues, requested by the defendants. The application was contested by the liquidators. The Court balanced the potential pitfalls of the preliminary issues procedure but found that preliminary issues based on an interpretation of one part the articles of association, and an argument on good consideration were suitable for determination by preliminary issue.
The liquidators applied to both the judge and a single judge of the Court of Appeal for permission to appeal. Both applications were refused.
Termination of liquidations
Following the Court of Appeal decision in Westford, a company which had previously been wound up applied under section 233 of the Insolvency Act 2003 to terminate the liquidation arguing that Westford had changed the previous authority of Western Union v Reserve International Liquidity Fund Limited and therefore a redeemed shareholder had no locus to apply to wind up a company.
The Court held that the issue in the application before it was whether this was a proper application under section 233 and held it was not. Following relevant English authority the court said that section 233 was designed to be applied in cases where there were no good grounds for a liquidation to continue, whether because all creditors and members were content that the liquidation should be ended so that the company can resume business, or if there are no other reasons to continue the liquidation.
Voluntary to compulsory liquidations
A strange set of facts sometimes makes interesting law. A BVI Company commenced the established solvent voluntary winding up procedure but the liquidators then informally admitted a purported creditor’s claim and based on that served a notice that the winding up should continue as an insolvent liquidation. The sole member then applied to terminate the liquidation and the purported creditor applied for leave to intervene in the proceedings. The Commercial Court decided that the liquidators were wrong to admit the purported creditor’s claim in any way and refused leave to intervene. However, the Court of Appeal held that the application for leave to intervene was unnecessary and that on the substantive application to terminate the liquidation the Commercial Court ought to allow the purported creditor to make submission and file evidence.
Material Non Disclosure
On a service out of jurisdiction appeal, the Court of Appeal set out useful guidance on non disclosure points. In Commercial Bank – Cameroun v Nixon Financial Group Limited a claimant requested an order for permission that proceedings be served out of jurisdiction without disclosing to the Court the existence of parallel French proceedings. The Commercial Court did not find this a deliberate attempt to deceive and took into account the resulting order was not “draconian” as in the case of an injunction, and the Court of Appeal did not interfere with the Commercial Court’s discretion not to discharge the order applying MRG (Japan) Ltd v Engelhard Metals Japan Ltd  EWHC 3418.