Introduction

In UVW v XYZ (October 27 2016), the BVI Court issued an important judgment in relation to the obligations of a registered agent to provide third-party disclosure to assist a foreign judgment creditor to trace assets. This judgment is a broadening of the Norwich Pharmacal jurisdiction. It will enable a judgment creditor which has no evidence of misuse of a specific corporate structure, but which can evidence a general pattern of wilfully evasive conduct by the judgment debtor – as opposed to a mere failure to pay – to obtain third-party disclosure in support of asset tracing or execution. This is a powerful new weapon in the court's armoury and is a sign of the jurisdiction's determination to assist foreign judgment creditors in appropriate cases.

Facts

The applicant was a foreign judgment creditor seeking general information as to the assets of the judgment debtor. The judgment debtor had been subject to an overseas freezing injunction with which he had failed to comply and had therefore been held in contempt of court for failing to provide disclosure of his assets. The applicant believed that the BVI-registered agent had information regarding the beneficial owner's assets and, in light of the non-compliance with the freezing injunction, that the beneficial owner was using BVI companies to conceal his assets. The applicant therefore sought disclosure from the registered agent in order to police the freezing injunction, to discover any assets that the judgment debtor may have concealed with BVI corporate vehicles registered with the same corporate service provider and to discover possible leads for asset tracing or execution efforts. While the respondent registered agent remained neutral – caught between its duty of confidentiality and its duty of disclosure under any court order – it properly sought to test the application and raised a number of important arguments for the court's consideration.

Decision

Justice Gerhard Wallbank held that Norwich Pharmacal relief post-judgment in aid of enforcement is in principle available:

  • where there is reasonable suspicion that a disclosure defendant is involved in the wilful evasion of another's judgment debt; and
  • to assist in securing compliance with freezing orders, both domestic and foreign.

In NML Capital Ltd v Chapman Freeborn Holdings(1) the Court of Appeal of England and Wales had doubted whether jurisdiction exists post-judgment in relation to assisting a judgment creditor, save in very particular and restricted circumstances. In essence, the court expressed the view that, in the case of a judgment creditor, a Norwich Pharmacal can be obtained against an innocent third party only if there is cogent evidence of wilful evasion by the judgment debtor.

In holding that there was jurisdiction post-judgment, the BVI court decided that it was not necessary to identify a specific transaction through which the alleged wrongdoer had transferred assets to the BVI corporate vehicle for no reason other than to avoid execution. It was sufficient if the applicant could show evidence of a deliberate effort to obstruct or frustrate enforcement, such that it would support a reasonable suspicion of wilful evasion.

The court held that there was no distinction between a company which was created for the purpose of concealing assets wrongfully and a company which was created for a legitimate purpose and then evolved into something used wholly or partially illegitimately. The mere fact of being a registered agent for a corporation is sufficient to make a finding that it is involved in the company's affairs, even if the registered agent does not know what the company is being used for.

For further information on this topic please contact Peter Ferrer or Andrew Thorp at Harney Westwood & Riegels by telephone (+1 284 494 2233) or email (peter.ferrer@harneys.com or andrew.thorp@harneys.com). The Harney Westwood & Riegels website can be accessed at www.harneys.com.

Endnotes

(1) [2013] 1 CLC 968.

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