Asset Tracing Recovery Tools in the BVI

The British Virgin Islands (BVI) is an Offshore Financial Centre where more than one million companies have been incorporated since the passing of the International Business Companies Act in 1984. The vast majority of these companies (more than 99%) operate outside the BVI, and it is estimated that at least 450,000 of them are active.

The abundance of companies has, in turn, meant that a multitude of disputes have arisen, ranging from corporate issues such as insolvencies and shareholder disputes, to operational issues such as claims for breach of contract. It is not surprising that, in the last 20 years, the territory’s courts have had to deal with a huge growth in the number of corporate disputes involving BVI offshore companies. Some of these cases involve tracing of assets owned by BVI companies or their affiliates, both locally and overseas.

Civil Procedure in the BVI
Applications for tracing remedies are made to the Commercial Court or the Civil Division of the High Court. Procedures in these Courts are regulated by the Civil Procedure Rules, 2000 (CPR) and the common law. In situations where the CPR is silent on a particular point, resort can be had to the United Kingdom Civil Procedure Rules, 1998.
The ex parte procedure is available and frequently used in the BVI. The procedure is now codified in Part 18 of the CPR. The initial hearing usually takes place within 24 hours of filing the application, or on the same day in extreme emergencies. The orders must be served promptly and are returnable for the full inter partes hearing within 28 days.
The applicant must satisfy the Court that:

• he has a good arguable case;
• there is a real risk of removal or dissipation of the assets being traced;
• service of the application would allow the defendant and other persons to take action to defeat the purpose of the order being sought; and
• any damage that the order will cause can be compensated under the applicant’s cross-undertaking in damages, or the potential damage is outweighed by the risk to the applicant if the order is not made.

On the return date the defendant can apply to set aside the order if any of the above criteria was not satisfied, or if there was some other irregularity in obtaining the ex parte order such as non-disclosure of material facts.
Some tools available in the BVI for tracing assets include: Norwich Pharmacal orders, Injunctions and disclosure orders, Bankers Trust orders, Bankers Book (Evidence) Act orders, Anton-Pillar orders, Gag orders, Receivers and liquidators, Criminal discovery orders.

ASSET TRACING TOOLS
The CPR does not make provision for pre-suit disclosure but the UK CPR has the procedure and it is, therefore, available in the BVI. However, the procedure has never been invoked in the territory, probably because of its apparent limitations in urgent disclosure applications, and because of the existence of the more effective and attractive procedures otherwise available which are discussed below.

Norwich Pharmacal Orders
Norwich Pharmacal Orders are available before suit against third parties who have become involved in or facilitated wrongdoing by the intended defendant, however innocent their involvement may be. The information sought must be relevant to and necessary for the claimant to pursue the wrongdoers.
This remedy is very relevant to the BVI and is frequently used to obtain information from registered agents relating to the companies that they administer. The Court of Appeal recently decided that the mere provision of basic registered agent services is sufficient involvement in the activities of the administered companies to make the information in the agent’s files available to the intended claimant. Evidence of involvement in the actual wrongdoing is not necessary. The Court of Appeal has effectively decided that the relationship of registered agent and company is sufficient.
Norwich Pharmacal Orders are granted ex parte before the claim is filed. In fact, there is no obligation to file a claim in the BVI after the information is disclosed. The information is usually used in connection with foreign proceedings.

Injunctions and Disclosure Orders
The Court has power under Part 17.1 of CPR to grant an interim injunction to preserve relevant property and also to order the defendant or a third party to provide information about the location of relevant property. Relevant property includes “property which is the subject of a claim,” distinguishing this type of injunction and discovery order from a Mareva injunction where the claimant does not have a proprietary interest in the defendant’s property but seeks to secure it to satisfy a future judgment.
This procedure can be used to secure assets being traced and to obtain information relating to assets from the defendant. The application for the orders can be made ex parte at the same time as the filing of the claim, and, in extreme cases, before the claim is filed if an undertaking is given to file the claim as soon as possible.

Bankers Trust Orders
Bankers Trust Orders are similar to Norwich Pharmacal Orders except that:

• there is no requirement to prove any involvement in the alleged wrongdoing by the discovery defendant; and
• the remedy is only available where the claimant is tracing assets that he claims belong to him but have been taken by the defendant. It is not available in connection with a Mareva injunction where the claimant has no proprietary interest in the relevant assets.

Bankers Trust Orders are available ex parte on, or after, the filing of the claim.

Bankers Evidence
A claimant can obtain an order under section 7 of the Bankers Book (Evidence) Act for the disclosure of information relating to the defendant’s bank account. This application is usually ancillary to a Norwich Phamacal or Bankers Trust Order.

Anton Pillar Orders
Anton Pillar Orders, now known simply as search orders, are available under Part 17 of CPR. The application is made ex parte but orders are only granted where absolutely necessary because of the extreme nature of the remedy.

Gagging Orders
The BVI courts have an inherent jurisdiction to grant orders restraining a defendant against whom an ex parte discovery order is made from communicating with the intended defendant regarding the disclosure order. Gagging orders are granted in conjunction with Norwich Pharmacal or Bankers Trust Orders. Breach of a gagging order can result in contempt proceedings, which makes them very effective against resident discovery defendants.

Liquidators and Receivers
Liquidators appointed under the Insolvency Act have very wide powers to collect and secure a company’s assets for the benefit of its creditors. Where a claimant alleges that the company’s assets belong to him and they are likely to be transferred or otherwise dissipated, he can take steps to appoint a provisional liquidator on an ex parte application to take charge of the company’s assets pending the full liquidation. The provisional liquidator, or the official liquidator when appointed, can also investigate the directors and officers of the company on any issue regarding the company’s affairs including the whereabouts of its assets. The use of liquidators in tracing claims has become very popular in the BVI.
Receivers can be appointed on an interim basis under section 24 of the Supreme Court Act to secure and protect relevant property on behalf of the person who secured the appointment. The Court can give the receiver similar investigative powers to that of a liquidator.

Criminal Discovery Orders
The BVI has a full complement of legislation dealing with money laundering and the proceeds of criminal conduct. The legislation includes provisions for discovery and investigation, but none of these provisions can be used by non-government litigants in private litigation.

Conclusion
The foregoing list of remedies shows that the territory has a full range of investigative tools for tracing assets in or from within the BVI. The list does not include tools that are available in non-proprietary claims where the claimant wishes to freeze the defendant’s assets to satisfy a future judgment (freezing orders or Mareva injunctions) and post judgment remedies.

This article was first published in the BVI International Finance Centre newsletter; BVI Finance- Asian Special Edition (October 2012)