Back to Basics- Disputes Series

It is unsurprising that modern wrongdoing often hides behind anonymity. In an offshore context, such “wrongdoing” may involve a sophisticated digital asset or cryptocurrency fraud, or anonymous fraudulent actors hiding behind complex cross-jurisdictional structures. Often, it can simply be a debtor’s attempt to use a BVI company as a means of concealing assets in an effort to wilfully evade judgment or render oneself judgment proof from creditors.

In the BVI, there is generally only limited information relating to a BVI company that is available to the public. While details of the current directors are now available from the BVI Registry of Corporate Affairs on payment of the prescribed fee, a public search would rarely reveal the shareholders, ultimate beneficial owners or assets of that company; sometimes leaving judgment creditors or victims of fraud in the dark.

The solution? The well-known English House of Lords case of Norwich Pharmacal Co v Customs and Excise Commissioners[1]. In its traditional form, this was developed to assist prospective claimants identify wrongdoers, in order to bring a claim against them. Since then, the jurisdiction in the BVI has been expanded to support a prospective claimant’s investigations, to help them find the “missing piece of the jigsaw”, to trace assets for execution of a judgment, or to help them plead out any claim made against the wrongdoer.

The test; In practice, the claimant should expect to demonstrate that:

1.  a wrong has been carried out (or arguably carried out) by an ultimate wrongdoer;
2. the order is “necessary” to enable action to be brought against the ultimate wrongdoer; and
3. the person against whom the order is sought is (innocently) mixed up in the wrongdoing and is likely to be able to provide the information sought [2].

The result; Where those conditions are met, we regularly see the BVI Court show flexibility to allow a party to unlock information and documentation in relation to a BVI company which would otherwise be unavailable to them.  Some key considerations:

•  Claimants regularly approach the BVI Court for relief where they have been the victim of an alleged fraud which involves a BVI company and they are looking to obtain further information to pursue a claim. It is not a remedy of last resort and may be granted where there is no other straightforward way of finding out the information[3].
•  Unlike in England[4], the BVI Court has shown a willingness to grant this relief in aid of actual or intended foreign proceedings (or arbitration)[5].
• A BVI company is required to maintain a registered agent (and registered office) in the Territory. A registered agent is regulated by the BVI Financial Services Commission and is required to hold KYC information on its clients.  Although less frequent, this relief can also be sought from other service providers including liquidators or corporate directors.
• A registered agent’s role includes ensuring that the company complies with its various legal and filing requirements; this will involve keeping various company documents at its office including the register of members and directors, beneficial ownership information, economic substance declarations and annual financial returns.   As a result, registered agents are often the target of applications for Norwich Pharmacal relief. The Court of Appeal has held that registered agents “by virtue of their role in providing registered agent service to the companies, a role which is voluntary, cannot on any view be considered as mere onlookers”[6].
•  A two-stage approach is typically adopted[7] unless there is genuine urgency to the relief sought; first, by applying without notice for a seal and gag order to preserve the confidentiality of the prospective Norwich Pharmacal application and prevent the registered agent from informing their client of the application for disclosure. Once that order is in place, the claimant would then usually apply for Norwich Pharmacal relief on-notice to the registered agent (but without notice to the ultimate “wrongdoer”).

• This is necessary both to preserve the confidentiality of the court file and to prevent a registered agent, following receipt of an application for Norwich Pharmacal relief, from “tipping off” their client (and the ultimate “wrongdoer”).  Without a seal and gag order, a registered agent would be contractually obliged to inform their client of a court application involving the company.
• Unless there are exceptional circumstances, an applicant for Norwich Pharmacal relief would usually expect to pay their own costs and indemnify the registered agent for its costs of dealing with the application (which may include obtaining legal representation in response to the application) and complying with any order made.  Whilst those costs are not fixed and will depend on the individual case, an applicant may seek an interim costs cap, limiting the costs which may be incurred by the registered agent in the first instance. Although not fixed, that interim fee cap is typically be US$2,000 – $3,000 per company.[8] Any interim fee cap would not distract from the well-established principle that an applicant should indemnify a respondent for its reasonable costs in these applications and the Court will not usually expect an innocent intermediary party to pay its costs of complying with any order made.

The documents; While there are limitations on the type of information and documentation that will be available to a successful applicant, the breath of possible information has expanded in recent years in line with the introduction of new reporting and filing requirements in relation to a BVI company’s beneficial owners, directors, economic substance and financial returns.  These recent amendments broaden the scope of the information held by a registered agent and thus further assist claimants seeking Norwich Pharmacal relief (or indeed a disclosure order attached to an injunction) by providing a potential route to financial information or confirmation that certain directors are linked to a company.

Whilst the position undoubtedly remains that the jurisdiction to grant Norwich Pharmacal relief is exceptional and “only to be exercised by the Court when it is satisfied that it is necessary”, the reality is that these applications are “an every-day feature of the legal and corporate service landscape in the BVI”[9]. The BVI Court has shown a clear desire to be flexible and exercise its discretion to help potential victims of fraud. As long as the claimant is able to demonstrate that it meets the various conditions, and the relief it seeks is necessary and proportionate[10], we expect to continue to see the BVI Court help victims of fraud at all stages of litigation.

[1] Norwich Pharmacal Co v Customs and Excise Commissioners [1974] AC 133. Traditionally a common law remedy, later given a statutory footing in the BVI by the Eastern Caribbean Supreme Court (Virgin Islands) Act (as amended).
[2] See also Mitsui & Co v. Nexen Petroleum [2005] 3 All ER 511
[3] UVW v XYZ (A Registered Agent) (BVHCOM2016/0108)
[4] R (Omar) v Secretary of State for Foreign Affairs [2013] EWCA Civ 118; Ramilos Trading Ltd v Buyanovsky [2016] EWHC 3175 (Comm)
[5] See for example K et al v Z et al (BVIHCOM2020/0016); Foreign Representative in Foreign Insolvency Proceedings v Five Registered Agents [Redacted] (15 June 2020)
[6] JSC BTA Bank v Fidelity Corporate Services Ltd et al (BVIHCVAP2010/0035)
[7] CIF v DLG et al (BVIHCM2023/0050)
[8] CIF v DLG et al (BVIHCM2023/0050)
[9] CIF v DLG et al (BVIHCM2023/0050)
[10] JSC BTA Bank v Fidelity Corporate Services Ltd et al (BVIHCVAP2010/0035)