A recent Commercial Court judgment has made it easier for foreign creditors to obtain information about companies registered in the Virgin Islands.
Commercial Court Justice Gerhard Wallbank ruled last month that VI courts have the power to compel registered agents to disclose their clients’ information if there is reasonable suspicion that those clients are evading court orders to pay their creditors.
Registered agents can also be instructed to disclose their clients’ information to assist in enforcing compliance with asset-freezing orders by foreign courts, the Oct. 27 ruling states.
In the judgment, Mr. Wallbank granted anonymity to the parties involved in the case, but he explained that the matter came to the Commercial Court after a debtor from another jurisdiction breached a court order freezing the debtor’s assets. Mr. Wallbank added that the debtor demonstrated a pattern of wilful evasion of the foreign court order.
The creditor applying for a disclosure order found out that the debtor has a VI-registered company “containing at least one substantial asset,” the judge stated.
As such, “the applicant comes to this court, saying it needs disclosure to police the freezing order, to discover assets the judgment debtor may have concealed through the VI corporate vehicle, … and to discover possible leads for asset tracing,” according to the judgment.
Registered agent
The debtor’s registered agent argued that it shouldn’t be ordered to disclose its client’s documents because it wasn’t involved with any of its client’s alleged wrongdoing, according to the judgment.
To support its argument, the registered agent cited a case where a party chartered a private jet on an overseas trip in order to avoid a jurisdiction where that party was accused of wrongdoing. In that case, the English Court of Appeal slapped down a disclosure application made against the private charter company on the grounds that the charter company did not knowingly facilitate wrongdoing, according to Mr. Wallbank.
But the judge disagreed with the registered agent’s argument, writing that it ignored a precedent set by the Eastern Caribbean Supreme Court of Appeal, which states that “by its very role, a registered agent facilitates the functioning of a company. It is involved in a company’s affairs, even if the registered agent does not know what the company is being used for.”
The justice further clarified that a non-payment isn’t sufficient to trigger a Commercial Court disclosure order. Instead, willful evasion of a debt judgment has to be demonstrated, he stated.
Harneys’ view
The law firm Harneys, which represented the applicant in the case, released a statement touting Mr. Wallbank’s decision as a valuable tool to assist in the recovery of assets.
“It will enable a judgment creditor who has no evidence of misuse of a specific corporate structure but who can evidence a general pattern of wilfully evasive conduct by the judgment debtor … to obtain third party disclosure in support of asset tracing or execution,” the Harneys release stated. “This is a powerful new weapon in the BVI courts’ armoury, and is a sign of the jurisdiction’s determination to assist foreign judgment creditors in appropriate cases.”
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