In a recent BVI Commercial Court's decision in
Factual Background
JTrust is a company incorporated in
In
Dissatisfied with the progress concerning the Committee's appointment, JTrust issued an application on
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that Showa or the receivers be directed to provide JTrust with an update as to the status of the appointment of the Committee;
- that the Order be amended to direct Showa and the receivers that all communication with the Chairman of the Committee be conducted by the receivers only (i.e. to the exclusion of Showa); and
- the receivers be directed to call an extraordinary general meeting of Showa in order to remove and replace its board of directors.
- As regards the second head of relief, the Court held that JTrust was not the proper person to have sought it and therefore had no standing to apply for it. Wallbank J determined that the establishment of the Committee was a process that fell within the scope of the receivers' investigations, and it is the receivers (and not JTrust) who have a legitimate interest in ensuring that this process is not perverted by undue influence. As such, the Court determined that as a matter of judicial restraint it should not hear JTrust in respect of this head of relief because, as per the learning of the
Privy Council inDeloitte & Touche AG v Johnson, a general interest in the outcome is not enough. An additional factor of "considerable weight" that the Judge took into consideration is that there are in place two professional receivers, who are professionally advised both as to Japanese and BVI law, and who are at liberty to seek the Court's direction in respect of any course of action they choose. There was no evidence before the Court that the receivers needed JTrust's help to obtain this relief and it is the receivers who are best placed to know whether the relief sought was necessary. The fact that the receivers supported JTrust's application was irrelevant. - On the basis of the same reasoning applied to the second head of relief, the Court found that JTrust did not have standing to ask the Court to direct the receivers to call an extraordinary general meeting of Showa to remove its board of directors.
On
The Judgment
By applying the principles articulated by Millet LJ in the
The second consideration that the Court bore in mind is whether the applicant is the 'proper person' to invoke the Court's jurisdiction. Again being guided by Millet LJ's reasoning, Wallbank J found that the proper person is one who not merely has an interest in making the application or who may be affected by its outcome, but one who has a "legitimate interest in the relief sought".
In applying this test to each of the three heads of relief sought by JTrust, Wallbank J determined as follows:
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Wallbank J found that an appointing claimant, who might be in a position to provide important information or insights into the circumstances of a case that receivers might otherwise not be aware of or properly appreciate, has a legitimate interest in being provided with updates so that he can proffer his knowledge, if the court considers it appropriate. As such, JTrust had standing to apply for this head of relief. Indeed, the Judge found that the Court ought to generally treat an appointing claimant as a proper person to apply for updates to be given. In the circumstances, however, the Court declined to exercise its discretion to grant the relief on the basis that JTrust had in fact been provided with an update by Showa prior to JTrust issuing its application (thereby rendering the relief otiose).
Commentary
The judgment acts as a sound reminder that, as a general rule in BVI receiverships, he who pays the piper does not call the tune. Indeed, a party's standing to bring an application in the context of a receivership depends less on who the party is and more on its legitimate interest in the relief sought. While an appointing claimant certainly has standing to apply to change the appointed receivers or to terminate the receivership altogether, it should not assume that it has an entitlement to direct or interfere with an ongoing receivership. Upon appointment, the receivers, as officers of the Court who are most often professionally advised, have an obligation to ensure that the appointing order is complied with and enforced, and stand accountable not to their appointers but to the Court alone.
The Group's BVI office continue to assist Showa and other clients in numerous jurisdictions in circumstances involving the actions of officers of the BVI court, often operating in a distressed corporate setting.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
Mr
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