BVI Court provides welcome clarification on appointing receivers

Walkers successfully represented the appellant in a recent BVI appeal, in which the Court of Appeal overturned the decision to appoint a receiver over a BVI company.

The appeal arose out of a dispute between beneficiaries of the estate of a deceased Russian businessman and subsequent wide ranging litigation in Russia and Switzerland. The respondents had sought to have a receiver appointed over the assets of the appellant's BVI company, Grantway, in support of the Swiss proceedings and to prevent the appellant from enforcing a judgment against them in Russia.

In their written reasons, the Court of Appeal held that there was “no solid evidence showing a real risk of dissipation” and said the evidence did not reach the required threshold for the appointment of a receiver. Even if there were such a risk, the Court held that the respondents should have sought relief in Russia, where the parties and assets were located, or applied for a freezing injunction in the BVI.

The court noted Justice Bannister's 2010 refusal to appoint receivers in the Yukos case, on the basis that if claimants did not wish to approach the foreign court for relief, it seemed “illegitimate for them to obtain it by the back door by coming here and asking this court to enjoin the BVI subsidiaries”. The Court of Appeal voiced concern over the increase in applications in the BVI to appoint receivers, when the grant of less intrusive relief such as a freezing injunction would provide the defendant with sufficient protection.

The case is an important reminder that the appointment of a receiver is a draconian remedy which can only be made when it is truly just and convenient to do so, not simply as an attractive alternative to seeking a freezing injunction or interim relief in the foreign court where the substantive litigation is being fought.

BRITISH VIRGIN ISLANDS
Murray LaingPartnerT +1 284 852 2226 murray.laing@walkersglobal.com
Iain TuckerPartnerT +1 284 852 2230iain.tucker@walkersglobal.com
Cate BarbourSenior AssociateT +1 284 852 2286cate.barbour@walkersglobal.com