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Widening the Net – BVI Court Expands Norwich Pharmacal Jurisdiction

In UVW v XYZ (27th October 2016), the BVI Court gave an important judgment in relation to the obligations of a registered agent to provide third party disclosure to assist a foreign judgment creditor trace assets.

This judgment is a broadening of the Norwich Pharmacal jurisdiction. 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 as opposed to a mere failure to pay, to obtain third party disclosure in support of asset tracing or execution. This is a powerful new weapon in the BVI Court’s armory and is a sign of the jurisdiction’s determination to assist foreign judgment creditors in appropriate cases.

The applicant was a foreign judgment creditor seeking general information as to the assets of the judgment debtor. The judgment debtor had been subject to an overseas freezing injunction which he had failed to comply with and had been held in contempt of court for failing to provide disclosure of his assets. The applicant believed that the BVI registered agent had information regarding the beneficial owner’s assets and, in the light of the non-compliance with the freezing injunction, that the beneficial owner was using BVI Companies to conceal his assets. The applicant therefore sought disclosure from the registered agent in order to police the freezing injunction, to discover assets the judgment debtor may have concealed with BVI corporate vehicles registered with the same corporate service provider and to discover possible leads for asset tracing or execution efforts. While the respondent registered agent remained neutral – caught between its duty of confidentiality and its duty of disclosure under any Court Order – it properly sought to test the application and raised a number of important arguments for the Court’s consideration.

Mr Justice Gerhard Wallbank held that Norwich Pharmacal relief post judgment in aid of enforcement was in principle available (a) where there is reasonable suspicion for believing that a disclosure defendant is mixed up in the wilful evasion of another’s judgment debt and (b) to assist in securing compliance with freezing orders, domestic and foreign.

The English Court of Appeal in NML Capital Ltd v Chapman Freeborn Holdings et all [2013] EWCA Civ 589 had doubted whether jurisdiction existed post judgment, in relation to assisting a judgment creditor, save in very particular and restricted circumstances. In essence, the English court expressed the view that, in the case of a judgment creditor, a Norwich Pharmacal could only be obtained against an innocent third party if there was cogent evidence of wilful evasion by the judgment debtor.

Mr Justice Wallbank in holding that there was jurisdiction post judgment, decided that it was not necessary to identify a specific transaction where the alleged wrongdoer had transferred assets to the BVI corporate vehicle for no reason other than to avoid execution. It was sufficient if the applicant could show there was evidence of a deliberate effort to obstruct or frustrate enforcement such that it would support a reasonable suspicion of wilful evasion.

He held that there was no distinction between a company which was created for the purpose of concealing assets wrongfully and a company which was created for a legitimate purpose and which then evolved into something used wholly or partially illegitimately. The mere fact of being a registered agent for a corporate was sufficient to make a finding that a registered agent was involved (or “mixed up”) in the company’s affairs even if the registered agent does not know what the company is being used for.

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