On 30 March 2020 the Eastern Caribbean Court of Appeal handed down its much anticipated judgment in Paraskevaides v Citco Trust Corporation and ors, which provides important guidance for those seeking urgent injunctive relief on an ex parte basis and clarifies principles that are commonly applied by the BVI Commercial Court.
In the first of two blogs, we consider the Court’s conclusions regarding the applicants’ standing to seek injunctive relief as beneficiaries of a trust. A second blog will follow on the principles clarified by the Court of Appeal regarding applications for injunctive relief.
The factual and procedural background
The dispute in Paraskevaides concerned the ownership and control of a group of companies that had formerly been part-owned and managed by a well-known Cypriot businessman and philanthropist, George Paraskevaides. Mr Paraskevaides held his interests through four BVI companies.
Following Mr Paraskevaides’ death, there was a dispute between Mr Paraskevaides’ immediate family members as to how shares in the BVI companies were held and who could deal with them. The claimants (Mr Paraskevaides’ wife and daughter) argued that they were the beneficiaries of a trust which held the BVI companies and they sought to prevent an administrator, appointed by the Cyprus Court over the late Mr Parskevaides’ estate, from taking steps to change the management and control of the BVI companies.
The claimants initially obtained an injunction preventing the Cypriot administrator from changing the management and control of the BVI companies and their subsidiaries. However, the injunction was discharged following an inter partes return date hearing.
The claimants appealed the discharge and sought the re-imposition of the injunction. One of the issues before the Court of Appeal was whether the claimants had standing to seek injunctive relief to prevent interference with trust assets.
Trust actions and direct claims by beneficiaries
In overturning the BVI Commercial Court and setting aside the discharge order, the Court of Appeal handed down a detailed judgment dealing with numerous principles of importance. These included the following points relating to claims made in relation to trust property by beneficiaries of the trust:
- it may be possible for the beneficiary of a trust to assert a direct claim to prevent unauthorised interference with trust property by a third party.
- where a trust has no trustee in office, this justifies a beneficiary pursuing a derivative claim in respect of trust assets against a third party as otherwise be no one else who could bring the claim to protect the trust property.
This decision ensures that there are mechanisms available to prevent unlawful interference with trust assets, at least pending determination of the substantive dispute, even though a trust would usually only be entitled to act through its trustee.
Custodians of bearer shares beware
The Court of Appeal was also critical of the actions of the custodian of the bearer shares in the BVI companies, who had initially indicated that it would not take any action in respect of the shares pending determination of an ongoing ownership dispute. The custodian was, along with the Cypriot administrator and his Cypriot companies, ordered to pay the Claimant’s costs. This serves as a stark reminder for custodians of BVI bearer shares that, if there be any uncertainty as to the validity of instructions they receive, they should seek directions from the court before taking any action.
Harneys, along with Vernon Flynn QC (Essex Court Chambers), Daniel Warents (XXIV Old Buildings), acted for the successful appellants.