"They Stand and Fall Together" - Privity of Interests in Recognition of Foreign Judgments

A recent decision of the BVI Court in an application to set aside an order for rectification of the register of a BVI company has wider implications for the recognition of foreign judgments in the BVI and the representation of companies in Commercial Court proceedings by individuals (including directors) who are not admitted in the BVI.

Rectification of the register of a BVI company and recognition of foreign judgments

In January 2021, in BVIHC (Com) 0188 of 2020, Justice Jack ordered the rectification of the register of Lenux Group Limited ("Lenux") having recognized the judgment of the English Court in proceedings brought by the claimants against, amongst others, Mr Sergei Pugachev, a Russian businessman and the beneficial owner of Lenux, and Miharo Limited, a New Zealand Company which the English Court determined held all of the shares in Lenux on behalf of Mr Pugachev (despite Mr Pugachev purportedly placing those assets into a discretionary trust for certain beneficiaries). The English court ordered Mr Pugachev and Miharo to effect the transfer of the shares in Lenux to the claimants but they failed to do so. The claimants sought a rectification of the register of Lenux pursuant to section 43 of the Business Companies Act and the principles set down in the case of Wanda Fong Jerrit et al v Meridian International Holdings Ltd et al BVIHCM2019/0135 (4 December 2019 and 4 June 2020 judgments).

Justice Jack held that whilst he did not consider that Miharo had submitted to the jurisdiction of the English Court (because there had been no positive act by Miharo showing that it had accepted the jurisdiction of the English Court), he was able to recognize the English judgment following the decision in House of Spring Gardens Ltd v Waite [1991] 1 QB 241 and applying the principles in Wonda Fong Jerrit. The Court found that Miharo (as trustee) and the beneficiaries shared a common interest in the English proceedings in establishing that there had been a proper discretionary trust and in defeating the claimants’ assertion that the trust assets were held on bare trust for Mr. Pugachev.  The BVI Court held that this was a quintessential example of privity of interest because Miharo had allowed the beneficiaries to argue its case and so "it is common sense that they stand and fall together". Justice Jack consequently ordered the rectification of the register of Lenux, but allowed Miharo a period of 35 days to apply to set aside that order.

Set aside applications and representation of companies

Miharo and Mr Pugachev both applied to set aside the rectification order, however neither appointed BVI legal practitioners to act on their behalf. At the hearing of the applications earlier this month, Mr Pugachev did not file submissions or appear. A director of Miharo attended the hearing and sought to appear on behalf of Miharo. The Claimants argued that Miharo must be represented by a legal practitioner, pursuant to CPR 69B.4(4) which provides that “bodies corporate must be represented by a legal practitioner in all commercial matters.” Justice Jack noted that this rule "appears to give the Court no discretion" but acknowledged that there may be some scope to relax the rule where it is absolutely necessary for a director to appear on behalf of a company, however, Miharo's director had failed to show such a case of necessity. Following the recent decision of the Court of Appeal in Yao Juan v Kwok Kin Kwo & anr [2021] ECSCJ No 577 in the application of the Legal Practitioners Act 2015, Justice Jack held that it is "highly arguable" that the director was "practicing law" in contravention of the provisions of that act.

Ultimately, the BVI Court dismissed both set aside applications on the basis that no adequate grounds had been shown by either party to vary or discharge the rectification order.

Whilst the decision to recognize the judgment of the English Court and rectify the register of Lenux in order to enforce a significant money judgment against Mr Pugachev is on its face a straightforward one, the findings of the BVI Court both in respect of privity of interest in recognition proceedings and the commentary on non-BVI legal practitioners appearing for companies in commercial court proceedings have much wider implications for the jurisdiction. The decision should reassure creditors of the BVI Court's pragmatic approach to enforcement of foreign judgments.

The judgment of Justice Jack dated 14 January 2021 can be found here and the judgment of 23 June 2021 here

Murray Laing and Cate Barbour acted for the Claimants.

BRITISH VIRGIN ISLANDS
Murray LaingPartnerT +1 284 852 2226 murray.laing@walkersglobal.com

DUBAI
Cate BarbourSenior CounselT +971 4 363 7917cate.barbour@walkersglobal.com