The recently published judgment by the Court of Appeal in Amerinvest International Forestry Group Company Limited -v- Kwok Ka Yik provides a useful summary of the test that must be satisfied before permission to serve a claim out of the jurisdiction will be granted.

Background

The Company was incorporated in the BVI and comprised of two directors, Mr. W and Ms. K, who resided in Hong Kong. The Company owns subsidiaries in Hong Kong which over time submitted various documents to the Hong Kong Company Registry for filing. Based on representations made by Ms. K as to, inter alia, ownership of the Company's shareholders and her unlawful removal as a director of the Company, the Hong Kong Registry refused to register the documents. This decision was appealed and subsequently adjourned to allow proceedings to be commenced in the BVI.

A claim was filed in the BVI seeking directions as to the identity of the directors and shareholders of the Company. Ms. K was the only named defendant and permission to serve out of the jurisdiction was duly sought on the basis that the subject matter of the claim related to the constitution, administration, management or conduct of the affairs and ownership and control of a BVI company. The Judge at first instance concluded that there was no issue in the BVI jurisdiction about the Company's membership or constitution of its board.

Service out of the jurisdiction

The applicable principles to be applied in relation to service out of the jurisdiction are captured in the case of AK Investment CJSC and others -v- Krygyz Mobil Tel Ltd and others1 and were restated in Nilon Ltd and another -v- Royal Westminster Investments SA and others.2 On an application for service out of the jurisdiction, three requirements have to be satisfied.

First, the Claimant must satisfy the Court that in relation to the foreign Defendant there is a serious issue to be tried on the merits, i.e. a substantial question of fact or law or both. Second, the Claimant must satisfy the Court that there is a good arguable case that the claim falls within one or more classes of case in which permission to serve out may be given. Third, the Claimant must satisfy the Court that the BVI is the appropriate forum for the trial of the dispute.

Court of Appeal decision

The Court of Appeal found that Ms. K's allegations related to the Hong Kong subsidiaries and ownership and directorship in the shareholders of the Company. It held that the Judge at first instance was right to hold that there was no serious issue to be tried as it relates to the constitution of the membership and directorship of the Company, as the Company knows who its members and directors are. The real issue was the Hong Kong Registry's refusal to register the documents related to the Hong Kong subsidiaries. Accordingly, the Judge was right to conclude that any question about changes to the boards of the Hong Kong subsidiaries was something exclusively within the jurisdiction of the Courts of Hong Kong. Merely because the basis provided by the Hong Kong Registry for its decision suggests some perceived dispute about the membership and directorship of the parent company of the Hong Kong subsidiaries in the BVI, does not bring about a dispute in the BVI concerning the membership and directorship of the Company. Accordingly it found that the appellant failed to show any issue relating to the constitution, administration or control of the Company which engages the gateway provided by CPR 7.3(7) for service out.

Conclusion

Service out of the jurisdiction is one of the fundamental issues affecting BVI companies involved in multijurisdictional disputes. Accordingly, in order to avoid issuing in the wrong jurisdiction, and erroneously incurring costs by doing so, the key principles must be understood and applied. In Amerinvest the Court rightly refused to countenance the appellant's attempt to sidestep the gateway provided for by CPR 7.3(7) and in doing so ensured that the Court's time and resources were not wasted. Accordingly the Court should be commended for correctly applying the applicable principles and ensuring that the dispute was remitted to the appropriate jurisdiction and forum. As the Judge at first instance forcefully stated "I am not prepared to allow litigation in this forum in order to resolve by the back door an issue which is appropriately to be resolved in the Courts of a friendly foreign jurisdiction". The salutary lesson from this decision by any would-be litigants is obvious but often missed, namely to ensure that the legal analysis with sufficient foresight as to such fundamental matters as jurisdiction, is carried out before issuing a claim. Remembering to have clarity as to what relief is being sought and, accordingly, whether the BVI is the appropriate jurisdiction to obtain it is essential. As can be seen, the Court will not tolerate attempts to circumvent its established principles by commencing inappropriate litigation in the wrong jurisdiction and the consequences of this are sometimes missed by claimants being advised in jurisdictions where the costs consequences are not identical. While this case was a refusal to grant permission and the consequences expensive enough, had this been an appeal against a decision to grant permission then both sides' costs would have resulted on the Claimant. While we have seen a welcome expansion of gateways permitting service out of the jurisdiction in recent years, the BVI remains robust on management of these gateways and strategic advice from the outset remains key to ensuring that costs are sensibly incurred.

Footnotes

1 [2011] UKPC 7 2 [2011] UKPC 6

2 [2011] UKPC 6

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.