British Virgin Islands: English Maritime Case Raises CPR And Legal Capacity Issues For BVI Litigants

Last Updated: 24 November 2015
Article by Hazelann E. Hannaway

The recent English decision Maritime Investment Holdings Inc v Underwriting Members of Syndicate 1183 Lloyd's and Others involving a BVI claimant in an insurance claim for a motor yacht's hull damage, raised a number of important issues relevant to BVI civil procedure, three of which are of special note. The Court gave instructive guidance on the re-opening applications heard in a party' absence, approach to security for costs and the pivotal question of a claimant's legal standing to commence or continue litigation whilst dormant.

In a twist of misfortune, the Claimant's solicitors applied to come off the record immediately before the security for costs application and its demitting solicitors appeared with only instructions to seek an adjournment. The presiding judge refused to adjourn, proceeded with the Defendant's application and the Claimant was ordered to pay £360,000 security for costs covering steps in the proceedings up to the exchange of expert evidence with £12,000 in assessed costs of the security for costs application by prescribed dates. The Defendant was given liberty to apply for striking-out in the event of default and the Claimant had liberty to apply for variation or setting aside. The Claimant applied for a variation of both orders before the dates for compliance expired, with new material in support of its variation application. The Insurer Defendant responded with an application for the claim to be struck-out for non-compliance. An interim order was made staying the proceedings pending resolution of the respective applications.

Variation or Setting Aside

On the substantive hearing of the applications, the court rejected arguments that liberty to apply was given to allow the Claimant to explain its absence or merely submit a skeleton in opposition, because those points were canvassed in support of the adjournment request and already refused. Instead, the court relied on MA Lloyd & Sons Ltd v PPC International Ltd and ruled that the court will not readily allow a party absent from a hearing to re-hear an application, even with express liberty to apply for variation or setting aside. However, the court recognised that the CPR power to vary or set aside orders made in a parties' absence was an unfettered discretion in keeping with the dicta in Tibbles v SIG. For the BVI, this power is governed by CPR 11.18. Instead, the court's view was that before an order is set aside or varied something out of the ordinary is required, the prime example being a change of circumstances or a material mistake. Whilst the new material supported a contention that the security for costs order could stifle the claim, it did not refer to recent events capable of constituting a change of circumstances and did not contain evidence of the court being misled or mistaken.

Security for Costs

In the end, a fundamental consideration in the court's rejection of the application to vary was the absence of special circumstances. This is a point which came to a head in the Cayman Islands in Caribbean Islands Development Ltd (in Official Liquidation) v First Caribbean International Bank (Cayman) Limited where the Claimant liquidator, seeking the security for costs variation, advanced no change of circumstances. Instead, it was merely a financial decision 'the liquidator's choice' as the court put it, to substitute an Insurance Bond in the place of the order for payment in of the security. Matters were compounded by the fact that the Claimant's variation application was made by Summons on the day of the Defendant's strike-out application, well after the expiration of the period for compliance with the unless order for security for costs. It was found that there was no promptitude in the making of the application and there had been many other instances of non-compliance by the Claimant. These are all relevant factors for successfully seeking relief from sanctions (such as the sanctions imposed by unless orders for security for costs) in the BVI under the CPR 26.8. In Maritime the other factor for rejecting the application for varying security for costs was that whilst the Claimant advanced evidence that security could stifle the litigation, the Claimant erred by failing to provide full and candid information about its means and options for financing.

These factors remain relevant in the BVI. That is so notwithstanding the BVI Commercial Court's useful but restrictive guidance in Wang Zhongyoung & Others v Union Zone Management Limited & Others, where Bannister J rejected the traditional approach to Nasser v Bank of Kuwait as obsolete and ruled that the BVI court would not readily grant security for costs orders against non–resident claimants, merely because of the litigant's non-resident status. Instead, security for costs orders must be just in the circumstances. For instance, where prospects of enforcement are so problematic that security is the only just course. Hence, from the BVI court's perspective there is a high bar for security for costs applications to succeed and with Maritime it is equally onerous for the variation of existing orders.

Legal Standing

The third and perhaps the largest issue arising from Maritime is a party's legal capacity to issue or pursue existing proceedings. In Maritime the BVI Company was struck off on 1 November 2014 and remained struck off up to the time of the applications in question. In that matter, the court relied on BVI law concerning the effect of the striking-off and applied Banque Internationale de Commerce de Petrograd v Goukassov, in finding that it is the law of the company's place of incorporation which determines how striking-off affects a company's capacity. As a result, the court also relied on a legal opinion presented in the matter, from our firm, which highlighted the provisions of s 215(2) (c) of the Act, providing that the struck-off company may continue to carry on legal proceedings instituted prior on the company's behalf prior to the striking-off. The court also considered that by s 216 of the Act the struck-off company could continue to exist for another seven years before it is automatically dissolved. The court considered Steans Fashions Ltd v Legal and General Assurance Society Ltd, in that for English Claimant companies struck-off during proceedings, the court would either dismiss or stay the claim pending the Claimant's restoration. However, the court distinguished the position of a struck-off BVI company and refused to dismiss the claim, because by s 215 of the Act that company actually maintains its 'capacity' to carry on the proceedings it is not to be regarded as 'dead' or no longer extant.

From the BVI perspective, the position of either struck off or dissolved companies is clear: neither company can commence or begin a defence in legal proceedings, but by s 215 the struck-off company can continue its defence or its pursuit of the claim, which was commenced prior to the company's striking-off. However, the word of caution from Maritime is that whilst being struck off after litigation commences does not prevent a BVI company from continuing the claim, the court was less optimistic about the struck-off company merely continuing to take steps in that state, because the English court maintained its view that a struck-off BVI company should ultimately seek restoration before the matter concludes.

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.

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