Using Receivers to Recover Out of Reach AssetsCate Barbour, Associate, and Jennifer Fox, Senior Associate, Walkers, London, UK and British Virgin Islands
Disputes between companies engaging in international business in both onshore and offshore jurisdictions are commonplace. The variety of the multijurisdictional elements involved is as broad as the wide range of offshore structuring options available to the entities themselves or in respect of their assets. Given the sophistication and variety of the offshore involvement in international business it is not always possible to formulate an asset recovery strategy at the outset of a dispute with any certainty of its ultimate effectiveness. Once a judgment has been obtained, complicated issues may arise when a successful party is left trying to enforce a judgment in a number of different jurisdictions or where there are various obstacles in the way of making any effective recoveries.
Obtaining a judgment is often only a first step to recovering money, and where payment is not forthcoming within a reasonable timeframe, time consuming and potentially expensive enforcement proceedings can become a necessity. This process might be complicated further where the judgment creditor has been the victim of a fraud and assets have been spread across a number of jurisdictions (both offshore and onshore), or placed in structures deliberately designed to make enforcement problematic. In such cases relevant information may be scant and simply unavailable and it may be difficult to identify and value those assets, which may itself hamper the enforcement process.
The Courts in offshore jurisdictions have demonstrated an increasingly flexible attitude toward the appointment of receivers as a method of preserving or recovering such property and for asset-tracing, where other asset recovery strategies may fail. We review below a number of recent cases from these jurisdictions where the appointment of an equitable receiver has represented an increasingly attractive method by which to overcome these difficulties. This remedy may be particularly useful where the underlying assets are held by way of shares in BVI or Cayman Islands’ companies or through a trust.
Circumstances in which receivers may be appointed
The appointment of a receiver is ordinarily regarded as a remedy of last resort and they are usually appointed
ex parte where the court is faced with allegations of fraud and immediate action is needed to prevent the Court’s orders from being rendered futile. There are two specific cases in which appointment is classically made. First, where the applicant already has an existing right to the property to be preserved (the claimant must have good prima facie title and the property that is the subject matter of the proceedings must be at risk of dissipation and a freezing order is unlikely to be effective). Second, a receiver is often appointed ‘to hold the ring’ i.e. where it can be established that it is necessary in order to preserve property to ensure its proper management pending litigation to decide the rights of the parties to that property. Receivers may be appointed over any property be that shares, contractual rights, partnership interests, or even more controversially in respect of retained powers arising under a trust (where a sufficient proprietary interest may be discerned).
As shall be seen from the cases discussed below there is an increasing number of circumstances in which the appointment of receivers might be an option in order to increase the prospect of making successful recoveries.