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Conyers Dill & Pearman has successfully appealed a liquidation order against its client, Spectrum Galaxy Fund Limited, on the grounds that the law had changed after the liquidation order was made, following the Court of Appeal decisions in Westford Special Situations Fund Limited v. Barfield Nominees et al.
In an order made on April 18, 2012, the Court of Appeal of the Eastern Caribbean Supreme Court accepted Spectrum’s argument that the Applicant creditor, who was the assignee of the proceeds of a share of redemption, had to be treated in no better manner than the assignor, and ruled that it was therefore prevented from bringing a liquidation order by reason of Section 197 of the Insolvency Act 2003.
The issue of whether BVI law permits a redeemed shareholder to participate in the liquidation process originally arose following a decision in Westford. At first instance, the Court in Westford held that there was no difficulty: being a redeemed member was no bar to bringing an application to appoint a liquidator.
That decision was appealed, but had not yet been considered when the Spectrum matter was heard at first instance. In March 2011, the Court held that a redeeming creditor does not have locus standi to bring an application to appoint a liquidator, changing the previous stance. Conyers obtained permission for Spectrum to appeal out of time against the liquidation order, due to the uncertainty in the law.
At the full appeal in Spectrum, the court had little hesitation in rejecting the Respondent’s argument that an assignee stood to be treated in a better fashion than an original redeemed member. It seemingly reached this conclusion on the grounds of both statutory construction and policy. Hence, the effect of Westford cannot be avoided by the simple expediency of an assignment.
Richard Evans, partner in the British Virgin Islands office of Conyers Dill & Pearman, acted as lead advocate for Spectrum, assisted by associate Jerry Samuel. Stephen Moverley Smith QC at XXIV Old Buildings acted for Xena Investments Limited, the Respondent.
Full terms of the April 2012 judgment are reserved and awaited.