Underhand tactics to avoid paying a creditor under a court order are likely to backfire, even if the conduct involved was in fact lawful. The commercial lawyers at Bahamas law firm ParrisWhittaker are specialists in advising business clients on disputes and their responsibilities under any court order made against them.
A significant ruling1 from the UK’s Court of Appeal, which has important persuasive authority on the courts in The Bahamas, is a salutary warning that poor conduct – even if not in itself illegal – with the intention of trying to reopen a court order, could be a poor move.
In this case, the commercial defendant (Berenger) authored its own change in circumstances – then asked the court to discharge a receivership order arguing that there was a material change in circumstances. The court refused on the basis the application amounted to an abuse of process.
What’s the background?
£25m worth of an individuals’ assets were made the subject of a worldwide freezing order. A receivership order was also made in respect of membership shares in a company linked to the individual.
Berenger, a foundation incorporated in Liechtenstein, accepted the instructions of the individual (a beneficiary of the foundation) to formally exclude him as a named beneficiary. The intention was Berenger would then argue he no longer had an interest in the assets.
Berenger then asked the court for the receivership order to be discharged on the basis of a material change in circumstances or on the basis the order should not have been granted.
The appeal court rejected Berenger’s appeal against the lower court’s dismissal of its application. It ruled that there could not be a clearer example of a wrongful and abusive process. It made clear that proceedings can be struck down as an abuse of process where there has been no unlawful conduct; no breach of procedural rules; no collateral attack on a previous decision; or dishonesty or other reprehensible conduct.
If a party tries – as Berenger did here – to reopen an order on the basis of a material change of circumstances wholly within that party’s control, it can amount to an abuse.
What does this mean?
Any party, such as a debtor, considering going back to court in an attempt to undo a court order in reliance on something it has done since the order was made, can expect the application to be rejected. It is clear that an applicant’s conduct, while perfectly legal, can be such that the court could treat any ensuing application as an abuse of process.
That’s not to say there will not be legitimate circumstances where a party has genuine reasons for making an application to the court. But caution must be exercised if there are any doubts as to the impact of any conduct preceding to the application.
How can we help?
We advise and represent commercial creditors and debtors on their rights and obligations under contract and as a result of any court orders where there is a dispute. We strongly advise you to take specialist advice before taking any steps against another party.
Contact the expert commercial lawyers at ParrisWhittaker for strategic advice and representation.
1JSC VTB Bank (a company incorporated in Russia) v Skurikhin and others [2020] EWCA Civ 1337
