10/05/2023

Eastern Caribbean Court of Appeal refuses leave to appeal to Privy Council against BVI winding-up order

Concerning Sian Participation Corp (in liquidation) v Halimeda International Ltd, BVIHCMAP 2021/0017 (decision of 24 April 2023)

On 24 April 2023, the Court of Appeal of the Eastern Caribbean Supreme Court refused Sian leave to appeal to the Privy Council against a judgment of the Court of Appeal (given on 11 November 2022) upholding a winding-up order made by the BVI Commercial Court.

The Court of Appeal’s judgment refusing leave to appeal addresses two important issues:

• It reiterates the legitimacy of the BVI courts’ decision to take a different approach to the English courts in relation to winding-up petitions presented by a creditor where the debt is subject to an arbitration agreement between the company and the creditor. The existence of the arbitration agreement is just a factor to be taken into account when it comes to the exercise of the Court’s discretion whether to make a winding-up order, rather than giving rise to a presumption that the petition should be stayed or dismissed in every case absent exceptional circumstances.
• There is not an automatic right to leave to appeal to the Privy Council in every case concerning a winding-up petition just because the debt in issue is more than the statutory threshold of £300.

The Court of Appeal also reiterated (obiter) that even where there is an automatic right of appeal under s 3(1) of the Virgin Islands (Appeals to Privy Council) Order 1967 (the “1967 Order”) the Court of Appeal still has the power to refuse to grant leave where there is no genuine dispute.

The BVI approach to the interface between the insolvency jurisdiction and the presence of an arbitration agreement is settled following Jinpeng v Peak Hotels and need not be aligned with the English approach in Salford Estates

At first instance Sian had argued that because the loan agreement between Sian and Halimeda included an arbitration agreement, the court should not consider the merits of Sian’s case for disputing the debt, even on a preliminary basis, and should stay or dismiss the winding-up petition unless Halimeda could establish that there were exceptional circumstances that justified the court doing otherwise, in line with the approach taken by the English courts following Salford Estates (No. 2) Ltd v Altomart Ltd [2014] EWCA Civ 1575.

Wallbank J rejected that argument on the basis that the BVI Court of Appeal had considered but specifically chosen not to follow the same approach as the English courts – in particular in Jinpeng Group Limited v Peak Hotels and Resorts Limited, BVIHCMAP2014/0025 – and that the existence of an arbitration agreement was just one of the factors that the Court would take into account when deciding whether to exercise its discretion to make a winding-up order. (Sian’s argument was also rejected on procedural grounds.)

Sian reserved its position on this point before the Court of Appeal, accepting that the Court was bound by the decision in Jinpeng.

In refusing leave to appeal to the Privy Council on this issue, Farara JA, giving the judgment of the Court, said that it was entirely legitimate for the BVI courts to have determined that they should take a different approach to the English courts when it came to exercising the discretion whether to make a winding-up order in circumstances where there was an arbitration agreement between the petitioning creditor and the company. That difference of approach, and Sian’s contention that Jinpeng was wrongly decided, did not amount to an issue of great general and public importance that would justify granting leave to appeal under s 3(2)(a) of the 1967 Order.

A winding-up petition over a debt of hundreds of millions of dollars does not necessarily meet the statutory minimum value threshold for automatic leave to appeal to the Privy Council

Sian contended that it had an automatic right to leave to appeal under s 3(1)(a) of the 1967 Order, on the basis that the liquidation order was a final order and, given the amount of the debt was approximately US$226 million, that the matter in dispute clearly involved, directly or indirectly, a claim to or question respecting property or a right of the value of £300 sterling or more (the “value threshold”).

The Court of Appeal accepted that the winding-up order was a final order, but rejected the argument that the value threshold was met simply because the amount of the debt that founded the winding-up petition was more than £300. As Farara JA pointed out, the judge had not had to make any final decision as to whether the debt was actually due and owing (a fact that was not in dispute between the parties to the insolvency proceedings) but had only needed to consider whether the debt was disputed on genuine and substantial grounds.

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Paul Lowenstein KC and Rupert Hamilton appeared for the successful respondent to the appeal and application for leave to appeal, together with (and instructed by) Andrew Willins and Tamara Cameron of Appleby BVI.