Supreme Court of Bermuda sets aside recognition order obtained for illegitimate purpose
Transworld Payment Solutions UK Limited’s (the Company) liquidation is one of a number of liquidations arising out of a VAT fraud perpetrated by various companies within the Transworld group. The nature of the fraud was such that the Company has claims (amongst others) for dishonest assistance and breach of fiduciary duty against certain entities and individuals implicated in the fraud. A number of those claims are sufficiently progressed to the point that they have been the subject of pre-action correspondence and are set out in draft points of claim.
In July 2019, the Company’s liquidator obtained an ex parte order in the Supreme Court recognizing his 2014 appointment by the High Court of England and Wales. Following his recognition, the liquidator wrote to a number of entities and individuals seeking detailed information regarding the Company, citing his recognition by the Bermuda Court and threatening to obtain the Court’s assistance if the requests were not met. The Company sought to have the order set aside on the basis that the only actual purpose it served, was to enable the liquidator to gather information for use in the anticipated claims; information which he would otherwise not be entitled to as an ordinary litigant in those proceedings.
The Supreme Court agreed with the Company and, in setting aside the order, placed heavy reliance on the Privy Council’s decision in Singularis v PwC and held that:
- The common law power of providing assistance to foreign office-holders cannot extend to or be utilised for the purposes of gathering evidence to be used in foreign proceedings; liquidators do not stand in a privileged position in this regard.
- Consequently, it is an illegitimate use of the recognition process to seek recognition for that purpose, and, in the absence of any other legitimate reason, recognition should be refused.
The Court did emphasise that should an alternative, legitimate, basis for recognition exist, it would be prepared to grant it. However, it considered that the other grounds advanced by the liquidator were mere "makeweights…lack[ing] any substance" and specifically noted that there were no assets in the jurisdiction for the liquidator to take control of.
