Fraudsters sometimes choose offshore vehicles in their illegal schemes under the mistaken belief that the misappropriated assets will not be found or that the victims of fraud will not be able to identify the fraudsters.
This is completely wrong. The BVI Courts apply a well-known legal maxim originally developed by the English Courts in Lazarus Estates v Beasley [1956] 1 QB 702: "No Court in this land will allow a person to keep an advantage which has been obtained by fraud ... fraud unravels everything."
When can fraud cases be brought in the BVI?
To secure assistance from the BVI Courts in tackling fraud, there must be a nexus to the BVI that engages the Court's jurisdiction. This will invariably involve one or more BVI companies participating in the fraud. The role of the entities located in the BVI, and the circumstances of the individual case, will dictate the extent to which the BVI Courts can assist.
Claims arising out of fraud might be pursued in the BVI in the following circumstances:
1. Where entities that participated in the fraud are located in the BVI
For example, where BVI entities paid or received bribes, where BVI entities are used as conduits through which proceeds of wrongdoing are passed, or where BVI entities enter into sham contractual agreements to conceal the diversion of assets to third parties.
2. Where property situated in the BVI has been transferred for the purpose of defrauding creditors
For example, where the shares of a valuable BVI company are transferred to a third party to put those shares out of the reach of the transferor's creditors.
3. Where the proceeds of fraud are held by an entity located in the BVI, regardless of whether that entity is directly involved in the wrongdoing
For example, where a BVI company used as the vehicle of a fraud holds a bank account in a different jurisdiction, through which it routes the proceeds of its scam.
4. Where fraudulent acts took place in the BVI
Such as the issuing of fake invoices by a BVI company or the issuing of deliberately misleading or untruthful statements by a BVI company to attract investment into a fund.
What are the claims that can be brought to tackle fraud in the BVI?
The term "fraud" can encompass a wide variety of actions that share the common theme of dishonesty, there are various causes of action that can be pursued in the BVI depending on the circumstances of the case. The most obvious ones are as follows:
1. Where fraudulent statements have persuaded people to part with their money or other assets then a tortious claim for deceit may accrue, which would allow the victim to seek compensatory damages. Where a statement has led to the victim entering into a contract then a claim in fraudulent misrepresentation may accrue which will allow the contract to be set aside and/or a claim in damages.
2. A claim in bribery will arise in circumstances where a person or entity pays secret commissions to the agent of a person or entity with whom they are dealing and where the principal has no knowledge of the payment. Such payments will often be made to induce the agent to act other than in the best interests of their principal and to favour the bribe payer in some way, although there is no requirement to prove such inducement (it will be presumed).
3. If the director(s) of a BVI company have misapplied company assets or otherwise acted for an improper purpose, not in the best interests of the company and/or dishonestly then they will be in breach of their fiduciary duties, which gives the company a cause of action against the director(s). In addition, the breach of fiduciary duties by the director(s) may give rise to ancillary claims against third parties that had knowledge of the breach of fiduciary duties (see below).
4. Where there has been a payment of money or transfer of assets in breach of trust or breach of fiduciary duties, then a person or entity receiving the money or assets with knowledge of the breach of duties can be liable in "k...
