The recent first instance decision in Rangecroft Limited v. Lenox International Holdings Ltd BVIHC (Com) 37 of 2020 (unreported, 6 July 2020) is an interesting and potentially far reaching one. If followed by other Commercial Court judges (and upheld by the Court of Appeal), it would substantially alter the way in which liquidation applications are approached in the jurisdiction, particularly where there is an arbitration clause in the agreement from which the petition debt is said to arise. It is a decision of which all commercial practitioners with practices including the BVI should be aware.
In summary, the case concerned an application to appoint liquidators over Lenox (a BVI company) by Rangecroft (a Cypriot company). The underlying petition debt was said to have arisen under the terms of a loan agreement (“the Loan Agreement”) between Rangecroft and Lenox (the debtor). That agreement contained a standard form arbitration clause providing that any dispute arising out of or connected with the loan agreement shall be resolved by arbitration (in this case an LCIA arbitration).
Following unsatisfied demands for repayment, Rangecroft issued an originating application to appoint liquidators over Lenox in March 2020. In accordance with well-established and judicially endorsed practice, Rangecroft chose not to serve a statutory demand prior to issuing the liquidation application.
In its response to the liquidation application, Lenox claimed inter alia that the debt was not in fact due and owing under the terms of the Loan Agreement. It also raised two cross-claims which it claimed exceeded the debt (if due). As a final fall-back argument, Lenox asserted that even if the court accepted that there was no genuine and substantial dispute about the petition debt, the court should nevertheless exercise its discretion and dismiss the application, given the existence of the arbitration clause. In essence, Lenox ran Sparkasse and Bayoil defences to the application.
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Rangecroft v. Lenox: Statutory Demands, Arbitration Clauses and s.18 of the Arbitration Act 2013