Maritime Investment Holdings Inc v Underwriting Members of Syndicate 1183 At Lloyd's & Ors

The court considered competing applications arising from an order of Carr J that the claimant (a British Virgin Islands incorporated company) provide security for the defendants' costs of expert evidence in the sum of 360,000. Key issues were whether the claimant, whose name had been struck off the BVI register, had capacity to pursue applications; whether Carr J's order should be varied or set aside; and whether the claim should be struck out for non-compliance.

The judge held that under BVI law a struck-off company may continue in existence for a period and may continue proceedings, and that the mere fact of striking-off did not require dismissal of the claim. However, Carr J's order for security should not be varied because the new material did not demonstrate a material change of circumstances or that the judge had been misled; Carr J had properly concluded there had been insufficient, full and candid disclosure of means. The court gave MIH a final opportunity to comply: the claim will be dismissed unless 360,000 is paid into court by 4.00pm on 2 October 2015, and until then the proceedings are stayed.

Background and nature of the claim: The claimant, an assured under a hull and machinery policy, sued insurers for an indemnity of $2 million or damages for the alleged total loss of a motor yacht. Defences included non-insured peril, contributory negligence/want of due diligence, misrepresentation avoiding the policy, and undervaluation.

Procedural posture: On 6 March 2015 Carr J ordered security for costs in specified terms and directed payment of the defendants' costs of the security application. MIH did not attend that hearing; subsequently MIH (through its sole director/shareholder, Ms Kathryn Straub) applied to vary or set aside Carr J's order and to postpone disclosure. The defendants applied to strike out the claim for failure to comply with Carr J's order. Burton J stayed the proceedings on 16 April 2015 pending resolution of these applications.

Issues framed:

• Whether a BVI company struck off the register has capacity to continue proceedings and to make applications in English proceedings;
• Whether Carr J's order for security for costs should be varied or set aside in light of further evidence;
• Whether the claim should be struck out for non-compliance with the security order;
• Whether the time for payment of the defendants' costs should be extended and whether disclosure directions should be postponed.

Courts reasoning and conclusions: The judge held that the effect of a company being struck off is governed by the law of incorporation: under the BVI Business Companies Act 2004 a struck-off company can continue to exist for a period (seven years before automatic dissolution) and may continue proceedings instituted prior to striking-off, and further can be restored. Accordingly the court would not treat MIH as dead or automatically remove its capacity to pursue the litigation. Questions about authority to act for a struck-off company and about the participation of its director were noted but did not prevent the court determining the applications on the assumption the applications were effective.

The judge refused to vary or set aside Carr J's order. Applying the established principles that a court will only re-open a previous order in exceptional circumstances (for example material change of circumstances or a material mistake/misleading), he found no such basis: the additional evidence did not show a material change nor that Carr J had been materially misled. Carr J had been entitled to conclude that MIH had not made full and candid disclosure of its means or of potential funders, and that there remained a veil over the funding and Mr Bergers (a third party funder) position. The judge emphasised the requirement to provide full disclosure when asserting that security would stifle a claim.

However, rather than strike out immediately, the court gave MIH a final opportunity to comply: the claim would be dismissed unless the ordered security of 360,000 was paid into court by 4.00pm on 2 October 2015. Until payment the proceedings remain stayed, with liberty to the defendants to apply to lift the stay. The judge adjourned the claimants application on postponement of disclosure as of no practical significance while the stay remains in place, and directed that consequential applications be made in writing.

First instance: The court refused to vary or set aside Carr J's order for security for costs. The claim is to be dismissed unless the claimant pays 360,000 into court by 4.00pm on 2 October 2015; until payment the proceedings are stayed. Rationale: under BVI law a struck-off company may continue proceedings; however Carr J was entitled to find MIH had not given full and candid disclosure of means and there was no material change or misdirection to justify reopening her order.

Prior steps in the litigation described in the judgment: Carr J made the order for security for costs on 6 March 2015 and awarded the defendants' costs of that application; Burton J ordered a stay of the proceedings on 16 April 2015 pending resolution of the applications concerning the security order.