Landmark Receivership Decision Delivered By Guernsey Court

by Robin Pilgrim, LawAndTax-News.com, London

06 June 2006

It emerged this week that a landmark receivership case has been heard by the Royal Court of Guernsey, regarding a $121 million international securities fraud scheme.

According to Ogier, the offshore law firm which acted on behalf of US attorneys DurretteBradshaw, the case represents the first time that an US receivership of a foreign company has been recognised in Guernsey, setting a precedent for all common law jurisdictions.

Simon Davies, partner and head of litigation at Guernsey's Ogier office acted for DurretteBradshaw, and its receiver Roy Terry, along with Paul Clements, partner and head of the dispute resolution department at English solicitors Rooks Rider, to recover the assets of Vavasseur Corp, a company it said had been incorporated in the Bahamas to hide money swindled from investors throughout the world.

Vavasseur was controlled by Terry Dowdell, who is said to have managed an international fraud scheme which raised as much as $121 million from investors in the United States and Europe through the sale of fictitious securities. Funds obtained from investors were traced to a number of jurisdictions including the US, the Channel Islands, the British Virgin Islands and Ireland.

As receiver of the assets, Roy Terry of DurretteBradshaw is acting to recover funds owing to investors defrauded in the scheme. He instructed English solicitors Rooks Rider, who appointed Ogier to seek recognition in Guernsey of the US receivership order, in order to be able to seek recovery of monies lodged in certain bank accounts in Guernsey in the name of Vavasseur.

Mr Terry explained that:

“Our appointment order directs that we recover assets wherever they are found. What has made this effort especially complex is the interplay of law from the various jurisdictions. Proceeding in Guernsey has involved not only gaining familiarity with Guernsey law, but also with relevant laws of the US, UK and the Bahamas.”

Under the current Guernsey corporate laws, the concept of receivership is restricted to a few very specialist fields, notably Protected Cell Companies. In no previous case had the Guernsey courts ever recognised a receiver appointed by a foreign court. In order to do so, the Court relied on applicable English law, which revolved around a somewhat unsatisfactory 1975 English judgment.

Paul Clements, head of dispute resolution at Rooks Rider, observed:

“This was a highly complex factual situation in an area of great legal uncertainty and complexity. Despite the political consensus amongst western governments since 9/11, that asset tracing in criminal cases should be made easier, most legal systems have historically put real obstacles in the way of asset recovery. It is in this, vital, area, that this case has achieved such a breakthrough.”

Ogier has subsequently been successful in obtaining a remittance order from Guernsey's Royal Court so that funds can be paid over to DurretteBradshaw.

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