BVI: Privy Council Clarifies Standing to Challenge the Decision of a Liquidator

The landmark decision by the Judicial Committee of the Privy Council in Stevanovich v Richardson¹ provides authoritative guidance on the proper interpretation of “person aggrieved” under section 273 of the BVI Insolvency Act, which deals with standing to challenge a liquidator’s decision. 

The judgment confirms the BVI law position on who may challenge a liquidator’s decision and reinforces the long-standing common law principle that insolvency proceedings are plenary proceedings which are primarily for the benefit of the company’s creditors and contributories.

Background

Barrington Capital Group Ltd (Company), a BVI-incorporated investment fund, extended loans to Petters Company Inc (Petters), a US entity which, it later transpired, was operating a Ponzi scheme. Following the collapse of Petters, its US Chapter 11 trustee (US Trustee) was appointed over it.

The Company, which had been placed into voluntary liquidation and dissolved some years earlier, was restored to the register of BVI companies as a company in liquidation on the application of the US Trustee. The US Trustee filed a claim in the liquidation seeking up to US$424m and obtained default judgment against the Company in the sum of US$500m in US court proceedings.

The BVI court-appointed joint liquidators of the Company (Liquidators) admitted Petters’ claim in the liquidation and valued it at approximately US$400 million (Petters Claim), rendering the Company insolvent under the BVI Insolvency Act 2020 (Revised Edition)(Act), because its debts exceeded its assets.

During the relevant period, Mr Stevanovich was the Company’s sole (de facto) director. The Liquidators alleged that the Company suffered loss and damage as a result of Mr Stevanovich’s misfeasance and fraudulent trading and initiated proceedings against him (funded by the US Trustee) seeking a Contribution to the Company’s liquidation estate under the Act (BVI Claim). Mr Stevanovich defended those proceedings and contested the Liquidators’ decision to admit the Petters Claim. If, as Mr Stevanovich alleged, the Petters Claim was wrongly admitted by the Liquidators, the legal basis for the BVI Claim and the Company’s insolvency would fall away and, in the event of his success, Mr Stevanovich intended to invite the BVI Commercial Court (Court) to terminate the Company’s liquidation.

Mr Stevanovich’s Application

Mr Stevanovich applied to the Court seeking the following orders:

1. an order reversing the Liquidators’ decision to admit the Petters Claim under section 273 of the Act; or, in the alternative
2. an order pursuant to the Court’s inherent jurisdiction to direct the Liquidators to apply to the Court under section 210(2) of the Act to expunge the claim.

Mr Stevanovich’s application was dismissed by the Court and his appeal was dismissed by the Eastern Caribbean Court of Appeal.

Mr Stevanovich, being dissatisfied by the Court of Appeal’s decision, appealed to the highest court of appeal under BVI law, the Judicial Committee of the Privy Council (Privy Council).

The Privy Council Appeal

The Privy Council was asked to determine whether:

1. Mr Stevanovich was a “person aggrieved” and thus had standing, under the Act, to challenge the Liquidators’ decision to admit the Petters’ Claim; and
2. the Court has an inherent jurisdiction to direct a liquidator to make an application under section 210(2) of the Act to expunge a claim (and, if so, whether Mr Stevanovich was entitled to invoke that jurisdiction).

The Privy Council’s Decision

The Privy Council handed down its landmark decision on 15 April 2025.

Section 273 of the Act: Standing to challenge a liquidator’s decision

The Privy Council acknowledged that the term “person aggrieved” is not defined within the Act, necessitating judicial interpretation. Drawing from the UK Supreme Court’s decision in Brake v The Chedington Court Estate Ltd² which discusses the equivalent provision in the UK’s insolvency legislation³, the Privy Council emphasised that standing is limited to those individuals whose rights or interests are directly affected by a liquidator’s decision.

In this case, Mr Stevanovich’s interest in the Liquidators’ decision was indirect. His challenge stemmed from his position as a defendant in separate proceedings and not from any direct impact arising from the Liquidators’ decision to admit the Petters Claim. The Privy Council therefore concluded that Mr Stevanovich was not a “person aggrieved“, as required by section 273 of the Act.

Inherent Jurisdiction to order a liquidator to apply under section 210(2) of the Act

The Privy Council held that an application under section 210(2) engages similar principles to those for determining standing under section 273. Therefore, for similar reasons, Mr Stevanovich failed to persuade the Privy Council that he was a proper person to invoke the Court’s inherent jurisdiction to require the Liquidators to seek relief under section 210(2) of the Act.

Commentary

This decision reinforces the principle that insolvency proceedings aim to serve the collective interests of creditors and contributories, confirming that former directors or third parties – “outsiders to the liquidation” – cannot leverage insolvency mechanisms to challenge liquidators’ decisions, unless they can demonstrate a direct and legitimate interest in the liquidation in question.

The Privy Council’s decision underscores the importance of establishing a clear basis for standing when seeking to contest the acts and decisions of liquidators, qualified professionals who are officers of the court, and the narrow interpretation of “person aggrieved” which will be applied by the courts to ensure that mechanisms such as section 273 of the Act are only used legitimately.

The decisions in Stevanovich v Richardson and Brake v The Chedington Court Estate Ltd are likely to be persuasive authorities in other common law jurisdictions. For example, Hong Kong’s insolvency regime⁴ includes similar provisions to that seen in the BVI and UK insolvency legislation discussed above. It is therefore likely that the Hong Kong Court, which has yet to analyse the proper interpretation of “person aggrieved” in this context in detail⁵, would find the reasoning of the Privy Council and the UK Supreme Court persuasive and come to a similar conclusion on the question of who is entitled to challenge the decisions of Hong Kong liquidators.

This article provides a high-level overview of the Privy Council’s decision. Our global Fraud and Insolvency team offers expert advice on complex, cross-border insolvency proceedings in the British Virgin Islands, Hong Kong, London and elsewhere. Should you need further guidance, please contact our BVI team or your usual HFW contact(s).

Footnotes

1. [2025] UKPC 18.
2. [2023] UKSC 29.
3. Section 168(5) of the Insolvency Act 1986.
4. Which is set out in the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap 32).
5. In Eagle Queen Co Ltd & Anor v First Bangkok City Finance Ltd 2 HKLR 71 (CA) the Court of Appeal touched upon this point, but their decision focuses on the liquidator’s conduct.