When the Legal Practitioners Act, 2015 (the “LPA”) came into force in the British Virgin Islands (the “BVI”), it rewrote the rules governing the legal costs that parties to BVI court proceedings can recover from their opponents. Some of the LPA's implications for costs recovery have only become apparent from a series of judgments delivered over the past year. These will be of particular relevance to lawyers practising BVI law overseas and, equally importantly, to their clients.
The legislative scheme
The “loser pays” principle, also known as the “English rule”, has always applied in BVI litigation. This is the policy that the losing party in court proceedings should reimburse the winning party for its legal costs. This is a general rule only and, of course, there are qualifications and exceptions.
This general rule is enshrined in the Civil Procedure Rules which apply in (relevantly) proceedings in the Commercial Division of the BVI High Court, and in appeals brought from decisions of the Commercial Division to the Court of Appeal of the Eastern Caribbean Supreme Court (of which the BVI High Court is a member).1 The “loser pays” principle applies to interlocutory applications as well as to substantive proceedings, such as claims and appeals. In practice, the tasks of ruling on which costs are allowed and of assessing the amount to be awarded pursuant to a costs order made in either Court fall almost invariably to the Judges sitting in the Commercial Division.
Prior to the LPA's commencement, the recoverability of fees charged by foreign lawyers pursuant to a costs order made in a party's favour was “governed by the common law principle that those fees were recoverable if they were necessarily and reasonably incurred and claimed as a disbursement on the schedule of costs of the BVI admitted legal practitioner”.2 Foreign lawyers' fees were typically allowed on assessment at similar rates to BVI legal practitioners' fees.
The LPA changed this. Its provisions include the following:
- Section 15(1) provides that “no person may practise law in the [BVI] unless he or she is the holder of a valid practising certificate”;
- Section 15(10) provides that a person who “practises law in the [BVI] without first obtaining a practising certificate commits an offence”;3
- Section 18(1) provides “where a person whose name is not registered on the Roll” (relevantly) “practises law”, “he or she commits an offence”.4 The “Roll” is the register of BVI-admitted legal practitioners maintained by the Registrar of the BVI High Court;
- Section 18(2) provides that “[a] person who, not being entitled to act as a legal practitioner, acts in any respect as a legal practitioner in any action or matter or in any court in the name or through the agency of a legal practitioner entitled so to act, commits an offence”;5 and
- Section 18(3) provides that “[n]o fee in respect of anything done by a person whose name is not registered on the Roll or to whom subsection (2) relates, acting as a legal practitioner, is recoverable in any action, suit or matter by any person”.
Admission to the Roll
It follows from these provisions that admission to the Roll is fundamental to the recoverability of legal fees in BVI litigation. Once a legal practitioner has been admitted to the Roll, and unless he or she is later struck off or suspended from practising law, the prohibitions in section 18 of the LPA will not prevent the recovery of his or her fees.
Not every provision in the LPA has been brought into force. Sections 10-13, 16-17 and 45-47 have not yet commenced, but if in future they do commence they will introduce a new regime for the admission of BVI legal practitioners, for the issue of practising certificates to non-BVI residents and for the temporary admission of foreign lawyers. At present, there is no such thing in the BVI as temporary, limited, pro tem or pro hac vice admission. On the other hand, there is no residency requirement either, so there is no immediate need for any circumscribed form of admission.
Until those provisions commence, admission applications will continue to be governed by Part IV of the Eastern Caribbean Supreme Court (Virgin Islands) Act (Cap. 80). This allows a Judge of the BVI High Court to grant BVI admission to inter alia any solicitor or barrister admitted in England, Scotland or Northern Ireland.
The practice has varied over time, but admission applications for partners or associates of BVI law firms, or of international law firms with BVI offices (regardless of whether the applicant is based in the BVI office or an overseas office), have generally been heard by a Judge in the Civil Division of the BVI High Court. Admission hearings have been held via videoconference during the coronavirus pandemic, but the requirement for the applicant to attend the hearing in person (i.e., on island in the BVI) is now recommencing.
Again, the practice has varied over time, but admission applications for foreign barristers, such as English counsel who have been briefed to appear at hearings in the Commercial Division, have generally been dealt with by the presiding Judge immediately before the hearing commences. Hearings in the Commercial Division are still being conducted by videoconference and it is yet to be seen whether the Court will insist on those barristers having to travel to the BVI for admission prior to appearing in the Commercial Division.
Oddly perhaps, the holding of a current practising certificate is not a statutory prerequisite to fee recovery. A person who practises law in the BVI without holding a current practising certificate will commit an offence which, arguably, may warrant the disallowance of his or her fees on illegality or public policy grounds. A person who practises BVI law outside the BVI, however, will not commit any offence, and provided that his or her name is on the Roll it does not matter whether he or she holds a current practising certificate.
Although the new practising certificate regime in section 15 of the LPA has commenced, the transitional provisions in section 67 also remain in force. Pursuant to these transitional provisions, practising certificates are granted to and renewed for BVI-admitted residents and non-residents alike, upon the registration of certain details with the Registrar of the BVI High Court and payment of the fee. Under section 67(4) of the LPA, the fee is US$1,000 for BVI residents and US$1,500 for non-residents.
Practising BVI law outside the BVI
Another provision of the LPA which never commenced was section 2(2). This would have purported to give the LPA extra-territorial effect, by extending the definition of “practising law” to include practising BVI law outside the BVI. However, section 2(2) was never brought into force and has since been repealed.
This led to an initial misstep when the LPA first received judicial scrutiny. In Garkusha v Yegiazaryan, the Court of Appeal held that the fees charged by a foreign law firm were irrecoverable on assessment and that those foreign lawyers, who were outside the BVI, had been practising BVI law unlawfully in breach of section 18 of the LPA. This was because of the Court's mistaken assumption that section 2(2) had in fact been brought into force.6
The error was soon corrected in Shrimpton v Scriven.7 However, the Court in that case reached the same outcome with respect to fee recovery, by reference instead to section 18(3) of the LPA. As a matter of BVI law, no person whose name is not on the Roll can recover any fee for acting as a legal practitioner, whether he or she does so within or outside the Territory of the BVI and whether or not it involves any breach of section 18(1) or (2). This means that the person's fees must be disallowed on any costs assessment.
Acting as a legal practitioner
What, then, does it mean to act as a legal practitioner for the purposes of the prohibition on fee recovery in section 18(3) of the LPA? This question was further considered by the Court of Appeal in two subsequent cases.
In Gany Holdings (PTC) SA v Khan, the Court held that the fees charged by an English costs draftsman whose name was not on the Roll in the BVI were irrecoverable because the preparation of a detailed schedule of costs for assessment was “solicitors' work” which involved the draftsman acting as a legal practitioner within the meaning of section 18(3).8
In Yao v Kwok, the Court took a “functional” approach to the interpretation of section 18(3), holding that “the court must therefore examine the actual nature of the work done by the persons whose costs are claimed, as against the roles and functions of a legal practitioner in order to determine whether the overseas lawyer was (or was not) ‘acting as a legal practitioner'”.9 Applying this approach, the Court held to be irrecoverable the fees charged in respect of work undertaken by foreign lawyers employed by an overseas office of the international firm whose BVI office conducted the litigation. In so holding, the Court overruled the Commercial Division Judge at first instance, who had looked instead to the capacity in which the foreign lawyers were acting and had decided that their fees for assisting the BVI legal practitioners were recoverable.10
It did not matter for this purpose whether the fees were charged by the BVI office, by the overseas office or even by the individual lawyers themselves. Rather, what mattered was whether the nature of the work for which fees were charged was of a type that should be classified as “acting as a legal practitioner”. The Court also held that, having found that the foreign lawyers were so acting, “any administrative tasks would be incidental to anything done by them if done to assist in the conduct of the litigation” and would therefore be irrecoverable as well.11
The application of the “functional” test prescribed in Yao v Kwok has led to the identification of potential unforeseen consequences in three subsequent decisions of the Commercial Division of the BVI High Court over the past year.
In Re Summer Fame Ltd (In Liquidation), the Court held that certain work undertaken by paralegals prima facie fell foul of section 18(3) of the LPA. Moreover, because the work was undertaken in the BVI, the Court suggested that it may also constitute a criminal offence in breach of sections 18(1) and (2).12
In Re Lenux Group Ltd, the Court suggested that a company director may be prohibited from appearing at a BVI Court hearing on the company's behalf, because “[o]ral advocacy in court is a quintessential function of a legal practitioner”.13 Additionally, the Court noted the possibility that a foreign lawyer who appeared at a BVI Court hearing from overseas via videoconference may be committing a criminal offence under sections 18(1) and (2) by practising law in the BVI.14
In Re the Fees of an English Barrister, the Court refused to authorise payment by the liquidators of a BVI company of the fees charged by an English junior barrister who had provided an opinion, jointly with a dual-qualified English and BVI Queen's Counsel, addressing matters of both English and BVI law.15
Law reform proposals
Unsurprisingly, these decisions have led to calls for legislative reform. The BVI Bar Association is currently considering a proposal to amend the LPA so that paralegals acting under a BVI legal practitioners' supervision are not caught by the criminal prohibitions in sections 18(1) and (2) against practising law and acting as a legal practitioner in the BVI, or by the prohibition in section 18(3) against the recovery of their fees for so acting.
The line between paralegals' work and junior solicitors' work is hardly a bright one, and it will often be to the client's advantage for work that might fall close to the line to be undertaken by a paralegal at a lower charge-out rate than by an associate lawyer. Paralegal work can also provide valuable training for law students from the BVI, and it seems quite unfair to expose them (and their employers) to the risk of criminal sanction for availing themselves of that opportunity.
If the BVI legislature decides to introduce such a proposal, the wording of the amendment, and indeed the objectives of the LPA, will require careful consideration. The Court of Appeal in Yao v Kwok noted the protectionist policy and public interest considerations which led to the LPA's introduction, stating that allowing law firms to “employ lawyers qualified in another jurisdiction to effectively ‘[act] as a legal practitioner' in relation to the conduct of BVI litigation” would “effectively undermine the intent and purpose of the LPA”.16
Unless any amendment is expressly limited to persons acting under a BVI legal practitioner's supervision in the BVI, it may reopen the door to the recovery of foreign lawyers' fees as well as paralegals' fees where the lawyers are acting, like those in Yao v Kwok, under the supervision of a BVI legal practitioner in a BVI firm's overseas office. The wisdom of maintaining the protectionist approach ascribed to the LPA by the Court in that case is beyond the scope of this article.
It is also possible that a future appellate decision may revisit the strict “functional” approach which prevailed on appeal in Yao v Kwok and mitigate its potential harshness by allowing some role for the “capacity” test preferred at first instance. Absent any such reconsideration or legislative intervention, however, some uncertainty will inevitably attend the recoverability of paralegals' fees in BVI litigation.
Implications for costs recovery
In the meantime, the potential implications of these decisions are having consequences for costs recovery in the BVI, with respect to which it pays to be aware.
One such implication arises from the suggestion in Re Lenux Group Ltd that appearing at a BVI Court hearing via videoconference from overseas may constitute practising law in the BVI. Section 15(1) of the LPA provides that no person may practise law in the BVI unless he or she holds a current practising certificate. An overseas-based, BVI-admitted lawyer who fails to pay the US$1,500 annual fee to renew his or her practising certificate will not offend any of the provisions in section 18 by appearing in Court via videoconference but might still commit an offence under section 15(1). In addition to the personal and professional consequences, this might lead to his or her fees being disallowed on illegality or public policy grounds.
Another potential implication, which is not yet the subject of any reported authority in the BVI, concerns the recoverability of foreign lawyers' and paralegals' fees by the employing law firm from its client under a BVI law-governed engagement letter. Where the word “recover” is used elsewhere in the LPA, it refers to a lawyer recovering fees from his or her client.17 Where the words “no fee … is recoverable” are used in section 18(3) of the LPA, they are used primarily in same sense: the section is concerned with protecting the public by preventing persons whose names are not on the Roll from recovering any fees for acting as a legal practitioner. Preventing litigants from recovering their costs for such work from opposing parties is a secondary consequence.18
What effect, if any, does this have on the recoverability of fees charged by the overseas offices of BVI law firms from their clients for work undertaken by foreign lawyers, or by paralegals whose work may be described as acting as a legal practitioner? If the engagement is not governed by BVI law, then perhaps the provisions of the LPA will be irrelevant. If, however, the firm's engagement letter contains a BVI governing law clause, then arguably section 18(3) may prevent the firm from recovering payment from its client for those fees.
The extent of the fees that might be irrecoverable on this basis could be substantial. The Court of Appeal has taken an expansive interpretation of the words “acting as a legal practitioner”, including within their scope the assistance provided by foreign lawyers to overseas-based parties to BVI litigation and the incidental administrative tasks undertaken by foreign lawyers in connection with such litigation.19 The fees that were disallowed for the BVI legal advice given in Re the Fees of an English Barrister did not even concern any active litigation. Unless there is some departure from a strict “functional” approach, the overseas offices of BVI firms may find themselves unable to recover any fees from their clients for the provision of any BVI legal services at all by foreign lawyers where the prohibition in section 18(3) of the LPA is held to apply.
BVI liquidators and receivers and their lawyers will also need to be aware of the decision in Re the Fees of an English Barrister because of a peculiar feature of the BVI's Insolvency Act, 2003 (the “Insolvency Act”). This situation will arise where a liquidator is appointed to a BVI or a foreign company by the BVI Court, to a BVI company by its members under section 159(2) the Insolvency Act, or to a BVI company by its members or directors under section 199(1) of the BVI Business Companies Act, 2004 but where the liquidator then forms the opinion that the company is insolvent. It will also arise where a receiver is appointed over a BVI company's assets by the BVI Court, and potentially where there is an application by a party with the requisite standing under section 134(6) of the Insolvency Act for the Court to fix the remuneration of a receiver or an administrative receiver appointed out of court (at least where BVI law governs the privately appointed receiver's entitlement to remuneration).
In any of those circumstances, the creditors' committee (where applicable) or the BVI High Court will be responsible for fixing the office holder's remuneration. Because of the unusual definition of “remuneration” in section 2(1) of the Insolvency Act, this includes the power to fix the office holder's disbursements, including legal fees.20 This is different to (for instance) an English liquidation or bankruptcy, in which the Court does not “fix” the fees to be paid to lawyers or other service providers but, rather, asks itself whether the office holder paying the invoiced fees was “outside the generous scope of his discretion in these matters [such that] it may be possible to challenge his accounts to the extent that they show that the [office holder] has acted unreasonably or improperly in incurring legal or other costs”.21
Accordingly, where the client is the company in liquidation or receivership, the lawyers will need to ensure that any BVI legal services are provided only by BVI-admitted legal practitioners, or else no fees for those services will be recoverable from the company's assets. Where instead the client is the office holder, the office holder will be an agent of the company for most purposes and will therefore not be liable personally for the lawyers' fees.22 However, some actions can only be brought by a liquidator personally, for instance with respect to voidable transactions under Part VIII of the Insolvency Act. A liquidator may be liable personally for the legal fees incurred pursuing such actions, but his or her entitlement to indemnification from the company's assets for those fees will depend upon the Court's approval. To avoid the risk of personal exposure without indemnification with respect to the fees of non-BVI lawyers, a liquidator in that position would be prudent to insist that the engagement is governed by BVI law and that the lawyers' entitlement to recovery is subject to the Court's approval of the liquidator's indemnification from the company's assets.
Finally, the recoverability of lawyers' fees may be relevant to the terms on which litigation funding can be obtained. Champerty and maintenance remain part of BVI tort law, though they are no longer criminal offences. Nevertheless, there is a well-recognised exception for proceedings brought by bankruptcy or insolvency office holders, and it remains to be seen in what other circumstances a proposed litigation funding agreement will be held not to contravene the public policy considerations regarding the integrity of the judicial process.23 Litigation funders will need to consider which legal costs may be recovered from an unsuccessful opponent when deciding on what terms to fund BVI litigation.
The commencement of the LPA and the Court of Appeal's application of a “functional” test for acting as a legal practitioner, for the purposes of costs recovery under section 18(3) of the LPA, have completely rewritten the rules in the BVI concerning the recoverability of legal fees charged in respect of work undertaken by lawyers or other persons who are not admitted in the BVI. Litigants, law firms, individual lawyers, paralegals, insolvency practitioners and litigation funders operating in the BVI legal services market will need to be aware of these changes and to govern themselves accordingly.
1 See Parts 64 and 65 of the Eastern Caribbean Supreme Court Civil Procedure Rules (“CPR”), esp. Rule 64.6, and, in Commercial Division proceedings, Rules 69B.10-14, which in some respects vary Parts 64 and 65.
2 Garkusha v Yegiazaryan (BVIHCMAP2015/0010; 6 June 2016) at -, citing McCullie v Butler  2 QB 309. See also Yao v Kwok (BVIHCMAP2018/0042; 1 June 2021) at .
3 The penalty for the offence is “a fine of ten thousand dollars and to a further fine of one thousand dollars for every day on which the offence continues after conviction of the person”.
4 The penalty for the offence is “a fine of not less than fifteen thousand dollars or to imprisonment for a term of not less than three years, or both”.
5 The penalty for the offence is “a fine of not less than less than ten thousand dollars or to a term of imprisonment of not less than two years, or both”.
6 BVIHCMAP2015/0010; 6 June 2016.
7 BVIHCMAP2016/0031; 3 February 2017.
8 BVIHCMAP2018/0045 and BVIHCMAP2018/0048; 30 March 2020.
9 BVIHCMAP2018/0042; 1 June 2021 at .
10 BVIHC(COM)2013/0162; 23 April 2020.
11 BVIHCMAP2018/0042; 1 June 2021 at .
12 BVIHC(COM)2020/0055 and BVIHC(COM)2020/0056; 9 June 2021.
13 BVIHC(COM)2020/0188; 28 June 2021 at -. But for sections 18(1) and (2), CPR Rule 22.3 would permit a duly authorised director or other officer to conduct BVI Court proceedings on a company's behalf, though in proceedings in the Commercial Division Rule 69B.4(4) requires companies to be represented by legal practitioners.
14 BVIHC(COM)2020/0188; 28 June 2021 at .
15 BVIHC(COM)[REDACTED]; 6 December 2021.
16 BVIHCMAP2018/0042; 1 June 2021 at .
17 Sections 13 (which is not in force) and 42 and 44 (which are in force).
18 See Shrimpton v Scriven at .
19 See Shrimpton v Scriven at ; Yao v Kwok at .
20 Re Unicorn Worldwide Holdings Ltd (In Liquidation) (BVIHC(COM)2017/0120; 5 July 2018) at -.
21 Engel v Peri  EWHC 799 (Ch) at .
22 Insolvency Act, sections 126, 184.
23 Re Exential Investments Inc (In Liquidation) (BVIHC(COM)2020/0081; 29 September 2020).
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.