As the global footprint of Belize's international financial services industry expands, so too does the volume and complexity of domestic litigation stemming from this sector. This includes asset recovery actions arising from the regrettable misuse of Belize companies and structures in the perpetration of fraud. Belize's courts have proven willing, adept and invaluable in coming to the aid of victims of dishonesty.
II LEGAL RIGHTS AND REMEDIES
Belize, a former British colony and member of the British Commonwealth of Nations, is governed by a Westminster style parliamentary democracy on the basis of a written Constitution. English common law therefore forms the basis of Belize's legal system. It is expressly incorporated into Belize law.
As it relates to actions stemming from fraudulent or dishonest conduct, compensatory remedies that can be sought in Belize generally include those that are available at English common law. Victims of dishonesty may seek compensation by way of private law court actions brought as actions in tort, particularly those torts relating to fraud and dishonesty, or as asset-tracing actions, which are primarily based on common law trust principles.
i Civil and criminal remedies
Compensatory remedies that can be sought against the person who committed the fraud primarily include damages, orders for the payment or return of money, orders to give an account and orders for the delivery-up of property. Such remedies would be based on the following causes of action that are known to Belize law:
- breach of trust;
- money had and received;
- fraudulent conversion;
- fraudulent misrepresentation; and
With the exception of remedies for fraudulent misrepresentation, these compensatory remedies can also be sought against the persons who assisted the fraudster. They can also be sought against third parties who may have received or helped to transmit the proceeds of fraud. In addition, the following causes of action may also be available against such third parties:
- knowing receipt; and
- dishonest assistance.
The above causes of action are actionable in the Belize Supreme Court where the value of the claims exceeds approximately US$7,500.
Most often, victims of fraud require immediate and effective relief. Cases can be brought relatively quickly: that is to say, generally within the time required for preparing and filing adequate pleadings. The procedural rules of the Belize Supreme Court, the Belize Supreme Court (Civil Procedure) Rules 2005, allow for applications to be brought without notice in the first instance and treated on an urgent basis. This means that an aggrieved person may file an action promptly and have it heard within a reasonably short time. Common experience is that these actions would be heard within about three to five days of filing depending on availability on the court's calendar of pending actions.
The usual periods of limitation provided for under Belize law apply equally to asset-tracing and recovery actions. There is generally a period of limitation of six years from the date on which the cause of action accrued to the claimant. This applies to actions in both contract and tort.
To bring a claim for compensatory relief, a claimant must be able to show that he or she has an actionable cause of action against the defendant or defendants. That cause of action must be one known to Belize law. The Supreme Court of Belize must have jurisdiction to determine the particular dispute. It must also have jurisdiction over the parties to the dispute and all parties that may be joined in the action before the Court. Alternatively, a claimant may show that he or she has a judgment against the defendant or defendants that remains unsatisfied. This especially applies where that judgment is one enforceable in Belize, whether enforceable according to the provisions of Belize's Reciprocal Enforcement of Judgments Act,2 or otherwise enforceable.
A claimant may have standing in his or her own right. A claimant may also have standing to bring an action in a trustee or representative capacity.
As far as the requirements to bring these actions can be generalised across the various causes of action outlined in this chapter, it is fair to say that a claimant must be able to show:
- that he or she has been the victim of some fraud or dishonesty;
- that the fraud or dishonesty was perpetrated by the defendant or defendants;
- that the fraud or dishonesty has caused the claimant or claimants loss;
- the extent of the actual loss; and
- that the above circumstances have given rise to a valid cause of action that is actionable in Belize as against the defendant or defendants.
Where the action is brought as a tracing action, the claimant must also be able to show that he or she is the owner of the property being traced or has a valid claim to that property, for example as a judgment creditor under a judgment that is due for payment and remains unsatisfied.
ii Defences to fraud claims
The main elements of the defences to these actions, particularly those based on fraudulent misrepresentation and deceit, include:
- that the defendant's statement or representation that is complained about involves no 'fraud' or 'dishonesty';
- that the defendant had no intention of inducing the claimant to act upon the relevant representation or statement;
- that the defendant did not, in fact, rely on the representation or statement; and
- that the claimant has not suffered any loss or damage as a consequence of relying upon that misrepresentation.
Where the action is brought as a tracing action, a defendant may plea that he or she does not have possession or control of the asset being traced, or that the claimant has no right to or interest in that asset.
III SEIZURE AND EVIDENCE
i Securing assets and proceeds
Freezing orders are available in Belize as provided for by its Civil Procedure Rules. Section 18 of the Supreme Court of Judicature Act of Belize3 confirms the existence and extent of the Belize Court's original jurisdiction:
- There shall be vested in the Court, and it shall have and exercise within Belize, all the jurisdictions, powers and authorities whatever possessed and vested in the High Court of Justice in England . . .
- Subject to rules of court, the jurisdiction, powers and authorities hereby vested in the Court shall be exercised as nearly as possible in accordance with the law, practice and procedure for the time being in force in the High Court of Justice in England.
The learned authors of Commercial Litigation: Pre-Emptive Remedies4 lend clear and very useful guidance on the 'jurisdiction' of the English court to grant interim injunctions.
The meaning of jurisdiction In the context of the grant of an interim injunction the word “jurisdiction” is ambiguous. In the strict sense of the word, the court has no jurisdiction where it has no power to deal with and decide the dispute as to the subject matter before it, no matter in what form or by whom it is raised. Conversely, the court has jurisdiction in the strict sense, where the defendant can be served with a claim form in respect of the claim . . .
Jurisdiction in the strict sense The cause of action must be justiciable in the courts of England and Wales. It follows that:
- the cause of action must be recognized as a matter of English law; and
- the courts of England and Wales must have territorial jurisdiction over the Respondent. Thus:
- the respondent must be capable of being served within the jurisdiction; or
- the applicant must be able to serve a claim form upon the respondent notwithstanding the fact that it is not possible to serve the respondent within the jurisdiction either:
- in accordance with CPR 6.32 (in respect of Scotland and Northern Ireland) and CPR 6.33 (in respect of countries out of the United Kingdom) . . . ; or
- with the permission of the court in accordance with CPR 6.37 and PD 6B para 3.1.
Consistent with the above, Part 17 of the Civil Procedure Rules provides for the granting of freezing orders and other remedies in a listed but non-exhaustive fashion: while, Part 7 provides for service of the court's process outside the jurisdiction of Belize with the court's permission, thereby providing an avenue for the Belize court to assert jurisdiction over foreign defendants. In Lauro Rezende v. Companhia Siderurgia Nacional and International Investment Fund Limited,5 the Belize Court of Appeal confirmed that the Belize Supreme Court has the jurisdiction to grant such freezing orders over foreign defendants where the Court's permission is first obtained to serve such defendants outside the jurisdiction of Belize.
Apart from the granting of freezing orders, the Belize Supreme Court may also order the appointment of receivers over companies or over specific property. This includes the power to appoint receivers with such powers of management as the Court finds appropriate. The power to appoint receivers may be exercised in addition to the power to grant freezing orders.
ii Obtaining evidence
Obtaining evidence is usually a litigant's priority. Helpful information typically concerns the ultimate beneficial ownership of companies; transaction records; internal corporate records; information on asset holdings; and business correspondences. This information, or the lack of it, often determines a case's outcome.
Searches of the International Business Companies Registry
Consistent with privacy provisions, only very limited information on each Belize international business company (IBC) is publicly accessible. This information is accessible through searches of the records of the International Business Companies Registry. Publicly available information on Belize IBCs is limited to the following:
- the company's name;
- its date of incorporation;
- its share capital (amount only);
- the name and address of the registered agent;
- the registered office address;
- certified copies of its certificate of incorporation; and
- certified copies of its memorandum and articles of association.
Information beyond this is protected by laws that compel registered agents to keep such information confidential. Further information can only be revealed voluntarily by the company's officers and members or by the company's registered agent. Otherwise, the court can compel the holders of the information to disclose it under proper circumstances.
The Belize Supreme Court is empowered to aid claimants by granting disclosure orders in appropriate cases. Typically, such discretionary relief is in the nature of Norwich Pharmacal or Bankers Trust orders.6
In granting these orders, the court is exercising its jurisdiction to come to the aid of persons who would otherwise have insufficient information to commence an action against a wrongdoer or who would otherwise have insufficient information to trace assets that they rightfully own or have a valid claim to. To qualify for Norwich Pharmacal relief, an applicant needs to prove to the court that he or she has suffered a legal wrong; the respondent has information that can identify or assist in identifying the wrongdoer by virtue of being mixed up in or facilitating the wrongdoer's actions; and the granting of the relief is necessary (i.e., that the disclosure of the information is required to enable the applicant to take effective action).7
The Bankers Trust element of such applications normally introduces additional bases on which the applicant qualifies for the disclosure of information in asset-tracing claims: specifically, that the applicant has been defrauded of his or her property, and that the respondent has information that can assist in tracing that property.8
The court will normally require from the applicant several usual undertakings. Primary among these is an undertaking that the applicant will bear the reasonable costs incurred by the respondent in complying with such an order or in providing such information. The court will normally also include terms within the order restricting the use of the information obtained.
These remedies often prove extremely useful. First, the court will permit these disclosure applications against non-parties to a suit: in effect, otherwise innocent third parties. In fact, these forms of court action fall within a very limited class of actions available against persons in respect of whom an applicant has no cause of action. Secondly, this relief is often pre-action in nature, being granted before a litigant commences a claim. Thirdly, the court can grant these orders in local satellite proceedings in aid of main proceedings taking place, or about to take place, elsewhere.
iii Securing assets and proceeds
Belize law allows for tracing actions based on common law principles of constructive and resulting trusts. These are the most direct ways of reaching assets or the proceeds of fraud. One may also freeze such assets or proceeds in anticipation of a civil judgment. The civil judgment can then later be attached to the assets or proceeds. These options are available in respect of both foreign and domestic claims.
Defences and answers asserting that the Belize court has no jurisdiction are perhaps the most common way of thwarting attempts to seize or secure assets. Whether a Belize court has jurisdiction over a matter is often determined by a mixture of common law jurisdictional principles, domestic statutes and domestic rules of civil procedure and practice. As a general rule, it is perhaps fair to say that the stronger the connection between the salient features of a dispute and the jurisdiction of Belize, the greater the chances that a Belize court will accept that is has jurisdiction over that dispute and the parties to it. Factors that ground such a connection to this jurisdiction will often include:
- the fact that the parties to an action (whether natural or juridical) are Belizean or domiciled in Belize;
- the fact that the action concerns property (real or personal) located within the country of Belize;
- the fact that the parties have chosen Belize law as the governing law of the agreement or deed from which the dispute arises;
- the fact that the parties have agreed to voluntarily submit to the jurisdiction of the Belize Courts in the event of a dispute; or
- the fact that the parties have taken some active and material step in the Belize proceedings on the basis of which that party can be deemed to have submitted to the jurisdiction of the Belize court, or waived his or her right to challenge its jurisdiction, or both.
Belize law may also expressly seek to secure or preserve for the Belize court jurisdiction regarding particular subject matters, persons or disputes. For example, Section 104 of Belize's International Business Companies Act expressly states:
140. For the purposes of determining matters relating to title and jurisdiction but not for purposes of taxation, the situs of the ownership of shares, debt obligations or other securities of a company incorporated under this Act is in Belize.9
Likewise, Section 141 of the Act also enables Belize IBCs to apply to the Belize Supreme Court for declarations on the interpretation of the Act or the memorandum and articles of association of that applicant company. Section 141 preserves the jurisdiction of the Belize court to make such declarations. Furthermore, it most importantly deems a person acting on such a declaration to have properly discharged his or her fiduciary or professional duty in the subject matter of the application:
- A company incorporated under this Act may, without the necessity of joining any other party, apply to the court, by summons supported by an affidavit, for a declaration on any question of interpretation of this Act or of the Memorandum or Articles of the company.
- A person acting on a declaration made by the court as a result of an application under subsection (1) of this section, shall be deemed, in so far as regards the discharge of any fiduciary or professional duty, to have properly discharged his duties in the subject matter of the application.
Whether the court does have jurisdiction with respect to a dispute or over a particular disputant is generally the first question that a Belize court will seek to decide before hearing the parties on the substance of a dispute. Consequently, successful jurisdictional challenges are often fatal to asset-tracing and recovery actions. Tactically, they are highly appealing because of their immediate and devastating effect even before a claim is able to get off the ground.
Attempts to seize are also often met with forum non conveniens challenges. Whether the Belize court is the most convenient or appropriate forum for the resolution of a dispute also factors heavily into the consideration of these applications. The degree of connection between the salient features of the dispute and the jurisdiction is again often the strongest determining factor. Unlike successful jurisdictional challenges, a successful forum non conveniens challenge will generally only result in a stay of the action. This temporarily neutralises the action in Belize while, it is assumed, the parties will divert or have diverted their efforts to the resolution of the dispute in another jurisdiction.
Interim freezing orders are also available. These applications must be made promptly. From a practical perspective, the supporting affidavit evidence must demonstrate the following:
- that the Belize court has jurisdiction over the subject matter of the dispute and the parties to it;
- that the applicant has an actionable cause of action against the respondent or respondents;
- the particulars of the applicant's claim against the defendant;
- that the applicant has a good arguable case that he or she will succeed at trial;
- the amount of his or her claim; and
- fairly state the points made against it by the defendant;
- that the respondent has assets that he, she or it is about to dissipate before the judgment or award is satisfied unless a freezing order is granted; and
- that the balance of convenience favours the granting of the freezing order.10
There are also other procedural requirements, primary among which are the requirements for the applicant to make full and frank disclosure of all material facts and provide an undertaking as to damages that the granting of the order may cause to any third party. The supporting evidence should also demonstrate that the applicant has the means and ability to honour the undertaking if called upon to do so.
Attempts to freeze assets will often fail where it is shown that the applicant has no claim or a very weak claim to the assets or proceeds sought to be frozen.
IV FRAUD IN SPECIFIC CONTEXTS
i Banking and money laundering
The Money Laundering and Terrorism Prevention Act 200811 (MLTPA) provides for the freezing of funds by way of restraining orders. For all intents and purposes, the effect of a restraining order under this statute is very similar to the effect of a freezing order obtained in a private action. The Director of Public Prosecutions or the Financial Intelligence Unit (FIU) may apply to the Supreme Court for a restraining order. The application can be made without notice to those parties affected. Once made, there is generally an anti-tipping-off order or mechanism put in place to restrain those third parties such as banks and other financial institutions who become aware of the fact that the restraining order has been made and is in place. This prevents them from tipping off any person that such an order is in place.
Restraining orders are generally intended to freeze the proceeds of crime. The restraint is predicated upon a money laundering offence. Money laundering offences must be, in turn, predicated upon some criminal offence.
The MLTPA provides that an applicant must satisfy certain strict requirements to obtain a restraining order. Section 39 of the MLTPA states that an application for a freezing order may be made ex parte, and shall be in writing and accompanied by an affidavit stating:
- where the accused has been convicted of a serious crime, the serious crime for which he or she was convicted, the date of the conviction, the court before which the conviction was obtained and whether an appeal has been lodged against the conviction;
- where the accused has not been convicted of a serious crime, the crime for which he or she is charged or about to be charged, or is being investigated, and the grounds for believing that the defendant committed the offence;
- a description of the property in respect of which the restraining order is sought;
- the name and address of the person who is believed to be in possession of the property;
- the grounds for the belief that the property is tainted property in relation to the offence or that the accused derived a benefit directly or indirectly from the commission of the offence;
- where the application seeks a restraining order against property of a person other than the defendant, the grounds for the belief that the property is tainted property in relation to the offence and is subject to the effective control of the accused or is a gift caught by the MLTPA; and
- the grounds for the belief that a forfeiture order or a pecuniary penalty order may be or is likely to be made under this part in respect of the property.
Section 39 thereby sets down the minimum evidentiary requirements and establishes the threshold of proof that an applicant must meet on applying to court for a restraining order. Section 40 of the MLTPA goes on to state the case that the applicant must make out before the court may grant a freezing order:
the Court may make an order,
- Subject to this section, where the Director of Public Prosecutions or the Financial Intelligence Unit applies to the Court for a restraining Order against property and the Court is satisfied that,
- the accused has been convicted of a serious crime or has been charge or is about to be charged with or is being investigated for a serious crime;
- where the accused has not been convicted of a serious crime, there is reasonable cause to believe that the property is tainted property in relation to an offence or that the accused derived a benefit directly or indirectly from the commission of the offence;
- where the application seeks a restraining order against property of a person other than the accused, there are reasonable grounds for believing that the property is tainted property in relation to an offence and that the property is subject to the effective control of the accused or is property held by the defendant or a gift caught by this Act; and
- there are reasonable grounds for believing that a forfeiture order or a pecuniary penalty order may be or is likely to be made under this part in respect of the property,
- prohibiting the defendant or any person from disposing of or otherwise, dealing with, the property or such part thereof or interest therein as is specified in the order, except in such manner as may be specified in the order
Sections 108 and 109 of the Belize International Business Companies Act provide that a company that has been struck off the International Business Companies Register can be restored upon application of any of the following parties: the company, a member, a creditor or a liquidator. Furthermore, a company that has been struck off the Register remains liable for its debts. Once restored, the company's capacity to be sued is restored. Therefore, a creditor of an IBC who is a victim of fraud perpetrated in the name of, or through the use of, that IBC can have a company restored upon his or her application. That creditor may then proceed to sue the company for recovery. The company is then subject to court orders of the Belize court, both interim and final, being made against it.
It is arguable that in Belize, a voluntary liquidation that has been proceeded upon on the basis of fraud or with the intent to defraud creditors can be overturned upon application to court for a declaration to that effect.
The Supreme Court of Belize may set aside an arbitration award where that arbitration or award has been improperly procured according to Section 12(2) of the Arbitration Act.12 It is submitted that the rubric 'improperly procured' includes awards procured through fraudulent or deceptive means.
iv Fraud's effect on evidentiary rules and legal privilege
The presence of fraud may result in shifting the ordinary evidence of the burden of proof in litigation. For instance, it is settled that in cases brought under Section 149 of Belize's Law of Property Act for relief on account of fraudulent conveyances, the normal incidence or burden of proof shifts from claimant to defendant once the claimant has established that a transaction was done for consideration that was short of full consideration. It then becomes for the defendant to prove that the transaction was bona fide and not made with the intent to defraud creditors:
In an action to set aside a conveyance . . . the onus of proof of intent to defraud rests upon the Plaintiff where the conveyance is for valuable consideration. Where, however, the conveyance is voluntary, and even perhaps where it is for valuable consideration short of full consideration, then on proof that at the time of its execution . . . the natural consequence of the conveyance was to defraud creditors, or that the circumstances under which the conveyance was effected bore one of the indications or badges of fraud subsequently mentioned, the onus of disproving an intent to defraud passes to the defendant.13
It is submitted that in Belize, the usual common law position that documents, correspondences and communications that are a part of a crime or fraud are not privileged applies.
V INTERNATIONAL ASPECTS
i Conflict of law and choice of law in fraud claims
As stated above, where the issues in a case touch and concern more than one jurisdiction, it is generally accepted that a court will determine that the applicable law will be the law of the jurisdiction with the strongest connection to the salient features of the case. Where the parties have chosen the law of a particular jurisdiction as the governing law of a contract or deed, a Belize court will generally give effect to the parties' choice of law.
ii Collection of evidence in support of proceedings abroad
The law and practice in Belize enables the collection of evidence locally to be used in support of proceedings abroad. So, for instance, a party may make an application to the Belize court for third-party disclosure orders with the aim of securing evidence for use in foreign proceedings. These include Norwich Pharmacal orders and Bankers Trust orders, as discussed above.
Similarly, one may make requests for such information directly to the Director of International Financial Services who may, in his or her discretion, require disclosure from any international financial service provider that may have the information.
iii Seizure of assets or proceeds of fraud in support of the victim of fraud
Where actions are brought primarily by way of asset-tracing claims or private law actions for damages, the fruits of the litigation will generally be for the individual claimant. This especially applies in tracing actions where the basis of the claim is the claimant's assertion of ownership of the funds or assets. The result of these actions, where successful, will generally be a pronouncement by the court affirming or declaring the claimant's ownership and consequential orders for the payment or delivery of the property.
In other cases, the FIU may rely on its powers to seize assets with the aim of restoring property to its lawful owner, who, in some cases, will have been a victim of fraud. Procedurally, the FIU will be required to go through the process of freezing the assets or proceeds of fraud on an interim basis, then satisfy the court that the property is the property of that victim before the court makes a final order or declaration of ownership.
iv Enforcement of judgments granted abroad in relation to fraud claims
In Belize, there are two main methods of enforcing judgments granted abroad. First, judgment may be enforced under the Reciprocal Enforcement of Judgments Act. This Act generally applies to judgments emanating from competent courts in the United Kingdom and other countries of the Commonwealth. Secondly, a judgment may be enforced by suit on the judgment sought to be enforced outside the provisions of the Reciprocal Enforcement of Judgments Act. This generally involves suing upon the foreign judgment as a bare contract debt in the Belize Supreme Court. In both cases, the judgment must generally be one for payment of a specified sum of money that has been granted by a competent court after consideration of the merits of the case. The judgment must be final and conclusive, which includes that it is not subject to appeal.
v Fraud as a defence to enforcement of judgments granted abroad
According to Section 11(1) of the Reciprocal Enforcement of Judgments Act, satisfactory proof that a judgment has been obtained by fraud is a defence to the enforcement of judgments granted abroad and a basis for the Belize court to set that judgment aside. This applies to cases where enforcement is sought under the Reciprocal Enforcement of Judgments Act and by suit de novo on the judgment.
VI CURRENT DEVELOPMENTS
Belize, like the rest of the offshore world, continues to contend with international pressure to reform its international financial services sector. There continues to be sustained international pressure to increase the amount of publicly available information on offshore entities and to strengthen the regulation of the sector generally. The effects may be twofold if these trends continue to take hold in ways that, from a positive perspective, engender greater access to information. First, Belize offshore vehicles may become less attractive for use in the perpetration of fraud. Second, where it turns out that these vehicles are so misused, the task of arresting their misuse may be made easier. From another perspective, though, it is possible that these trends may dissuade legitimate users of our services from using them. Whether that delicate balance can in fact be struck remains to be seen.
1 Nigel Ebanks is an associate at Barrow & Williams LLP.
2 Reciprocal Enforcement of Judgments Act, Chapter 171 of the Laws of Belize, re 2011.
3 Supreme Court of Judicature Act of Belize, Chapter 91 of the Laws of Belize, re 2011.
4 Commercial Litigation: Pre-Emptive Remedies, editor in chiefs Iain Goldrein, QC, et al.; 3rd edition, 1997, Sweet & Maxwell.
5 Civil Appeal No. 23 of 2009, Lauro Rezende v. Companhia Siderurgia Nacional and International Investment Fund Limited.
6 See, e.g., Oao Baltiyskiy Bank v. Artur Kirlenko, et al, Claim No. 319 of 2010, Decision of Hafiz-Bertram, J delivered 19 October 2011.
7 Norwich Pharmacal Company Limited v. Customs and Excise Commissioners  2 ALL ER 943.
8 Bankers Trust Co v. Shapira  3 All ER 353.
9 International Business Companies Act, Chapter 270 of the Laws of Belize, re 2011.
10 See, generally, Halsbury's Laws of England, Volume II (2015), Paragraph 598.
11 The Money Laundering and Terrorism Prevention Act 2008 (as amended by Act No. 4 of 2013 and Act No. 7 of 2014).
12 Arbitration Act, Chapter 125 of the Laws of Belize (RE 2011).
13 Meerabux, J in Norman Angulo McLiberty v. Corozal Free Zone Ltd, and another, Action No. 302 of 1999, Supreme Court of Belize (quoting from an earlier judgment of the Belize Supreme Court in Gardiner v. Hoare, Action No. 279 of 1996).