Blake Morgan success in Privy Council ‘freezing orders’ judgment
The landmark judgment in Convoy Collateral v Broad Idea and Cho Kwai Chee, provides clarity on the power of the Court to grant injunctions and freezing orders in international litigation. We were pleased to act for the winning party in this case.
Facts of the case
A freezing order is an interim or provisional order of the court restraining the party against whom it is granted from disposing or dealing with the party’s assets.
Broad Idea is a company incorporated in the British Virgin Islands (BVI). Dr. Cho is a shareholder and director of Broad Idea. In February 2018, Convoy applied to the BVI court for freezing orders against Broad Idea and Dr. Cho in support of anticipated proceedings against Dr Cho in Hong Kong. Convoy also sought permission to serve Dr. Cho out of the jurisdiction. Following a hearing held without notice to Broad Idea and Dr. Cho, the BVI court granted freezing orders restraining them from disposing of or diminishing the value of certain of their respective assets and gave permission to serve Dr. Cho out of the jurisdiction. Convoy commenced proceedings against Dr. Cho (but not Broad Idea) in Hong Kong shortly thereafter. The freezing orders issued against Dr. Cho by the BVI court and the order granting permission to serve Dr Cho out of the jurisdiction were subsequently set aside in April 2019 on the basis that the court did not have jurisdiction to make them. In the meantime, Convoy had made a further application for a freezing order against Broad Idea in support of the Hong Kong proceedings against Dr. Cho.
In July 2019, the judge continued the freezing order against Broad Idea indefinitely on the basis that the principle enunciated in TSB Private Bank International SA v Chabra [1992] 2 All ER 245 applied in the circumstances and that Broad Idea’s assets were at risk of dissipation. Broad Idea’s appeal against the judge’s decision was allowed by the Court of Appeal. Convoy then appealed to the Judicial Committee of the Privvy Council (JCPC).
Issues in the case
The main issues for the Board in this appeal were:
- whether the BVI court has jurisdiction and/or power to grant a freezing order where the respondent is a person against whom no cause of action has arisen, and against whom no substantive proceedings are pursued, in the BVI or elsewhere; and
- whether any such jurisdiction and/or power extends to the granting of a freezing order in support of proceedings to which that person is not a party.
Court decision and reasoning
Whilst the Board decided unanimously to reject the appellant’s appeal in its entirety, thus resulting in a win for our client, the Board was split 4:3 as to its reasoning. Dissenting judgments have become increasingly rare in decisions of the Supreme Court and Privy Council in recent years so we expect this judgment to attract considerable commentary in legal circles.
The majority decision (set out by Lord Leggatt) overturned several previous Privy Council, House of Lords and English Court of Appeal decisions to explain that there is no principle or practice which prevents an injunction from being granted in appropriate circumstances against an entirely innocent party even when no substantive proceedings against anyone are taking place elsewhere. Instead, Lord Leggatt set out a new three-fold test for when a court with equitable and/or statutory jurisdiction to grant an injunction where it is just and convenient to do so has power to do so:
- The applicant has already been granted or has a good arguable case for being granted a judgment or order for the payment of a sum of money that is or will be enforceable through the process of the court;
- The respondent holds assets (or is liable to take steps other than in the ordinary course of business which will reduce the value of assets) against which such a judgment could be enforced; and
- There is a real risk that, unless the injunction is granted, the respondent will deal with such assets (or take steps which make them less valuable) other than in the ordinary course of business with the result that the availability or value of the assets is impaired and the judgment is left unsatisfied.
Lord Leggatt also stated that although other factors are potentially relevant to the exercise of the discretion whether to grant a freezing injunction, there are no other relevant restrictions on the availability in principle of the remedy, in particular:
- There is no requirement that the judgment should be a judgment of the domestic court – the principle applies equally to a foreign judgment or other award capable of enforcement in the same way as a judgment of the domestic court using the court’s enforcement powers.
- Although it is the usual situation, there is no requirement that the judgment should be a judgment against the respondent.
- There is no requirement that proceedings in which the judgment is sought should yet have been commenced nor that a right to bring such proceedings should yet have arisen: it is enough that the court can be satisfied with a sufficient degree of certainty that a right to bring proceedings will arise and that proceedings will be brought (whether in the domestic court or before another court or tribunal).
Comment
We consider that this new test for granting of injunctions heralds more broad-ranging and wider parameters for the grant of injunctions in the future, such that international injunctions may be easier to obtain. This may reflect the court’s changing role over time in acknowledgment of the major changes in circumstances since freezing injunctions were devised by the English courts in the 1970’s, as acknowledged by Lord Leggatt:
- The ease and speed with which money and other financial assets can be moved around the world
- The globalisation of commerce and economic activity and consequent growth of litigation and arbitration with international dimensions
- The growth and use of offshore companies.
David Miles and Nicola Diggle of our Litigation and Dispute Resolution Division supported this international and technical legal case alongside Walkers BVI and Counsel Richard Morgan QC of Maitland Chambers and Andrew McLeod of One Essex Court Chambers.
This article has been co-written by David Miles and Nicola Diggle.
Share:
Litigation & Dispute Resolution specialist lawyers
Contact usHOW CAN WE HELP?
To get in touch with one of our legal experts please fill in your details.
Enjoy That? You Might Like These:
articles
articles
events