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Convoy Collateral Ltd v Broad Idea International Ltd & Anor

International & Offshore, Judgments

04 October 2021

Richard Morgan QC appeared with Walkers’ partner Rosalind Nicholson and Andrew McLeod (One Essex Court) on behalf of the First Respondent instructed by Walkers’ partner Murray Laing (with Blake Morgan as Privy Council Agent) and David Mumford QC and Ryan Turner appeared with Appleby’s Andrew Willins on behalf of the Second Respondent (with BDB Pitmans as Privy Council Agent).

The appeal concerned the jurisdiction of the Courts of the British Virgin Islands to grant freezing orders in support of foreign proceedings, to permit service of an application claiming only freestanding freezing relief out of the jurisdiction, and to injunct third parties to the underlying proceedings against whom no substantive claim is advanced (commonly known as “Chabra” orders).  The appeal followed in the wake of the decision of the Court of Appeal of the Eastern Caribbean Supreme Court that the Court had no “Black Swan” power to grant a freezing injunction in the absence of domestic proceedings claiming substantive relief.  The Court of Appeal’s judgment had been followed, in turn, by the legislature enacting the Eastern Caribbean Supreme Court (Virgin Islands) (Amendment) Act 2020 to grant the Court such a power.

Due to the anticipated legal significance of the appeal, the Privy Council sat as an enlarged seven-member Board that included both the President and Deputy President of the Supreme Court (Lord Reed of Allermuir and Lord Hodge) and the Master of the Rolls (Sir Geoffrey Vos). The appeal presented the opportunity for the Privy Council to revisit its own decision in Mercedes Benz v Leiduck, as well as the decisions of the House of Lords in The Siskina, The Channel Tunnel, Fourie v Le Roux, and the Board was invited to depart from a number of well-known authorities.

In a unanimous decision the Board upheld the reasoning in Mercedes in relation to the interpretation of the wording of the procedural gateway for service out and found in favour of the Second Respondent (as had both Adderley J at first instance and the Court of Appeal).  In a unanimous decision the Board also dismissed the appeal in relation to the First Respondent based on the facts set out in the decision of the Court of Appeal.

The most interesting aspect of the appeal is, however, the analysis of the power of the Court to grant injunctions generally. The Board split 4:3 in favour of abandoning the traditional analysis of that power as dependent on the presence of a pre-existing cause of action justiciable before the local court.  In so doing, the majority overturned or distinguished  a number of previous Privy Council, House of Lords and English Court of Appeal decisions and articulated the breadth of the power in terms such 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.” (at [82]).  Lord Leggatt endorsed the “enforcement principle” as explaining the jurisdiction to grant freezing orders and articulated a new threefold test for the grant of such an injunction:

  1. 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;
  2. 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
  3. 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.

Importantly, Lord Leggatt further explained that:

  1. 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.
  2. Although it is the usual situation, there is no requirement that the judgment should be a judgment against the respondent.
  3. 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).

A minority (Lords Reed and Hodge, and Sir Geoffrey Vos MR) dissented from this step change in the law because a decision on the point was not necessary to decide the appeal in light of the other conclusions (unanimously) reached by the Board.

The appeal was, therefore, refused on wholly conventional grounds.  However, in the careful reasoning of the majority lies a brave new world that is likely to be fought over in the years ahead, both in the British Virgin Islands and England and Wales.  It is important to recognise that the majority’s new rationalisation of the law of injunctions extends beyond the particular question of whether an injunction can be granted in aid of foreign proceedings (something now governed by statute in England and the BVI); it also potentially heralds a new approach to “Chabra” injunctions against third parties and opens the door to the grant of injunctions more generally where a there is no cause of action in the traditional sense.

To view a copy of the judgment, please click here. 

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