Summary

The Court of Appeal of the Eastern Caribbean Supreme Court has dismissed an appeal against the discharge of a Black Swan freezing injunction for want of jurisdiction over the second respondent, Dr Cho. In doing so, the Court of Appeal affirmed the applicability of the Privy Council’s judgment in Mercedes-Benz AG v Leiduck [1996] 1 AC 284 in the Territory of the Virgin Islands: in short, it is not possible for proceedings seeking only freezing order relief against a foreign respondent to be served on that respondent out of the jurisdiction.

David Mumford QC was instructed on behalf of Dr Cho by Andrew Willins and Fraser Mitchell of Appleby, assisted by Ryan Turner.

Facts

The Eastern Caribbean Supreme Court (the “Court”) had granted a freezing injunction against the Second Respondent, Dr Cho, on an application made without notice in support of proceedings in Hong Kong. The proceedings in Hong Kong claim remedies against Dr Cho totalling more than HK$700 million and the injunction prevented Dr Cho from dealing with assets in the Virgin Islands up to US$75 million (including shares in the Virgin Islands’ domiciled First Respondent).

Dr Cho was not within the territorial jurisdiction of the Court and applied to discharge the injunction on two bases:

(1) the Court had no power under the rules of the Court to authorise service of an application for a freestanding injunction in support of foreign proceedings out of the jurisdiction; and

(2) If the Court did have such power, it should decline to grant permission to serve the application out of the jurisdiction because the Territory of the Virgin Islands was not the appropriate forum.

David Mumford QC succeeded both at first instance before Adderley J and on appeal before Baptiste and Thom JJA and Webster JA (Ag.). After Adderley J had given judgment, but before the hearing in the Court of Appeal, the Claimant had also unsuccessfully sought a freezing injunction against Dr Cho from the Hong Kong Court.

Held

The Claimant pursued its appeal on four broad grounds, but the judgment of the Court of Appeal turned principally on the precedential value of the judgment of the Privy Council, on appeal from the Courts of Hong Kong, in in Mercedes-Benz AG v Leiduck [1996] 1 AC 284. In that case, the Privy Council construed the “injunction gateway” in the civil procedure rules that were then in force in Hong Kong in a way that did not extend to an application for a freestanding injunction. The mere existence of a territorial link - the existence of assets in the jurisdiction on which the freezing injunction could bite – was not enough to bring an injunction application within the gateway and so found jurisdiction.

The Court of Appeal concluded that it was bound by the decision in Mercedes, and so confirmed that judgments of the Privy Council on appeal from another common law jurisdiction are binding on the Courts of the Virgin Islands and are not merely persuasive, where the point of law in issue is the same.

The case is potentially of real significance to fraud litigation in the Virgin Islands. Cases in which freezing order relief is sought in the Islands with respect to locally situated assets will commonly involve offshore respondents who are subject to other proceedings abroad. In Black Swan, it was decided that the Virgin Islands courts have the power to grant freezing injunctions in support of such foreign proceedings. The Court of Appeal’s decision in Cho establishes that this power is nevertheless subject to the limits on the courts’ territorial jurisdiction: a proper basis for serving the respondent with process out of the jurisdiction must still be established (if the respondent is not otherwise amenable to the jurisdiction); and the injunction application itself cannot provide such a basis.

The judgment of the Court of Appeal is available here and the judgment of Adderley J is available here.