Privy Council makes landmark decision on freezing injunctive jurisdiction | Conyers


In Convoy Collateral Ltd v Broad Idea International Ltd and Cho Kwai Chee [2021] UKPC 24, the majority judgment of Lord Leggatt in the Privy Council upheld the decision in Black Swanreversing the decision of the Eastern Caribbean Court of Appeal, and decided that it was finally time to move from The Siskina[1]. However, from Bermuda’s perspective, while this clarification is welcome, issues remain regarding the service of defendants out of court.

Injunction requests

Convoy filed a lawsuit in Hong Kong, seeking damages and other relief against Dr. Cho, a Hong Kong resident, and other defendants except Broad Idea. In the British Virgin Islands (BVI), Convoy separately sought freezing injunctions against Dr Cho and against Broad Idea, a company located in the BVI.

Against Dr Cho, the hurdle Convoy faced was identifying a provision in the BVI Rules of Procedure under which leave may be given to serve a claim form outside of territorial jurisdiction. court, where the only relief sought is a freezing injunction. The relevant BVI rules were similar to Bermuda RSC 1985 and permitted service where:”an application is made … for an injunction ordering the defendant to do or refrain from doing any act in the jurisdiction.”[2]

The Council decided that it had long been established that the term “injunctionin the rule could only refer to an injunction as a final substantive remedy for the impairment of a plaintiff’s legal or equitable right and did not include a freezing injunction or other interlocutory injunction. Accordingly, the Commission upheld the lower courts’ decision that Dr. Cho could not fall within the jurisdiction of the BVI court by serving him overseas.

This question did not arise with respect to Broad Idea, which was located at the BVIs and therefore subject to change in personal meaning. The Commission had to decide whether the Court of Appeal was correct in overturning Black Swan. While there is undoubtedly personal jurisdiction over Broad Idea, no substantive proceedings have been brought against Broad Idea at the BVI. The purpose of applying for an interim freezing injunction was to support the claim in Hong Kong. Given the lack of a BVI claim against Broad Idea, was it fair for the BVI court to grant the requested injunction?

To go beyond The Siskina

The judgment of Lord Diplock in The Siskina is generally considered to be the starting point for the proposition that an interim injunction could only be granted in support of substantive proceedings in the jurisdiction[3]. In convoy collateralLord Leggatt reviewed the history and development of restraining orders, emphasizing the following points:

  1. following The SiskinaMareva interim relief was extended from overseas defendants to domestic defendants, a development subsequently recognized in the UK by section 37(1) of the Superior Courts Act 1981.
  2. Marveva’s relief has been extended to facilitate the enforcement of a judgment already rendered: see Stewart Chartering v Management SA (Practice Note) [1980] 1 WLR 460.
  3. The Mareva interim relief was extended to defendants without a cause of action in the form of a Chabra relief, named after TSB Private Bank vs. Chabra [1992] 1 WLR 231.
  4. Ensuring compliance with Article 24 of the Brussels Convention[4], section 25(1) of the Civil Jurisdiction and Judgments Act 1982 was enacted in the UK (in force since 1987) empowering the Court to grant interim measures where proceedings are or have been instituted in another Contracting State; in 1997, this was extended to the rest of the world.[5]
  5. The development of the practice of granting restraining orders around the world, which began with the judgment of Lord Hoffmann in Bayer AG vs. Winter (#2) [1986] 357.
  6. The decision of the House of Lords in Channel Tunnel Group Ltd v Balfour Beatty Construction Ltd [1993] AC 334. The claim was stayed pending arbitration and the plaintiffs sought an interim injunction prohibiting the suspension of work pending that decision. The court rejected defendants’ argument based on The Siskinathat the court was unable to grant an interlocutory injunction because it was not sought in support of a claim for relief on the merits which the court had jurisdiction to grant.
  7. The judgment of Lord Nicholls in Mercedes Benz AG vs. Leiduck [1996] AC 284, in which he provided a principled basis for granting interim relief to Mareva in the following passage[6]: “It is not so much a remedy related to a pecuniary claim as a remedy related to a possible monetary judgment. It is a measure granted to facilitate the process of execution or enforcement which will occur when, but only when, the judgment for the payment of a sum of money has been obtained”.
  8. The development of disclosure orders to third parties and Bankers’ confidence[7] orders. Their importance lies in the fact that the third party so ordered need not invade or threaten to invade any right of the plaintiff. In Bankers’ confidence case, the third party may be ordered to disclose information to facilitate asset tracing.
  9. The development of website blocking orders. In Cartier International versus BSkyB [2016] EWCA Civ 658, the Court of Appeals upheld the decision to grant injunctions against Internet Service Providers (ISPs) to block the sale of counterfeit products by websites. Again, the ISPs had not infringed or threatened to infringe any rights of the plaintiff.

In convoy collateral, the majority held that these developments illustrated the flexibility of courts with the equitable power to modify existing practice in response to changing circumstances. Three major changes since the 1970s were highlighted: the transformation in the ease and speed with which money and other assets could be moved around the world; the globalization of trade and the consequent growth of disputes with an international dimension; and the growth in the use of offshore companies.

The starting point was constructing the wording of the BVI statute giving the court the power to grant an interlocutory freezing injunction: it could be granted by interlocutory order whenever it seemed just and expedient to do so.[8]. There was no reason to read this language restrictively (as had been done in The Siskina), in particular, there was no reason to presuppose the existence of a cause of action claiming a substantial remedy which the judge has jurisdiction to grant.

There was no established practice to read the language restrictively. In Channel Tunnelthe House of Lords has held that a court may grant interim relief against a defendant over whom the court has personal jurisdiction when proceedings on the merits are before an arbitral tribunal or a foreign court.

Citing JSC BTA Bank vs. Ablyazov (#10) [2015 UKSC 64]where the court characterized the rationale for granting interim freezing orders as “the principle of execution”, the majority judgment held that the main purpose of granting a freezing order was to prevent the defendant who was put on notice from dissipating assets that should be subject to execution if the plaintiff wins. of cause. The rationale was not that the injunction was incidental to the cause of action in the main proceeding.

Once accepted, there was no policy reason to tie the granting of an injunction to a cause of action. This decoupling manifested itself in the possibility of granting a freezing order after the pronouncement of the judgment (when the cause of action was extinguished).

Summarizing the position, the majority held that while other factors are potentially relevant to the exercise of the discretion to grant an interim freezing order, there are no other relevant restrictions on the availability principle of appeal. Specifically:

  1. There is no requirement that the judgment be a judgment of the domestic court.
  2. Although this is the usual situation, there is no requirement that the judgment be a judgment against the respondent.
  3. It is not necessary that the proceedings in which judgment is sought have already been instituted, nor that a right to institute such proceedings has already arisen: it is sufficient that the court can be satisfied with a sufficient degree of certainty that a right to sue will arise and that legal action will be taken (whether in the national court or in another court).

The importance of the decision convoy collateral

The majority decision provides welcome clarification on whether a freezing injunction against a defendant in support of a foreign proceeding is possible where no substantive claim is made against the defendant in proceedings before the national court. However, the difficulty remains for jurisdictions such as Bermuda where the procedural rules have not been changed to allow the out-of-jurisdiction service of a single freezing order; that the dissenting judgment of Sir Geoffrey Vos in convoy collateral clearly articulates, the decision of the Privy Council in Mercedes Benz AG vs. Leiduck limits Order 11 to originating documents that initiate proceedings to ascertain substantive rights. If Bermuda wishes to go further and allow service out of court for stand-alone Mareva injunctions, it will likely need to adopt its equivalent of section 25(1) of the UK Civil Jurisdiction and Judgments Act 1982 and adjust its rules of procedure accordingly. .

[2] The rule in Bermuda is Ordinance 11, Rule 1(1)(b) RSC 1985.

[3] The following passage from his judgment is commonly quoted:That the High Court has no power to grant an interlocutory injunction except in the protection or assertion of a legal or equitable right which it has jurisdiction to enforce by final judgment has been stated for the first time in Cotton LJ’s classic judgment in North London Railway Co. v. Great Northern Railway Co. (1883) 11 QBD 30, 39-40, which has been consistently followed ever since”.

[4] on Jurisdiction and Enforcement of Judgments in Civil and Commercial Matters 1968

[5] This provision is enormous in scope and has been used to grant restraining orders around the world against defendants with no known assets in England and Wales: see Republic of Haiti vs. Duvalier [1990] 1 QB 202.

[6] Particularly important for common law jurisdictions (such as Bermuda) where legislation comparable to Section 25(1) of the 1982 Act and a corresponding amendment to the procedural rules governing the service of overseas proceedings n were not introduced, as was the case in Leiduck.

[7] named after Bankers Trust v Shapira [1980] 1 WLR 1274.

[8] The wording of section 19(c) of the Supreme Court (of Bermuda) Act 1905 is identical for these purposes.

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