Privy Council widens law on freezing injunctions in "ground-breaking" exposition of the law

12 April 2022. Published by Dan Wyatt, Partner and Joe Cresswell, Associate

In Broad Idea International Ltd v Convoy Collateral Ltd / Convoy Collateral Ltd v Cho Kwai Chee [2021] UKPC 24, the Privy Council handed down a judgment which set new juridical boundaries for the law of freezing injunctions.

Rejecting the long-established position in The Siskina, the panel of judges confirmed that a court's injunctive power extends to the grant of freezing orders where (i) there are no relevant domestic proceedings in prospect and (ii) the sole purpose of the order is to aid enforcement in foreign proceedings.

Facts

The decision arises from combined appeals in an action originally brought in Hong Kong by Convoy Collateral Ltd (Convoy) against Dr Cho Kwai Chee, for damages arising from allegedly fraudulent investments made during his time as a director of Convoy. 

Convoy applied for a freezing injunction against Dr Cho in the British Virgin Islands (BVI) and sought permission to serve the application out of the jurisdiction. A second freezing order was also sought against Broad Idea International Ltd (Broad Idea), a company incorporated in the BVI which was majority owned by Dr Cho. 

The Court of Appeal of the Eastern Caribbean Supreme Court rejected both applications, finding that:

  1. there was no jurisdictional gateway pursuant to the Eastern Caribbean Supreme Court Civil Procedure Rules 2000 (the EC CPR) which would permit service of a freezing order upon Dr Cho in Hong Kong where that was the only relief sought; and

  2. the High Court of the BVI was unable to grant a freezing order against Broad Idea on the basis that it only had the power to grant freezing injunctions which were ancillary to substantive proceedings brought in its jurisdiction. 

In its appeal to the Privy Council, Convoy sought to overturn each of these decisions. 

The expanded seven-member bench of the Privy Council acknowledged that to uphold the first limb of the appeal would require a departure from the test established by the House of Lords decision in Siskina v Distos Cia Naviera SA [1979] AC 21(The Siskina) and the subsequent decision in Mercedes Benz AG v Leiduck [1996] AC 284 (Mercedes), which had provided the authority as to whether a court has the power to authorise service on a defendant outside the jurisdiction in circumstances where a freezing injunction is the only relief sought. 

Decision

The Privy Council upheld the Court of Appeal's decision in relation to both limbs. 

On the question of service out of the jurisdiction, the Privy Council found unanimously that a freezing injunction did not constitute an injunction for the purposes of the relevant jurisdictional gateway under the EC CPR. The injunction sought against Dr Cho must therefore be dismissed on the basis of the current provisions of the EC CPR. 

In relation to the second limb, the Court accepted the reasoning in Mercedes in relation to the interpretation of the procedural gateway and found, on the facts of this case, in favour of Broad Idea by upholding the Court of Appeal's decision to discharge the injunction against it. However, the Court's obiter comments in relation to the power to grant freezing injunctions outside of the jurisdiction were ground-breaking in their departure from the position in The Siskina

In his discussion of the authorities which contributed to the development of the orthodox position, Lord Leggatt noted that The Siskina was decided at a time when freezing injunctions were in their infancy, and that the development of modern international commerce had long since altered the nature of protection which freezing orders would need to provide. While the foundational principles of freezing orders included a jurisdictional limitation designed only to ensure the enforceability of relevant judgments against foreign defendants, such a limitation could not be maintained in circumstances where the risk of dissipation of assets in the jurisdiction could exist regardless of where a defendant was resident or situated. Quoting Equitable Remedies, 9th ed (2014), Lord Leggatt observed that, subject to any statutory restrictions, the powers of courts with equitable jurisdiction to grant injunctions on the basis of what is "just and convenient" are effectively unlimited and should adopt the application of new practices where appropriate.

On that basis, the majority of the panel accepted Convoy's submissions that the law on the impact of The Siskina must be clarified. It concluded that the authority, which states that power to grant an injunction is dependent on the existence of a claim for substantive relief in that jurisdiction, had been comprehensively undermined by subsequent developments, and that any attempt to re-assert the principles of The Siskina would be "putting the clock back". 

Commentary

As noted by Sir Geoffrey Vos (in the minority), the Privy Council's obiter comments, while not binding on lower courts, present a "ground-breaking exposition of the law of injunctions", extending far beyond the scope of BVI law.  Although section 25 of the Civil Jurisdiction and Judgments Act 1982 already gives English courts the power to grant injunctive relief in support of foreign jurisdictions (in conjunction with specific gateway for service of such claims under CPR PD 6B 3.1(5)), the decision in Convoy may well widen circumstances in which such injunctions are granted. However, recognition will likely have its most significant impact in those common law jurisdictions where no such framework exists; extending the potential to seek freezing injunctions in their jurisdictions to litigants across the world. 

Perhaps most importantly, Leggatt's impassioned call for the law of injunctions to adapt as necessary in order to allow the courts to respond to changes in modern commerce has put the legal world on notice that the scope of freezing injunctions will continue to evolve. Developments in this area will no doubt continue to be watched closely.