Broad Idea International Ltd v Convoy Collateral Ltd (British Virgin Islands); Convoy Collateral Ltd v Cho Kwai Chee (also known as Cho Kwai Chee Roy) (British Virgin Islands)

These were appeals raising the questions (i) whether under the Eastern Caribbean Supreme Court Civil Procedure Rules 2000 (the ‘EC CPR’) the court had power to authorise service on a defendant outside the jurisdiction of a claim form in which a freezing injunction was the only relief sought; and (ii) whether, where the High Court of the British Virgin Islands (‘BVI’) had personal jurisdiction over a party, the court had power to grant a freezing injunction against that party to assist enforcement of a prospective or existing foreign judgment.

The first respondent, Broad Idea, was a company incorporated in the BVI. 50.1% of its shares were owned by the second respondent, Dr Cho, who was resident in Hong Kong. Broad Idea held an investment worth about US$126 million consisting of an 18.85% shareholding in a company listed on the Hong Kong stock exchange. The appellant, CCL, had brought proceedings in Hong Kong claiming damages and other substantive relief against Dr Cho and other defendants, not including Broad Idea. In the BVI, CCL applied for freezing injunctions against Dr Cho and against Broad Idea.

An ex parte order of the BVI court granting a freezing injunction against Dr Cho and permission to serve a claim form on him outside the BVI was set aside on the ground that no EC CPR gateway allowed service out of the BVI of an application for a freestanding freezing order in support of foreign proceedings. The EC Court of Appeal dismissed CCL's appeal from that decision. CCL appealed.

The court granted a freezing injunction against Broad Idea on the basis that permission to serve out of the jurisdiction was not required, that CCL had a good arguable case against Dr Cho in the Hong Kong proceedings capable of resulting in a judgment which would be enforceable in the BVI, and that there was a good arguable case that Dr Cho was beneficially entitled to the shares held by Broad Idea. The EC Court of Appeal set aside the injunction on the ground that the BVI court had no jurisdiction to grant a freezing injunction against a BVI company except as ancillary to proceedings for substantive relief brought in the BVI, and went on to hold that there was no evidence to support the judge's finding that there was a good arguable case that Broad Idea held assets beneficially owned by Dr Cho. CCL appealed.

Held, dismissing the appeals:

1. As a matter of construction EC CPR, r. 7.3(2)(b), on which CCL relied, did not allow a claim form to be served out of the jurisdiction in which the only relief claimed was a freezing injunction. The relevant provisions of the EC CPR were in materially similar terms to the English rules of court which were applicable in The Siskina [1979] AC 210 and the Hong Kong rules which were applicable in Mercedes-Benz v Leiduck [1995] CLC 1090; [1996] AC 284. Both the House of Lords and the Privy Council had decided that the injunction gateway in those terms did not allow a free-standing claim to a freezing injunction to be served out of the jurisdiction. There was no good reason for the Privy Council to depart from its previous decision. The justice and convenience of interpreting a rule in accordance with a settled meaning was all the greater where, as in the present case, a rule in the same or materially similar terms existed in other jurisdictions. For the Board to depart from the interpretation of the rule applicable to claims for injunctions which was adopted in The Siskina and in Mercedes-Benz would have repercussions beyond the BVI. Any lacuna in the EC CPR could only be filled by amending the rules and not by reinterpreting them. (The Siskina and Mercedes-Benz applied.)

2. (By a majority) The essential purpose of a freezing injunction was to facilitate the enforcement of a judgment or other order to pay a sum of money, and there was therefore no reason in principle to link the grant of such an injunction to the existence of a cause of action for substantive relief. A court with equitable and/or statutory jurisdiction to grant injunctions where it was just and convenient to do so had power to grant a freezing injunction against a party over whom the court had personal jurisdiction provided that: (i) the applicant had already been granted or had a good arguable case for being granted a domestic or foreign judgment or order for the payment of money that was or would be enforceable through the process of the court; (ii) the respondent held assets against which such a judgment could be enforced; and (iii) there was a real risk that, unless the injunction was granted, the availability or value of the assets would be impaired and the judgment left unsatisfied. There was no requirement that the judgment should be a judgment against the respondent and no requirement that proceedings should have been commenced; it was enough that the court could be satisfied with a sufficient degree of certainty that a right to bring proceedings would arise and that proceedings would be brought whether in the domestic court or before another court or tribunal. (The Siskina and Mercedes-Benz AG not followed; Veracruz Transportation Inc v VC Shipping Co Inc (The Veracruz I)[1992] 1 Ll Rep 353disapproved; Black Swan Investment ISA v Harvest View Ltd(BVIHCV 2009/399) (unreported) 23 March 2010, BVI High CtandYukos CIS Investments Ltd v Yukos Hydrocarbons Investments Ltd(HCVAP 2010/028) (unreported) 26 September 2011, BVI CAapproved.)

3. Where there were substantive proceedings against Dr Cho in Hong Kong, the BVI court could in appropriate circumstances grant a freezing injunction against Broad Idea, over which it had personal jurisdiction, to protect the ability of CCL to enforce a future judgment against Dr Cho in the BVI. However, the EC Court of Appeal had been entitled to find on the facts that there was no good arguable case that the shares held by Broad Idea were beneficially owned by Dr Cho.