Walsh v Trustee of the Estate of Bre-X Minerals Ltd (A Bankrupt)
| Jurisdiction | UK Non-devolved |
| Judge | Lord Hoffmann |
| Judgment Date | 17 December 2001 |
| Neutral Citation | [2001] UKPC 58 |
| Docket Number | Appeal No. 37 of 2000 |
| Court | Privy Council |
| Date | 17 December 2001 |
[2001] UKPC 58
Privy Council
Present at the hearing:-
Lord Slynn of Hadley
Lord Hoffmann
Lord Rodger of Earlsferry
Sir Martin Nourse
Sir Kenneth Keith
and Others
[Delivered by Lord Hoffmann]
Bre-X Minerals Ltd is a company which was incorporated in Alberta in 1988 with its head office in Calgary. Its founder, chief executive and principal shareholder was a Mr David Walsh. The company obtained a quotation on the Alberta Stock Exchange in 1989 and carried on business exploring for gold in Canada and abroad. Until 1993 it was not particularly successful. But in April of that year Mr Walsh renewed acquaintance with a geologist he knew named John Felderhof, who was employed by a company called Montague Gold NL to prospect for gold in the rain forest of Borneo. Through the good offices of Mr Felderhof, Bre-X acquired an option to buy for US $80,000 an 80% interest in the project with which he was concerned (referred to as Busang I) from a company associated with Montague Gold NL. (The remaining 20% was held by Indonesian interests). On 10 May 1993 Mr Walsh issued a press release announcing that Bre-X had agreed in principle to acquire an "80% working interest" in Busang I.
In July 1993 Bre-X announced that it had completed the acquisition of an 80% interest in Busang I and from time to time during 1994 it issued statements about the results of exploratory drilling on the site. These were said to be very encouraging. Thus encouraged, Bre-X decided to acquire an interest in an adjoining area which has been called Busang II. In October 1995 it announced that it held a 90% interest in the joint venture company entitled to prospect in Busang II. A stream of announcements indicating that Busang was, as stated in the Bre-X annual report dated 30 November 1995, "the world's largest gold deposit ever to be discovered", drove up the share price. During 1995 it rose from $2.85 to $53. In 1996 listings were obtained in the Toronto Stock Exchange and NASDAQ and by May, just before a 10-1 stock split, the shares were trading at $286.50.
Between October 1996 and March 1997 various rumours circulated to the effect that Bre-X's rights to exploitation of the Busang gold were being challenged in Indonesia, both by Indonesian parties involved in the joint ventures and by the Indonesian government. It was also rumoured that Mr Walsh and other insiders had sold substantial numbers of shares without revealing these difficulties to the market. Mr Walsh issued press releases saying that the challenges to Bre-X's title were without substance and that it was about to enter into a joint venture agreement with a large and reputable mining company for working the deposits and winning the gold.
In March 1997, however, the disputes about title were overtaken by an announcement that independent surveys on behalf of the prospective new mining partner had revealed that there was no gold at all. The drilling samples had been fraudulently salted. Mr Walsh commissioned an independent inquiry by a firm called Forensic Investigative Associates Inc ("FIA") into how the salting had occurred, who was responsible and who knew about it. The report found no evidence to implicate him.
Meanwhile, however, the share price collapsed and on 5 November 1997 the company made a voluntary assignment in bankruptcy. Deloitte & Touche Inc, the respondent to this appeal, was appointed Trustee.
Following the spectacular collapse of Bre-X, a number of law suits were commenced. In October 1997 shareholders commenced a derivative action in Ontario, in the name of the company, against several defendants, including Mr Walsh and his wife, alleging among other things breach of their fiduciary duties by making improper use of the company's information about its title and regulatory problems in Indonesia in order to sell shares to a total value of about $25m each. The conduct of this action was taken over by the Trustee on their appointment. The same and other allegations were made in class actions, also brought in Ontario, on behalf of persons who had bought shares in the market, claiming the losses they had sustained on their purchases.
In about April 1996, Mr and Mrs Walsh moved from Calgary to The Bahamas. On 24 April 1998, when the Ontario proceedings had been on foot for some six months, the Trustee commenced proceedings against Mr and Mrs Walsh in The Bahamas. The substantive relief claimed was damages for breach of fiduciary duty or an account of money received from the sale of shares. But the main purpose of the proceedings was to obtain interlocutory relief in the form of a Mareva injunction restraining Mr and Mrs Walsh from dealing with their assets world-wide and an order for disclosure of the value, location and other particulars of such assets. On 1 May 1998 Mr Acting Justice Evans made such an order until trial or further order with liberty to the defendants to apply to discharge. On 4 June 1998 Mr Walsh died. An application to discharge was made by Mrs Walsh as his personal representative and on her own behalf. It came before Strachan J. on 17 December 1998. He discharged the order against Mrs Walsh but maintained the order against Mr Walsh's estate, limited to assets in The Bahamas. The Trustee appealed against the discharge of the one order and the limitation of the other and Mr Walsh's estate cross-appealed against the refusal of the judge to discharge the order against it. The Court of Appeal allowed the appeal, reinstating the order against Mrs Walsh personally and the world-wide application of both orders. It dismissed the cross-appeal.
The case against Mrs Walsh personally has since been settled and their Lordships need say no more about it. As Mr Walsh's personal representative, she appeals to the Privy Council against the maintenance of the Mareva injunction against his estate. Pending appeal, the part of the order prohibiting dealing with assets has remained in force but the parties have agreed that the order for disclosure of their whereabouts should be suspended.
The jurisdiction of the courts of The Bahamas to grant Mareva injunctions is based upon section 21(1) of the Supreme Court Act 1996, which provides that the court may grant an interlocutory injunction "in all cases in which it appears to the court to be just and convenient to do so." The language is the same as that of section 45(1) of the Supreme Court of Judicature (Consolidation) Act 1925 which formed the basis of the creation of the Marevajurisdiction in England before that section was replaced and amplified by section 37 of the Supreme Court 1981. The Bahamas legislature has not enacted the equivalent of subsection (3) of section 37, which gives the court express power to grant Mareva relief in respect of assets within the jurisdiction, whether or not the defendant is "domiciled, resident or present" within that jurisdiction. Nevertheless, their Lordships consider that the jurisdiction to grant such relief in respect of assets within or without the jurisdiction and against residents or foreigners was well established in England before the 1981 Act was passed: see Third Chandris Shipping Corporation v Unimarine SA [1979] QB 645 and Barclay-Johnson v Yuill [1980] 1 WLR 1259 (jurisdiction against residents) and Derby & Co Ltd v Weldon [1990] Ch 48 (world-wide restraints). The courts of The Bahamas have a similar jurisdiction.
Interlocutory jurisdiction is ordinarily ancillary to substantive jurisdiction and in Siskina (Owners of cargo lately laden on board) v Distos Compania Naviera SA [1979] AC 210 the House of Lords decided that a court could not (in the absence of express statutory authority) grant Mareva interlocutory relief unless the defendant was "amenable to the jurisdiction of the court" in respect of a substantive cause of action. As the proceedings are interlocutory, it is not necessary for the applicant to show that he is likely to succeed in establishing such a cause of action. For the purposes of the threshold requirement it is sufficient if, upon the material before the court, he appears to have a good arguable case: see The Ninemia Maritime Corporation v Trave Schiff-ahrtsgesellschaft MbH Und Co KG [1983] 1 WLR 1412. It is then a matter for the court to decide as a matter of discretion, taking into account among other matters the strength or otherwise of the applicant's case, whether it is "just and convenient" to grant an injunction.
Both Strachan J. and the Court of Appeal considered that the Trustee had shown an arguable case against the late Mr Walsh. Their Lordships would...
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