{"id":5894,"date":"2020-06-02T08:52:47","date_gmt":"2020-06-02T13:52:47","guid":{"rendered":"https:\/\/www.campbellslegal.com\/?p=5894"},"modified":"2020-06-02T09:37:56","modified_gmt":"2020-06-02T14:37:56","slug":"black-swan-jurisdiction-in-the-british-virgin-islands-flown-the-nest","status":"publish","type":"post","link":"https:\/\/www.campbellslegal.com\/client-advisory\/black-swan-jurisdiction-in-the-british-virgin-islands-flown-the-nest-5894\/","title":{"rendered":"Black Swan jurisdiction in the British Virgin Islands \u2013 Flown the Nest?"},"content":{"rendered":"
On 29 May 2020 the Eastern Caribbean Supreme Court, Court of Appeal (the \u201cCourt of Appeal<\/strong>\u201d) handed down a judgment which found that the BVI Court has no jurisdiction to grant free-standing freezing injunctions against a BVI company where no cause of action exists against that entity and an injunction is only sought against it for the purpose of preserving assets beneficially owned by a party to the proceedings.<\/p>\n This is a marked departure from relief often sought and frequently (until now) granted in cases coming before the Commercial Division where a party to substantive proceedings, either in the BVI or elsewhere, would apply to the BVI Court for a freezing injunction to safeguard assets of a defendant, which are in the possession and control of a third party (whether before the BVI court or elsewhere), pending the outcome of the case. The inability to obtain this relief puts claimants in BVI at a disadvantage until the same is remedied either upon a successful appeal or through amended legislation.<\/p>\n A more complete summary follows.\u00a0 Any member of Campbells\u2019 BVI litigation team is available to answer any questions you may have regarding this decision.<\/p>\n On 29 May 2020 judgment was handed down by the Court of Appeal in the matter of Broad Idea International Limited<\/em> v Convoy Collateral Limited<\/em>. By allowing the appeal, the Court of Appeal overturned over twenty years of BVI law originating with the seminal decision of the Commercial Division of the Eastern Caribbean Supreme Court, Black Swan Investment I.S.A. v Harvest View Limited et al[1]<\/strong><\/a> <\/em>(\u201cBlack Swan<\/strong>\u201d).<\/p>\n Convoy Collateral Limited (\u201cConvoy Collateral<\/strong>\u201d), a company incorporated in Hong Kong, commenced proceedings in Hong Kong against a shareholder of Broad Idea International Limited (\u201cBroad Idea<\/strong>\u201d), Dr Cho Kwai Chee (\u201cDr Cho<\/strong>\u201d), claiming, amongst other things, breach of fiduciary duty. Broad Idea is a company incorporated in the BVI. Convoy Collateral also applied to the Eastern Caribbean Supreme Court, Commercial Division in the BVI for a freezing injunction against Broad Idea and Dr Cho to freeze Dr Cho\u2019s assets and, importantly for the purposes of the later Court of Appeal decision, to restrain Broad Idea from transferring Dr Cho\u2019s shares in Broad Idea. Convoy Collateral succeeded in obtaining the injunction at first instance. Convoy Collateral sought to continue this injunction, however Dr Cho applied to set it aside. Subsequently, Convoy Collateral made an additional application seeking a freezing injunction against Broad Idea in support of the proceedings against Dr Cho in Hong Kong. Dr Cho\u2019s application to set aside the first instance judgment in relation to Broad Idea was granted and the BVI freezing order was discharged.<\/p>\n The subsequent application brought by Convoy Collateral against Broad Idea was granted by the Honourable Mr Justice Adderley. In his judgment the Judge reasoned that, pursuant to the decision in Black Swan<\/em>, he had jurisdiction and continued the freezing order against Broad Idea. It is this order that Broad Idea appealed.<\/p>\n As outlined by Madam Justice Blenman, the following issues stood to be determined by the Court of Appeal:<\/p>\n In considering the effect of section 24 of the Supreme Court Act Chief Justice Pereira held that:<\/p>\n \u201cthe authorities all support the proposition that, for the court\u2019s jurisdiction under section 24 of the Supreme Court Act to be properly invoked, there must be an enforceable cause of action against a defendant which the court has jurisdiction to enforce by final judgment, and that cause of action must be raised in substantive proceedings or an undertaking must be given to commence such proceedings\u2019\u2019[2]<\/strong><\/a>.<\/em><\/p><\/blockquote>\n The judgment found that it was a critical failure that Convoy Collateral had no cause of action against Broad Idea nor did it plan to bring proceedings at a later date (as a third party with control of assets of one of the parties to the proceedings, such orders often come within the heading of \u201cChabra Orders\u201d[3]<\/a>). The absence of an enforceable cause of action giving rise to actual or potential substantive proceedings \u201cfalls short of the requirements\u2026 for the grant of interlocutory injunctions such as freezing orders<\/em>\u2019\u2019[4]<\/strong><\/em><\/a>.<\/p>\n Similarly, in the judgment given by Justice Blenman, it was considered that the necessity for the applying party to have a cause of action was a \u201csafeguard\u201d<\/em>[5]<\/a> that was \u201cbuilt into the court\u2019s exercise of discretion\u201d[6]<\/strong><\/a><\/em>. Justice Blenman concluded that she failed to see how a freezing injunction could be obtained \u201cin circumstances where there is no cause of action or a substantive claim against Broad Idea in the BVI or in any part of the world<\/em>\u201d[7]<\/a>. Her Ladyship favourably cited a passage from Lord Diplock in The Siskina[8]<\/strong><\/a><\/em> which states \u201ca right to obtain an interlocutory injunction is not a cause of action. It cannot stand on its own. It is dependent upon there being a pre-existing cause of action against the defendant…The right to obtain an interlocutory injunction is merely ancillary and incidental to the pre-existing cause of action<\/em>\u201d[9]<\/a>.<\/p>\n Turning to a consideration of Convoy Collateral\u2019s reliance on the decision in Black Swan<\/em>, Chief Justice Pereira commented that the facts in Black Swan<\/em> are on \u201call fours<\/em>\u201d[10]<\/a> with the facts in this matter. This necessarily, Broad Idea argued, meant that the decision of Black Swan<\/em> had to be reviewed. As part of this review, Chief Justice Pereira referred to section 24 of the Supreme Court Act stating that this does not provide any foundation for the grant of injunctions in aid of foreign proceedings and, as per Justice Blenman, it must be given its clear meaning:<\/p>\n \u201cFurther, pre-1982 English authorities such as the Siskina suggest that interlocutory injunctions should not be granted otherwise than as ancillary to substantive proceedings in the BVI. There is therefore no common law basis for the grant of such injunctions apart from Black Swan. In my view, the jurisdiction to grant such interlocutory injunctions must be one which arises as a result of an enactment\u2019\u2019[11]<\/strong><\/a>. <\/em><\/p><\/blockquote>\n Justice Blenman reasoned further that it was significant that Justice Bannister in Black Swan<\/em> felt able to grant the freezing injunction on the basis of his interpretation of the dissenting judgment of Lord Nicholls judgment in Mercedes-Benz A.G. v Leiduck[12]<\/strong><\/a> <\/em>and did not, for instance, follow the decision of the House of Lords in The Siskina<\/em>:<\/p>\n \u201cI fail to see how the learned judge of the Commercial Court could have failed to properly apply the ratio decidendi in Mercedes-Benz which followed the tested pronouncements in Mareva Compania Naviera SA v International Bulkcarries SA and The Siskina and which had been consistently applied in our courts until Black Swan\u201d[13]<\/strong><\/a>.<\/em><\/p><\/blockquote>\n In dealing with submissions from Counsel, Chief Justice Pereira referred to the UK\u2019s Civil Jurisdiction and Judgments Act 1982<\/em>. Section 25 of that Act empowers courts to grant injunctions in support of specified foreign proceedings. Notably, comparable legislation has not been enacted in the BVI. In this regard the position in the UK was deemed to be \u201cvastly different\u201d[14]<\/strong><\/a><\/em> from that as currently exists in the BVI. Justice Blenman added that there was \u201ca clear process\u2026provided for obtaining such an order by rule 25.4 of the Civil Procedure Rules of the United Kingdom\u201d[15]<\/strong><\/a><\/em>. In the absence of such an equivalent in the BVI, she found that:<\/p>\n \u201c\u2026in the absence of any statutory authorisation, it was not open to the learned judge in Black Swan to have concluded that he could have expanded the jurisdiction of the court, even though he was very well intentioned. In my view, the courts in the BVI, in the absence of legislative authority, have no jurisdiction to grant a free standing interlocutory in aid of foreign proceedings\u201d[16]<\/strong><\/a>.<\/em><\/p><\/blockquote>\n The Court moved on to consider the application of the decision in Yukos<\/em> to the appeal. In holding that \u201cthe existence of the Black Swan jurisdiction was merely assumed in order to ventilate the central issue\u201d[18]<\/strong><\/a><\/em>, Chief Justice Pereira reasoned that Yukos<\/em> should not be read as confirming the jurisdiction put forward in Black Swan<\/em> and indeed was not applicable to this case:<\/p>\n \u201cIn other words, as the source of the Black Swan jurisdiction was not in issue, any pronouncements in Yukos affirming its existence can only be regarded as obiter. It follows that the decision in Yukos is not binding on this Court in so far as it assumed the existence of the Black Swan jurisdiction. As the existence of the jurisdiction is being challenged for the first time on this appeal, this Court is at liberty to render its view on Black Swan\u201d[19]<\/strong><\/a>. <\/em><\/p>\n The Court thereby concluded that whilst having personal jurisdiction over Broad Idea (as a BVI incorporated company) the BVI courts have no subject matter jurisdiction to grant a free standing interlocutory injunction against it in aid of foreign proceedings as there is no statutory basis for the exercise of this jurisdiction. If this jurisdiction is to be sanctioned in the BVI, it must be done by the legislature.<\/p>\n This decision has significant repercussions for the BVI.<\/p>\n Unless this decision is overturned by the Judicial Committee of the Privy Council or, alternatively, remedied by legislative intervention, the absence of such relief puts parties (particularly claimants) at a significant disadvantage if they wish to safeguard assets.<\/p>\n\r\n\t\t\t [1]<\/a> BVIHCV2009\/0399 (delivered 23 March 2010, unreported). Further to a recent decision by the Court of Appeal, the BVI Court now has no jurisdiction to grant free standing freezing injunctions against a BVI company.<\/p>\n","protected":false},"author":4,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[4],"tags":[],"yst_prominent_words":[4223,2686,2689,864,3002,4219,2695,1125,1315,863,854,4225,4226,4220,4227,4221,4222,455,4224,4228],"class_list":["post-5894","post","type-post","status-publish","format-standard","hentry","category-client-advisory"],"acf":[],"_links":{"self":[{"href":"https:\/\/www.campbellslegal.com\/wp-json\/wp\/v2\/posts\/5894","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.campbellslegal.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.campbellslegal.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.campbellslegal.com\/wp-json\/wp\/v2\/users\/4"}],"replies":[{"embeddable":true,"href":"https:\/\/www.campbellslegal.com\/wp-json\/wp\/v2\/comments?post=5894"}],"version-history":[{"count":5,"href":"https:\/\/www.campbellslegal.com\/wp-json\/wp\/v2\/posts\/5894\/revisions"}],"predecessor-version":[{"id":5905,"href":"https:\/\/www.campbellslegal.com\/wp-json\/wp\/v2\/posts\/5894\/revisions\/5905"}],"wp:attachment":[{"href":"https:\/\/www.campbellslegal.com\/wp-json\/wp\/v2\/media?parent=5894"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.campbellslegal.com\/wp-json\/wp\/v2\/categories?post=5894"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.campbellslegal.com\/wp-json\/wp\/v2\/tags?post=5894"},{"taxonomy":"yst_prominent_words","embeddable":true,"href":"https:\/\/www.campbellslegal.com\/wp-json\/wp\/v2\/yst_prominent_words?post=5894"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}The Decision<\/strong><\/h2>\n
Background<\/strong><\/h2>\n
The Appeal<\/strong><\/h2>\n
\n
Section 24 of the Eastern Caribbean Supreme Court (Virgin Islands) Act, Cap 80 (the \u201cSupreme Court Act\u201d) and Black Swan<\/em><\/strong><\/h2>\n
Comparison with the position in the United Kingdom<\/strong><\/h2>\n
\u00a0<\/strong>Distinction of Yukos Cis Investments Limited et al v Yukos Hydrocarbons Investments Limited et al <\/em>(\u201cYukos\u201d)[17]<\/a><\/strong><\/h2>\n
Commentary<\/strong><\/h2>\n
\n[2]<\/a> Paragraph 22 of the judgment.
\n[3]<\/a> As per the decision in TSB Private Bank International SA v Chabra<\/em> [1992] 2 All ER 245.
\n[4]<\/a> Paragraph 25 of the judgment.
\n[5]<\/a> Paragraph 89 of the judgment.
\n[6]<\/a> Ibid.
\n[7]<\/a> Ibid.
\n[8]<\/a> Siskina (owners of cargo lately laden on board) and others v Distos Compania Naviera SA (\u201cThe Siskina\u201d)<\/em> [1979] AC 210.
\n[9]<\/a> Paragraph 90 of the judgment.
\n[10]<\/a> Paragraph 27 of the judgment.
\n[11]<\/a> Paragraph 43 of the judgment.
\n[12]<\/a> [1995] 3 All ER 929.
\n[13]<\/a> Paragraph 98 of the judgment.
\n[14]<\/a> Paragraph 105 of the judgment.
\n[15]<\/a> Ibid.
\n[16]<\/a> Ibid.
\n[17]<\/a> HCVAP2010\/028 (delivered 26 September 2011, unreported).
\n[18]<\/a> Paragraph 48 of the judgment.
\n[19]<\/a> Paragraphs 48-49 of the judgment.<\/p>\n\r\n\t\t\t<\/div>\r\n\t\t\n","protected":false},"excerpt":{"rendered":"