Broad Idea International Limited v Convoy Collateral Limited BVIHCMAP 2019/0026 – the demise of the Black Swan?

A unanimous Court of Appeal led by the Lord Chief Justice, The Hon. Dame Janice M Pereira, has overruled the 2010 decision in Black Swan Investment ISA v Harvest View Limited. It confirmed that the BVI Court does not have jurisdiction to grant "stand alone" injunctions in support of foreign proceedings. Subject to any appeal to the Privy Council, this now means that a means of relief which has resonated in Cayman and elsewhere outside the BVI, needs to be carefully revisited by claimants engaged in securing and tracking assets from wrongdoers. The ramifications of this judgment will doubtless reverberate throughout the offshore world.

Background

Broad Idea International Limited ('Broad Idea') is a company incorporated in the BVI. Its shareholders were a Mr Cho and a Mr Choi. Its main asset was its shareholding in another company. Convoy Collateral Limited ('Convoy') commenced proceedings in Hong Kong against Mr Cho. Convoy applied for and was granted a freezing order in the BVI against Mr Cho and Broad Idea. Mr Cho made an application to discharge the freezing injunctions which was granted. Convoy made a subsequent application for a further freezing injunction against Broad Idea which was granted. It is this Order that was the subject of consideration by the Court of Appeal.

Summary Conclusions

1. The application against Broad Idea was purely to safeguard enforcement of a potential monetary judgment against Mr Cho. There no actual or potential substantive proceedings against Broad Idea in the BVI or Hong Kong. The jurisdiction to grant interim relief by way of injunction in the BVI derives from section 24 Supreme Court Act which is based on the existence of substantive proceedings against the respondent to such an application. As there was no cause of action against Broad Idea the Court had no jurisdiction to grant a freezing injunction against Broad Idea.
2. The majority decision of the Privy Council in Mercedes Benz AG v Leiduck [1995] 3 All ER 929 is binding on the Court of Appeal and the BVI High Court and therefore substantive proceedings must exist for a freezing injunction to be granted.
3. The decision in Black Swan does not provide support for free standing interlocutory injunctions in aid of foreign proceedings. In so far as the Judge relied on a dissenting judgment in the Mercedes decision that was not a course of action available to him.
4. As the Court in the BVI has no jurisdiction to grant free standing interlocutory injunctions in aid of foreign proceedings, Black Swan was wrongly decided.
5. Further it was not open to the judge to conclude that Broad Idea was a valid non cause of action defendant under the Chabra jurisdiction as no cause of action had been raised against Mr Cho in the BVI.
6. The evidence of risk of dissipation must be real and not fanciful. The evidence of risk of dissipation was in any event unsatisfactory and even if the Court had jurisdiction the grant of relief in the exercise of its discretion would have been wrong as a result.