Freezing Orders in support of foreign proceedings

The Privy Council has given a landmark judgment in Convoy Collateral Ltd v Broad Idea International Ltd [2021] UKPC 24.

This Judgment relates to freezing and interim injunctions and potentially opens the door to grant injunctions against third parties where there is no cause of action in the traditional sense.

The Privy Council Decision

The appeal related to the jurisdiction of the BVI Courts to grant freezing orders in support of foreign proceedings; to permit service of an application claiming only freestanding freezing relief out of the jurisdiction; and an injunction against third parties to the underlying proceedings against whom no substantive claim has been advanced.

Due to the significance of the appeal, the Judicial Committee of the Privy Council expedited the appeal and assembled a seven-member board that included both the President and Deputy President of the Supreme Court (Lord Reed of Allermuir and Lord Hodge), and the Master of the Rolls (Sir Geoffrey Vos).

A new regime?

In a significant finding of the appeal, the Privy Council analysed the power of the Court to grant injunctions generally. The Board split 4:3 in favour of abandoning the traditional analysis of that power as dependent on the presence of a pre-existing cause of action justiciable before the local court. As Lord Leggatt observed [at para. 82 of the Judgment]:

“[T]here is no principle or practice which prevents an injunction from being granted in appropriate circumstances against an entirely innocent party even when no substantive proceedings against anyone are taking place elsewhere”.

In doing so, the decision overturned, or distinguished, a number of previous Privy Council, House of Lords and English Court of Appeal decisions in that, prior to Broad Idea, there was uncertainty of whether you needed to establish a cause of action against a third party in order to obtain an injunction against them.

The majority in Broad Idea concluded that a court with equitable and/or statutory jurisdiction to grant injunctions, where it is just and convenient to do so, has power to grant a freezing injunction against a party over whom the court has personal jurisdiction in the following circumstances [at para. 101 of the Judgment]:

1. The applicant has already been granted or has a good arguable case for being granted a judgment or order for the payment of a sum of money that is or will be enforceable through the process of the court;
2. The respondent holds assets (or, as discussed below, is liable to take steps other than in the ordinary course of business which will reduce the value of assets) against which such a judgment could be enforced; and
3. There is a real risk that, unless the injunction is granted, the respondent will deal with such assets (or take steps which make them less valuable) other than in the ordinary course of business with the result that the availability or value of the assets is impaired and the judgment is left unsatisfied.

Impact

The decision is to be welcomed in providing clarity in obtaining injunctions against third parties in this jurisdiction in support of foreign proceeding if where there no direct cause of action against the third party.

Gherson litigation team has considerable experience dealing with cross border disputes and issues involving jurisdiction. If you have a potential claim or facing a potential dispute matter, please do not hesitate to contact us for advice, send us an e-mail, or alternatively, follow us on Twitter, Facebook, or LinkedIn to stay-up-to-date.

The information in this blog is for general information purposes only and does not purport to be comprehensive or to provide legal advice. Whilst every effort is made to ensure the information and law is current as of the date of publication it should be stressed that, due to the passage of time, this does not necessarily reflect the present legal position. Gherson accepts no responsibility for loss which may arise from accessing or reliance on information contained in this blog. For formal advice on the current law please do not hesitate to contact Gherson. Legal advice is only provided pursuant to a written agreement, identified as such, and signed by the client and by or on behalf of Gherson.

©Gherson 2021