Black Swans Freezing In BVI But Not Migrating; White Elephant Spotted In The Cayman Islands?

• Published date: 28 November 2021
• Subject Matter: Corporate/Commercial Law, Corporate and Company Law, Shareholders
• Law Firm: Charles Russell Speechlys LLP
• Author: Ray Ng

An indigenous species

It is "already.the law of the BVI (and other jurisdictions where courts have inherited the equitable powers of the former Court of Chancery)", that "where the court has personal jurisdiction over a party, it has the power to grant a freezing injunction against that party to assist enforcement through the court's process of a prospective (or existing) judgment [of a foreign court]".

With those historic words, the Privy Council in Broad Idea International Limited v Convoy Collateral Limited¹ confirmed the existence and origin of Justice Bannister's Black Swan² .

Non-migratory

Concurrently, the Privy Council also held that there was no power under the existing rules to serve "on a defendant outside the jurisdiction.a claim form in which a freezing injunction is the only relief sought", and noted that "in BVI, there has, as yet, been no new statute introducing a gateway for interim or freezing injunctions."

The absence of a service-out gateway distinguishes the BVI free-standing freezing injunction from its Cayman Islands and English counterparts. Does this distinction make a difference?

Context

The Siskina³ and Mercedes Benz⁴ concerned applications to freeze assets within the jurisdiction owned by a 'cause of action defendant' (CAD) outside the jurisdiction; and the freezing injunctions were denied on the ground that there was no gateway for serving the applications out of the jurisdiction.

Black Swan on the other hand did not involve service out of the jurisdiction. Freezing relief was sought and granted against 'non-cause of action defendant' (NCAD) BVI companies within the jurisdiction, on the Chabra basis.

After Black Swan, there were BVI cases in which leave was sought to serve Black Swan applications out of the jurisdiction, but no definitive position emerged. As late as February 2018, it was seemingly still possible for Convoy Collateral to obtain leave to serve a Black Swan application out of the jurisdiction against Dr. Cho.

In the meantime, other jurisdictions such as the Cayman Islands had enacted legislation to put beyond doubt, the power of their courts i) to grant free-standing freezing injunctions in aid of foreign proceedings⁵; and ii) to permit applications for such injunctions to be served out of the jurisdiction on foreign CADs⁶.

When in May 2020, the Eastern Caribbean Court of Appeal allowed Broad Idea's appeal⁷ and overturned⁸ 10 years of Black Swan jurisprudence, the BVI legislature swiftly enacted a statutory power⁹ to fill the gap. However, it refrained from enacting any service-out gateway.

Is a gateway needed?

Absent a gateway, Black Swan¹⁰ relief is unavailable against the foreign CAD and his BVI shares and only...