'Chabra' Relief In The BVI ' Freezing The Assets Of A Person Who Is Not A Substantive Defendant

• Published date: 18 December 2020
• Law Firm: Carey Olsen
• Author: Mr Jeremy Lightfoot, Richard Brown and Catie Wang

A Chabra injunction is a powerful weapon which can substantially enhance the scope of assets which a claimant can ring-fence. Here, Carey Olsen's Jeremy Lightfoot, Richard Brown and Catie Wang examine how recent cases have seen the requirements of Chabra relief evolve.

A Chabra injunction is a freezing injunction over the assets of a person against whom the claimant has no direct cause of action. ¹ It is a powerful weapon which can substantially enhance the scope of assets which a claimant can ring-fence.

The requirements for Chabra relief have continued to evolve over the years and can be the subject of debate. They have however recently been the subject of clarification and development in the British Virgin Islands (BVI).

The current position is that to obtain Chabra relief in the BVI, the following elements must be established:²

1. There must be substantive proceedings against the primary defendant (cause of action defendant or CAD) in the BVI;
2. The Court must have granted or be in the process of granting a freezing order against the CAD;
3. There must be a good reason to suppose that assets held by a third party would be amenable to some process of execution to satisfy an eventual judgment, or that a third party is holding assets as a bare trustee, agent or nominee of the CAD;
4. There must be evidence that the assets of the third party are at risk of dissipation;
5. The Court is able to join or has joined the third party to the substantive proceedings as a non-cause of action defendant (NCAD); and
6. It is just and convenient for the Court to grant such an injunction

Two of these requirements merit further consideration given recent developments.

The requirement for substantive proceedings against the CAD in the BVI

Until the Court of Appeal's recent decision in Broad Idea International Limited v Convoy Collateral Limited,³ free-standing freezing injunctions from the BVI Courts against third parties (often BVI companies) in support of foreign court proceedings, known as 'Black Swan' injunctions, had been available to claimants for at least 10 years following the decision in Black Swan Investment I.S.A. v Harvest View Limited et al.⁴ In Broad Idea, however, the Court of Appeal overturned the Black Swan decision, concluding that such relief could only be granted in support of substantive proceedings in the BVI.

This has created difficulties for claimants seeking relief in the BVI in support of foreign proceedings. This difficulty was illustrated in Commercial Bank...