Are Freezing Injunctions Allowed Without An Underlying Cause Of Action?

A freezing injunction is an interim order preventing a party from dealing with or disposing of its assets to prevent enforcement of an existing or potential future judgment.

The law surrounding the Courts’ powers to grant freezing injunctions has been evolving since the case of Mareva Compania Naviera SA v International Bulkcarriers SA; The Mareva [1980] 1 All ER 213. In this case, the jurisdiction of the High Court to grant such injunctions was firmly established.

It was not until the House of Lord’s case of The Siskina [1979] AC 210 that the Court had to consider its ability to grant an interlocutory injunction in respect of claims outside of its jurisdiction. This case established the foundational principle that a freezing injunction could only be granted by the Court if in support of a pre-existing cause of action. In this case, the proceedings were to be brought outside of England and it was, therefore, held that the English Courts could not impose an injunction.

Fast forward to 4th October 2021 and the landmark judgment of the Privy Council in the case of Convoy Collateral Ltd v Broad Idea International Ltd and Cho Kwai Chee [2021] UKPC 24.

Convoy Collateral Ltd v Broad Idea International Ltd and Cho Kwai Chee

Case summary

Convoy Collateral applied in the BVI (British Virgin Islands) Courts for freezing injunctions in support of proceedings issued in Hong Kong against Dr Cho (a Hong Kong resident) and Broad Idea International (a BVI company under the control of Dr Cho). In the first instance, the injunction was granted. On appeal, it was overturned.

The issues on appeal were:

  1. Whether the rules of Court in the BVI permitted service out of a claim purely to obtain a freezing injunction; and,
  2. Whether the Court can grant an injunction to assist with the enforcement of a prospective foreign judgment.

On the first issue, it was held that the BVI Court rules did not permit service out of the claim purely to obtain a freezing injunction against Dr Cho.

As to the second issue, the Court held that in an instance where it has personal jurisdiction over a defendant, it can grant an injunction to assist with the future enforcement of a foreign judgment. The Court, it should be noted, rejected dicta to the contrary in The Suskina.

Lord Leggatt’s judgment extrapolated further into the development and purpose of freezing injunctions. He rejected the earlier view that an injunction needed to be in support of a pre-existing cause of action, summarising that an injunction could be granted when:

  • The applicant has either had granted or has an arguable case for being granted, a judgment that will be enforceable through a process of the Court;
  • The respondent holds assets which the applicant could look to enforce against;
  • There is a real risk that the respondent, in the absence of an injunction, would take steps to deal with the assets outside the ordinary course of business which would impact the ability for the judgment to be satisfied.

Further:

  • The judgment can be given either a domestic or foreign Court, provided that it is capable of being enforced by the domestic Court;
  • The judgment can be against the respondent but also against a ‘non-cause of action defendant’ that is holding assets that would be available for enforcement; AND, most significantly
  • Proceedings do not have to have been commenced and the right to bring proceedings does not yet have to have arisen for an injunction to be sought. It must simply be the case that such a right will arise and that proceedings will be brought.

Although the decision in Convoy Collateral Ltd v Broad Idea International Ltd and Cho Kwai Chee is not binding in the Courts of England and Wales and is just obiter dicta, the Courts will likely utilise the majority judgment as a starting point for future cases surrounding the granting of such injunctions.

Convoy Broad Idea Chee

How Nelsons can help

Ryan Belcher is a Trainee Solicitor in our Dispute Resolution team.

For further information or advice on the subjects discussed in this article, please contact Ryan or another member of our team in Derby, Leicester, or Nottingham on 0800 024 1976 or via our online form.

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