In Great Panorama International Ltd v Qin Hui & Ors, the BVI Court continued a freezing injunction made against BVI non-cause of action defendants associated with a foreign judgment debtor. In doing so the Court issued a judgment covering a wide-range of issues that will be of interest to those seeking to enforce debts against and preserve the assets of BVI companies. In this blog we consider the court’s pronouncements regarding its jurisdiction to grant Chabra relief and the extent of the applicant’s duty to give full and frank disclosure. In the sequel to this blog we will consider the Court’s treatment of findings made by another court that was relied upon as evidence and the Court’s response to an attempt to introduce evidence post order/judgment.
The applicant had obtained default judgment in Hong Kong against a resident of the PRC and sought to preserve assets in the BVI that the applicant said were owned or controlled by the defendant.
The respondents relied on the decision in Broad Idea (No.2) to argue that the freezing injunction should be discharged because the BVI Court did not have jurisdiction to grant Chabra relief against the respondents.
In addressing the BVI courts’ ability to grant Chabra relief against the BVI companies, the judge distinguished this case from Broad Idea (No.2) on the basis that the defendant’s ownership of the companies was such that the assets of the companies would be amenable to execution when enforcing any judgment made against the defendant. The Court held that its ability to appoint an equitable receiver over the defendant’s 100 per cent shareholding in the NCADs was sufficient to support the grant of the Chabra jurisdiction.
In considering whether the requirement that the companies be the "money-box" of the defendant imposed a more onerous hurdle for an applicant to overcome, the judge explained that the test would be whether the companies and their assets would fall within terms of a standard freezing injunction (ie whether they were assets owned or controlled by the defendant).
Despite one of the companies having been transferred by the defendant to his mother-in-law the judge said that the fact that the defendant had continued to be the company’s sole director demonstrated that he had control over the company. Furthermore, the judge found that it was arguable that the transaction transferring the company would be liable to be set aside.
The decision also raised an interesting point concerning applicants’ duties to give full and frank disclosure at ex parte hearings. At the ex parte stage the applicant had argued that property owned by the defendant had been put up for sale at a heavily discounted price when in fact the property had not been put up for sale at all. The applicant had relied upon a report prepared by a third-party investigative firm which had included information that turned out to be false and where it was not possible to explain the error in question. The Court found that there had been no deliberate or negligent misstatement to the Court at the ex parte hearing and decided to continue the injunction. It is apparent that the judge did not consider the applicant’s duty to make enquiries extended to going beyond the report and checking the sources it was based upon. Indeed, even if the judge had found a breach of the applicant’s duty to give full and frank disclosure, he made clear that he would have still re-imposed the injunction given that the apparent error was that of the third-party and because of the materiality of the breach in the overall scheme of the application.