Release the shackles! The Privy Council sets Black Swan free to soar again
The Judicial Committee of the Privy Council has handed down its judgment in the Broad Idea appeals confirming that where the BVI High Court has personal jurisdiction over a party, the court has power to grant a freezing injunction against that party to assist enforcement through the court’s process of a prospective (or existing) foreign judgment. The Eastern Caribbean Court of Appeal was wrong to hold otherwise and overturn Black Swan. The common law equitable power to grant such injunctions did – and continues to – exist.
The Privy Council’s lengthy 78-page judgment takes a deep dive into the history of freezing injunctions. Lord Leggatt gives the majority judgment, with whom Lords Briggs, Lord Sales and Lord Hamblen agree for a 4-3 majority.
Central to the majority judgment was the treatment in subsequent decisions of Lord Diplock’s wider statements in The Siskina. The majority judgment dispels what it termed the continuing “uncertainty and inconsistency” The Siskina brought to the common law. It makes clear that the constraints on the court’s power to grant interim injunctions articulated in that case are not only undesirable in modern day international commerce but legally unsound.
The issue being that the House of Lords in The Siskina was solely concerned with whether a particular service out rule of court applied to an interim injunction; it did not determine the more fundamental questions about the powers of the court to grant a freezing injunction against a defendant on whom a writ had been properly served.
Lord Leggatt’s judgment traverses the key developments of freezing inunctions and how the practice regarding the grant of injunctions has moved on since The Siskina was decided 44 years ago. Modern day third party disclosure orders, Bankers Trust orders and website blocking orders all show that there is no principle or practice preventing an injunction from being granted in appropriate circumstances against an innocent party even when no substantive proceedings against anyone are taking place anywhere.
Lord Leggatt stressed the importance of the width and flexibility of equitable powers to modify practice in accordance with principle and, where necessary, to provide an effective remedy. Such flexibility is essential for the law to keep abreast of societal changes. Key changes including: the ease and speed with which money and other financial assets can be moved around the world; globalisation of commerce and economic activity leading to cross-border dispute resolution; and the growth in use of offshore companies.
Lord Leggatt concludes that the Court of Appeal “failed to recognise the breadth of the power to grant injunctions already possessed by the BVI courts, the fact that the limit on the court’s power which the EC Court of Appeal derived from The Siskina was not part of the ratio decidendi of that case, and how the law relating to injunctions generally – and freezing injunctions in particular – has developed in far-reaching ways since The Siskina was decided in 1977”.
Further, the language of section 24(1) of the Eastern Caribbean Supreme Court (Virgin Islands) Act (the Act) did not confine the power of the BVI court to grant freezing injunctions to proceedings in which substantive relief is claimed in the BVI. Even if that were wrong, the statutory power to grant interlocutory orders did not cut down the court’s equitable powers to do so, which continues to exist despite the legislation. Additionally, Lord Leggatt had no issue with specific statutory power to grant such interim relief (as introduced in January this year by the BVI legislature in a new section 24A to the Act) sitting alongside the common law power. In fact, he noted, it only highlighted the confusion left in The Siskina’s wake.
Lord Leggatt went on to recognise that a freezing injunction is not, on a true analysis, ancillary to a cause of action, in the sense of a claim for substantive relief, at all. The purpose of the injunction is to prevent the right of enforcement from being rendered ineffective by the dissipation of assets against which the judgment could otherwise be enforced. Once this is appreciated, it is apparent that there is no reason in principle to link the grant of such an injunction to the existence of a cause of action. What in principle matters is that the applicant has a good arguable case for being granted substantive relief in the form of a judgment that will be enforceable by the court from which a freezing injunction is sought.
The Privy Council also considered whether under the Eastern Caribbean Supreme Court Civil Procedure Rules 2000 (the EC CPR) the BVI High Court has power to authorise service on a defendant outside the jurisdiction of a claim form in which a freezing injunction is the only relief sought. In light of The Siskina and the Privy Council’s Mercedes Benz judgment, all of the Law Lords were in agreement that the EC CPR gave the BVI court no such power: “The lacuna in the EC CPR can only be filled by amending the rules and not by reinterpreting them”, a matter which will no doubt be promptly addressed by the BVI Rules Committee.
Common law practitioners across the globe will recognise the importance of this appeal, not least as demonstrated by the seven-member Board considering it. Lord Leggatt’s judgment will be an anthology for all freezing injunction cases going forward. It “seeks not to break new ground but to integrate into a coherent statement the principles which underpin the exercise of the relevant power”. On which it delivers. For BVI practitioners the finding that Black Swan is good law will be welcome news. Section 24A of the Act does not have retrospective effect. With confirmation that the Black Swan jurisdiction exists, despite the Act, all extant Black Swan injunctions remain safe.
Harneys acts for the Appellant.
A copy of the Privy Council’s judgment can be found here.
Listen to our podcast Take 10 season three, episode seven – Black Swan flies as Siskina dies as Partners Andrew Thorp and Jonathan Addo discuss the eagerly awaited Privy Council decision.