The Last Rites for the Siskina?

At issue in the appeal were two important questions:

1. Whether or not the Court has the power to grant injunctive relief in support of foreign proceedings.
2. Whether that power is exercisable against persons not subject to the territorial jurisdiction of the Court.

To answer both questions, Convoy sought to persuade the Privy Council that the decision of the House of Lords in Siskina (Owners of cargo lately laden on board) v Distos Cia Naviera SA [1979] AC 210 (the Siskina) was wrongly decided, and that the majority decision in Mercedes Benz v. Leiduck [1996] AC 284 was also wrong (Mercedes).

The Privy Council unanimously dismissed both of Convoy’s appeals, holding that the decisions in Mercedes Benz and the Siskina should not be disturbed, and that the CPR should be interpreted consistently with them. However, the majority also considered that the logic which underpins the power of the Court to grant injunctive relief was misunderstood.

Black Swan

Inevitably, all roads lead back to the seminal decision of the (then) newly established Commercial Court in Black Swan Investment ISA v Harvest View Ltd (BVIHCV 2009/399) (Black Swan). In Black Swan, Bannister J held that there was “high authority that in the absence of a provision to the effect of section 25 (of the UK Civil Jurisdiction and Judgments Act 1982) (the CJJA) the Court may not grant a freezing order in aid of foreign proceedings against a defendant who is not subject to the Court’s in personam jurisdiction.” But he also reasoned that the question of whether or not the Court should grant relief against a person that is subject to the Court’s in personam jurisdiction, had been left open.

Bannister J considered that the lacuna could be filled in the BVI, by adopting the approach of Lord Nicholls in Mercedes: that in the case of a prospective money judgment, the Court should grant a freezing order over somebody subject to the Court’s jurisdiction if the freezing order would facilitate enforcement.

That remained the position following the decision of the Court of Appeal in Yukos CIS Investments Ltd v Yukos Hydrocarbons Investments Ltd (HCVAP 2010/028) 26 September 2011 (Yukos). In Yukos, the Court of Appeal rejected an argument that Black Swan had been wrongly decided, and accepted the principle that an injunction could be granted against a resident of the BVI that controls assets against which a foreign judgment could be enforced.

The following decade saw repeated use of the Black Swan jurisdiction, and the decisions that emerged were mostly concerned with the outer limits of that jurisdiction – for example, whether or not ancillary disclosure orders could be given (in a series of decisions beginning with Magot v. Gazin), whether it was just and convenient to make an order in the BVI where a foreign court had already done so (Usilett v. Osetinskaya BVIHCV 37/2013), the extent to which the BVI Court should act in the event that a foreign Court was unable (or declined to do so) (Yukos), whether it is necessary to establish the existence of local assets (Usilett; Koshigi v. Donna Union Foundation BVIHC 2018/0043) and the need to avoid jurisdictional disharmony as between competing orders (VTB Capital v. Nutritek). None of those cases brought with them any sustained challenge to the principle itself.

Third Time Unlucky

It was perhaps inevitable that a time would come when the boundaries would be pushed. On 9 February 2018, Convoy Collateral obtained an order ex-parte against a company that was subject to the territorial jurisdiction of the Court, and its shareholder (who was not). On a conventional application of Black Swan, the Court had jurisdiction against the former, but not against the latter. This difficulty was not brought to the attention of the Court at the ex-parte hearing.

In response to the resulting injunction, the shareholder challenged the jurisdiction (and power) of the Court to make an order against him. Convoy sought to argue that CPR 7.3(1)(b) (“if a claim is made … for an injunction ordering the defendant to do or refrain from doing some act within the jurisdiction”) extended to its claim for injunctive relief, even in the absence of a substantive cause of action maintained in the BVI.

To that, the Board’s answer was two-fold: first, no such claim had in fact been issued; second, the rule was to be construed (consistently with Black Swan and the Siskina) as applying only to a claim which was justiciable in the British Virgin Islands. It was therefore too late to doubt the Siskina for these purposes: “the common law does not operate on a principle of third time lucky.”

Convoy 2 and the Enforcement Principle

Even though Convoy’s appeal failed on the facts, the more enduring aspect of the Board’s decision is likely to arise from its treatment of the Siskina and the basis upon which the Court acts when it grants injunctive relief.

The Board’s starting point was to note the breadth of the statutory jurisdiction to grant injunctive relief at Section 37 of the English Supreme Court Act 1981 (and its BVI equivalent, Section 24 of the Eastern Caribbean Supreme Court Act (the BVI Act). It adopted as correct a passage in Spry on Equitable Remedies, noting that the Courts have often been guilty of confusing questions of jurisdiction with power, and questions of discretion with practice. The “preferable analysis” involves “a recognition of the great width of equitable powers, an historical appraisal of the categories of injunctions that have been established and an acceptance that pursuant to general equitable principles injunctions may issue in new categories when this course appears appropriate.”

Just as the nature of injunctive relief has evolved in response to changing circumstances, the majority held that “at this stage of the law’s development it is possible to go further and 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.” Rather, the essential purpose of a freezing injunction is facilitate enforcement (the Enforcement Principle). It is not appurtenant to the cause of action itself.

It was this feature of Lord Nicholls’ dissenting judgment in Mercedes which made his speech of enduring relevance:

“Lord Nicholls spelt out a principled basis for the practice of granting freezing injunctions which, until then, the courts had been struggling to articulate. His key point was that the essential purpose of a freezing injunction is to assist the enforcement through the court’s process of a money judgment (which is usually prospective): the claimant’s underlying cause of action is relevant only in so far as it bears on the prospect that such a judgment will be obtained.”

It follows that “once it is accepted that an interlocutory injunction can be granted (i) where substantive proceedings are taking place abroad and (ii) against a “non-cause of action defendant”, there is no reason why it should not be granted in an appropriate case where both circumstances are combined.” More dramatically, the majority considered it to follow that “there is no principle or practice which prevents an injunction from being granted in appropriate circumstances against an entirely innocent party even when no substantive proceedings against anyone are taking place anywhere.”

These conclusions were buttressed with a helpful summary of the law as it now stands. Gone is the focus upon the cause of action, in favour of a focus upon the probability of obtaining a judgment. Perhaps the most often cited passages of the judgment will be paragraphs 101 and 102:

The Board emphasized the breadth of this jurisdiction:

What Comes Next?

Lord Leggatt held that “the shades of The Siskina have haunted this area of the law for far too long and they should now finally be laid to rest”. He also noted that it was the importance of the appeal that led the Board, exceptionally, to convening a panel of 7. These remarks, together with the way in which the majority addressed the concern that its judgment on the Enforcement Principle was strictly obiter, suggests that the majority intended their judgment to be an authoritative restatement of the principles upon which the Court acts. As Sir Geoffrey Vos put it, “Lord Leggatt has sought to provide a juridical foundation for the entire law of freezing and interlocutory injunctions.”

In response to the decision of the Court of Appeal in Convoy 2, the legislature in the BVI had been quick to intervene with legislation which put the Court’s power to grant injunctive relief in support of a foreign proceeding on a statutory footing: Section 24A(1) of the BVI Act. In the Cayman Islands, the legislature was similarly nimble: in response to the decision of the Cayman Islands Court of Appeal in VTB Capital plc v Universal Telecom Management [2013] 2 CILR 94, the legislature intervened with Section 11A of the Grand Court Law.

Sir Geoffrey Vos considered that these developments were a sufficient reason to refuse to adopt what the Board called the Enforcement Principle, because doing so risked causing confusion with the statutory schemes in those commonwealth jurisdictions that had legislated to address the problems caused by the Siskina. But the majority was unpersuaded by this logic. They considered that “there is no inconsistency between legislation such as section 25 of the 1982 Act in England and Wales and our conclusion about the extent of the court’s power under section 37 of the 1981 Act and its predecessors.” Section 24A(1) of the (amended) legislation in the BVI broadly follows Section 25 of the English CJJA and “can also operate in future alongside and in harmony with Section 24(1).” Time will tell whether that is the case in the BVI, or indeed elsewhere.

If the two jurisdictions do exist harmoniously, it is likely that the body of law which had developed in relation to the exercise of the Black Swan jurisdiction will continue to be relied upon. But there are obvious problem areas ahead. Take the case of a BVI person to whom property is transferred by a wrongdoer, perhaps against whom a claim might be made in the future under Section 423 Insolvency Act 1986 or equivalent legislation. Will the Court then act to freeze the property of the recipient, in the absence of a claim against him anywhere – and what limits are there to be to such a jurisdiction? To what extent will the Court be prepared to act in aid of the enforcement of a non-monetary judgment? Bannister J in Black Swan and the decision of the majority in Convoy Collateral suggests that the power to grant injunctive relief exists to facilitate enforcement only of a putative money judgment; the decision of the Court of Appeal in Yukos took a more expansive view.

Whatever else emerges from this decision, it is clear that the BVI’s first commercial court judge was well ahead of his time. Not only did he (correctly) decide that the Court had power to act in aid of the putative enforcement of a foreign judgment, but the limits which he imposed on that jurisdiction have also proved to be correct: (i) it is limited to the enforcement of a monetary judgment and (ii) (subject to any change in the rules) available only against those subject to the personal jurisdiction of the Court.

Andrew Willins of Appleby appeared on behalf of the successful Respondent in the Privy Council, with David Mumford QC and Ryan James Turner of Maitland Chambers.