15 October 2021
Broad Idea v Convoy Collateral  UKPC 24
1. It has traditionally been assumed in Hong Kong that to qualify for interim relief under s.21L of the High Court Ordinance (“HCO”), an applicant had to show a cause of action justiciable within the jurisdiction. This assumption might perhaps be traced to a dictum in The “Siskina”  2 AC 210, where Lord Diplock said (256):
“…the High Court has no power [at common law] to grant an interlocutory injunction except in protection or assertion of some legal or equitable right which it has jurisdiction to enforce by final judgment…” (emphasis added)
2. Because of this assumption, there was a belief that s.21L did not permit the courts to grant freezing orders in the absence of substantive proceedings in Hong Kong. In their Final Report, the Chief Justice’s Working Party on Civil Justice Reform recommended that (§347):
“[Section 21L of the HCO] clearly classifies [freezing] injunctions as ‘interlocutory’. In the light of The Siskina and the Leiduck decisions which unequivocally lay it down that as an interlocutory injunction, [freezing] injunctions require to be incidental to a substantive action… the Working Party’s view is that s.21L should be amended, making it clear that [freezing] injunctions…are capable of being sought independently in aid of foreign proceedings…” (emphasis added)
3. To implement these recommendations, the legislature enacted s.21M of the HCO to authorise a standalone freezing order to aid foreign substantive proceedings.
4. Yet, the correctness of these assumptions was recently challenged before the Judicial Committee of the Privy Council (“JCPC” or “Board”) in Broad Idea v Convoy Collateral  UKPC 24. By a majority, the Board held that the BVI High Court has the power at common law and under s.24(1) of the Eastern Caribbean Supreme Court Act (“BVI Act”) (in pari materia with s.21L of the HCO) to grant freezing orders, despite the absence of substantive proceedings before it. In doing so, the majority rejected Lord Diplock’s dictum and held that an existing cause of action is no longer a condition for an interlocutory injunction.
5. It is unclear whether the Hong Kong courts might extend the common law in the same manner. By enacting s.21M of the HCO in response to a perceived lacuna in the common law, the legislature might have made it impossible, or at least undesirable, for s.21L to be read in the same way as s.24(1) of the BVI Act. This concern is fortified by a well-established line of cases that treated The “Siskina” as laying down a hard requirement for an existing cause of action. These decisions might have to be overruled or otherwise distinguished if the majority’s approach was adopted. To that extent, it is arguable that the enactment of s.21M had frozen the common law’s development in this area.
6. Dr Cho is a shareholder of Broad Idea, a BVI company. The injunction applicant, CCL, sought a freezing order against Broad Idea to aid substantive proceedings against Dr Cho in Hong Kong. No substantive proceedings were on foot in the BVI. There being no dispute that the BVI High Court had jurisdiction over Broad Idea, the key issue was whether the Court had the power to grant an order freezing Broad Idea’s assets under s.24(1) of the BVI Act.
7. At first instance, Adderley J granted the freezing order against Broad Idea. But his decision was reversed by the Eastern Caribbean Court of Appeal (“ECCA”). Citing Lord Diplock’s dictum, the ECCA held that the High Court had no power to grant a freezing order in the absence of substantive proceedings in the BVI.
8. By a majority (Lords Leggatt, Briggs, Sales and Hamblen), the Board disagreed with the ECCA. It held that the High Court had the power under s.24(1) of the BVI Act and common law to grant a freezing order even without substantive proceedings in the BVI. Contrary suggestions in The “Siskina” should “be laid to rest” (§§120-121). They reasoned:
Section 24(1) refers to an “interlocutory order…in all cases”. Was there a reason to read “in all cases” as excluding cases “where an injunction is sought in aid of foreign proceedings” (§76)? The Board decided otherwise. “Interlocutory order” meant “any order other than a final judgment in an action”. There is no basis to read in a requirement of a “final judgment” in “the action in which the order is made” (§77).
Further, s.24(1) of the BVI Act did not reduce the courts’ common law powers to grant injunctions. The only limits were those arising from an “established practice” (§§78-79). But there is “no settled practice or principle” at common law preventing the grant of an injunction “against a defendant” if substantive proceedings are abroad (§80).
The requirement of substantive proceedings in the BVI is unprincipled. There is “no connection between a freezing injunction and a cause of action for substantive relief” (§91). The freezing order aims to “prevent the right of enforcement [of a judgment] from being rendered ineffective” by dissipation of assets (§89). There is no reason to link this with a cause of action (§90).
9. The minority (Sir Geoffrey Vos, Lords Reed and Hodge) refused to endorse this sea change in the law. It was unnecessary to do so as the Board had unanimously agreed that, since there was no risk of dissipation, no injunctive relief lay against Broad Idea (§215). In those circumstances, the majority’s “exposition” will be no more than “powerful obiter dicta” and “an unsatisfactory way to change the law in such an important area” (§221).
10. The majority’s approach in Broad Idea creates two layers of uncertainty. First, it is unclear whether the Hong Kong courts will construe s.21L of the HCO in the same way as s.24(1) of the BVI Act, despite both being in pari materia.
11. Unlike the BVI, s.21M of the HCO has been on Hong Kong’s statute books for over a decade. As Lord Phillips explained in Compania v Hin-Pro (2016) 19 HKCFAR 586, this section was intended to “reverse” the “effect of the Siskina” and to make freezing orders “available” for “proceedings…outside the jurisdiction” (§44).
12. Since s.21M of the HCO was enacted to fill the lacuna created by the common law, further development of the latter might no longer be possible or desirable. A similar point was made, albeit in another context, in Johnson v Unisys  1 AC 518. Lord Millett said (§80):
“But the creation of the statutory right has made any such development of the common law both unnecessary and undesirable. In the great majority of cases the new common law right would merely replicate the statutory right…In other cases, where the common law would be giving a remedy in excess of the statutory limits…it would be inconsistent with the declared policy of [the legislature]….” (emphasis added)
13. The same concern rears its head here. If s.21L were given the same effect as s.21M, this would give the latter little work to do. And since s.21M expressly relates to freezing orders in respect of proceedings “outside Hong Kong”, the “new common law right” would “merely replicate the statutory right”. But that would be “unnecessary and undesirable”. On the other hand, if s.21L were given an effect “in excess of” s.21M, this might be “inconsistent with the declared policy of” the legislature.
14. However, this conundrum was not addressed in Broad Idea, where the majority only noted that statute and common law could operate “in harmony” (§118). This begs the question – do the principles governing the exercise of discretion under s.21M also apply to s.21L by analogy? If both provisions are “in harmony”, s.21L should not be used as a backdoor to sneak in applications that might otherwise fail to get past s.21M. But this will then run into the obvious complaint that s.21M would be perfunctory if s.21L were duplicative. Arguably, the fact that there is no easy solution might indicate that the enactment of s.21M had rendered further development of the common law unnecessary or undesirable.
15. Second, it is unclear whether the Hong Kong courts would follow Broad Idea in disclaiming the “connection between a freezing injunction and a cause of action for substantive relief” (§91). The issue is fundamental. If we are to adopt the majority’s approach, the Court’s power to grant freezing orders might be significantly expanded to include cases where:
An applicant anticipated that the respondent would owe it a debt, but the latter might unjustifiably dissipate its assets before the debt becomes due.
An applicant anticipated that the respondent would commit a breach of contract, but the latter might unjustifiably dissipate its assets before the breach occurred.
An applicant anticipated a potential cost-order against the respondent, but the latter might unjustifiably dissipate its assets before the cost-order was made.
16. But this expansion of powers might be too much of a good thing. In Grand Trade v Bonance (unrep., CACV 776/2000, 3.11.2000), Rogers VP cautioned that freezing orders “are extremely serious”, “very damaging”, and akin to “nuclear weapons” (§17). Due to the undoubted potency of a freezing order, any attempt to expand the courts’ powers will be treated with circumspection.
17. These difficulties are further compounded by the existence of a line of cases that consistently affirmed the need for an existing cause of action as a precondition to freezing orders: see, for example, (1) Intercontinental v Quek  HKLR 1153 at 1163H-1164 D (Fuad JA); (2) Gainluxe v Superstand  3 HKC 641 at 665G (Yam J); (3) Pacas v China Health (unrep., HCA 2961/2015, 3.5.2016) at §§8; 20 (Au-Yeung J), and (4) Americhip v Zhu  HKCFI 2073 at §§28-30 (Recorder Manzoni SC).
18. On the other hand, a different view was taken in Tang v Sinopac  HKCFI 2087. At issue was whether a co-defendant could apply for a freezing order in aid of a contribution notice, notwithstanding that it had no cause of action. The Deputy Judge held that the absence of a cause of action did not foreclose the grant of a freezing order. Analogies were drawn with quia timet injunctions, which are granted even without an accrued cause of action (§§82-85).
19. Although Tang was clearly ahead of its time by foreshadowing Broad Idea, certain aspects of its reasoning might be open to challenge. For instance, the analogy between freezing orders and quia timet injunctions is hard to square with Mercedes v Leiduck  AC 284, a JCPC decision on appeal from Hong Kong, where Lord Mustill repudiated the same attempt to draw “an analogy” between freezing orders and “quia timet injunction” (303E). Nor did it consider the long line of cases beginning with The “Siskina”. In such circumstances, the precedential value of Tang as a springboard to abolish the requirement for an existing cause of action might be somewhat limited.
20. Given the conflicting decisions and the intervention of s.21M of the HCO, the Hong Kong courts will have to be very cautious before developing the common law on freezing orders. In the end, the minority in Broad Idea might prove prescient in warning that the majority’s approach has “unpredicted and unknown circumstances” and that it will be “danger[ous] in seeking to develop the common law in this way” (§§222-223).
José-Antonio Maurellet SC was part of the counsel team acting for the Appellant (CCL) before the JCPC in Broad Idea.
John Hui and Cyrus Chua co-authored this Case Report.