In its seminal decision in Broad Idea International v Convoy Collateral  UKPC 24 (“Convoy”), a case which had its genesis in the BVI Commercial Court, the Privy Council delivered a ground-breaking exposition of the law of injunctions, including a restatement of the test for freezing injunctions. Among other things, the Privy Council determined that freezing orders are not ancillary to a cause of action (in the sense of a claim for substantive relief), further ruling that there is no requirement on the part of an applicant for a freezing order to show that the right to bring underlying proceedings had arisen. Instead, the Privy Council found that it is enough for a court to be satisfied with a sufficient degree of certainty that a right to bring such proceedings would arise.
The Privy Council’s analysis in Convoy was, strictly speaking, obiter, but those principles were subsequently affirmed by the EC Court of Appeal in Multibank FX International Corporation v Von Der Heydt Invest SA.1 In the recent case of Svirsky and Donin v Oyekenoc and Tensigma Limited (“Tensigma”), the EC Court of Appeal was required to consider how to apply these principles with respect to the cryptocurrency assets of a dissolved company.2
A shareholder of Tensigma (a BVI company) brought unfair prejudice/oppression proceedings against the majority shareholders of the company, which held various cryptocurrency assets. The claimant shareholder sought and obtained a freezing order against the majority shareholders with respect to these crypto assets. At the time that the application was made, Tensigma had already been dissolved following a voluntary liquidation process. This point was raised at the return date of the freezing injunction, but on applying the principles in Convoy, Wallbank J continued the freezing order (with other directions) pending Tensigma’s restoration.
The prospect of restoration
Before Wallbank J and the EC Court of Appeal, the Appellants argued that the freezing order should not have been made or continued, as due to Tensigma’s dissolution there was no good arguable case sufficient to justify a freezing injunction. Wallbank J disagreed, as did the Court of Appeal. The Court of Appeal found that under section 218 of the BVI Business Companies Act, an application for restoration may be made where the purpose of the restoration is to initiate or continue proceedings against a company. Therefore, as long as the evidence demonstrates that there is a good arguable case, and the judge considering the application for a freezing order is satisfied that there is a realistic prospect of the dissolved company being restored (such that the right to formally bring proceedings would arise), then there is sufficient basis for establishing a “good, arguable case”. The Court found that the first instance judge’s continuation of the freezing order so as to enable the Respondent to amend its claim and apply for a new freezing order on those grounds may in fact have been unnecessary, as the freezing order could have been granted on the identification of evidential bases for potential claims not yet pleaded.
The Court of Appeal therefore found that, despite the legal non-existence of an entity, and the absence of specifically pleaded claims against the “entity”, that “entity” could still be the subject of a freezing order if there is a realistic prospect of the restoration of the entity.
Service outside of the jurisdiction
The Court was also called upon to consider whether the BVI court had territorial jurisdiction by way of the “gateway” in the Civil Procedure Rules, which permits service outside of the BVI where the subject matter of the claim relates to various stated matters concerning a BVI company (CPR 7.3(7)). The Court found, by employing a “purposive” approach, that a “company” for these purposes included a dissolved company, as the alternative interpretation may enable majority shareholders to prevent proceedings regarding a company by using their majority power to place the company in voluntary liquidation. Applications for service outside of the jurisdiction may therefore be obtained for contemplated claims against dissolved entities.
Convoy demonstrated that the principles surrounding injunctions are by no means static, and that these principles will evolve in an ever-changing and connected commercial world. The decision in Tensigma is an example of this continued evolution, highlighting that the rights of interested parties in a dissolved company may be protected and preserved by interim relief, such as freezing orders.