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Solvalub Again

Paul Matthews

It seems that you cannot keep a good point down. The vexed question of how far it is possible, under Jersey law, for the Court to grant a "free-standing" Mareva or other injunction keeps on surfacing [1] . Not only that, but the Bahamian Court of Appeal has also given an added twist to the saga by overturning the decision of the Bahamian High Court [2] applying Solvalub v Match Investment Ltd [3]in The Bahamas.

There are in fact three cases to notice. The first in order of time was the decision of the Royal Court, given on March 26th 1998, in Yachia v Levi [4] . In that case the parties, who both lived in Israel, were involved in proceedings instituted in a court in Texas over a transfer of certain shares by the plaintiff to the defendant (his daughter) and her sister. It was alleged that, by means of an abuse of the rules of civil procedure in Texas, the assets in dispute were sent to Jersey, with which neither party had any other connection. The plaintiff obtained an ex parte injunction requiring the party cited (a Jersey banker) to deliver documentation to the plaintiff, and an inter partes hearing was thereafter held to consider the matter again.

It was argued that the Court had no power to order the injunctions in the first place. The Court considered Solvalub and Krohn GmbH v Varna Shipyard (No 2) [5] . The Court held, that since the question of jurisdiction was entirely covered by the decision in Krohn, the Royal Court should only depart from it if it so strongly disagreed with it that in conscience it was quite unable to follow it. That was not the case here. Although the Court rather tantalisingly said that, if this case had arisen before Krohn, "this Court might have reached a different conclusion," the Court applied Krohn, and confirmed the injunction.

Chronologically, the second case was the decision of the Bahamian Court of Appeal in Mees Pierson (Bahamas) Limited v Grupo Torras SA, given on April 16th, 1999. In that case, the plaintiffs at first instance had obtained an order from the Chief Justice freezing certain assets held by six local trust companies, and also making certain discovery orders. The defendants were clearly subject to Bahamian jurisdiction. However, the plaintiffs had no substantive cause of action against them, either in The Bahamas or elsewhere. The proceedings were entirely in aid of proceedings then currently on foot in London. [6]

Like Jersey, The Bahamas did not have any statutory modification of the common law position stated by the House of Lords in The Siskina [7] . But the Court of Appeal considered the dissenting opinion of Lord Nicholls of Birkenhead in Mercedes Benz v Leiduck [8] , which had so impressed the Court of Appeal of Jersey in Solvalub. Three judges of the Court of Appeal all held that The Siskina was to be preferred to Lord Nicholls’ dissent in Mercedes Benz. Solvalub was not to be followed in The Bahamas. [9]

The third case was decided by the Royal Court on May 27th 1999, State of Qatar v Sheikh Khalifa bin Hamad al Thani. Again, this was a case where neither party had any connection with Jersey, save that assets of the defendant were to be found there. The plaintiff, in bringing an action against the defendant in respect of an agreement compromising earlier litigation between the parties, was not seeking to claim that the assets in Jersey belonged to it. Instead it applied to have an injunction placed on the defendant’s assets to prevent him rendering himself judgement proof. An order was made for service out of Jersey under rule 7(b) of the Service of Process (Jersey) Rules 1994. This was the rule considered in Krohn v Varna Shipyard.

The defendant sought to have the order set aside on the basis that the plaintiff’s case did not fall within rule 7(b), and that the Court did not have jurisdiction. In light of the existing Jersey authorities, and in particular Krohn, the defendant’s argument could not be that the question was a new one, which could be decided either way. The defendant argued instead that the Court in Krohn had not given proper weight to the doctrine of precedent, and in particular had not, following de Lasala v de Lasala [10] , followed the majority judgement in Mercedes Benz as the Privy Council decision on the meaning of words which were identical to those under consideration in the present case. But, that argument was rejected, and Krohn once again followed. [11]

Accordingly, the position in Jersey remains that, without the need of any statutory modification of the customary common law position, the Royal Court has both a "territorial" jurisdiction and a "power" jurisdiction [12] to grant free standing Mareva relief whenever appropriate, and even though the defendant has no connection with Jersey other than the presence of assets, and there is no substantive cause of action to be litigated here.

Paul Matthews is a solicitor of the Supreme Court of England and Wales and a consultant with the firm of Withers, 12, Gough Square, London, EC4A 3DE.