Royal Westminster Investments SA & Ors v Varma

Relief under section 25 of the Civil Jurisdiction and Judgments Act 1982 requires a two-stage inquiry: whether the relief would be justified if the substantive proceedings were in England, and whether the absence of ordinary jurisdiction makes relief inexpedient. Interim injunctive relief must ordinarily support an enforceable substantive right. A shareholder suing only personally cannot obtain relief against a director for an alleged breach of duties owed to the company. The court should also avoid relief which would obstruct or hamper management of the substantive proceedings by the foreign court. A repayment order should not ordinarily be made before liability has been established, particularly where no substantive claim for repayment exists.

The applicants sought relief under section 25 of the Civil Jurisdiction and Judgments Act 1982 in support of proceedings in the British Virgin Islands concerning alleged rights to shares in Nilon Limited. They alleged that the respondent, Nilon’s sole director and registered shareholder, had wrongfully caused Nilon to incur legal costs in those proceedings.

The applicants sought orders restraining further expenditure, requiring disclosure of expenditure, and requiring repayment of sums allegedly spent improperly. The central issues were whether the applicants had standing to seek interim relief concerning duties owed to Nilon, whether the proposed orders were justified under ordinary interim-injunction principles, and whether relief would interfere with management of the BVI proceedings.

1. Application dismissed. The applicants’ case was based on alleged breaches of duties owed by the respondent to Nilon. They had brought no substantive claim in respect of those alleged breaches and could not sue personally for loss suffered by the company. Any claim would belong to Nilon or would have to be pursued derivatively.
2. Section 25 required a two-stage approach. The court first asked whether the facts would justify the relief if the substantive proceedings were in England. It then asked whether the absence of jurisdiction apart from section 25 made relief inexpedient.
3. An interim injunction should ordinarily be in aid of an enforceable right and a substantive claim. CPR 25.1(4) did not displace that general principle. Accordingly, a shareholder suing only personally could not obtain an injunction restraining a director from causing the company to incur legal costs, or a mandatory order requiring repayment to the company.
4. Even if standing had existed, the proposed prohibitory injunction was not justified. There was a serious question as to Nilon’s proper role, but breach of duty was not clearly established. The evidence indicated that damages would be an adequate remedy, and the applicants had no proprietary claim to Nilon’s assets.
5. A repayment order was inappropriate before liability had been established at trial. The respondent should have the opportunity to contend that any breach was excusable under section 1157 of the Companies Act 2006. The proposed disclosure order was ancillary to repayment and therefore failed with it.
6. Relief was additionally inexpedient because it risked obstructing or hampering the BVI court’s management of the substantive proceedings. An order preventing Nilon from participating significantly could inhibit the BVI court’s ability to direct the role of a BVI company in proceedings before it.