Linsen International Ltd & Ors v Humpuss Sea Transport Pte Ltd & Ors

Factual and Procedural Background

The claimants applied on 5 July 2011 to continue a worldwide freezing injunction originally granted ex parte on 9 June 2011 against the third to thirteenth defendants by HHJ Mackie QC. The injunction was challenged by the third to tenth and thirteenth defendants (represented by Byrne & Co and collectively referred to as "the Byrne defendants") and the eleventh and twelfth defendants, who were separately represented. The challenges included arguments that there was no good arguable case for the injunction, failure to give full and frank disclosure, no good arguable case for joinder, and that England was not the appropriate forum for the dispute.

None of the third to thirteenth defendants had filed evidence supporting their applications, and some materials were served late, limiting the hearing to submissions on whether the claimants had shown a sufficiently arguable case to justify continuation of the freezing injunction against these defendants.

The injunction was based on an alleged abuse of the corporate structure of the Humpuss group of companies by the third to thirteenth defendants, justifying piercing the corporate veil to hold them liable under the underlying charterparties and guarantees involving the first and second defendants. The claimants had previously obtained a freezing injunction against the first and second defendants in December 2009, which was upheld on application to discharge.

On 13 July 2011, the court ruled that although the claimants had a good arguable case that asset transfers to the third defendant were colourable transactions and an abuse of the corporate structure, this did not justify holding the third to thirteenth defendants liable under the original contracts. The injunctions should be set aside unless the claimants could argue an alternative basis under the Chabra jurisdiction.

A further hearing on 19 July 2011 concluded that the claimants had a good arguable case for a Chabra injunction only against the third defendant if it were amenable to jurisdiction. However, the third to thirteenth defendants were all outside the jurisdiction, and the claimants could not show a good arguable case for service out of jurisdiction under the relevant Practice Direction. Consequently, the freezing injunction granted on 9 June 2011 was discharged.

The claimants applied for permission to appeal and renewal of injunctions, but the Court of Appeal refused permission and declined to renew the injunctions.

Legal Issues Presented

1. Whether the claimants had shown a sufficiently good arguable case on the merits to justify continuation of the freezing injunction against the third to thirteenth defendants, based on piercing the corporate veil.
2. Whether the court had jurisdiction to grant a Chabra injunction against the third to thirteenth defendants, who were outside the jurisdiction.
3. Whether piercing the corporate veil could render the third to thirteenth defendants liable under the original charterparties and guarantees.
4. The applicability and scope of the Chabra jurisdiction in granting freezing injunctions ancillary to enforcement against non-cause-of-action defendants.
5. Whether permission to serve the claim form out of jurisdiction on the third to thirteenth defendants could be justified under Practice Direction 6B.

Arguments of the Parties

The opinion does not contain a detailed account of the parties' legal arguments.

Table of Precedents Cited

Court's Reasoning and Analysis

The court began by assessing whether the claimants had shown a good arguable case to justify continuation of the freezing injunction against the third to thirteenth defendants based on piercing the corporate veil. Applying the established legal principles, the court confirmed that piercing the veil requires both control of the company by the wrongdoer(s) and impropriety involving misuse of the company structure to conceal wrongdoing. Mere ownership, control, or group affiliation is insufficient.

The court found that the claimants had a good arguable case that asset transfers from the first to the third defendant were colourable transactions and an abuse of the corporate structure designed to frustrate enforcement of claims against the first defendant. However, there was no good arguable case that the third to thirteenth defendants could be held liable under the original charterparties or guarantees, as the contracts were genuine and not shams at inception.

The court analyzed wide-ranging allegations of corporate abuse and found them unpersuasive as to the existence of wrongdoing at the time the contracts were made. The restructuring commencing in 2009 was the first evidence of abuse, but liability could not extend to all group companies or individuals merely by virtue of control or association.

Regarding the Chabra jurisdiction, the court reviewed its scope as recently restated in Algosaibi v Saad Investments, emphasizing that a freezing injunction against a non-cause-of-action defendant requires a good arguable case that the cause-of-action defendant has enforceable rights to compel the non-party to apply assets toward satisfaction of a judgment. Mere substantive control or involvement is insufficient without a legal process enforceable by the court.

Applying these principles, the court held that only the third defendant arguably held assets of the first defendant and could be subject to a Chabra injunction if amenable to jurisdiction. None of the other defendants were shown to hold assets or be involved in a manner justifying such relief. The second defendant's assets had not been diminished or transferred, so no basis existed for piercing the veil or Chabra relief in relation to it or its shareholders.

Finally, the court considered the procedural issue of service out of jurisdiction under Practice Direction 6B. It concluded that permission to serve out on the third to thirteenth defendants could not be justified because the substantive claims against the first defendant were to be determined by arbitration in London, not by the English courts, and the claims against the second defendant (which were before the English court) did not implicate the other defendants. The relevant gateways for service out were inapplicable, and the Court of Appeal's refusal of permission was upheld.

Holding and Implications

The court's final decision was to SET ASIDE the freezing injunction granted by HHJ Mackie QC on 9 June 2011 against the third to thirteenth defendants.

The court held that the claimants did not establish a good arguable case to pierce the corporate veil so as to make those defendants liable under the original charterparties and guarantees. Furthermore, the Chabra jurisdiction did not apply to grant freezing injunctions against these defendants, particularly given the lack of jurisdictional basis for service out of the jurisdiction.

This decision directly affects the parties by discharging the freezing injunction against the third to thirteenth defendants and setting aside permission to serve proceedings on them outside the jurisdiction. No new precedent was established beyond the application and reaffirmation of existing legal principles regarding piercing the corporate veil, the Chabra jurisdiction, and jurisdictional requirements for service out.