Singapore Court of Appeal Affirms Power to Grant Mareva Injunctions in Aid of Foreign Court Proceedings
Introduction
1. The Singapore Court of Appeal (“SGCA”) in Bi Xiaoqiong (in her capacity and as trustee of the Xiao Qiong Bi Trust and the Alisa Wu Irrevocable Trust) v China Medical Technologies, Inc. (in Liquidation) and CMED Technologies Ltd [2019] SGCA 50 has clarified that the Singapore court has the power to grant a Mareva injunction in aid of foreign court proceedings where a local action is commenced, even if it is stayed pending the determination of the foreign court proceedings.
2. This clarification is important since members of the Supreme Court had previously held differing views on the extent of the Singapore court’s power to grant a Mareva injunction in aid of foreign court proceedings[i].
3. Thus, this E-Briefing focuses on the SGCA’s decision pertaining to the legal issue on the court’s power and will not address the exercise of the court’s discretion to grant the said Injunction in this case.
Background Facts
Singapore Action
4. In December 2017, China Medical Technologies, Inc. (in Liquidation) and CMED Technologies Ltd (“Respondents”) commenced an action in the High Court (“Singapore Action”) against one Mr Wu Xiaodong (“Wu”) (unrepresented and did not enter appearance) and Mdm Bi Xiaoqiong (“Appellant”). The Respondents also applied for a domestic Mareva injunction against Wu and the Appellant at the same time.
5. The Respondents allege that around US$521.8 million had been misappropriated in an alleged fraud by former management, including Wu and associates, through the acquisition of 2 allegedly worthless medical technologies from one Supreme Well Investments Limited (“SW”).
6. The Respondents claim that the monies which it paid to SW were transferred to bank accounts of other persons or entities, and subsequently transferred to bank accounts of other persons or entities, one of whom was the Appellant. They alleged that the Appellant is liable in dishonest assistance, knowing receipt and/or unjust enrichment, for part of the allegedly misappropriated sum, i.e. a sum of US$17.6 million.
7. Prior to commencing the Singapore Action, the Respondents had taken these steps in Hong Kong:
- The Respondents commenced 2 suits in August 2013 and December 2016 (“HK Actions”) asserting the same facts and claiming substantially the same reliefs against the Appellant and Wu, albeit against several other defendants including the alleged primary wrongdoers. The Appellant is a named defendant to only the second HK Action and is defending these claims against her.
- The Respondents obtained an ex parte worldwide Mareva injunction against the Appellant and Wu, and other defendants in the HK Actions.
8. In February 2018, the Respondents also applied for a stay of the Singapore Action, pending the determination of the ongoing HK Actions. There was no dispute that Hong Kong was the most appropriate forum for the trial of the dispute between the parties.
Decision of the High Court
9. On the question of the court’s power to grant the Mareva injunction, the Judge in the High Court held that the Singapore court indeed had the power to grant the Mareva injunction in this case since there was a reasonable accrued cause of action recognisable in a Singapore court, and the Singapore court had in personam jurisdiction over the Appellant. In this regard, the Judge found, amongst other things, the wording of s 4(10) of the Civil Law Act (“s 4(10)”) was broad and conferred on the court the power to grant a “mandatory order or an injunction” in all cases where it is “just or convenient” to do so.[ii]
Issues in the appeal against Mareva injunction (“Appeal”)
10. The central question for determination in the Appeal on the issue of the court’s power was:
Does the court have the power to grant a Mareva injunction against a defendant to Singapore proceedings where, at the time of the application, the plaintiff has taken out foreign proceedings in respect of the same cause of action and intends to pursue its substantive remedy in that foreign court (such that it will likely be the foreign proceedings, not the Singapore proceedings, that terminates in a judgment)?
11. In analysing this issue, the SGCA considered:
- Whether s 4(10) confers on the court the power to grant a Mareva injunction in aid of foreign court proceedings; and
- Whether there is a requirement that for the court to grant a Mareva injunction under s 4(10), the underlying cause of action will or must terminate in a judgment in Singapore.
12. The SGCA highlighted that in their decision, the term “Mareva injunction in aid of foreign court proceedings” is being used in the specific context that the Mareva injunction sought was to restrain the disposal of assets, in the hope that such restraint will aid in the enforcement of any judgment that the Respondents might obtain against the Appellant in Hong Kong.
Whether s 4(10) empowers the court to grant Mareva injunctions in support of foreign court proceedings
13. The SGCA held that s 4(10) confers on the court the power to grant Mareva injunctions, including those in support of foreign court proceedings, for the following reasons.
14. First, the broad language used in s 4(10) confers on the court a wide power to grant mandatory orders or injunctions and would appear broad enough to encompass Mareva injunctions in aid of foreign court proceedings. The term “injunction” in s 4(10) does not specifically exclude injunctions in aid of foreign court proceedings.
15. Second, such a reading is consistent with the legislative purpose of s 4(10), which can be discerned from the intent of its original enactment, s 2(8) of the Straits Settlements Ordinance No. IV of 1878 (“1878 Ordinance”):
- The legislative intent of s 2(8) of the 1878 Ordinance was to preserve the court’s power to grant the equitable remedy of injunctions, as part of the broader aim of the 1878 Ordinance to facilitate the concurrent administration of law and equity.
- This is consistent with and supported by the legislative intent of s 25(8) of the Supreme Court of Judicature Act (c 66) (UK) (“1873 UK Act”), from which s 2(8) of the 1878 Ordinance was adopted. The underlying intention of s 25(8) of the 1873 UK Act was not to limit the court’s powers to granting discrete types of injunctions, but to preserve or confirm its equitable jurisdiction to grant injunctions.
Whether the underlying cause of action, in support of which the Mareva injunction is granted, must terminate in a judgment in Singapore
16. Having established that s 4(10) of the CLA did not bar the court from granting Mareva injunctions in aid of foreign court proceedings, the SGCA considered if the grant of such remedy was precluded by other restrictions upon the court’s power. In this regard, the SGCA held that there were only 2 such restrictions: (1) that the court must have in personam jurisdiction over the defendant; and (2) that the plaintiff must have a reasonable accrued cause of action against the defendant in Singapore.
17. As the Judge had noted in the decision below, whether there existed a third restriction or condition that the cause of action must also terminate in a judgment rendered by the court that issues the injunction (referred to as the Forum requirement) was not settled in Singapore, given the divergence in the views expressed by the High Court in Petroval and Multi-Code. The SGCA has settled this issue now clarifying that there was no such Forum requirement, namely, where a Mareva injunction is sought in Singapore, the cause of action on which the injunction is premised need not terminate in a final judgment in this court.
18. Hence, in the event of a stay of the action, the court retains its residual jurisdiction over the action; such residual jurisdiction arises by virtue of the proceedings which are “alive though asleep”. It thus follows that the court must retain its jurisdiction (described as residual jurisdiction in Multi-Code) to grant a Mareva injunction.
19. This is contrasted against an action that has been struck out, where the court would be deprived of ancillary or residual jurisdiction to grant any interlocutory injunctions since the underlying cause of action will not be before the court.
20. Thus the juridical basis for the Mareva injunction is still premised on and in support of proceedings in Singapore. Accordingly, what is legally relevant to the court’s power to grant that Mareva injunction, is that the court has jurisdiction over the substantive cause of action before the Singapore court.
21. Therefore, the element of foreign court proceedings (in aid of which a Mareva injunction obtained in Singapore may be used) does not feature in the inquiry, and is a reference only to know how the plaintiff intends to use the Mareva injunction after it is granted.
Conclusion
22. Moving forward, the existence of the Court’s power to grant Mareva injunctions (including those in aid of foreign court proceedings) pursuant to s 4(10) is subject to only two requirements[iii]:
- The court must have in personam jurisdiction over the defendant; and
- The plaintiff must have a reasonable accrued cause of action against the defendant in Singapore.
23. In the present case, these two requirements were satisfied where the Appellant was concerned and so, the SGCA found that it had the power to grant the Mareva injunction sought by the Respondents.
24. To read the SGCA’s decision in Bi Xiaoqiong (in her capacity and as trustee of the Xiao Qiong Bi Trust and the Alisa Wu Irrevocable Trust) v China Medical Technologies, Inc. (in Liquidation) and CMED Technologies Ltd [2019] SGCA 50, please access this link.
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Hee Theng Fong
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Tan Chau Yee
Partner, Eversheds Harry Elias
Head, Construction and Engineering
chauyeetan@eversheds-harryelias.com
+65 6361 9850
Sharmini Selvaratnam
Partner, Eversheds Harry Elias
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Andrea Koh
Senior Associate, Eversheds Harry Elias
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+65 6361 9336
[i] 2019 SGCA 50 at [2]; A divergence in views is seen in the High Court decisions in Petroval SA v Stainby Overseas Ltd and ors [2008] 3 SLR(R) 856 (“Petroval”) and Multi-Code Electronics Industries (M) Sdn Bhd and anor v Toh Chun Toh Gordon and ors [2008] 1 SLR(R) 1000 (“Multi-Code”).
[ii] China Medical Technologies, Inc. (in Liquidation) and CMED Technologies Ltd v Bi Xiaoqiong (in her capacity and as trustee of the Xiao Qiong Bi Trust and the Alisa Wu Irrevocable Trust) [2018] SGHC 178; see also 2019 SGCA 50 at [21(b)].
[iii] Based on Siskina (Owners of Cargo Lately Laden on Board) and others v Distos Compania Naviera SA [1979] AC 210.