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    05:20 PM Colin Liew (Associate Director, TSMP Law Corporation)

    To Infinity and Beyond: Where to Next for the Court’s Inherent Powers?

        

    Introduction

    Order 92, rule 4 of the Rules of Court (Cap 322, R 5, 2014 Rev Ed) provides: “For the avoidance of doubt it is hereby declared that nothing in these Rules shall be deemed to limit or affect the inherent powers of the Court to make any order as may be necessary to prevent injustice or to prevent an abuse of the process of the Court”.

    This Delphic provision has always been a fruitful source of litigation, since the mysterious “inherent powers of the Court” it refers to are constrained only by counsel’s imagination and the courts’ willingness to fashion the appropriate order.

    In two recent cases, the High Court has had the occasion to explore its inherent powers. While these cases demonstrate the potentially far-reaching consequences such powers might have if incorrectly exercised, they also point to a greater willingness by the courts to utilise their inherent powers where there is a perceived need to do so, which might be a welcome development in other areas of the law. 

    Re Taisoo Suk

    In Re Taisoo Suk (as foreign representative of Hanjin Shipping Co Ltd) [2016] SGHC 195 (“Re Taisoo Suk”), an ex parte application was made by Hanjin Shipping Co Ltd (“Hanjin”) to the High Court seeking interim orders for, inter alia, the:

    • recognition of Hanjin’s rehabilitation proceedings in Korea;
    • restraint of all pending proceedings against Hanjin and its Singapore subsidiaries or any enforcement or execution against any of their assets; and
    • stay of all present proceedings against Hanjin and its Singapore subsidiaries until 25 January 2017 (which was when the Korean rehabilitation proceedings were estimated to be completed).

    Essentially, Hanjin, whose financial difficulties were by then well-known, was asking the High Court to support Hanjin’s efforts in Korea by making orders in Singapore in aid of the Korean rehabilitation proceedings.

    The application in Re Taisoo Suk was brought pursuant to Order 92, rule 4 of the Rules of Court. This was a bold attempt to extend the Court’s inherent powers. As the Court noted at [14], Hanjin’s Korean rehabilitation proceedings might well have been recognised under the UNCITRAL Model Law on Cross-Border Insolvency (the “Model Law”), as they have been by the courts in the United States and United Kingdom (both of which are Model Law countries), but for the fact that Singapore has not as yet adopted the Model Law.

    Hanjin’s application in Re Taisoo Suk, therefore, had to be dealt with on the basis of the common law as it then stood, and there was little domestic authority directly on point. Nonetheless, the Court was satisfied that the Korean rehabilitation proceedings should be recognised, and that the Singapore courts should render the appropriate assistance to them by restraining and staying any pending or ongoing actions against Hanjin and its Singapore subsidiaries, including any enforcement or execution against their assets (Re Taisoo Suk at [12]).  

    In other words, the Court in Re Taisoo Suk was persuaded to exercise its inherent powers to grant the orders sought, notwithstanding that doing so constituted a significant development of Singapore’s common law.

    Interestingly, the Court in Re Taisoo Suk came to this decision in the face of several factors which might be thought to have pointed the other way.

    Inherent power or inherent jurisdiction?

    First, the Court in Re Taisoo Suk appears to have made its decision on the basis that it had the inherent power to do so. This presupposes that the Court also had the jurisdiction to make that decision, since a court can only exercise its powers in a subject matter in which it has jurisdiction (Muhd Munir v Noor Hidah [1990] 2 SLR(R) 348 at [19]).

    Jurisdiction can only be conferred by statute (Kho Jabing v Public Prosecutor [2016] 3 SLR 135 at [17], citing Re Nalpon Zero Geraldo Mario [2013] 3 SLR 258 (“Re Nalpon”) at [14] to [20]). The civil jurisdiction of the High Court is set out in sections 16 and 17 of the Supreme Court of Judicature Act (Cap 322, 2007 Rev Ed) (“SCJA”), which, by section 17(c), includes “jurisdiction under any written law relating to bankruptcy or to companies”.

    The application in Re Taisoo Suk appears to have been made by way of ex parte originating summons (“OS”), and purported to be made pursuant to Order 92, rule 4 of the Rules of Court. Significantly, the application does not appear to have been made under any provisions of the Companies Act (Cap 50, 2006 Rev Ed).

    On that basis, there is a good argument that the Court in Re Taisoo Suk simply had no jurisdiction to hear the application.

    The most natural basis upon which an ex parte OS might have been justified in the circumstances of Re Taisoo Suk would have been pursuant to section 210(10) of the Companies Act. However, that does not appear to have been the basis of the application in Re Taisoo Suk, undoubtedly because the High Court has previously held in Re TPC Korea Co Ltd [2010] 2 SLR 617 (“Re TPC Korea”) that it had no jurisdiction under section 210(10) of the Companies Act to entertain an application of the sort being made in Re Taisoo Suk.     

    Nor could jurisdiction have been conferred by Order 92, rule 4 of the Rules of Court, since that provision concerns the court’s powers, not its jurisdiction (Re Nalpon at [40] to [41]).

    The Court in Re Taisoo Suk, however, did not appear to have been troubled by this, on the basis that, unlike the situation in Re TPC Korea, what was before it “was an issue of recognition of foreign proceedings rather than an application of s 210 to such proceedings” (Re Taisoo Suk at [29]).

    With respect, it is doubtful if that analysis can be sustained. The issue was (or ought to have been) what jurisdiction the Court was exercising in making the orders that it purported to make, and that issue was not addressed in Re Taisoo Suk.

    Admiralty jurisdiction

    Second, the Court in Re Taisoo Suk considered that the exercise of its inherent powers in assisting the Korean rehabilitation proceedings ought to extend even to preventing the arrest of any ships within the Hanjin fleet (Re Taisoo Suk at [23]).

    The Court in Re Taisoo Suk accordingly disagreed with the view expressed in Re TPC Korea that the High Court (Admiralty Jurisdiction) Act (Cap 123, 2001 Rev Ed) (“HCAJA”) created a self-contained regime for the resolution of disputes where the relevant interests or assets involved were vessels. According to the Court in Re Taisoo Suk, nothing in the HCAJA insulated the High Court’s admiralty jurisdiction from the general powers of the Court (Re Taisoo Suk at [26]).

    Again, this analysis is predicated on the assumption that the Court in Re Taisoo Suk had jurisdiction in the first place. However, even assuming that it did, the orders made in Re Taisoo Suk amount to an extraordinary blanket interdict by the Court that either:

    • completely precluded the admiralty jurisdiction of the High Court from being invoked ab initio, despite all jurisdictional requirements under the HCAJA being otherwise satisfied; or
    • simply prevented the High Court from exercising its admiralty jurisdiction by, in effect, subjecting the HCAJA to a balancing exercising in which “the benefits of a universalist approach in winding up” conclusively outweighed any interests in the High Court’s admiralty jurisdiction being exercised (Re Taisoo Suk at [15]).

    The issue was therefore not so much whether the High Court’s admiralty regime was to be “insulated” from the Court’s general powers (Re Taisoo Suk at [26]), but whether it was proper for the Court in Re Taisoo Suk to grant unqualified orders that essentially suspended an Act of Parliament.

    This appears to have been implicitly recognised by the Court in Re Taisoo Suk at [17], where the Court noted that similar applications in Hong Kong had been concerned with stays of “specific” awards or judgments, rather than the “general restraint and stay as asked for by the Applicant here” [emphasis added].

    A spur to domestic changes

    Third, in deciding whether to grant the orders sought, the Court in Re Taisoo Suk took into account at [27] the fact that the rehabilitation regime in Korea was more liberal than the corporate rehabilitation regimes in the Companies Act for schemes of arrangement and judicial management. 

    However, the Court in Re Taisoo Suk was not overly concerned by this, concluding at [27] that different regimes would always have different details, and that to insist on equivalence would not serve the needs of “universality” and an “orderly disposition” of the debtor’s affairs. Indeed, the Court in Re Taisoo Suk considered that “a more liberal foreign approach may be a spur to changes in the domestic regime” (Re Taisoo Suk at [27]).

    With respect, it must be questioned whether courts should be so quick to discount such matters, for three reasons.

    First, Parliament has enacted laws, such as the Companies Act and the HCAJA, with Singapore’s domestic circumstances and interests in mind. Indeed the entire framework of Singapore’s legislation and its interconnectivity has been carefully considered by Parliament. To the extent that our domestic corporate rehabilitation regimes are considered unsatisfactory and need to be improved, it is the business community as prime stakeholder that should have the first say in any legislative change. Our courts should hardly operate as judicial pressure groups.  

    Second, as seen, the Court in Re Taisoo Suk was persuaded to effectively suspend the operation of the HCAJA on the basis of giving effect to Hanjin’s rehabilitation proceedings in Korea. Leaving aside the question of whether it is ever constitutionally appropriate for a court to prevent an Act of Parliament from being given its due effect, there is a further issue.

    Given that Korea’s rehabilitation regime is more generous than the scheme of arrangement regime under the Companies Act, it is questionable whether a statute as significant to Singapore’s shipping interests as the HCAJA ought to have been so quickly abandoned in support of Hanjin’s Korean rehabilitation regime, when, as Re TPC Korea strongly suggests, the same decision would not have been made in support of a domestic scheme of arrangement.  

    Third, to the extent that our courts should give effect to foreign insolvency proceedings, assisting those which are less onerous than our own insolvency regimes on the basis that “a more liberal foreign approach may be a spur to changes in the domestic regime” (Re Taisoo Suk at [27]) seems to be an unhealthy descent towards the lowest common denominator.

    These seem strong reasons for our courts to tread cautiously in the realm of cross-border insolvency, particularly when invited by counsel to consider a liberal exercise of the courts’ inherent powers. As the Court noted in Re Taisoo Suk at [32], “O 92 r 4 is often the first resort in dubious claims”.

    BBW v BBX and others

    The decision in Re Taisoo Suk seems to reflect a changing judicial attitude. While still maintaining that their inherent powers should not be invoked or granted lightly (Re Taisoo Suk at [32]), the courts do appear to be resorting to their inherent powers with greater frequency.

    For instance, on the same day that the application in Re Taisoo Suk was heard, the High Court in BBW v BBX and others [2016] SGHC 190 (“BBW”) heard and granted an application seeking an order sealing all court documents and records in Suit No 689 of 2016 (the “Suit”), as well as an application that all proceedings brought by way of the Suit be heard in camera.

    The application in BBW was made ex parte by BBW (BBW at [1]). At the time of BBW’s application, the Suit was still at the pleadings stage, with only BBW’s amended statement of claim having been filed (BBW at [3]).

    The Court in BBW, in other words, appears to only have had before it BBW’s version of events as disclosed in BBW’s amended statement of claim, and affidavit evidence filed by or on behalf of BBW. According to BBW (BBW at [4]):

    • BBW had commenced the Suit against BBX (the personal representative of the estate of B), BBY and BBZ seeking, inter alia, the enforcement of an alleged indemnity agreement between BBW and B;
    • under the alleged indemnity agreement, B had agreed to indemnify BBW against all liability, loss or damage incurred by BBW in connection with an arbitration (the “Arbitration”) in which the claimant C sought damages against BBW for breach of an agreement by BBW to purchase certain shares from C.

    In granting the application, the Court in BBW explained that, as the Suit was not a proceeding under the International Arbitration Act (Cap 143A, 2002 Rev Ed) (“IAA”), BBW could not rely on the provisions of the IAA in order to obtain a sealing order.

    However, the Court in BBW also held that the courts had the inherent power to grant a sealing order (BBW at [30]). The Court accordingly granted BBW’s application on the basis that it furthered the public policy of keeping arbitrations confidential, as there was a considerable overlap between the facts of the Suit and the Arbitration, and without a sealing order evidence adduced in the Suit would compromise the confidentiality of the Arbitration (BBW at [36]).

    The Court in in BBW considered that the principle of open justice did not outweigh the need to preserve the confidentiality of the Arbitration as the alleged indemnity agreement between B and BBW was “for all intents and purposes” a private contractual arrangement (BBW at [38]). Nor, apparently, did it make a difference that BBX, BBY and BBZ were not parties to the Arbitration (BBW at [36]). 

    For much the same reasons, BBW’s application for all proceedings relating to the Suit to be heard in camera was also granted (BBW at [41]).

    As the orders in BBW was made ex parte and only on BBW’s evidence, it is difficult to say for sure whether they were correctly granted. For example, there surely ought to be some concern that the principle of open justice can so easily give way to the secrecy sought by BBW.

    To the extent that the alleged indemnity agreement between B and BBW was viewed as a “private contractual arrangement” (BBW at [38]), the same can be said of any other contractual dispute that comes before the courts on a daily basis. Yet, it is not generally accepted that such disputes can be made the subject of a sealing order, even if they concern confidential matters.

    Similarly, it might be thought that, as BBX, BBY and BBZ were not parties to the Arbitration and any confidentiality obligations therein, they were entitled as of right to a public hearing. As is often stressed, open justice is a fundamental principle, and derogations from it are “wholly exceptional”, and can only be justified when they are “strictly necessary” as “measures to secure the proper administration of justice” (Practice Guidance (Interim Non-disclosure Orders) [2012] 1 WLR 1003 at [10]).

    Further scope for the courts’ inherent powers?

    Re Taisoo Suk and BBW therefore seem to represent an increasingly expansive view of the courts’ inherent powers. Judiciously applied in the right circumstances, this may not necessarily be a bad thing. For instance, it may allow for greater use of Mareva injunctions in aid of foreign legal proceedings.

    No freestanding Mareva injunctions

    It has long been a bugbear of the Commercial Bar that a Mareva injunction cannot be granted to a plaintiff to freeze a foreign defendant’s assets in Singapore in circumstances where the plaintiff has no cause of action within the jurisdiction.

    The plaintiff cannot commence proceedings in Singapore seeking only a Mareva injunction, i.e. “freestanding” Mareva injunctions cannot be granted by a Singapore court. Instead, because the Mareva injunction is considered ancillary to a substantive underlying claim, the Court of Appeal has held that a Mareva injunction cannot be granted unless and until the plaintiff has an accrued right of action (Karaha Bodas Co LLC v Pertamina Energy Trading Ltd [2006] 1 SLR(R) 112).

    This is highly inconvenient in circumstances where, because the wrongdoing took place overseas, the plaintiff has no cause of action in Singapore. Yet, in the jurisdiction where the plaintiff’s cause of action arises, the defendant has no assets against which a judgment can be enforced, because his assets are in Singapore.

    If a plaintiff in such circumstances cannot obtain a Mareva injunction in Singapore in support of the foreign proceedings in which the cause of action arises, the defendant may be free to dissipate his assets long before he is sued to judgment in the foreign proceedings. In this manner the utility of the Mareva injunction as an effective tool in cross-jurisdictional litigation is significantly blunted.

    As Lord Nicholls lamented in Mercedes Benz AG v Leiduck [1996] 1 AC 284 at 305: “That cannot be right. That is not acceptable today. A person operating internationally cannot so easily defeat the judicial process. There is not a black hole into which a defendant can escape out of sight and become unreachable.”

    Legislative reform in Singapore may not have gone far enough

    In England and in Hong Kong, the situation has been remedied by legislative reform, allowing freestanding Mareva injunctions to be granted in aid of foreign court and arbitration proceedings (see JJ Spigelman AC, “Freezing Orders in International Commercial Litigation” (Singapore Academy of Law Distinguished Speaker Series Inaugural Lecture, 6 May 2010) (“Spigelman”) at [31], [60] and [61]).

    The position in Singapore remains unclear. In 2006, the High Court decided in Swift-Fortune Ltd v Magnifica Marine SA [2006] 2 SLR(R) 323 (“Swift-Fortune (HC)”) that it did not have the power under the IAA (as then drafted) to issue a Mareva injunction in support of a foreign arbitration.

    However, in Front Carriers Ltd v Atlantic & Orient Shipping Corp [2006] 3 SLR(R) 854 (“Front Carriers”), a differently-constituted High Court disagreed with the decision in Swift-Fortune (HC), holding that it did have power under the IAA (as then drafted) to grant freestanding interim relief in support of a foreign arbitration.

    The High Court in Front Carriers also decided that, apart from the IAA, the courts’ general power under section 4(10) of the Civil Law Act (Cap 43, 1999 Rev Ed) (“CLA”) could be relied on to grant a freestanding Mareva injunction in support of a foreign arbitration, as long as there was a “justiciable right between the parties that is recognised by the court in Singapore” (Front Carriers at [43]).

    The decision in Swift-Fortune (HC) was appealed and the High Court’s reasoning and decision were upheld by the Court of Appeal in Swift-Fortune Ltd v Magnifica Marine SA [2007] 1 SLR(R) 629 (“Swift-Fortune (CA)”).

    The Court of Appeal declined to express a view on the correctness of Front Carriers, beyond noting that it had extended the scope of section 4(10) of the CLA to allow a Mareva injunction to be granted in support of foreign arbitrations where the plaintiff had “a recognisable cause of action under Singapore law” and the defendant was subject to the court’s jurisdiction (Swift-Fortune (CA) at [92]).

    Swift-Fortune (CA) was then statutorily reversed by an amendment to the IAA so as to insert section 12A with effect from 1 January 2010. Hence, since 2010, the High Court has had the power to grant Mareva injunctions in support of foreign arbitrations.

    However, two things remain unclear. First, it is not clear whether a truly “freestanding” Mareva injunction can be granted under section 4(10) of the CLA. Even on the basis of Front Carriers, a Mareva injunction could only be granted where there was a “justiciable right between the parties that is recognised by the court in Singapore” (Front Carriers at [43]).

    The High Court in Multi-Code Electronics Industries (M) Bhd and another v Toh Chun Toh Gordon and others [2009] 1 SLR(R) 1000 (“Multi-Code”) has restated this requirement. According to the Court in Multi-Code, an applicant for a Mareva injunction must still show “an accrued cause of action that is recognisable or justiciable in a Singapore court” (Multi-Code at [116(a)]), and must in addition bring substantive proceedings in Singapore, even if those proceedings are ultimately stayed (Multi-Code at [116(d)]).

    Thus, it would seem, a plaintiff still cannot commence proceedings in Singapore seeking only a Mareva injunction.

    Second, as a result, it is unclear if the same requirements apply to section 12A of the IAA. Although section 12A reversed Swift-Fortune (CA), the actual decision in Swift-Fortune (CA) was a relatively narrow one: namely, that on the proper interpretation of the IAA as it was then drafted, the High Court had no power to grant a Mareva injunction in support of a foreign arbitration.

    Arguably, all that section 12A of the IAA does is to provide a statutory basis for such a power, but without otherwise modifying the conditions necessary for that power to be invoked. After all, section 12A(2) of the IAA expressly provides: “… for the purpose of and in relation to an arbitration referred to in subsection (1), the High Court or a Judge thereof shall have the same power of making an order in respect of any of the matters set out in section 12(1)(c) to (i) [section 12(1)(i) being “an interim injunction or any other interim measure”] as it has for the purpose of and in relation to an action or a matter in the court” [emphasis added].

    In other words, section 12A of the IAA merely provides that the High Court has the same power to grant a Mareva injunction in support of foreign arbitrations as the High Court does in domestic proceedings under section 4(10) of the CLA.

    If so, then a plaintiff who seeks a Mareva injunction from the High Court in support of foreign court or arbitration proceedings must, following Multi-Code, still start court proceedings in Singapore claiming substantive relief upon “an accrued cause of action that is recognisable or justiciable in a Singapore court” (Multi-Code at [116(a)]).

    It is somewhat unclear what a cause of action that is “recognisable or justiciable in a Singapore court” means. The Court of Appeal in Swift-Fortune (CA) seems to have regarded this requirement as meaning “a recognisable cause of action under Singapore law” (Swift-Fortune (CA) at [92]) or “a pre-existing cause of action subject to Singapore law” (Swift-Fortune (CA) at [93]). The facts and reasoning in Multi-Code, however, suggest that what was meant is a cause of action that could potentially (with the aid of expert evidence, if necessary) be adjudicated before a Singapore court.

    The former interpretation is much narrower, and would mean that a plaintiff in foreign proceedings would never be able to obtain a Mareva injunction from a Singapore court in support of those proceedings unless he can also show that those proceedings disclose a cause of action under Singapore law, which would seem unlikely.

    Even on the latter interpretation, a plaintiff in foreign proceedings who seeks a Mareva injunction from a Singapore court would have to characterise his claim in the foreign proceedings as being a cause of action that a Singapore court might recognise. However, given that Mareva injunctions are typically sought on an urgent basis, and often even before a claim is fully-formed, it is not obvious how a plaintiff might easily do this, particularly where his claim is governed by a foreign system of law that might be completely different to Singapore’s.

    In other words, given the course that Singapore law has taken in relation to Mareva injunctions, section 12A of the IAA may achieve little in practice.

    The courts’ inherent powers to the rescue?

    In those circumstances, Singapore’s courts may have to resort to their inherent powers in order to grant Mareva injunctions in aid of foreign proceedings.

    It has been suggested that, in this regard, the field of cross-border insolvency is “closely analogous”, with a number of authorities supporting the existence the jurisdiction or power of a court to assist a foreign insolvency even in the absence of statutory authority (Spigelman at [71]).

    Of course, to these authorities can now be added Re Taisoo Suk, and the analogy seems compelling. Ultimately, the Court in exercising its inherent powers seeks to “make any order as may be necessary to prevent injustice” (Order 92, rule 4 of the Rules of Court). If that can encompass the staying of actions in furtherance of a foreign insolvency, there seems no reason in principle why it cannot also include the preserving of assets in order to satisfy a foreign judgment or award.

    Indeed, in delivering the Singapore Academy of Law’s inaugural Distinguished Speaker Lecture in 2010, Chief Justice Spigelman advocated this view. His Honour pointed out that Australian courts have managed to avoid the difficulties associated with the grant of freestanding Mareva injunctions by refusing to treat them as traditional interlocutory injunctions parasitic on an underlying cause of action, but as an exercise of the court’s inherent power to protect the integrity of the administration of justice (Spigelman at [32] to [49]). Consequently, Australian law has had no difficulty in recognising freestanding Mareva injunctions (Spigelman at [47]).

    Conclusion

    The decisions in Re Taisoo Suk and BBW are striking examples of the courts in Singapore reaching for their inherent powers in an effort to prevent injustice. While both decisions may perhaps be criticised on their facts, the potential use of these powers should not be discounted. In particular, greater resort to the inherent powers of the court may be the best way forward in setting the law of Mareva injunctions on a firmer footing, and allowing them to be used with greater effectiveness in support of foreign proceedings.   

    * This blog entry may be cited as Colin Liew, “To Infinity and Beyond: Where to Next for the Court’s Inherent Powers” (3 October 2016) (http://www.singaporelawblog.sg/blog/article/171)

    ** A PDF version of this entry may be downloaded here

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