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    03:59 PM Lionel Leo (Partner, WongPartnership LLP)

    Examination orders against foreign officers of a judgment debtor: Burgundy Global Exploration Corp v Transocean Offshore International Ventures Ltd and another appeal [2014] SGCA 24

        

    Two appeals were decided in the recent Court of Appeal decision of Burgundy Global Exploration Corp v Transocean Offshore International Ventures Ltd and another appeal [2014] SGCA 24 (“Transocean”). This case comment will focus solely on the second appeal, which was an appeal by directors of Burgundy (the “Directors”) against the High Court’s refusal to set aside orders for substituted service of examination of judgment debtor (“EJD”) orders that had previously been issued against them. The Directors were foreign nationals ordinarily resident overseas. 

    The Court of Appeal’s decision in respect of the second appeal is significant because it answered the question of whether an EJD order can be made against a foreign officer of a judgment debtor. Prior to this decision, there was no local authority on this point. The leading authority in England was the House of Lords’ decision of Masri v Consolidated Contractors Int (UK) (No. 4) [2010] 1 AC 90 (“Masri”), which held that under the English counterpart of Order 48 Rule 1 of the Rules of Court (“ROC”), the English courts could not assume extraterritorial jurisdiction to make an EJD order against an officer of a corporate judgment debtor who was overseas unless the officer is the “alter ego” of the judgment debtor.

    The decision

    In Transocean, the Court of Appeal declined to follow Masri, holding that the Singapore courts do have jurisdiction to make an EJD order against a foreign officer of a corporate judgment debtor. However, the Court of Appeal held that leave had to be sought to serve such an EJD order out of jurisdiction on the foreign officer, and that such leave ought to be sparingly granted (see Transocean at [111]). While stating that it was not appropriate to lay down strict or exhaustive rules as to when the court may exercise its discretion, the Court of Appeal did lay down several guidelines which it considered relevant in determining whether leave to serve an EJD order out of jurisdiction should be granted (see Transocean at [112]):

        •    The fundamental question is whether the foreign officer is so closely connected to the substantive claim that the Singapore court is justified in taking jurisdiction over him. 

        •    If a foreign officer does not possess any relevant information on the judgment debtor’s financial affairs, leave should not be granted.

        •    But even if a foreign officer has relevant information, that fact alone would generally be insufficient. Something more would be required. 

        •    For example, the court might wish to consider the extent of the foreign officer’s involvement in the matters relating to the claim. It might be easier to justify invoking the court’s jurisdiction over a foreign officer who has played a key role in the events giving rise to the judgment creditor’s successful claim. 

        •    The duty is on the judgment creditor to persuade the court that this is a proper case to grant leave to serve out of the jurisdiction.

    On the facts, the Court of Appeal did not think this was a proper case for granting leave. Accordingly, the Directors’ appeal was allowed. 

    This case comment examines the implications of the Court of Appeal’s decision and explores the issue of whether the guidelines laid down by the Court of Appeal can be effectively applied to a case where the party seeking an EJD order is not seeking such an order on the basis of a Singapore court judgment, but instead on the basis of an international arbitration award which it is seeking to enforce in Singapore.

    Implications of the decision

    In light of Transocean, it is now beyond peradventure that a judgment creditor may apply for an EJD order against a foreign officer of the judgment debtor. However, after the EJD order is made, the judgment creditor would have to take out a separate application for service of the EJD order out of jurisdiction on the foreign officer. This requirement of leave would apply except in the following situations:

        •    First, the Court of Appeal noted that it was entirely conceivable for a party to serve an EJD order on a foreign officer in jurisdiction when he/she comes to Singapore for a temporary visit (see Transocean at [94]). 

        •    Second, the Court of Appeal appeared to accept that leave would not need to be obtained if it can be shown that the officer in question is the “alter ego” of the judgment debtor or where there is evidence that the officer “instigates, controls and finances” the litigation brought in the name of the corporate party to such a degree that it would be unjust to allow him to rely upon the separate corporate personality (see Transocean at [108]). 

    The second exception appears to be founded on the basis that in such situations, the officer in question can be equated with the judgment debtor which has already submitted to the jurisdiction of the Singapore court, or has in effect submitted to the jurisdiction of the Singapore courts by virtue of being the person that had in reality brought the main proceedings. The Court of Appeal did not explain in Transocean when an officer would be considered to be the “alter ego” of a company. Fortunately, this concept is a relatively well-established one in Singapore law and guidance can be gleaned from previous cases. In essence, the courts have held that whether an officer of a company is its “alter ego” is a factual inquiry which focuses on the question: is the company carrying on the business of the officer (see NEC Asia v Rail Asia Pacific [2011] 2 SLR 565 (“NEC Asia”) at [31])? It has been held that the court will not lightly infer that an officer is the “alter ego” of a company. Evidence of majority or sole shareholding, or that the officer is the “controlling mind” of the company, would not, without more, mean that the officer is the company’s “alter ego” (see Zim Integrated Shipping Services Ltd v Dafni Igal [2010] 2 SLR 426 at [88]; Sitt Tatt Bhd v Goh Tai Hock [2009] 2 SLR(R) 44 (“Sitt Tatt”) at [81]). Based on the reported decisions on this issue, an officer will only be held to be the “alter ego” of a company in exceptional circumstances such as if the true contracting party was the officer (see NEC Asia at [27]); if the officer treated the company’s assets as his own (see Children’s Media Ltd v Singapore Tourism Board [2009] 1 SLR(R) 524); or if the company was created as a sham or facade to shield the officer from responsibility for nefarious transactions (see Sitt Tatt at [81]).

    Save for the two situations outlined above, leave would have to be obtained for an EJD order to be served out of jurisdiction on a foreign officer of a corporate judgment debtor in all other situations. What is noteworthy about the approach adopted by the Court of Appeal is that it declined to follow the English approach in Masri after concluding that there were key differences between the EJD provisions in England and Singapore and after stating its disagreement with some of the reasoning adopted by the House of Lords:

        •    With regard to the former, the Court of Appeal noted that a key difference between the EJD provisions in England and Singapore was that the “extreme informality” of the English procedure (which allows inter alia an application for an EJD order to be dealt with without a hearing) was not present in Order 48 Rule 1 of the ROC. In addition, unlike the English civil procedure rules which do not allow an EJD order to be served on a company officer out of jurisdiction, an EJD order may be served out of jurisdiction on a foreign officer under the Singapore rules with leave of court. Thus any concerns relating to the imposition of extraterritorial jurisdiction can be considered and addressed at the stage where leave is sought to serve an EJD order abroad.

        •    With regard to the latter, the Court of Appeal did not think that the fact that the rule-maker did not consider whether a rule would apply in a particular situation (which the House of Lords considered to be relevant) would, without more, supply a basis for excluding it from the ambit of the rules. Further, the Court of Appeal did not think that the public interest analysis in Masri provided a sustainable basis for deciding which laws should be interpreted as having extraterritorial effect because it saw no inherent reason why extraterritorial jurisdiction would be more readily conferred by a written law when public interests, as opposed to private interests, are at stake.

    This is reflective of the maturation of Singapore civil procedure jurisprudence and signals a confidence of the Singapore judiciary in forging its own reasoned approach to difficult issues based on its own procedural rules and in the context of the Singapore experience. More importantly, the approach adopted by the Court of Appeal benefits from being more nuanced than that adopted by the House of Lords in Masri. On the one hand, it gives considerable weight to the primary objection against the making of an EJD order against a foreign officer of a corporate judgment debtor, namely the extraterritorial concerns which emanate from the fact that a corporate judgment debtor is a separate legal entity from its officers – although the judgment debtor is already subject to the court’s jurisdiction, its officers have not submitted to jurisdiction. This is achieved through the requirement that leave must be sought before an EJD order can be served out of jurisdiction and the exhortation that such leave should only be granted sparingly. On the other hand, the Court of Appeal’s approach acknowledges the fact that companies can only act through individuals such that if a court was unable to issue orders against foreign officers, then it would not have the means to control foreign companies which are legitimately within its personal and substantive jurisdiction. Accordingly, the Court of Appeal’s approach permits leave to be granted for service of an EJD order out of jurisdiction in appropriate cases. By approaching the issue at the leave stage rather than the jurisdiction stage, the Court of Appeal avoided an “all or nothing” approach and instead allowed for the use of an EJD order as a means of gathering information from foreign officers on a case by case basis. 

    Turning now to the guidelines, the Court of Appeal appears to have laid down a threshold test that the judgment creditor must show that the foreign officer possesses relevant information on the judgment debtor’s financial affairs. This threshold test is an important safeguard preventing the abuse of the EJD process as a means of harassment of foreign officers of the judgment debtor. If this threshold test is passed, the inquiry envisaged by the Court of Appeal then focuses on the level of connection between the foreign officer and the “substantive claim” that is before the Singapore court. It is respectfully submitted that this approach is eminently sensible in the vast majority of cases. As the Court of Appeal noted, the question of when leave should be granted to serve an EJD order out of jurisdiction on a foreign officer turns on whether doing so would be an exercise of the court’s exorbitant substantive jurisdiction to an impermissible degree. Since the Singapore court has already assumed substantive jurisdiction over the “substantive claim”, a logical way of approaching the issue would be to only grant leave in situations where the officer in question has such a close connection to the “substantive claim” that it is fair and reasonable to extend the substantive jurisdiction already assumed to the issuance of an EJD order out of jurisdiction against him. Further, as mentioned above, a company can only act through individuals and a court that has assumed jurisdiction to determine a “substantive claim” ought thus to be permitted to issue orders to control a company in respect of that “substantive claim”. Accordingly, insofar as a foreign officer has a close connection with the “substantive claim” which the court has determined, the court should be permitted to issue orders against such a foreign officer in aid of execution or enforcement of its judgment in respect of that “substantive claim” less its judgment be rendered toothless.

    Application of the Court of Appeal’s guidelines in the context of an international arbitration award

    Nevertheless, there is one particular context in which the Court of Appeal’s guidelines do not fit snugly – namely where a party applies for an EJD order to be served out of jurisdiction as part of its efforts to enforce an international arbitration award in Singapore. This is because while the emphasis of the Court of Appeal’s guidelines is the connection between the foreign officer and the “substantive claim”, it is not clear what the “substantive claim” is where the court is enforcing an international arbitration award. 

    At first blush, one might surmise that the “substantive claim” must be the underlying arbitration proceedings. If that were the case, then the issue would be the level of connection between the foreign officer and the factual matrix of the dispute between the parties which was the subject of the arbitration proceedings. However, this would be fundamentally inconsistent with one of the cardinal principles underlying the regime for enforcement of international arbitration awards in Singapore – namely that of minimal curial intervention, which translates at the enforcement stage to limited judicial review on certain narrow grounds for the purposes of setting aside an award or for refusing to enforce the same. The court would not generally look behind the arbitral tribunal’s award and delve into the merits of the dispute. But if the court were to undertake the task of determining the level of connection between the foreign officer and the factual matrix of the underlying dispute between the parties, this would be a significant increase in the level of curial oversight over arbitration and necessarily involve some form of interpretation of the arbitral tribunal’s award. It is respectfully submitted that the court may not have the competence to conduct such an exercise in light of the statutory regime relating to the enforcement of international arbitration awards and may not, in any event, be well placed to conduct such an exercise.

    What then is the “substantive claim”? In the first place, it should be highlighted that the Court of Appeal’s decision in Transocean pertained to a judgment of the Singapore High Court and the Court of Appeal did not appear to direct its attention to the enforcement of international arbitration awards. Therefore, one view could be that there is technically no “substantive claim” at all before the court where what is sought to be enforced is an international arbitration award and that the Court of Appeal’s guidelines are completely inapplicable. However, this would not be a desirable result as this could lead to a situation where there is one set of guidelines when an EJD order is sought in respect of a Singapore judgment and a different set of guidelines where what is sought to be enforced is an international arbitration award.

    Accordingly, it is respectfully submitted that the better view is that the Court of Appeal’s guidelines can be extended to apply in the context of enforcement of an international arbitration award. This can be done by taking the “substantive claim” to be the subject matter which is being enforced in Singapore (i.e., the arbitral tribunal’s award). On this interpretation, the court would be examining the level of connection between the foreign officer and the arbitral tribunal’s factual findings as set out in the award. In line with the principle of minimal curial intervention, there should be little or no room for the court to go behind what is written on the face of the award. In practical terms, this would mean that leave should only be granted to serve an EJD order out of jurisdiction on a foreign officer of a corporate judgment debtor where that officer is named in the award for some meaningful reason. One instance where granting leave to serve an EJD order out of jurisdiction could conceivably be justified is where the arbitral tribunal’s decision on one of the successful claims is based on the conduct of the foreign officer on whom the EJD order is sought to be served. For example, if an arbitral tribunal concludes that a contract ought to be rescinded because a foreign officer had made false representations to induce the successful party into entering into a contract, this could well be a valid basis for the granting of leave to serve an EJD order on that foreign officer. 

    Although this would likely mean that there would be very few instances in which leave would be granted for service of an EJD order out of jurisdiction on a foreign officer of a corporate judgment debtor, it is respectfully submitted that this would be in line with the Court of Appeal’s exhortation that such leave should only be sparingly granted. In fact, there are valid reasons why leave should be granted even more sparingly in the context of enforcement of international arbitration awards (as opposed to a Singapore judgment). In particular, in the international arbitration context, the Convention on the Recognition and Enforcement of Foreign Arbitral Awards allows for enforcement of an international arbitration awards in all 146 contracting states. As such, a successful party would in many cases be able to enforce the arbitral tribunal’s award in the jurisdiction where the foreign officer is resident or present and then proceed to obtain an EJD order against him there. This would be the sensible option to take since it would be less onerous on the foreign officer. The availability of enforcement in 146 contracting states also means that if leave to serve an EJD order out of jurisdiction is freely given, this could be abused as a means of harassing officers of a corporate judgment debtor to attend hearings in a foreign land at great time and expense, and at the risk of penal sanction, even though the corporate judgment debtor and/or the contract has little or no connection with Singapore. As the question of whether leave should be granted is ultimately a matter of discretion, the existence of viable alternatives which are more appropriate and less burdensome on the foreign officer would be relevant factors that the court can taken into account to decide that leave should not generally be granted where the EJD order is being sought in the context of enforcement of an international arbitration award. 

    * This blog entry may be cited as Lionel Leo, "Examination orders against foreign officers of a judgment debtor: Burgundy Global Exploration Corp v Transocean Offshore International Ventures Ltd and another appeal [2014] SGCA 24" Singapore Law Blog (4 September 2014)

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

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