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    03:06 PM Tan Tian Hui (LLB (First Class Hons) (Bristol), B.C.L. (Oxon), Associate, Rajah & Tann Singapore LLP)

    Mareva injunctions in support of foreign court proceedings: Bi Xiaoqiong v China Medical Technologies, Inc (in liquidation) and CMED Technologies Ltd [2019] SGCA 50

        

    INTRODUCTION

    Consider the following scenario: a plaintiff commences proceedings in a foreign jurisdiction, and subsequently discovers that the defendant has been dissipating his assets to Singapore, in order to frustrate enforcement of the judgment.

    Enter the Mareva injunction, a useful tool in such situations as it assists the plaintiff to preserve the defendant’s assets, and prevents the defendant from dissipating his assets to avoid satisfaction of a potential judgment that the plaintiff may obtain.  

    To trigger the court’s power to grant the Mareva injunction in Singapore, the plaintiff would have to satisfy the following requirements: first, the court must have in personam jurisdiction over the defendant; and second, the plaintiff must have a reasonable accrued cause of action against the defendant in Singapore.

    In Bi Xiaoqiong v China Medical Technologies, Inc (in liquidation) and CMED Technologies Ltd [2019] SGCA 50, the Court of Appeal (“CA”) considered whether the plaintiff has to satisfy a third requirement – that the cause of action against the defendant must also terminate in a judgment rendered by the court that issues the injunction (the “Forum Requirement”). The coram of five judges held that this requirement does not exist, providing much welcomed clarity in the light of conflicting High Court decisions of Petroval SA v Stainby Overseas Ltd [2008] 3 SLR(R) 856 and Multi-Code Electronics Industries (M) Bhd and another v Toh Chun Toh Gordon and others [2009] 1 SLR(R) 1000.

    This commentary examines and considers the practical implications of the decision.

    BACKGROUND

    The first and second respondents are China Medical Technologies, Inc (“CMT”) and its wholly-owned subsidiary, CMED Technologies Ltd (“CMED”), respectively. CMT was wound up in 2012.

    The appellant, Ms Bi Xiaoqiong, is the ex-wife of Mr Wu Xiaodong, who founded and ran CMT until its winding up (at [4]). The couple divorced in 2012 (at [5]).

    After CMT was wound up, its liquidators discovered that CMT’s management had acted fraudulently in two transactions for the acquisition of medical technology from another company (at [7]). Thereafter, the respondents commenced two suits in Hong Kong (the “first HK Suit” and “second HK Suit” respectively) relating to the transactions.

    The respondents obtained a worldwide Mareva injunction against the couple in the second HK Suit (the “HK Injunction”). The terms of the HK Injunction specifically identified, inter alia, property and bank accounts in Singapore (at [13]).

    Thereafter, the respondents commenced a suit in Singapore against the couple. The respondents applied for a Mareva injunction and stay of the proceedings, both of which were granted by the High Court (“HC”) (at [19]).

    ISSUES CONSIDERED IN THIS APPEAL

    In respect of the appeal against the Mareva injunction granted by the HC, the CA had to consider two issues (at [26]):

    1. First, whether the HC had power to grant a Mareva injunction against the appellant (the “Power Issue”); and
    2. Second, if the HC had such power, whether the Judge should have granted the Mareva injunction against the appellant (the “Discretion Issue”).

    The CA answered both questions in the positive.

    THE POWER ISSUE

    The CA held that the court has power to grant a Mareva injunction against a defendant to Singapore proceedings, notwithstanding that at the time of the application, the plaintiff had taken out foreign proceedings in respect of the same cause of action advanced in the Singapore proceedings, and intended to pursue its substantive remedy in the foreign court (at [1]).

    In arriving at its conclusion that the Singapore courts may grant such a Mareva injunction, the CA also addressed two sub-issues (at [34]):

    1. Whether s 4(10) of the Civil Law Act (Cap. 43, Rev. Ed. 1999) (“CLA”) confers on the court the power to grant a Mareva injunction in aid of foreign court proceedings; and
    2. Whether there is a requirement that the proceedings in which the Mareva injunction is sought will or must terminate in a judgment in Singapore (the “Forum Requirement”).

    Court has power to grant a Mareva injunction in aid of foreign court proceedings under s 4(10) CLA

    The CA held that s 4(10) CLA confers on the court the power to grant a Mareva injunction in aid of foreign court proceedings.

    First, s 4(10) CLA permits the grant of Mareva injunctions in aid of foreign court proceedings. In this connection, s 4(10) CLA prescribes that the injunction granted must be of an “interlocutory” nature, and that it can only be made in “cases in which it appears to the court to be just or convenient that such order should be made” (at [37]). It does not impose a requirement that the injunction must only be in aid of or in support of local proceedings. Nor does s 4(10) CLA set out a preclusion against the Singapore courts granting a Mareva injunction in aid of foreign proceedings.

    Second, the CA rejected the appellant’s submission that the legislative intent of s 4(10) CLA was confined to the improvement of the administration of civil law or cases in Singapore (at [44]), a purpose not met by the grant of a Mareva injunction in aid of foreign court proceedings (at [48]). The CA stated that the legislative intent of s 4(10) CLA was to preserve the court’s power to grant injunctions in order to facilitate the concurrent administration of law and equity (at [50]), and rejected the appellant’s narrow interpretation of the provision.

    Forum Requirement need not be established

    Having analysed both local and foreign positions, the CA held that the Forum Requirement need not be established for the court to grant a Mareva injunction. The court would not be barred from granting a Mareva injunction even where the local proceedings are stayed, such that it is possible that no judgment will eventually be made by the Singapore courts.

    First, the CA held that its power to grant a Mareva injunction even where the local action is stayed is premised on the concept of the court retaining a “residual jurisdiction” over the underlying cause of action (at [104]). When the action is stayed, the court leaves open the possibility that the matter would be revived at some stage; thus, it retains its ancillary jurisdiction over the action pending the stay being lifted (at [107]-[108]). The court’s power to grant ancillary relief only ceases if and when the action is discontinued or struck out.

    Second, the CA observed that this position is supported by authorities. In Channel Tunnel Group Ltd and another v Balfour Beatty Construction Ltd and others [1993] 2 WLR 262, the House of Lords recognised the English court’s residual jurisdiction to grant interim injunctions, even where the English action might have been stayed by the court. This reasoning was adopted by the Singapore High Court in Multi-Code Electronics Industries (M) Bhd and another v Toh Chun Toh Gordon and others [2009] 1 SLR(R) 1000, which held that the court’s residual jurisdiction over the underlying cause of action was per se sufficient to ground the court’s jurisdiction to allow the continuation of the Mareva injunction.

    Third, the court also took the view that the juridical basis of a Mareva injunction in aid of foreign proceedings is premised on, and in support of, proceedings in Singapore (at [113]). In this regard, the Mareva injunction may assist the plaintiff by ensuring that the plaintiff, if successful in the foreign court proceedings, would have assets in Singapore over which to enforce the foreign judgment (at [112]).

    THE DISCRETION ISSUE

    Having considered the matter, the CA dismissed the appeal and affirmed the grant of the Mareva injunction against the appellant, as the dual requirements that the Mareva injunction applicant must have a good arguable case on the merits and the presence of a real risk of dissipation of assets were satisfied (at [140] and [144]). Further, the CA found that there was no inordinate delay on the part of the respondents, such as to indicate that their application for the Mareva injunction was an abuse of process (at [155]).

    CRITIQUE

    This decision is to be welcomed as it confirms that the Singapore court is empowered to grant a Mareva injunction to a plaintiff, even where the proceedings in Singapore are stayed pending the determination of foreign court proceedings, and therefore may not terminate in a judgment in Singapore. This position accords with the policy of promoting mutual assistance and reciprocity in the international arena (China Medical Technologies, Inc. v Wu Xiaodong [2018] SGHC 178, at [47]), which is desirable as disputes increasingly involve cross-border elements.

    However, the danger of the CA’s approach of allowing the grant of Mareva injunctions in aid of foreign court proceedings, while urging caution with respect to plaintiffs commencing proceedings in Singapore for collateral purposes, is that potential litigants may nevertheless commence proceedings in Singapore for the collateral purpose of safeguarding the defendant’s assets in Singapore, without the intention of pursuing the Singapore action (at [119]–[120]). While the CA cautioned that the court should not grant an interlocutory injunction in such situations, there are potentially two difficulties with this approach.

    First, the basis for the court’s different treatment of a plaintiff that seeks an injunction to safeguard the defendant’s assets in support of foreign proceedings, as opposed to proceedings within the jurisdiction, is questionable.

    One premise for this position is that the court lacks in personam jurisdiction over a foreign defendant where no substantive claim is being made against him within the jurisdiction (Karaha Bodas Co LLC v Pertamina Energy Trading Ltd and another appeal [2006] 1 SLR(R) 112, at [43], citing this principle which was established by The Siskina  [1979] AC 210 and reiterated by Mercedes Benz). Consequently, the court’s jurisdiction over a foreign defendant cannot be sustained where a plaintiff obtains an injunction purely to safeguard the defendant’s assets in support of foreign proceedings, without concurrently pursuing a claim against the defendant within the jurisdiction.

    However, this objection can be overcome by changing the requirement for establishing in personam jurisdiction, to do away with the requirement of establishing a substantive cause of action against the defendant to obtain leave for service out of jurisdiction (see below).

    It is therefore argued that in both cases (i.e. where the plaintiff seeks an injunction to safeguard the defendant’s assets in support of foreign proceedings and proceedings within the jurisdiction), the plaintiff’s ultimate goal is the same: to safeguard the defendant’s assets within the jurisdiction, so as to enforce an anticipated judgment against the defendant. The plaintiff ought not to be deprived of the right to do so simply because it intends to seek relief in a foreign court.

    Second, practically speaking, the court would face difficulties in ascertaining whether a plaintiff has a collateral purpose in obtaining a Mareva injunction. The court will largely be reliant on the parties’ submissions (specifically, the plaintiff’s) to determine the plaintiff’s intended litigation strategy, and will likely have no reason to refuse the injunction where the submissions reveal a possibility that the plaintiff will return to the jurisdiction to pursue the action.

    As a related point, there will be no recourse against the plaintiff, should it eventually decide not to pursue the action in the court that granted the injunction. Given that litigation strategy is usually reactive to the progress of the proceedings, and not cast in stone, the court will not be able to secure a commitment from the plaintiff to pursue the action in the jurisdiction. Thus, this could give rise to cases where the plaintiff eventually does not return to pursue proceedings upon which the injunction was premised.

    PROPOSED REFORM

    Allowing the grant of free-standing Mareva injunctions

    In the light of the above, it is proposed that legislative reform should be implemented to facilitate the grant of Mareva injunctions in aid of foreign court proceedings. Specifically, it is proposed that the legislative amendment should confer jurisdiction upon courts to grant Mareva injunctions where they are sought in aid of foreign court proceedings, irrespective of whether they are premised on an accrued cause of action brought in Singapore.

    First, this position may be justified in principle. One school of thought is that the Mareva injunction constitutes substantive relief, as it is sought in respect of the potential enforcement of an anticipated foreign judgment. In Lord Nicholls’ dissenting judgment in Mercedes Benz AG v Leiduck [1996] 1 AC 284 (“Mercedes Benz”), his Lordship had proposed the re-characterisation of the Mareva injunction as substantive relief in and of itself, as it is sought in respect of the potential enforcement of an anticipated foreign judgment (Mercedes Benz at 307C). As such, a claim for the Mareva injunction can stand alone as a form of relief granted pending judgment in other proceedings (Mercedes Benz at 313). Thus, it is submitted that as the Mareva injunction sought could constitute final relief insofar as the court rendering it is concerned, it is unnecessary to require the Mareva injunction to be pegged to a cause of action.

    Second, this position poses practical benefits to litigants in terms of case management. Currently, a plaintiff needs to establish a pre-existing cause of action in Singapore, and the injunction sought must be ancillary to that cause of action. In some cases, the plaintiff may seek a stay of the Singapore proceedings as part of case management. Allowing the grant of a free-standing injunction obviates the need for a plaintiff to commence a cause of action, which is already the subject of foreign proceedings, and thereafter seek a stay of the same.

    Third, this approach brings the Singapore position in line with other Commonwealth jurisdictions such as England and Hong Kong, where the legislation permits the grant of free-standing interim relief.

    In England, s 25 of the Civil Jurisdiction and Judgments Act 1982 (Cap. 27) (“CJJA”) and CJJA (Interim Relief) Order 1997 empower the English court to grant interim relief in proceedings in England in which there is no claim to substantive relief on the merits of a case based on a cause of action. It provides a jurisdiction for the court to grant free-standing interim relief in support of substantive proceedings elsewhere (see e.g. Steven Gee, Commercial Injunctions (6th Ed., Sweet & Maxwell, 2016), at [6-054] and [6-056]).

    In Hong Kong, s 21M of the High Court Ordinance (Cap 4) (HK) confers on the court the power to grant interim relief in support of foreign proceedings where those proceedings are capable of giving rise to a judgment which may be enforced in Hong Kong. The statute also provides that the court has such a power notwithstanding that the subject matter of the proceedings would not otherwise give rise to a cause of action in Hong Kong.  

    Establishing in personam jurisdiction over a foreign defendant

    If the grant of free-standing injunctions is allowed, there should be consequent amendments to the legal requirements for establishing in personam jurisdiction over a foreign defendant with assets in Singapore.

    The most straightforward proposal would be to do away with the requirements for obtaining leave for service out of jurisdiction, and to permit service out of jurisdiction for a claim made for Mareva relief under the relevant legislation.

    CONCLUSION

    This decision clarifies that a Singapore court has power to grant a Mareva injunction in aid of foreign court proceedings, even where the Singapore proceedings are stayed and may not terminate in judgment being rendered by the court. It is a sound development in today’s climate where disputes increasingly involve cross-border elements, and assets may be transferred across borders rapidly. This decision paves the way forward for legislative reform to allow the grant of free-standing Mareva injunctions, which will enhance Singapore’s reputation as an international dispute resolution hub and promotes mutual judicial assistance across jurisdictions.

    * This blog entry may be cited as Tan Tian Hui, “Mareva injunctions in support of foreign court proceedings: Bi Xiaoqiong v China Medical Technologies, Inc (in liquidation) and CMED Technologies Ltd [2019] SGCA 50”  (2 March 2020) (https://www.singaporelawblog.sg/blog/article/243)

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

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