Bi Xiaoqiong (in her personal capacity and as trustee of the Xiao Qiong Bi Trust and the Alisa Wu Irrevocable Trust) v China Medical Technologies, Inc (in liquidation) and another

• Jurisdiction: Singapore
• Judge: Sundaresh Menon CJ
• Judgment Date: 30 September 2019
• Neutral Citation: [2019] SGCA 50
• Court: Court of Appeal (Singapore)
• Docket Number: Civil Appeal No 188 of 2018
• Year: 2019
• Published date: 08 October 2019
• Hearing Date: 30 April 2019
• Plaintiff Counsel: Hee Theng Fong, Tan Chau Yee, Sharmini Sharon Selvaratnam and Koh Fang Ling Andrea (Eversheds Harry Elias LLP)
• Defendant Counsel: Kelvin Poon Kin Mun, Nigel Desmond Pereira, Chew Xiang and Chow Jie Ying (Rajah & Tann Singapore LLP)
• Subject Matter: Civil Procedure,Mareva injunctions
• Citation: [2019] SGCA 50

Judith Prakash JA (delivering the grounds of decision of the court): Introduction

The injunction to restrain parties from disposing of their assets prior to the disposition of a claim against them, known variously as the freezing order and the Mareva injunction (following the eponymous case, Mareva Compania Naviera SA v International Bulkcarriers SA [1980] 1 All ER 213 (“The Mareva”)), has become firmly entrenched in our legal system as a potent tool. Particularly because of its potentially draconian effect, the precise ambit of the court’s power to grant such an injunction remains, in certain circumstances, fiercely contested. In the present appeal, the central question which arose for our determination was this: does the court have the power to grant a Mareva injunction against a defendant to Singapore proceedings where, at the time the injunction is sought, the plaintiff intends to pursue foreign proceedings against that defendant so that there is a possibility that it will be the foreign proceedings, rather than the Singapore proceedings that terminate in a judgment? At the close of the appeal hearing, we decided that provided the court otherwise had the power to grant a Mareva injunction against the particular defendant, the plaintiff’s intention to pursue foreign proceedings could not negate such power.

Lawyers and other persons who have followed the development of case law and arguments on the question over the years would be aware that some members of this court had previously held differing views as to the extent of the court’s power to grant Mareva injunctions in support of foreign court proceedings. Thus, although we gave oral grounds for our decision at the end of the appeal hearing, we set out at some length in this judgment the arguments and the reasons why this court made the determination it did.

Background facts Parties to the dispute

The first respondent, China Medical Technologies, Inc (“CMT”), was incorporated in the Cayman Islands. Its wholly-owned subsidiary, CMED Technologies Ltd (“CMED”), the second respondent, was incorporated in the British Virgin Islands. CMT’s principal business was developing, manufacturing and marketing advanced surgical and medical equipment in China. This business was short-lived as CMT was wound up on 27 July 2012.

Mr Wu Xiaodong (“Mr Wu”) founded CMT and ran it until it was wound up. He was the largest shareholder of CMT, holding 23% of its issued share capital through a company called Chengxuan International Ltd.

The appellant is Ms Bi Xiaoqiong (“Ms Bi” or “the appellant”). She is a Singapore citizen. Ms Bi and Mr Wu were married in 1995. They were divorced in 2012 but Ms Bi claims that they separated in 2001 and lived apart thereafter.

After investigating the affairs of CMT and CMED, the liquidators of CMT (“the Liquidators”) took the view that as much as US$521.8m had been fraudulently misappropriated from the respondents by members of their former management. The respondents therefore started a series of legal proceedings against these persons in both Hong Kong and Singapore. The present action, in which Mr Wu and Ms Bi are the defendants, is one such proceeding.

In brief, the background of the alleged fraud is as follows. Between 2005 and 2010, CMT raised capital of approximately US$631m, and had US$515m of that capital at its disposal. Between February 2007 and October 2008, the respondents entered into two transactions for the acquisition of medical technology from Supreme Well Investments Limited (“SW”) for a total consideration of US$521.8m (“the Transactions”). Allegations were made subsequently that CMT’s management had acted fraudulently in respect of the Transactions.

Their investigations led the Liquidators to the view that Mr Wu and other members of the respondents’ management had procured the conclusion of the Transactions by withholding from CMT’s full board of directors: (a) details of their personal interests in the Transactions; (b) the fact that the chief financial officer of CMT at the time was also the sole authorised signatory of SW’s bank accounts; and (c) the fact that the medical technology sought to be acquired in the Transactions was worthless.

In particular, the Liquidators discovered that the respondents had acquired only patent applications through the Transactions, and that none of the technology acquired had the necessary regulatory approval for sale and use in China at the time. The Liquidators were also advised by experts that the technology acquired was of little value because: (a) the technology acquired in the first transaction had already been in existence for almost 30 years; and (b) the technology acquired in the second transaction did not have any clinical application, and was “inherently unsuited to use in clinical diagnosis”.

In the circumstances, in the various lawsuits the respondents alleged that the Transactions were used as a means of “stealing US$521.8 million of purported purchase consideration, paid through a series of banking transactions involving Hong Kong bank accounts” controlled by CMT’s former management. Of the total of US$521.8m, between 2006 and as late as 2011: US$355.5m was paid by the respondents via cashier orders to SW’s bank accounts. The funds were later transferred from SW’s bank accounts to bank accounts of various other persons and entities (“the SW Payees”), all of whom were associated with or controlled by the former management of CMT. The payment out of SW’s bank accounts to the SW Payees took place, in many instances, within days of SW receiving the funds. From the SW Payees, the funds were then transferred to other persons and entities (“the Further SW Payees”), a number of whom were associated with or controlled by the former management of CMT. The Further SW Payees include Mr Wu and Ms Bi. From the Further SW Payees, the funds were often further transferred to other recipients. The balance of US$166.3m was paid to SW through other means, such as bank transfers and cheques.

Mr Wu was subsequently indicted on criminal charges relating to the alleged fraud in the United States of America (“the US”). Ms Bi denied being in any way complicit in the alleged fraud. She claimed that she had no involvement in CMT and its affiliates, except in respect of a Singapore subsidiary, CMT Diagnostics (Singapore) Pte Ltd. She also denied having any knowledge of the alleged breaches of fiduciary duty or trust by the perpetrators of the fraud, or that the moneys received in her bank accounts were the proceeds of the alleged fraud.

Procedural history The Hong Kong Proceedings

On 1 August 2013, CMT commenced proceedings in Hong Kong by way of High Court Action No 1417 of 2013 (“the first HK Suit”) against Mr Wu and four others, claiming, inter alia, breach of fiduciary duties, breach of trust, conspiracy, money had and received, and knowing receipt, in respect of four specific payments made from CMT to SW. On 23 December 2016, the respondents commenced another set of proceedings in Hong Kong by way of High Court Action 3391 of 2016 (“the second HK Suit”) against Mr Wu, Ms Bi and 21 other defendants. The second HK Suit was for causes of action that were similar to those pursued in the first HK Suit, but were in respect of a broader class of payments, namely, any or all payments made between November 2006 and December 2009 by the respondents and their subsidiaries to SW, its subsidiaries and/or its nominees. Ms Bi was served with the writ for the second HK Suit through her solicitors in Singapore.

On 11 December 2017, the Hong Kong High Court, pursuant to an application made in the second HK Suit, granted the respondents a worldwide Mareva injunction against, among others, Mr Wu and Ms Bi (“the HK Injunction”). The HK Injunction restrained Ms Bi from removing from Hong Kong any of her assets up to a total value of at least US$17.6m. It also provided that she was not to dispose of or deal with any of her assets, whether within or outside Hong Kong, unless she had assets with a total value of at least US$17.6m. The terms of the HK Injunction specifically identified, inter alia, property and bank accounts in Singapore.

The Singapore proceedings

On 13 December 2017, the respondents commenced this action, Suit No 1180 of 2017 (“Suit 1180”), in the High Court of Singapore. At the same time, they applied by way of Summons No 5689 of 2017 (“SUM 5689”) for Mareva injunctions against Mr Wu and the appellant. The endorsement of claim in the writ of summons for Suit 1180 set out substantially the same claims and causes of action as those pursued in the second HK Suit. The Mareva injunctions sought by way of SUM 5689 were to prevent the defendants from disposing of their assets in Singapore only (ie, the respondents did not seek worldwide Mareva injunctions). In respect of the appellant, the precise order sought was to prevent her from removing her assets from Singapore or dealing with them within the country so long as the total value of her assets in Singapore was below US$17.6m. In particular, the order sought to restrain the disposal of the following assets belonging to the appellant: a property at 17 Coral Island Singapore which she holds jointly with Mr Wu (“the Coral Island Property”); moneys in an account with United Overseas Bank (“UOB”), held jointly with Mr Wu; moneys in two other UOB accounts and one account with Standard Chartered Bank, held in her own name; moneys in a UOB account in the name of WB International Holding Pte Ltd (“WB International”); and moneys in an account with Credit Suisse AG, Singapore Branch (“Credit Suisse Singapore”), in the name of Long Chart Investments Limited (“Long Chart”).

Long Chart and WB International are alleged to be two of the Further SW Payees (see above at [10(a)]), and are defendants in the second HK Suit. The respondents claimed that the appellant controlled Long Chart and WB...