China Medical Technologies, Inc (in liquidation) and another v Wu Xiaodong and another

• Jurisdiction: Singapore
• Judge: Audrey Lim JC
• Judgment Date: 13 August 2018
• Neutral Citation: [2018] SGHC 178
• Court: High Court (Singapore)
• Docket Number: Suit No 1180 of 2017 (Summonses Nos 5689 of 2017 and 878 of 2018)
• Published date: 05 October 2019
• Year: 2018
• Hearing Date: 23 March 2018,23 May 2018,16 May 2018
• Plaintiff Counsel: Kelvin Poon / Nigel Pereira / Chew Xiang / Quek Teck Liang (Rajah & Tann Singapore LLP)
• Defendant Counsel: Hee Teng Fong / Tan Chau Yee / Sharmini Selvaratnam / Andrea Koh (Eversheds Harry Elias LLP)
• Subject Matter: Civil Procedure,Injunctions,Mareva injunctions,Court's power to grant Mareva injunction in aid of foreign court proceedings,Whether there is good arguable case,Whether there is real risk of asset dissipation
• Citation: [2018] SGHC 178

Audrey Lim JC:

This case raises the question of whether a Singapore court has the power to grant a Mareva injunction in aid of foreign court proceedings, particularly where the Singapore court has in personam jurisdiction over the defendant.

Background

The first plaintiff (“P1”) is a public company incorporated in the Cayman Islands in 2004. The second plaintiff (“P2”) is a wholly-owned subsidiary of P1. Around February 2007 and October 2008, P1 and P2 acquired various medical technologies (“the technologies”) for US$521.8m from Supreme Well Investments Limited (“SW”) and its subsidiary. P1 was subsequently wound up in July 2012. The first defendant (“Wu”) was the founder, chairman, chief executive officer and director of P1, and its largest shareholder, holding around 23% of P1’s shares through his controlled entity Chengxuan International Limited (“Chengxuan”).

After P1 was wound up, the liquidators investigated its affairs and alleged that the technologies purchased by P1 and P2 were substantially worthless and that SW was a sham entity controlled by P1’s former management which included Wu and one Tsang (the former chief financial officer and director of P1). Hence, P1 and P2 claimed that they were victims of fraudulent misappropriation of some US$521.8m perpetrated by their former management and their associates, and that Wu and other directors of P1 had orchestrated and participated in the fraud (“the Fraud”). The funds transferred from P1 and P2 to SW’s bank accounts were subsequently distributed to bank accounts of other parties (“SW Payees”) who were apparently associated with or controlled by Wu, Tsang and/or their associates. Funds were then apparently transferred from SW Payees to bank accounts of other parties (“Further SW Payees”) which included Wu and the second defendant (“Bi”). Bi married Wu in 1995 and they entered into a divorce agreement in 2012, though she claimed that they were separated since 2001.

On 1 August 2013, P1 commenced an action in the Hong Kong High Court (High Court Action No 1417 of 2013) (“first HK suit”) against Wu and four others claiming, inter alia, breach of fiduciary duties, breach of trust, fraud, conspiracy, knowing receipt, dishonest assistance and money had and received.¹ On 23 December 2016, P1 and P2 commenced another action in the Hong Kong High Court (High Court Action No 3391 of 2016) (“second HK suit”) against Wu and Bi and 21 others.² The second HK suit included claims additional to those found in the first HK suit. P1 and P2 intend to consolidate the first and second HK suits subsequently. The writ in the second HK suit was served on Bi’s solicitors (who accepted service) on 27 November 2017.³

On 11 December 2017, the Hong Kong court granted P1 and P2 a worldwide Mareva injunction against Wu and Bi in the second HK suit (“HK injunction”), the subject of which included assets in Singapore. On 13 December 2017, P1 and P2 filed a writ in Singapore for substantially the same causes of actions and relief as in the second HK suit (“Suit 1180”), and concurrently applied for a Mareva injunction against Wu and Bi (“SUM 5689”) to prevent them from disposing of their assets in Singapore (which are already the subject of the HK injunction). On 18 December 2017, Bi was served with the writ for Suit 1180, papers for SUM 5689 and the HK injunction order.⁴ On 4 January 2018, the Singapore court granted the Mareva injunction (ex parte) against Wu in SUM 5689.

Before me, SUM 5689 remains to be determined against Bi. At the same time, P1 and P2 have, on 20 February 2018, applied to stay Suit 1180 (as they consider Hong Kong to be the more appropriate forum for the dispute) except for proceedings in relation to SUM 5689, pending the final determination of the first and second HK suits (“SUM 878”). Bi submits that the Singapore court has no power to grant a Mareva injunction in aid of foreign court proceedings, and even if it did, the injunction should not be granted in this case.

Court’s power to grant Mareva injunction in aid of foreign court proceedings

P1 and P2 commenced Suit 1180 with the primary purpose of obtaining a Mareva injunction against Wu and Bi in aid of the Hong Kong proceedings. Hence, they applied to stay Suit 1180 concurrently with the grant of the injunction, as they recognise Hong Kong to be the most appropriate forum for the dispute.⁵ It is not disputed that they have a reasonable accrued cause of action recognisable in a Singapore court, that Wu and Bi have assets in Singapore that could be subject to the injunction, and that the court has in personam jurisdiction over Bi. Bi is a Singapore citizen and was properly served with the writ for Suit 1180 (see [5] above).

Section 4(10) of the Civil Law Act – the current state of the law

Section 4(10) of the Civil Law Act (Cap 43, 1999 Rev Ed) (“the CLA”) confers on the court the power to grant “a Mandatory order or an injunction … either unconditionally or upon such terms and conditions as the court thinks just, in all cases in which it appears to the court to be just or convenient that such order should be made”. The question is whether s 4(10) can be read to confer on the Singapore court power to grant interim relief in aid of foreign court proceedings, particularly where the court has in personam jurisdiction over the defendant and the plaintiff has a reasonable accrued cause of action recognisable by the court.

As a preliminary point, although some cases have interchangeably used the term “power” and “jurisdiction” in relation to s 4(10) of the CLA, the section essentially confers a “power”. “Jurisdiction” should more appropriately be confined in this context to mean the court’s “authority, however derived, to hear and determine a dispute brought before it” (Re Nalpon Zero Geraldo Mario [2013] 3 SLR 258 at [13] and [31]). Whether the court has properly assumed jurisdiction over the defendant is an anterior question that must be determined before the court decides whether it has power to grant an injunction.

There is currently a divergence of views in the High Court on the ambit of s 4(10) of the CLA. In Petroval SA v Stainby Overseas Ltd and others [2008] 3 SLR(R) 856 (“Petroval”), the plaintiff, a foreigner, commenced an action in Singapore against the defendants who were also foreigners. The plaintiff based its jurisdiction for the Singapore action solely on O 11 r 1 of the Rules of Court (Cap 322, R5, 2006 Rev Ed), ie, that the defendants had assets in Singapore. It was clear that the merits of the claim would not be determined in Singapore, and that the sole purpose of commencing the Singapore action was the obtaining of interim relief. The plaintiff obtained a Mareva injunction and a stay of the Singapore action until final disposal of another action it commenced in the British Virgin Islands (“BVI”). The defendants subsequently applied for a declaration that the court had no jurisdiction to grant the Mareva injunction and for the setting aside of the writ of summons (in the Singapore suit), service of that writ, and all subsequent proceedings.

Tay J (as he then was) held that the court had no jurisdiction to grant a Mareva injunction in aid of foreign court proceedings. Although the claims were justiciable in Singapore as the causes of action are recognised under Singapore law, Tay J held (at [13]) that the substantive claim should also terminate in a judgment by the court in which the injunction is sought. In that case, the merits of the claim would be determined in the BVI and the plaintiff’s sole purpose for commencing the Singapore action was to obtain a Mareva injunction to enforce an injunctive relief earlier granted by the BVI court. Tay J thus set aside the interlocutory relief previously granted, as well as the writ of summons, the service thereof and all subsequent proceedings thereto (at [18]).

In Multi-Code Electronics Industries (M) Bhd and another v Toh Chun Toh Gordon and others [2009] 1 SLR(R) 1000 (“Multi-Code”), the plaintiffs commenced an action in Malaysia and obtained a worldwide Mareva injunction against the first and fourth defendants. The plaintiffs then commenced an action in Singapore against the first, third and fourth defendants, for almost identical relief as that claimed in the Malaysian action, and obtained an ex parte Mareva injunction preventing them from disposing their assets located in Singapore. The actions in Malaysia and Singapore were recognised to be duplicitous.

Chan Seng Onn J upheld the injunction granted against the first and fourth defendants (the injunction against the third defendant was discharged as the plaintiffs could not prove a real risk of asset dissipation by him). Chan J held at [79] and [85] that under s 4(10) of the CLA, the court had a residual jurisdiction over the underlying cause of action that could ground the court’s jurisdiction to grant or allow the continuation of a domestic Mareva injunction against assets in Singapore even if the Singapore action was stayed. Certain prerequisites, however, would have to be met: (a) first, the court must have in personam jurisdiction over the defendants for the Singapore action; and (b) second, the “stayed” action must not have been struck out (because there was no reasonable accrued cause of action under Singapore law or for other reasons under O 18 r 19 of the Rules of Court) and the writ must not have been set aside on the basis that the court had no jurisdiction to hear or try the matter. The residual jurisdiction would allow the stayed Singapore action to be revived and carried forward to judgment in the Singapore court if, for some reason, the stay was subsequently lifted by the Singapore court.

Both Petroval and Multi-Code referred to the case of Swift-Fortune Ltd v Magnifica Marine SA [2007] 1 SLR(R) 629 (“Swift-Fortune”). The issue there was whether the court had power to grant a Mareva injunction in aid of foreign...