CPIT Investments Ltd v Qilin World Capital Ltd

JurisdictionSingapore
CourtHigh Court (Singapore)
JudgeVivian Ramsey IJ
Judgment Date15 September 2016
Date15 September 2016
Docket NumberSuit No 5 of 2016 (HC/Summonses Nos 2398 and 3128 of 2016)

[2016] SGHC(I) 4

Singapore International Commercial Court

Vivian Ramsey IJ

Suit No 5 of 2016 (HC/Summonses Nos 2398 and 3128 of 2016)

CPIT Investments Ltd
and
Qilin World Capital Ltd and another

Tan Poh Ling Wendy and Kenneth Chua (Morgan Lewis Stamford LLC) for the plaintiff;

Renganathan Nandakumar, Vernon VoonandSharon Chung (RHTLaw Taylor Wessing LLP) for the defendants.

Case(s) referred to

Airtrust (Singapore) Pte Ltd v Kao Chai-Chau Linda [2014] 2 SLR 693 (refd)

Bakery Mart Pte Ltd v Ng Wei Teck Michael [2005] 1 SLR(R) 28; [2005] 1 SLR 28 (refd)

Bloomsbury International Ltd v HolyoakeUNK [2010] EWHC 1150 (Ch) (refd)

CHS CPO GmbH v Vikas Goel [2005] 3 SLR(R) 202; [2005] 3 SLR 202 (refd)

Commodity Ocean Transport Corp v Basford Unicorn Industries Ltd (The Mito)UNK [1987] 2 Lloyd's Rep 197 (refd)

Energy Venture Partners Ltd v Malabu Oil and Gas LtdWLR [2015] 1 WLR 2309 (refd)

Harley Street Capital Ltd v TchigirinskiUNK [2005] EWHC 2471 (Ch) (refd)

JSC Mezhdunarodniy Promyshlenniy Bank v PugachevWLR [2016] 1 WLR 160 (refd)

Miller Brewing Co v The Mersey Docks and Harbour CoUNK [2003] EWHC 1606 (Ch) (refd)

Poh Huat Heng Corp Pte Ltd v Hafizul Islam Kofil Uddin [2012] 3 SLR 1003 (folld)

Purcell v F C Trigell LtdELR [1971] 1 QB 358 (refd)

Ropac Ltd v Inntrepreneur Pub Co (CPC) Ltd [2001] CP Rep 31 (refd)

Siebe Gorman & Co Ltd v Pneupac LtdWLR [1982] 1 WLR 185; [1982] 1 All ER 377 (refd)

Thai-Lao Lignite (Thailand) Co Ltd v Government of the Lao People's Democratic RepublicUNK [2013] EWHC 2466 (Comm) (refd)

Wellmix Organics (International) Pte Ltd v Lau Yu Man [2006] 2 SLR(R) 117; [2006] 2 SLR 117 (refd)

Weston v DaymanUNK [2006] EWCA Civ 1165 (refd)

Wiltopps (Asia) Ltd v Drew & Napier [1999] 1 SLR(R) 252; [2000] 3 SLR 244 (refd)

Zheng Yu Shan v Lian Beng Construction (1988) Pte Ltd [2009] 2 SLR(R) 587; [2009] 2 SLR 587 (refd)

Legislation referred to

Evidence Act (Cap 97, 1997 Rev Ed) ss 58, 59

Rules of Court (Cap 322, R 5, 2004 Rev Ed) O 92 r 4

Rules of Court (Cap 322, R 5, 2006 Rev Ed) O 92 r 4

Rules of Court (Cap 322, R 5, 2014 Rev Ed) O 92 r 4

Civil Procedure — Injunctions — Plaintiff seeking fortification of undertaking not previously sought at injunction application — Whether appropriate to grant fortification not originally a condition of injunction — Whether circumstances justifying granting fortification in any event

Civil Procedure — Judgments and orders — Consent order arising from real agreement between parties — Whether sufficient grounds justifying variation of consent order

The plaintiff, CPIT Investments Ltd (“CPIT”), and the defendants, Qilin World Capital Ltd (“Qilin”), entered into two related agreements on 16 November 2015 under which CPIT provided 25,000,000 shares in Millennium Pacific Group Holdings Ltd (“Millennium”), a publicly listed company in Hong Kong, as collateral for a non-recourse loan from Qilin of HK$31,250,000. On 12 January 2016, CPIT brought proceedings in the High Court against Qilin contending that Qilin had unlawfully sold the Millennium shares. On the same date, CPIT applied for (a) an injunction (“the Injunction”) prohibiting Qilin from disposing of the unsold shares (“Order 1 of the Injunction”) and the proceeds of sale of any shares which had been sold (“Order 2 of the Injunction”); and (b) a worldwide Mareva injunction against Qilin up to the value of HK$31,250,000.

The High Court granted the Injunction application. With regard to the Mareva injunction application, the parties decided to enter into an agreement, which was eventually recorded as a consent order (“Consent Order”). Under the Consent Order, Order 1 of the Injunction was to remain in effect, while Order 2 of the Injunction was varied such that Qilin was to pay the proceeds of sale of the Millennium shares to the client account of Qilin's solicitors as security for CPIT's claim. CPIT also provided an undertaking to compensate Qilin for any loss arising from Qilin's provision of security (“the Undertaking”).

On 17 May 2016, Qilin filed two applications, which were placed before the Singapore International Commercial Court (“SICC”) after CPIT's action was transferred from the High Court to the SICC. The first was an application for CPIT to provide fortification of its undertaking to compensate Qilin for any loss (“the Fortification Application”), while the second was an application to vary Order 1 of the Injunction such that Qilin was at liberty to sell the unsold shares (“the Variation Application”).

Held, dismissing both applications:

(1) The detailed terms of the Consent Order and Undertaking were carefully considered and negotiated by the two experienced firms of solicitors acting for the parties. There could be no doubt that it constituted a consent order arising from a real agreement between the parties: at [33] and [36].

(2) With respect to the Fortification Application, the general principle was that a consent judgment or consent order was binding and could not be set aside save for exceptional reasons, ie, on grounds of fraud or on any of the grounds that would justify the setting aside of a contract. There might be rare cases where O 92 r 4 of the Rules of Court (Cap 322, R 5, 2014 Rev Ed) could be relied on in relation to enforcement of consent orders or to extend time in relation to consent orders. Presently, there were no exceptional reasons which would justify the variation of the terms of the Consent Order by way of fortification of the terms of the agreed undertaking as to damages.

There was also nothing on the facts which would make it possible to rely on O 92 r 4: at [52], [55] and [56].

(3) A court would decide whether to grant an injunction based on the conditions which it considered to be appropriate at that time. If fortification was not made a condition initially, then the injunction was granted on the basis that fortification was not required and to fortify the undertaking later would be to impose an undertaking which the party did not agree to give. If fortification was granted at a later date, it would also relate back to the original undertaking and therefore impose a retrospective burden as the price of the original injunction. At this stage, it was not appropriate to impose fortification which was not originally a condition of the Injunction and/or Consent Order and which would have retrospective effect: at [63].

(4) Even if this were a case where fortification might in principle be granted, Qilin had not made out a case for it to be ordered. Qilin had not produced sufficient evidence to discharge the burden of establishing a sufficient risk of loss or that the loss was or would be caused by the Consent Order: at [71] and [74] to [76].

(5) With respect to the Variation Application, the parties had made the Consent Order on the basis of Order 1 of the Injunction, each accepting that the share value could, on the usual basis, rise or fall. Further, whilst the shares had a commercial value, they also had a non-monetary value to a particular party and the court decided to grant the Injunction to preserve the Millennium shares as an asset. A fall in the value of those shares did not justify converting that asset into cash.

Lastly, the value of the shares appeared to have stabilised and might increase in value. There was no apparent advantage of converting the shares to cash at this stage: at [90].

15 September 2016

Judgment reserved.

Vivian Ramsey IJ:

1 In this judgment I deal with two applications made by the defendants (collectively “Qilin”), one relating to an injunction granted by the High Court on 18 January 2016 (“the Injunction”) and the other relating to a consent order made on 12 February 2016 (“the Consent Order”). These proceedings which involve an international commercial transaction have now been transferred to the Singapore International Commercial Court.

2 In the first application, Summons No 3128 of 2016 (“the Variation Application”), Qilin seeks a variation of the terms of the Injunction to allow the second defendant to sell 2,860,000 shares in Millennium Pacific Group Holdings Limited (“Millennium”). In the second application, Summons No 2398 of 2016 (“the Fortification Application”), Qilin applies for the plaintiff (“CPIT”) to provide fortification of its undertaking to the court in relation to any damages that Qilin might suffer and the court might order as a result of the Consent Order.

3 There is an issue in these proceedings as to whether the first defendant, a Hong Kong company, or the second defendant, a British Virgin Islands company, is the relevant party. They both have the same name. I shall also refer to the relevant party as “Qilin”.

Background

4 CPIT and Qilin entered into two related agreements dated 16 November 2015 under which CPIT provided 25,000,000 Millennium shares as collateral for a non-recourse loan from Qilin of HK$31,250,000. Those two agreements were a stock secured financing agreement made between CPIT and Qilin (“the Loan Agreement”) and a control agreement made between CPIT, Qilin and Prominence Financials Limited (“the Control Agreement”).

5 The loan was disbursed on 2 December 2015 and CPIT transferred the shares. CPIT contends that Qilin then unlawfully transferred and/or sold and/or disposed of those shares and that, as a result, CPIT terminated the two agreements on 4 January 2016. Qilin contends that it was entitled to deal with the shares as it did and that, in any event, because CPIT failed to cure an event of default, it became the full legal and beneficial owner of the shares with effect from 22 December 2015. The main issue in these proceedings therefore relates to Qilin's entitlement to deal with the shares during the term of the two agreements.

6 These proceedings were commenced in the High Court on 12 January 2016. On the same date CPIT applied for an injunction prohibiting Qilin from disposing of the unsold shares and the proceeds of sale of any shares which had been sold...

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