CPIT Investments Ltd v Qilin World Capital Ltd and another

• Jurisdiction: Singapore
• Judge: Vivian Ramsey IJ
• Judgment Date: 15 September 2016
• Neutral Citation: [2016] SGHC(I) 4
• Plaintiff Counsel: Tan Poh Ling Wendy and Kenneth Chua (Morgan Lewis Stamford LLC)
• Date: 15 September 2016
• Docket Number: Suit No 5 of 2016 (HC/Summons No 2398 of 2016 and HC/Summons No 3128 of 2016)
• Hearing Date: 28 July 2016
• Subject Matter: Judgments and orders,Civil Procedure
• Published date: 21 September 2016
• Defendant Counsel: Renganathan Nandakumar, Vernon Voon and Sharon Chung (RHTLaw Taylor Wessing LLP)
• Citation: [2016] SGHC(I) 4
• Court: International Commercial Court (Singapore)
• Year: 2016

Vivian Ramsey IJ:

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.

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.

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

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”).

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.

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 (Summons No 164 of 2016). On 13 January 2016, CPIT applied for a worldwide Mareva injunction against Qilin up to the total value of HK$31,250,000 (Summons No 170 of 2016).

On 13 January 2016, the court fixed the hearing date for the applications as 15 January 2016, before Kan Ting Chiu J and on 14 January 2016, notice of the hearing date was given to Qilin, together with copies of the applications.

At the hearing at 10:00am on 15 January 2016, Qilin's solicitors, RHT Law Taylor Wessing LLP (“RHT”) sought an adjournment of the hearing for the applications to be dealt with on an inter partes basis. The hearing was adjourned until 5:00pm while Qilin considered whether it would give an undertaking pending the inter partes hearing. In the event, an acceptable undertaking was not offered and the hearing was adjourned to 18 January 2016.

At 10:00am on 18 January 2016, after hearing argument from counsel for CPIT and Qilin, the Court granted the Injunction in the following relevant terms:

UPON THE EX PARTE APPLICATION of [CPIT] by way of HC/Summons No. 164/2016 filed on 12 January 2016, and UPON READING the 1st Affidavit of Chan Kwong Chi Vicky filed on 12 January 2016 and the 1st Affidavit of Lee Kai Ming filed on 14 January 2016 on behalf of the [CPIT], and UPON HEARING Counsel for [CPIT] and Counsel for [Qilin] on a contested ex parte basis on 15 January 2016 and 18 January 2016, and subject to [CPIT’s] undertaking to abide by any order the Court or a Judge may make as to damages in case the Court or a Judge should hereafter be of opinion that [Qilin] shall have sustained any by reason of this order which the Plaintiff ought to pay, it is ordered that:- 1. [Qilin] by themselves their agents or employees or otherwise be restrained, and an injunction is hereby granted retraining [Qilin], whether by themselves, by their agents or servants or howsoever otherwise from transferring, selling, charging, or in any other way disposing of the 25,000,000 shares of [Millennium], a listed company in the Growth Enterprise Market of the Stock Exchange of Hong Kong Limited in Hong Kong. which were originally deposited by [CPIT] into a brokerage account no. C083103 maintained by Prominence Financials Ltd in Hong Kong in [CPIT’s] name on or around 24 November 2015 (the "Pledged Shares") until the trial of or determination of this action or until further order; 2. Where, prior to any order being obtained from this Honourable Court or prior to the same being served or otherwise for any reason whatsoever, any part of the Pledged Shares have been parted with, sold, charged or disposed of, an order is hereby granted restraining [Qilin], whether by themselves, by their agents or servants or howsoever otherwise from parting, transferring or otherwise dealing with any proceeds of the sale (or its equivalent), except according to any order(s) of Court, until the trial of or determination of this action or until further order;… [emphasis in original]

On 27 January 2016 and 11 March 2016, pursuant to the terms of the Injunction, Qilin filed the Affidavits from Cheng Yin Kong in which it was disclosed that Qilin had sold the Millennium shares, except for 2,860,000 shares and that there were proceeds from the sale of the shares of HK$25,3 82,415.78 held in various accounts. As a result, the 2,860,000 shares became the subject of prayer 1 of the Injunction and the proceeds became the subject of prayer 2 of the Injunction.

When the Mareva injunction application came before the court on 18 January 2016 it was adjourned until later in the afternoon for Qilin to consider whether it would offer an acceptable undertaking. As an acceptable undertaking was not then offered, the Court, after hearing argument from counsel for the parties, heard and dismissed the Mareva injunction application. CPIT filed a request for further arguments which was refused. CPIT then filed an application for leave to appeal which was heard on 28 January 2016.

At that hearing on 28 January 2016 RHT indicated that Qilin was prepared to provide security for CPIT’s claim in the sum of HK$31,250,000 and, in light of that proposal, the hearing was adjourned to 5 February 2016. Morgan Lewis Stamford LLC, the solicitors for CPIT (“MLS”) and RHT then exchanged correspondence. This led to an agreement which was recorded in the Consent Order on 12 February 2016 (Summons No 387 of 2016) and the earlier Order in relation to the Mareva injunction application was rescinded.

The relevant terms of the Consent Order are as follows:

UPON THE APPLICATION made by [CPIT] by way of HC/Summons No. 387/2016 coming on for hearing on 28 January 2016, 5 February 2016 and 12 February 2016, AND UPON HEARING Counsel for [CPIT] and Counsel for [Qilin] and UPON THE UNDERTAKING of [CPIT] that, if the Court later finds that [Qilin’s] provision of security pursuant to this Order has caused loss to [Qilin], and decides that [Qilin] should be compensated for that loss, [CPIT] shall comply with any order the Court may make, BY CONSENT:

It is ordered that:

1. Order 1 of the Order of Court of the Honourable Justice Kan Ting Chiu in respect of HC/Summons No. 164/2016 dated 18 January 2016 (“the “Prohibitory Injunction Order”), shall continue to remain in effect

2. Order 2 of the Prohibitory Injunction Order be varied such that [Qilin] shall pay the total sum of HK$25,382,415.78, being the proceeds of sale under the said Order disclosed in the 1st Affidavit of Cheng Yin Kong filed on behalf of [Qilin] on 27 January 2016 currently held in the following accounts (the “Sale Proceeds”), to the client account of [Qilin’s] solicitors [RHT] (OCBC Account No. ***) within 7 days from the date the Consent Order dated 27 January 2016 in Hong Kong proceedings HCMP No. 149/2016 (the “HK Order”) is varied by the Hong Kong Court to give effect to this Order made herein, for the sole purpose of enabling RHT to provide an undertaking to [CPIT] as security for [CPIT’s] claim in the action in the form of the draft letter annexed hereto at Annex A (the “LOU”), such variation to come into effect only upon receipt by [CPIT] of the original LOU issued by RHT within two (2) days from the date of the Order made herein: a. sale proceeds of HK$31,945.68 held in [Qilin’s] account with Haitong International Securities Company Limited in Hong Kong; b. sale proceeds of HK$470.10 held in [Qilin’s] account with RHB Securities Singapore Pte Ltd in Singapore; c. sale proceeds of HK$25,350,000.00 split between [Qilin’s] account with Prominence Financials Limited in Hong Kong and [Qilin’s] account with Hongkong Shanghai Banking Corporation in Hong Kong.

3. [Qilin] pay the further sum of HK$2,149,584.22 to the client account of RHT (OCBC Account No. ***) within 7 days from the date the HK Order is varied by the Hong Kong Court to give effect to this Order made hereon.

4. Within five (5) days of [CPIT’s] receipt of the original LOU issued by RHT, [CPIT] and [Qilin] shall take steps, by consent, to vary paragraph 2 of [Qilin’s] undertaking to the Court in the HK Order to give effect to Order 2 above.

5. To the extent that any part of the Sale Proceeds are not for any reason received in the aforesaid client account of RHT within the time above stated, [CPIT] shall have liberty to apply for restoration of Order 2 of the Prohibitory Injunction Order in its original terms. …

[emphasis in...