European Grain & Shipping Ltd v Compania Naviera Euro-Asia SA

• Jurisdiction: Singapore
• Judge: Chan Sek Keong J
• Judgment Date: 21 October 1989
• Neutral Citation: [1989] SGHC 93
• Docket Number: Admiralty In Personam No 389 of
• Date: 21 October 1989
• Published date: 19 September 2003
• Year: 1989
• Plaintiff Counsel: Christopher Lau (Allen & Gledhill)
• Citation: [1989] SGHC 93
• Defendant Counsel: Jude Benny (Joseph Tan Jude Benny & Co),Lawrence Boo (Haridass Ho & Partners)
• Court: High Court (Singapore)
• Subject Matter: Mareva injunction,Whether real risk of assets being dissipated pending trial or further award,Abuse of process of Mareva injunction,Injunctions,Plaintiffs' motive in applying for injunction,Civil Procedure

At the conclusion of the hearing of the application by the plaintiffs for the continuation of a Mareva injunction obtained by them against the first defendant (CNEA) and an application by the interveners to vary the terms of the injunction, I varied the injunction in terms of the interveners` application and, after reserving judgment for a short period, I discharged it altogether. The plaintiffs have appealed against both decisions. I now give my reasons.

On 5 November 1987, the plaintiffs issued an admiralty in personam writ against CNEA indorsed with a claim for: (1) damages for breach of charterparty; (2) loss and damage to the plaintiffs` cargo which was laden on board CNEA`s vessel Salamis during the voyage from Qinhuangdao and Hsinkang to Avonmouth and Liverpool between July and November 1986 sustained by reason of CNEA`s breach of contract or duty or negligence in or about the carriage thereof; and (3) an account of extra freight and/or profits earned by CNEA in chartering out the plaintiffs` space on the said vessel.

On 23 November 1987, the plaintiffs obtained the injunction ex parte restraining CNEA until trial or further order, firstly, from removing its assets from the jurisdiction or disposing of or dealing with the same within the jurisdiction save in so far as such assets exceeded £4650,000 and secondly, from drawing on its accounts in the name of the second defendant (SSC), the third defendant (ESM) and the fourth defendant (RC) at five named banks in Singapore so as to reduce the balance in such accounts to below £650,000.

The application for the injunction was supported by an affidavit sworn on 19 November 1987 by the plaintiffs` claims manager, JF Lester. The material allegations in the said affidavit were as follows:

(a) the plaintiffs chartered under a GENCON charterparty dated 8 July 1986 the entire vessel from CNEA for a voyage `1/2 SB Qinhuangdao completing 1/2 SB Xingang ... ` and `1/2 safe berths each 1/2 safe ports ... West Coast United Kingdom ... ` for a lump sum freight of $497,500 in terms which required the vessel to proceed directly to her destination unless ordered otherwise by the plaintiffs;

(b) the vessel loaded the plaintiffs` cargo of agricultural products at Qinhuangdao and Xingang between 20 July 1986 and 3 August 1986, then proceeded to Hong Kong for bunkering (which was permitted under the charterparty) and thereafter instead of proceeding to her contractual destination, deviated to the ports of Kota Kinabalu and Port Klang in Malaysia to load about 5,353 MT of sawn timber in the vessel`s holds and on deck between 17 August 1986 and 12 September 1986;

(c) the vessel resumed her voyage on 14 September 1986 and on arrival off the west coast of Europe further deviated from her direct route in order to discharge the sawn timber at Rotterdam and Nantes contrary to the plaintiffs` order given on 7 October 1986;

(d) the unlawful deviations set out above resulted in at least four weeks delay in the performance of the charterparty;

(e) heating in hold no 3 was first detected in Kota Kinabalu and again in Port Klang; heating in hold no 3 was detected when the vessel passed Lisbon;

(f) on the vessel`s arrival at Avonmouth on 31 October 1986, the plaintiffs` cargo in hold no 2 was reported to be on fire;

(g) as a result of the delay, claims by on-purchasers totalling £85,000 have been made against the plaintiffs; the plaintiffs` losses arising from deviation and damage to cargo were estimated at £650,000 inclusive of four years` interest and costs;

(h) the plaintiffs have failed to obtain security from CNEA and its underwriters;

(i) CNEA was incorporated in Panama with a capital of US$10,000 as a wholly-owned subsidiary of SSC; CNEA is a company of no substance and is properly to be regarded as a vehicle of SSC and/or ESM (which is an 80% subsidiary of SSC);

(j) there was a real risk of assets being removed before any award in an arbitration (which had been commenced in London on 29 October 1987) or judgment in the matter could be satisfied on the grounds: (1) CNEA`s recent incorporation and domicile in Panama, its small size, its activities as a trading company without any fixed assets and the inaccessibility of its financial records; (2) CNEA`s gross breach of its obligations under the charterparty and its lack of candour in responding to the plaintiff`s demands; (3) the unexplained use of the name of the fourth defendant in three of the bills of lading; (4) as security had been provided by CNEA and SSC to certain claimants against an affiliate company, it would be fair and just for security to be provided to the plaintiffs;

(k) it was likely that CNEA would not have maintained its own separate bank account and that its funds would be maintained in the funds of SSC and/or the group of companies of which the SSC was the holding company (hereinafter called the SSC group).

After the granting of the Mareva injunction, SSC, ESM and RC on 2 December 1987 applied to vary the second part of the injunction on the ground that none of them had any moneys of CNEA in their accounts or otherwise and that the injunction prevented them from operating their accounts in the ordinary course of business. The plaintiffs resisted the application but the court allowed the application thereof.

On 4 December 1987, the plaintiffs made an ex parte application to court for discovery, in aid of the Mareva injunction, of the nature, value and location of all the defendant`s assets within the jurisdiction and also inspection of all documents in its possession relating to the freight of US$475,000 paid by the plaintiffs which went into CNEA`s bank account No 260-234406-001 with the Hongkong and Shanghai Banking Corp (HKSB) and the extra freight earned by CNEA and its books and accounts for 1986 and 1987 including but not limited to paying-in- slips, cheque stubs, bank statements and correspondence between CNEA and its banks relating to any financial dealing of CNEA. An order in terms of the application was made by the court on 8 December 1987.

On 8 December 1987, CNEA entered appearance. On the same day, SSC, ESM and RC also applied for leave to be joined as defendants in the action for the purpose of seeking damages suffered by them by reason of the Mareva injunction.

On the following day, ie 9 December 1987, CNEA applied to court to set aside the order for discovery on the ground that the application should not have been made ex parte as CNEA had earlier appeared by counsel to argue the application for variation of the Mareva injunction. Other grounds of objection were set out in an affidavit affirmed by the solicitor for CNEA to which the solicitor for the plaintiffs replied in her affidavit sworn on 10 December 1987. The order for discovery was stayed pending further hearing.

Then on 17 December 1987, CNEA applied to court for a further variation of the Mareva injunction to permit CNEA to pay the following sums (a) US$31,000 to Mint Shipping Pte Ltd (MS); (b) US$86,800 to CN Jaya SA (CNJ); (c) $10,000 to Haridass Ho & Partners; and (d) £20,000 to Ince & Co. Payments (a) and (b) were for charterhire owing to MS and CNJ from whom CNEA had chartered the vessels `Ikopa` and `Athol`. Payments (c) and (d) were for legal fees and expenses. The plaintiffs again resisted this application but the court sanctioned payments (a) and (c) and adjourned the hearing of the application in respect of (b) and (d), liberty being given to CNEA to file further evidence in support thereof.

The next relevant event was the filing of a notice of motion on 30 July 1988 by CNJ to intervene in this action and for an order that the Mareva injunction be varied by allowing HKSB to pay out of CNEA`s bank account the sum of US$212,000 together with interest and costs of $450, and costs of CNJ`s garnishee proceedings in Suit No 1115 of 1988. This application was also resisted by the plaintiffs at the hearing before me.

It was not disputed by counsel for the defendants that the plaintiffs had crossed the threshold for claiming a Mareva injunction, ie they had a good arguable claim. The only dispute between the parties was whether if the plaintiffs succeeded in the pending arbitraton in London, there was a real risk that...