Milaha Explorer Pte Ltd v Pengrui Leasing (Tianjin) Company Ltd
Jurisdiction | Singapore |
Judge | Judith Prakash JCA,Tay Yong Kwang JCA |
Judgment Date | 20 February 2023 |
Docket Number | Civil Appeal No 2 of 2022 |
Court | Court of Appeal (Singapore) |
[2023] SGCA 6
Judith Prakash JCA and Tay Yong Kwang JCA
Civil Appeal No 2 of 2022
Court of Appeal
Civil Procedure — Mareva injunctions — Allegations of dishonesty — Appellant alleging respondent acted dishonestly in concealing material facts relating to asset — Whether allegation of dishonesty had real and material bearing on risk of dissipation
Civil Procedure — Mareva injunctions — Appellant commencing arbitration against respondent for breach of contract — Respondent was foreign special purpose vehicle owning sole asset — Ultimate parent company of respondent was foreign publicly listed company — Whether corporate structure supported real risk of dissipation of assets — Whether foreign origin of company supported existence of real risk of dissipation
Civil Procedure — Mareva injunctions — Original transaction between appellant and respondent contemplating sale of asset — Respondent giving notice to appellant that it would exercise contractual right to sell asset — Respondent had not sold asset at time of application for injunction — Respondent was special purpose vehicle owning sole asset — Whether risk of unjustified dealings with assets — Whether potential sale of asset would be carried out to avoid consequences of lawsuit
Held, allowing the appeal:
(1) The test for establishing a real risk of dissipation of assets by the defendant was whether, objectively assessed, a judgment might not be satisfied because of a risk of unjustified dealings with assets by that defendant. This inquiry would turn on whether there were circumstances suggesting that the defendant not only could but likely would frustrate the judgment, thereby defeating in whole or in part any judgment or order which the plaintiff might thereafter obtain against the defendant: at [23] and [29].
(2) There had to be “solid evidence” to demonstrate a real risk of dissipation of assets, and not merely bare assertions of fact: at [23].
(3) Dealing with assets in and of itself would be insufficient to show a real risk of dissipation; the dealing with the assets had to be unjustified. A dealing with assets would not be unjustified if it was for legitimate commercial reasons: at [32].
(4) The mere fact that a defendant held its assets through offshore structures or by way of special purpose vehicles would not in itself be evidence of a risk of dissipation: at [25].
(5) The foreign origin or foreign connection of a company/person would be a relevant factor, but could not conclusively lead to a finding of a real risk of dissipation of assets: at [30].
(6) Any allegation of dishonesty on the defendant's conduct had to have a real and material bearing on the risk of dissipation: at [36].
(7) In deciding whether to grant a Mareva injunction, the court should balance the effects of the Mareva injunction on the respondent against the potential prejudice or loss that would be caused to the applicant: at [38].
(8) The court found that Milaha's corporate structure did not, in itself, support the finding of a real risk of dissipation of assets. The mere fact that a defendant held its assets through offshore structures or by way of special purpose vehicles was not in itself evidence of a risk of dissipation. Milaha's corporate structure could be explained by the purpose of its incorporation, which was to ringfence risks and liabilities arising from owning and operating vessels. This corporate structure had to have been known to Pengrui when the MOA was concluded; Pengrui had to therefore be taken to have accepted the associated risks. That monies from any subsequent sale of the Vessel might be used to pay Milaha's other creditors or Qatari Navigation did not mean that there was impropriety; such payments could be for legitimate commercial purposes: at [25] to [28].
(9) The court also found that there was no unjustified dealing with assets by Milaha. In the 12 August 2021 Letter, Milaha was merely stating the consequence of Pengrui's alleged breach of contract. Further, as recently as the date of the hearing of the appeal, the Vessel had not been sold and Milaha had not entered into any contract for the sale of the Vessel. Even if the Vessel was eventually sold, there could be various legitimate commercial reasons for the sale. In this connection, the court observed that the sale of the Vessel to another commercial party would simply be a continuation of what Milaha had set out to do in the first place, and was in fact a contractual right that Milaha was entitled to exercise under the buyer's default clause. Ultimately, the court found that Pengrui did not discharge its burden of showing “solid evidence” of a real risk of dissipation: at [33] and [34].
(10) The court agreed with the Judge that Pengrui's allegations of dishonesty on Milaha's part should be disregarded. There was no real and material bearing between the alleged dishonesty and the risk of dissipation. In any case, such allegations were hotly contested and did not assist Pengrui in advancing its arguments: at [36] and [37].
[Observation: To grant Pengrui the Mareva injunction against Milaha would be to prevent Milaha from conducting its entire business in its best interests, given that Milaha had only a single asset, ie, the Vessel: at [38].
It was not the purpose of a Mareva injunction to provide security to a litigant or to guard against potential insolvency of the counterparty. There was therefore no basis on which to accept Pengrui's suggestion that Milaha should set aside a sum of money as security or pay that sum into escrow or into court: at [29] and [39].]
Bouvier, Yves Charles Edgar v Accent Delight International Ltd [2015] 5 SLR 558 (folld)
Customs and Excise Commissioners v Barclays Bank plc [2007] 1 AC 181 (refd)
Guan Chong Cocoa Manufacturer Sdn Bhd v Pratiwi Shipping SA [2003] 1 SLR(R) 157; [2003] 1 SLR 157 (distd)
Holyoake v Candy [2018] Ch 297 (folld)
JTrust Asia Pte Ltd v Group Lease Holdings Pte Ltd [2018] 2 SLR 159 (folld)
Lee Shieh-Peen Clement v Ho Chin Nguang [2010] 4 SLR 801 (folld)
Milaha Explorer Pte Ltd v Pengrui Leasing (Tianjin) Co Ltd [2022] 1 SLR 1147 (refd)
Tribune Investment Trust Inc v Dalzavod Joint Stock Co [1997] 3 SLR(R) 813; [1998] 1 SLR 1003 (refd)
Milaha Explorer Pte Ltd (“Milaha”) was a company incorporated in Singapore for the purpose of owning its sole asset, a vessel called the “Milaha Explorer” (the “Vessel”). Milaha's ultimate beneficial owner was Qatari Navigation QPSC (“Qatari Navigation”), a public company listed on the Qatar stock exchange.
Milaha and Pengrui Leasing (Tianjin) Co Ltd (“Pengrui”) entered into a memorandum of agreement (“MOA”) for the sale of the Vessel from Milaha to Pengrui. Shortly thereafter, a dispute over the MOA arose. Milaha alleged that Pengrui was in repudiatory breach of the MOA, and gave notice to Pengrui in a letter dated 12 August 2021 (the “12 August 2021 Letter”) that it was cancelling the MOA and exercising its contractual right under clause 13 of the MOA to sell the Vessel (the “buyer's default clause”). Pengrui disputed Milaha's invocation of the buyer's default clause and commenced arbitration proceedings in London pursuant to the arbitration clause in the MOA.
On 20 August 2021, Pengrui filed an ex parte application seeking a Mareva injunction against Milaha in aid of the London arbitration. The injunction was granted by the judge of the General Division of the High Court (the “Judge”), who dismissed Milaha's subsequent application to set aside the injunction. The injunction prohibited Milaha from dealing with its assets, including the Vessel, up to a value of US$23,760,473. The Judge found that there was a real risk that Milaha would dissipate its assets given its express intention of selling the Vessel to other buyers as stated in the 12 August 2021 Letter. The Judge, however, found that Pengrui's allegations of dishonesty on Milaha's part in that it allegedly concealed material facts relating to the Vessel should be disregarded.
Dissatisfied with the decision, Milaha appealed. The sole question before the court was whether the Judge was correct in finding that there was a real risk of dissipation of assets on Milaha's part.
Harpreet Singh Nehal SC, Jordan Tan, Victor Leong (Audent Chambers LLC) (instructed), Edgar Chin Ren Howe, Ch'ng Cheng Yi Samantha, and Teo Jim Yang (Ascendant Legal LLC) for the appellant;
Goh Kok Leong (Ang & Partners) for the respondent;
Shawn Lim Zi Xuan (Oon & Bazul LLP) for OHT Osprey AS (watching brief).
20 February 2023
Judith Prakash JCA (delivering the grounds of decision of the court):
1 The present appeal arises from the decision of the judge below (the “Judge”) in Pengrui Leasing (Tianjin) Co Ltd v Milaha Explorer Pte Ltd[2022] SGHC 80 (the “Judgment”) granting a Mareva injunction over the assets of the appellant.
2 On 7 September 2022, we heard and allowed the appeal and set aside the Mareva injunction granted by the Judge. These are the detailed grounds of our decision.
3 On appeal, the parties only disputed a single issue, that is, whether there was a real risk of dissipation of assets by the appellant (see below at [22]). We therefore set out only the facts that are relevant to this issue. The complete facts are set out in the Judgment.
4 The appellant, Milaha Explorer Pte Ltd (“Milaha”), is a Singapore-incorporated company. It is a special purpose vehicle incorporated for the purpose of owning its sole asset, a vessel called the “Milaha Explorer” (the “Vessel”). Milaha has a paid-up capital of S$50,000 and is fully owned by a company called Milaha Offshore Holding Company Pte Ltd (“Milaha Offshore”), which is in turn fully owned by Milaha Offshore Support...
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