Solvadis Commodity Chemicals Gmb H v Affert Resources Pte Ltd

JurisdictionSingapore
Judgment Date23 October 2013
Date23 October 2013
Docket NumberOriginating Summons No 681 of 2013 (Summons No 4122 of 2013)
CourtHigh Court (Singapore)
Solvadis Commodity Chemicals Gmb H
Plaintiff
and
Affert Resources Pte Ltd
Defendant

Andrew Ang J

Originating Summons No 681 of 2013 (Summons No 4122 of 2013)

High Court

Civil Procedure—Mareva injunctions—Inter partes application to discharge ex parte injunction—Trading company failing to provide letter of credit as contractually agreed—Trading company failing to provide alternative security as agreed—Trading company failing to pay for cargo—Whether there was real risk of dissipation of assets—Whether there was failure to disclose material facts at ex parte hearing

Affert Resources Pte Ltd (‘the Defendant’) applied in Summons No 4122 of 2013 (SUM 4122/2013) to set aside a worldwide Mareva injunction ordered in Originating Summons No 681 of 2013 (‘OS 681/2013’) against its assets. Solvadis Commodity Chemicals Gmb H (‘the Plaintiff’) was a German company engaged in the business of exporting sulphur while the Defendant was a Singapore exempt private company engaged in the manufacture of and trade in fertilisers and mineral ores. Under a solid sulphur agreement, the Plaintiff agreed to sell and deliver up to an aggregate of 100 mt of solid sulphur to the Defendant (‘the Contract’). Pursuant thereto, the Defendant placed an order to purchase 26.43 mt of solid sulphur (‘the Cargo’) from the Plaintiff at the price of US$5,761,740 (‘the Purchase Price’). Under the Contract, payment for the Cargo was to be made under an irrevocable and confirmed letter of credit which had to be in perfect order at least five clear working days before the first day of the mutually agreed laycan.

Before shipment, samples of the Cargo were drawn by an independent surveyor at the port of loading in Gda?sk, Poland as required under the Contract. Subsequent analysis of a sample by an independent laboratory showed that the Cargo met the specifications stipulated under the Contract. Prior to this shipment of sulphur, 24 other trades worth approximately US$40 m had been made between the parties.

In breach of the Contract, the Defendant failed to furnish a letter of credit for the purchase of the Cargo despite repeated reminders by the Plaintiff. One day before the Cargo arrived in Senegal on 19 September 2012, the Defendant requested for a last minute waiver because its credit lines were exhausted. The Defendant asked the Plaintiff to grant it the option of paying for the Cargo with a bill of exchange. The Plaintiff replied suggesting that the Defendant could ‘avalise’ the bill of exchange through the Defendant's bank. This suggestion was accepted by the Defendant. After certain amendments were made to the draft bill of exchange, the Plaintiff gave instructions to discharge the Cargo.

On 8 October 2012, the Defendant's bank informed the Plaintiff that they were unable to ‘avalise’ the bill of exchange. Subsequently on 9 and 10 October 2012, the Plaintiff was assured that payment would be made for the Cargo. Despite these assurances, payment for the Cargo was never made by the Defendant. On 18 October 2012, the Defendant by its e-mail alleged that the Cargo supplied by the Plaintiff was of an inferior quality which caused damage to its factory as well as production losses (‘the Defendant's Claim’).

On 7 December 2012, the Defendant demanded compensation of US$14.97 m for the damage and losses caused by the Cargo. This amount was subsequently revised to US$22.4 m. Attempts by the parties to settle the dispute proved unsuccessful and the Plaintiff commenced arbitration to recover the sums owed to it under the Contract. In order to prevent dissipation of the Defendant's assets pending arbitration of the dispute, the Plaintiff applied for a Mareva injunction in OS 681/2013. This application was granted on 2 August 2013 and the Defendant brought the present application in SUM 4122/2013 praying for a discharge of the Mareva injunction.

Held, dismissing the application:

(1) Section 12 A of the International Arbitration Act (Cap 143 A, 2002 Rev Ed) (‘the IAA’) empowered the High Court to grant interim measures in aid of arbitration. This included the power to grant a Mareva injunction. On the facts, the requirements of appropriateness (s 12 A (3) of the IAA), urgency (s 12 A (4) of the IAA) and the inability of the arbitral tribunal to act effectively for the time being (s 12 A (6) of the IAA) were satisfied: at [14] and [15] .

(2) To obtain a Mareva injunction, an applicant had to show that it has a good arguable case and that there was a real risk of dissipation of assets. There had to be solid evidence to substantiate the alleged risk, which might consist of direct evidence that the defendant had previously acted in a way which showed that its probity was not to be relied on: at [16] .

(3) An applicant for an ex parte interlocutory injunction had a duty to make full and frank disclosure. If an applicant failed to disclose a material fact, the court had a discretion to discharge the interlocutory injunction without looking into the merits, continue the ex parte injunction or issue a fresh injunction: at [18] .

(4) The Defendant's seeming lack of commercial morality on the facts lent credence to the Plaintiff's contention that there was a real risk of dissipation of assets. Also, the series of events that transpired in this case strongly suggested that the Defendant had no real intention to pay for the Cargo: at [23] .

(5) It was not unreasonable for the Plaintiff to ask for an alternative way to secure payment for the Cargo rather than to accept without question the Defendant's word that the latter's credit lines had been exhausted. Per contra, it was disingenuous on the part of the Defendant to agree to ‘avalisation’ when it knew its credit lines were exhausted: at [26] .

(6) Whether the suggestion to ‘avalise’ originated from the Plaintiff was not material. Of much greater significance was that the Defendant agreed to ‘avalisation’ when it knew or ought to have known that there was no prospect of its bankers agreeing to ‘avalise’ the bill of exchange and that it was in reliance upon its agreement so to do that the Plaintiff released the Cargo: at [28] .

(7) The Defendant's Claim was obviously lacking in merit. The Defendant's 18 October 2012 e-mail was sent almost a month after discharge of the Cargo when, by the terms of the Contract, the claim had to be lodged with the Plaintiff immediately after discovery of the non-conformity but, in any event, not later than 15 days after completion of discharge of the Cargo. This unexplained lateness of the claim raised doubts as to its veracity. Further, if there were indeed any merit in the Defendant's Claim, it would not have offered to pay 60% of the Purchase Price to settle the dispute with the Plaintiff. Given that the quantum of the Defendant's Claim (viz, US$22.4 m) was almost four times the Plaintiff's claim for the Purchase Price of US$5.7 m, it was surprising that the Defendant would have offered to pay anything at all if its claim was genuine: at [29] and [30] .

(8) Moreover, the Defendant's Claim as to the inferior quality of the solid sulphur was not substantiated by any cogent evidence. The only evidence given by the Defendant was an internal laboratory report generated by the Defendant's consignee (‘the Defendant's report’) and little weight could be accorded to it. There was cogent evidence in the form of an independent report establishing that the Cargo met the specifications in the Contract. This report was final and binding on the parties under the Contract. Also, the Defendant admitted that its consignee had blended the Cargo with sulphur from other sources. This admission belied the reliability of the findings in the Defendant's report based on an analysis of blended sulphur samples (and not samples of the Cargo): at [31] and [32] .

(9) The failure to disclose the Defendant's offer of ‘security’ (viz,an inchoate offer of a future trade involving phosphoric acid) was not a material fact and would not have affected the decision to grant the Mareva injunction in OS 681/2013 in the least: at [37] .

(10) The failure to mention the Plaintiff as the party who suggested ‘avalisation’ was not material and there was no intention on the part of the Plaintiff to mislead the court in the ex parte application. In any case, not every suggestion of inaccuracy would necessarily result in the discharge of an injunction; a locus poenitentiae might sometimes be afforded: at [38] and [39] .

Brink's-MAT Ltd v Elcombe [1988] 1 WLR 1350; [1988] 3 All ER 188 (folld)

Guan Chong Cocoa Manufacturer Sdn Bhd v Pratiwi Shipping SA [2003] 1 SLR (R) 157; [2003] 1 SLR 157 (folld)

Gulf Interstate Oil Corp LLC v Ant Trade & Transport Ltd of Malta (The Giovanna) [1999] 1 Lloyd's Rep 867 (distd)

Maldives Airports Co Ltd v GMR Malé International Airport Pte Ltd [2013] 2 SLR 449 (folld)

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1 books & journal articles
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    • Singapore
    • Singapore Academy of Law Annual Review No. 2014, December 2014
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