Sumifru Singapore Pte Ltd v Felix Santos Ishizuka and others

• Jurisdiction: Singapore
• Judge: Vincent Hoong J
• Judgment Date: 10 January 2020
• Neutral Citation: [2020] SGHC 7
• Date: 10 January 2020
• Docket Number: Suit No 310 of 2018 (Summons No 4746 of 2019)
• Published date: 16 January 2020
• Plaintiff Counsel: Dedi Affandi bin Ahmad and Dharini Ravi (Rajah & Tann Singapore LLP)
• Defendant Counsel: Khoo Ching Shin Shem, Teo Hee Sheng, Christian and Yong Zhixin, Esther (Focus Law Asia LLC)
• Court: High Court (Singapore)
• Hearing Date: 24 September 2019,29 November 2019
• Subject Matter: Civil Procedure,Variation,Mareva injunctions

Vincent Hoong J: Introduction

Mareva injunctions have been described as “nuclear weapons” of civil litigation (Bouvier, Yves Charles Edgar and another v Accent Delight International Ltd and another and another appeal [2015] 5 SLR 558 (“Bouvier, Yves”) at [1]); while they do not act as security for a plaintiff’s claim, they act to circumscribe a defendant’s right to deal with its own property. To alleviate the hardship occasioned on defendants, such injunctions are often paired with standard exceptions, which include a provision permitting the defendant to deal or dispose with its assets in the ordinary and proper course of its business (the “Ordinary Course exception”).

The defendants in the present case were subject to a Mareva injunction and granted the Ordinary Course exception. However, after the defendants had made significant withdrawals by relying on the Ordinary Course exception, the plaintiff took out a summons to restrict their use of the exception. Andrew Ang SJ granted the summons in part. Thereafter, the plaintiff alleged that new facts had surfaced, which justify further variations to the Mareva injunction to prevent the defendants from unscrupulously dissipating assets under the premise of the Ordinary Course exception. The present summons was brought before me, as the trial judge for the pending action, for my consideration.

Background facts

The plaintiff, Sumifru Singapore Pte Ltd, brought an action against the defendants. In the main, it was asserted that the first defendant, Felix Santos Ishizuka had, through the second and third defendants, which were companies under his control, acquired secret profits or commissions in breach of the first defendant’s implied duties of good faith and fidelity or fiduciary duties which he owed to the plaintiff as its employee.¹

Mareva injunction

Prior to the commencement of the trial of the action, the plaintiff applied for, and Lai Siu Chiu SJ granted, a world-wide Mareva injunction against the defendants, prohibiting them from disposing of, dealing with, or diminishing the value of their assets which are in Singapore, up to the value of US$3,180,029.48 (the “Mareva Injunction”).² The Mareva Injunction was subject to the standard exceptions, including permission for the defendants to spend monies on legal expenses and on dealings “in the ordinary and proper course of business” (ie, the Ordinary Course exception). Pursuant to paragraph 4 of the Mareva Injunction, it was stated that:³

This Order does not prohibit the Defendants from dealing with or disposing of any of their assets in the ordinary and proper course of business. The Defendants shall account to the Plaintiff every 4 weeks (every Monday) for the amount of money spent in this regard.

Lai SJ further ordered that the defendants inform the plaintiff of “all their assets whether in or outside Singapore, whether in their own name or not and whether solely or jointly owned, giving the value, location and details of all such assets”.⁴

Pursuant to Lai SJ’s order to disclose, on 22 May 2018, the first defendant deposed, on the second defendant’s behalf, that the sole asset of the second defendant was its Oversea-Chinese Banking Corporation Limited (“OCBC”) Bank Account (the “OCBC Account”), which had a “value” of US$3,733,903.08.⁵

Withdrawals and SUM 3820/2019

Thereafter, from 22 May 2018 to 23 August 2019, the defendants notified the plaintiff that it would be making a range of withdrawals from the OCBC Account, amounting to about US$2.9m:⁶

S/N	Stated purpose	Amount (US$)
1	Rice trade and shipping services	2,389,638.96
2	Travel expenses	93,776.95
3	Salaries	120,450.69
4	Legal fees to Focus Law Asia LLC (“FLA”)	SG$324,119.92 (approx US$235,460.16)
5	Other expenses (Office renovation, annual corporate fees, etc)	69,080.71
	Total withdrawals from OCBC Account from 22 May to 23 August 2019	2,954,831.97

Alarmed by the substantial withdrawals, the plaintiff filed Summons No 3820 of 2019 (“SUM 3820/2019”), for the following orders:⁷ A declaration that the withdrawals were made in breach of the Mareva Injunction. In respect of the withdrawals: that the defendants make full disclosure, within five days, of all documents and correspondence in connection with the withdrawals and the business proceeds (if any) relating to the withdrawals; and for the defendants to restore the assets dissipated by making payment into the second defendant’s OCBC Account and all business proceeds (if any) relating to the withdrawals made from the OCBC Account. That the Ordinary Course exception in the Mareva Injunction (see [4] above) be amended such that it provided:

This Order does not prohibit the 1st and 3rd Defendants from dealing with or disposing of any of their assets in the ordinary and proper course of business. The 1st and 3rd Defendants shall account to the Plaintiff every 4 weeks (every Monday) for the amount of money spent in this regard.

In respect of the 2nd Defendant, prior to every intended withdrawal in the ordinary and proper course of business, the 2nd Defendant shall provide the Plaintiff's solicitors 3 clear working days' advance notice of the 2nd Defendant's intention to make such withdrawal (including the bank account from which such withdrawal is to be made), together with the reason(s) why such withdrawal is in the ordinary and proper course of business and documents in support thereof …. Provided the Plaintiff has not objected to such withdrawal within 3 clear working days of receipt of the Notice, the 2nd Defendant may make such withdrawal in the ordinary and proper course of business.

In essence, the plaintiff sought, by way of SUM 3820/2019, to police any further withdrawals by the defendants from the OCBC Account, and to ensure that any business proceeds relating to the withdrawals would be channelled back to the OCBC Account.

In response, the first defendant filed an affidavit on behalf of the defendants, asserting that the withdrawals were to make payments “in the ordinary and proper course of business”.⁸ According to the first defendant, after the plaintiff stopped working with the second defendant to provide shipping between the Philippines and the Middle East in or around March 2018, he turned his attention to other shipping routes for which the second defendant could provide a service.⁹ This eventually led him to run a shipping service on the “BIMP route” (Brunei, Indonesia, Malaysia, and the Philippines),¹⁰ which involved the delivery of cargo to the Philippines.¹¹ To minimise any risk of losses from the BIMP route, and to allow the second defendant to reap a profit from the route, the first defendant sought a “backbone cargo” for the BIMP route.¹² Having conducted his research, the first defendant concluded that rice would be the “backbone cargo”, as it is heavily consumed in the Philippines and as the cheaper alternatives existed outside the Filipino market.¹³

As a result, the first defendant and his colleague travelled around Southeast Asia to identify suitable rice brokers and suppliers for the Filipino market, and eventually decided on Xaris International Shipping & Trading Limited (“Xaris”), a rice broker based in Labuan, Malaysia.¹⁴ Pursuant to their agreement with Xaris, the second defendant purchased 4,000 Metric Tonnes (“MT”) of rice from various suppliers, at the price of US$1,418,500. Furthermore, a commission fee of US$50 per MT of rice was payable to Xaris, as the broker of the rice.¹⁵

In the circumstances, the defendants’ case in resisting the variations sought in SUM 3820/2019 was that the second defendant had engaged in the rice trade with the expectation that it would generate revenue, and further that it would form the backbone cargo of its BIMP shipping service. These payments and transfers were thus duly made in the proper and ordinary course of the second defendant’s business.¹⁶

After hearing parties, Ang SJ declined to make a declaration that the withdrawals were made in breach of the Mareva Injunction. Nonetheless, he ordered the defendants to make full disclosure, within five days, of all documents and correspondence in connection with the withdrawals and business proceeds relating to the withdrawals (“the Disclosure order”). The defendants were further ordered to pay all business proceeds relating to the withdrawals back to the OCBC Account (“the Repayment order”).¹⁷

The Ordinary Course exception was also amended, albeit not to the extent sought by the plaintiff. Under the new Ordinary Course exception, apart from the first and third defendants being required to account to the plaintiff every four weeks for the amount of money that they spent in the ordinary and proper course of business, additional duties were imposed on the second defendant (“the Notice obligation”):

… prior to every intended withdrawal in the ordinary and proper course of business, the [second defendant] shall provide the [p]laintiff’s solicitors 3 clear working days’ advance notice of the [second defendant’s] intention to make such withdrawal …, together with the reason(s) why such withdrawal is in the ordinary and proper course of business and documents in support thereof [(collectively, the “Notice”)].

Hence, while the second defendant was required to provide the Notice of its future intended withdrawals, such withdrawals would not be contingent on the plaintiff’s non-objection, contrary to the broader order which the plaintiff had sought (see [8(c)] above). Instead, should the plaintiff wish to object to future withdrawals by the second defendant, the former would have to apply to court for an order to restrain any such withdrawals after the Notice was given.¹⁸

The present application

According to the plaintiff, since the making of the orders in SUM 3820/2019, new information has come to light. It...