Sun Electric Pte Ltd and another v Menrva Solutions Pte Ltd and another

• Jurisdiction: Singapore
• Judge: Dedar Singh Gill JC
• Judgment Date: 22 January 2020
• Neutral Citation: [2020] SGHC 18
• Plaintiff Counsel: Koh Swee Yen, Daniel Liu, Andrew Pflug and Eden Li (WongPartnership LLP)
• Docket Number: Suit No 200 of 2016 (Summons Nos 4280 of 2019 and 5557 of 2019)
• Date: 22 January 2020
• Hearing Date: 22 October 2019,16 September 2019,05 December 2019,24 September 2019,17 December 2019,12 September 2019
• Subject Matter: Disclosure orders,Civil Procedure,Mareva injunctions
• Year: 2020
• Defendant Counsel: Jennifer Sia Pei Ru Mrs Jennifer Nicolau, Rezvana Fairouse d/o Mazhardeen and Ng Lip Chih (NLC Law Asia LLC)
• Court: High Court (Singapore)
• Citation: [2020] SGHC 18
• Published date: 30 January 2020

Dedar Singh Gill JC:

This was an application by Menrva Solutions Pte Ltd (“Menrva”) and Mr Chan Lap Fung Bernard (“Mr Chan”) (collectively, “the applicants”) who sought, among other things, a Mareva injunction against Sun Electric Power Pte Ltd (“SEPPL”), Sun Electric Pte Ltd (“SEPL”), Sun Electric (Singapore) Pte Ltd (“SESPL”), Sun Electric Energy Assets Pte Ltd (“SEEAPL”), Sun Electric Digital Stream Ltd (“SEDSL”) and Mr Matthew Peloso (“Mr Peloso”) (collectively, “the respondents”), as well as various ancillary disclosure orders against the same parties.¹ The applicants had found out about the impending sale of a majority stake in SEEAPL to an as-yet unidentified foreign investor and believed this to be a potential act of dissipation.

This matter was heard over four separate hearings. At the final hearing on 22 October 2019, I granted the applicants the disclosure orders (“the Disclosure Orders”). I now give my grounds of decision. The grounds primarily concern disclosure orders that are granted ancillary to a Mareva injunction. I also set out my reasons for dismissing the respondents’ application for leave to appeal and a stay of execution of the Disclosure Orders.

Facts The parties

SEPL, SEPPL, SEEAPL, SEDSL and SESPL are part of the Sun Electric Group (“the SE Group”).² These companies engage in, inter alia, business development, marketing for rooftop solar systems and supplies of clean electrical power. SEPPL was incorporated on 17 September 2013.³ Both SEPL and SEEAPL were incorporated in 2014.⁴ In 2015, SESPL was founded as SEPL’s subsidiary.⁵ The last corporate entity, SEDSL, is a company incorporated in the British Virgin Islands (“BVI”).⁶ SEDSL was the only entity unrepresented in the present proceedings.

Mr Peloso is the founder of the SE Group.⁷ At the time of the dispute, he was the sole director of SEPL, SESPL, SEPPL, and SEEAPL.⁸

The underlying claim

Both SEPL and SEPPL were the plaintiffs in Suit No 200 of 2016. This suit involved a claim against the applicants for breach of a consultancy agreement (“the consultancy agreement”) and breach of various duties of care.⁹ Menrva, one of the two defendants in Suit 200 of 2016, counterclaimed against SEPL for fees owed under the consultancy agreement. Vinodh Coomaraswamy J’s decision is reported in Sun Electric Pte Ltd and another v Menrva Solutions Pte Ltd and another [2018] SGHC 264 (“the liability judgment”).¹⁰

The facts giving rise to the underlying claims and counterclaim in Suit 200 of 2016 have been set out extensively at [1]–[26] of the liability judgment. I will not repeat them here. It suffices to note that the Energy Market Authority of Singapore (“EMA”) had established the Enhanced Forward Sales Contract Scheme (“the Scheme”) to facilitate participation in Singapore’s electric futures market. SEPL was accepted as a participant in the Scheme.¹¹ SEPL later engaged Menrva as a consultant pursuant to the consultancy agreement.

Under the consultancy agreement, Menrva was obliged to provide Mr Chan’s services to SEPL (liability judgment at [1]). Two of the legal issues were (a) whether Menrva had breached the consultancy agreement and (b) whether SEPL was contractually liable to pay Menrva certain fees under the same agreement (liability judgment at [27]). Coomaraswamy J held largely in favour of the defendants to the claim, who are also the applicants in the present case. He held for Menrva in the counterclaim, leaving damages to be assessed (at [153] and [154]).

SEPL and SEPPL appealed against the liability judgment. This is reported in Sun Electric Pte Ltd and another v Menrva Solutions Pte Ltd and another [2019] SGCA 51. The appeal was dismissed with SEPL and SEPPL ordered to pay costs in the sum of S$45,000. Meanwhile, the parties proceeded with the assessment of damages for Menrva’s counterclaim.¹² The hearing of oral closing submissions was fixed on 30 September 2019.¹³ Menrva had quantified its counterclaim at S$1,495,452.53 and interest at S$262,489.20. Both applicants also filed a Bill of Costs against SEPL and demanded costs amounting to S$622,771.81.¹⁴ However, these sums were disputed by SEPL and SEPPL.

Although the respondents have not sought leave to appeal against my decision to grant the applicants the Mareva injunction on 24 September 2019, I set out the matters that transpired during all four hearings. These also encompass my reasons for granting the Mareva injunction.

Judicial Management proceedings

It must be highlighted that one of the respondents, SEPPL, the second plaintiff in the suit, had become the subject of judicial management proceedings (“JM proceedings”) (see Originating Summon 1060 of 2019).¹⁵ This was made known to the applicants on 21 August 2019 through the disclosure of Mr Peloso’s affidavit in support of the JM proceedings.¹⁶ Mr Peloso applied for SEPPL to be placed under judicial management on two grounds. First, that SEPPL was unable to pay its debts. Second, that the interests of SEPPL’s shareholders would be better served through the winding down of its operations.

Based on Mr Peloso’s affidavit, SEPPL’s issued share capital was S$45,605,994. As of the date of Mr Peloso’s affidavit, SEPPL’s cash on hand amounted to a meagre $93,599.64. In his affidavit, Mr Peloso claimed that SEPPL’s major creditors were SESPL and SEPL, various customers of SEPPL, Wong Partnership LLP, and an entity known as Kashish.¹⁷ Kashish was listed as SEPPL’s largest creditor with an outstanding debt of S$927,594.61. The role of Kashish in the present proceedings was significant and I will explain the relevance of this in greater detail below. As of the date of the final hearing on 22 October 2019, judicial managers had not yet been appointed.¹⁸ The applicants had stressed that judicial management applications (“JM applications”) were not always successful and that in the meantime, SEPPL should be restrained from dissipating its assets.¹⁹

The 12 September hearing

Before the 12 September 2019 hearing, Andrew Ang SJ had granted a Mareva injunction and various disclosure orders on 30 August 2019 on an ex parte basis. On 4 September 2019, Tan Lee Meng SJ ordered that compliance with the disclosure orders be put on hold until the disposal of the inter partes hearing.

At the inter partes hearing on 12 September 2019, the applicants sought, inter alia, the following orders:²⁰ an order restraining the respondents from disposing of their assets in Singapore and any jurisdiction outside Singapore up to the value of S$2,512,817.80; further and in the alternative, an order restraining SEPPL from disposing of its assets in Singapore and any jurisdiction outside Singapore up to the value of S$709,263.81; and various ancillary disclosure orders.

On the basis of the evidence before me, I was inclined to grant both the Mareva injunction and Disclosure Orders at the first hearing on 12 September 2019. However, for reasons which will be made clear, both the Mareva injunction and the Disclosure Orders were not granted that day but only at the subsequent hearings held on 24 September 2019 and 22 October 2019.

To obtain Mareva relief against a party to the suit, a plaintiff must establish a good arguable case on the merits and a real risk that the defendant will dissipate its assets to frustrate the enforcement of an anticipated judgment of the court (Bouvier, Yves Charles Edgar and another v Accent Delight International Ltd and another and another appeal [2015] 5 SLR 558 (“Bouvier”) at [36]). The issue of there being a “good arguable case” did not arise because the plaintiff in the counterclaim, Menrva, had successfully established its counterclaim against SEPL, with judgment having been entered.

In an application for a Mareva injunction against a third party to the suit, the applicant must show a “good arguable” case that a third party is holding assets that belong to the defendant (Teo Siew Har v Lee Kuan Yew [1999] 3 SLR(R) 410 (“Teo Siew Har”) at [19]). The Court of Appeal (“CA”) in Bouvier affirmed the court’s jurisdiction to include in a Mareva court order assets belonging to a third party on the basis that the assets are “in truth the assets of the defendant” (at [124]). I was mindful that the respondents, save for SEPL and SEPPL, were third parties in Suit No 200 of 2016. I was equally cognisant that each respondent was a separate legal personality. In arriving at my decision to grant Mareva relief against the respondents, I did not rely on the single economic entity doctrine, which has been rejected by the CA in Goh Chan Peng and others v Beyonics Technology Ltd and another and another appeal [2017] 2 SLR 592 at [70]–[75].

Applying the test in Teo Siew Har, I was of the view that the assets of the third parties were, on a good arguable standard, the assets of the defendant in the counterclaim, SEPL. It is not necessary for me to elaborate further as the respondents did not seek leave to appeal against this point (see [9] above).

The parties’ main point of contention at the four hearings was the existence of a “real risk” of asset dissipation.

The evidence cited by the applicants included the following matters, which I accepted as showing a “real risk” of dissipation. First, there appeared to have been a breach of an existing Order of Court, ie, an interim injunction obtained by RCMA Asia Pte Ltd (“RCMA”) against SEPPL (“the RCMA Injunction”, explained further at [21] below), through SEPPL’s withdrawal or transfer of large sums of money out of a bank account it held. Second, SEPL had sold several of its patents for a sum of S$80,000. SEPL was then made the exclusive licensee of those patents. The terms of the licenses were not shown to court. Third, there was a large depletion of assets from SEPPL, the company that is now the subject of JM proceedings, to the tune of $16.8 million.

The RCMA Injunction

As part of the same Scheme established by the...