Swift-Fortune Ltd v Magnifica Marine SA

• Judge: Judith Prakash J
• Judgment Date: 01 March 2006
• Neutral Citation: [2006] SGHC 36
• Citation: [2006] SGHC 36
• Defendant Counsel: S Mohan and Bernard Yee (Gurbani and Co)
• Published date: 02 March 2006
• Plaintiff Counsel: Toh Kian Sing and Ian Teo (Rajah and Tann)
• Date: 01 March 2006
• Docket Number: Originating Summons No 261 of 2005
• Court: High Court (Singapore)
• Subject Matter: Order 11 r 1, O 69A r 3, O 69A r 4 Rules of Court (Cap 322, R 5, 2004 Rev Ed),Civil Procedure,Mareva injunctions,Application for leave to serve out of jurisdiction originating summons taken out under International Arbitration Act,Service,Section 12(7) International Arbitration Act (Cap 143A, 2002 Rev Ed),Requirements to be satisfied under Rules of Court,Whether court having jurisdiction to issue Mareva injunction over Singapore assets of foreigner in support of foreign arbitration

1 March 2006 Judgment reserved.

Judith Prakash J:

Introduction

1 This is an application to set aside the originating process by which these proceedings were commenced and the order of court granting leave to serve the same out of the jurisdiction as well as for a discharge of the Mareva injunction granted against the defendant. I was the judge who, on 8 March 2005, made the orders that the defendant now contests.

Background

2 The defendant is Magnifica Marine SA, a Panamanian company. At all material times, it owned one ship, a Panamanian-flagged vessel called Capaz Duckling (“the vessel”). On 31 August 2004, the defendant entered into a memorandum of agreement (“MOA”) with the plaintiff herein, Swift-Fortune Ltd, a Liberian company, whereby it agreed to sell the vessel to the plaintiff for US$9.5m.

3 The payment terms set out in the MOA required the plaintiff to place a 20% deposit (US$1.9m) with Den Norske Bank ASA (“DnB Bank”) in Singapore and for DnB Bank to hold the deposit in the joint names of the plaintiff and the defendant and release it only in accordance with joint written instructions from both parties. Neither party acting alone could, therefore, deal with that money. Under cl 3 of the MOA, the purchase price was to be paid in full to the US-dollar client account of M/s Clyde & Co (“Clyde & Co”), solicitors, at Standard Chartered Bank, Battery Road. Payment was to be made on delivery of the vessel but no later than three banking days after the vessel was in every aspect physically ready for delivery.

4 As the purchase money was to be held and transferred over in Singapore, legal completion of the sale, which encompassed the transfer of title and other documents against the payment of the balance of the purchase price, was to take place in Singapore at the offices of DnB Bank. Physical delivery of the vessel was, however, to be given to the plaintiff at a safe port in China at the time when legal completion occurred in Singapore.

5 The MOA provided that it was to be governed by and construed in accordance with English law and that any dispute arising out of it would be referred to arbitration in London.

6 It was agreed under the MOA that the defendant would deliver the vessel by 6 December 2004. Clause 14 of the MOA provided that if the defendant failed to complete the legal transfer of the vessel by that date, the plaintiff had the right to cancel the MOA. The clause further provided that whether or not the plaintiff cancelled the MOA, the defendant had to make compensation to the plaintiff if the failure to deliver the vessel on or before 6 December 2004 was due to the proven negligence of the defendant.

7 The vessel was not delivered by 6 December 2004 and the delivery date was subsequently extended four times at the request of the defendant. The plaintiff acceded to all these extensions on the basis that such agreement was without prejudice to the plaintiff’s rights to make claims for compensation for late delivery of the vessel pursuant to cl 14 of the MOA.

8 Around 23 November 2004, an explosion took place on board the vessel and it sustained some damage. The vessel then called at Acapulco, Mexico to attend to the injured crew and the damage caused by the explosion. The vessel did not leave Mexico until 15 January 2005. Subsequently, the parties entered into negotiations on a reduction of the purchase price to take into account the damage caused to the vessel by the explosion and the loss sustained by the plaintiff by reason of the delayed delivery. The parties reached a settlement as regards the explosion damage but no agreement was reached on the delay claim. The purchase price was reduced by US$200,000.

9 The vessel arrived at the port of Jingtang in China on 17 February 2005. On or about 24 February 2005, the parties agreed to a further extension of the delivery date to 9 March 2005. On 4 March 2005, the defendant’s solicitors sent an e-mail to various parties, including the plaintiff’s solicitors and the vessel’s mortgagee, setting out the procedure for what was called “the Closing Meeting” at which title to the vessel would be transferred against payment and coincident with which delivery of the vessel would take place in China. The e-mail reflected the understanding that the Closing Meeting was scheduled for 8 March 2005. The parties proceeded on this basis until the evening of 7 March 2005 when the plaintiff’s solicitors requested the defendant’s solicitors to postpone delivery of the vessel by one day to 9 March 2005 because of some delay in the remittance of the balance of the purchase price to the account of Clyde & Co in Singapore. The defendant agreed to this request.

10 On 8 March 2005, the plaintiff commenced the present proceedings. The originating summons (“the OS”) that it caused to be issued was in Form 8, which was then the form for an ex parte originating summons issued pursuant to O 7 r 2 of the Rules of Court (Cap 322, R 5, 2004 Rev Ed) (“the Rules”). When I heard the application for the injunction that same day, I did not notice the form of the OS but having now noticed it, I consider that the plaintiff should not have used that form. In view of the nature of the proceedings, the plaintiff should instead have used Form 6 (now Form 4) which is the form applicable where there is a plaintiff and a defendant and where the appearance of the defendant is required. Whilst I mention this point, nothing turns on it at this stage since the defendant did not apply for the OS to be set aside on the basis of the irregularity in the form used.

11 The OS contained a number of prayers for relief. The main reliefs sought were that:

(a) the defendant be restrained by injunction from removing or in any way disposing of or dealing with or diminishing the value of its assets in Singapore up to the value of US$2.5m. This prohibition was to apply also to money held on behalf of the defendant and in particular any money held by DnB Bank and in the client account of Clyde & Co; and

(b) the plaintiff be at liberty to serve a sealed copy of the OS, the supporting affidavit and any order made in the proceedings on the defendant at its address in Panama and at an address in Taiwan.

The plaintiff did not take out a summons in chambers in the originating process as would usually be the case (and which I think would have been the proper procedure for the plaintiff to have followed) but procured an urgent hearing of the OS itself before me in order to obtain the interim injunction and the leave to serve the proceedings out of the jurisdiction. The application in respect of service was made pursuant to O 11 rr 1(a), (b) and/or (e) and/or (p) of the Rules.

12 I was informed that the matter was extremely urgent because the “Closing Meeting” was scheduled for the next day and once the balance of the purchase price had been paid to the defendant and the deposit released to it, the funds would leave Singapore and the plaintiff would have no security for its claim for damages as a result of the defendant’s repeated breaches of contract in relation to the delivery of the vessel. The plaintiff was concerned, for various reasons detailed in the affidavit, that the purchase moneys would be dissipated and there would be no assets against which an arbitration award in the plaintiff’s favour could be enforced. On completion, a major part of the purchase moneys would be paid to the mortgagee of the vessel to procure the discharge of the mortgage and the balance left in the defendant’s hand would be in the region of US$2.9m. After hearing counsel for the plaintiff, I granted the injunction as requested and gave leave to the plaintiff to effect service out of jurisdiction. I ordered the plaintiff to fortify the undertaking as to damages by providing security in the sum of US$100,000 and, further, to serve a notice of arbitration on the defendant by 14 March 2005. I also permitted the plaintiff to withhold service and/or notification of the injunction order until after the Closing Meeting had taken place and the vessel had been delivered to the plaintiff both legally and physically. I was aware at the time I granted the injunction that the substantive dispute between the parties would be settled by arbitration in London in accordance with the terms of the MOA and that no substantive claim would be brought in this court by the plaintiff against the defendant. At that time, I did not accord that fact much significance.

The present application

13 On 7 April 2005, the defendant filed the summons in chambers that is now before me. By this application, the main orders that the defendant is seeking are the following:

(a) that the ex parte OS dated 8 March 2005 and the order of court dated 8 March 2005 granting leave to the plaintiff to serve the OS on the defendant out of jurisdiction, the service thereof and all subsequent proceedings herein be set aside and/or dismissed;

(b) a declaration that this court does not have jurisdiction over the defendant in these proceedings in respect of the subject matter of these proceedings or the relief or remedy sought by the plaintiff in these proceedings and further, that this action be dismissed;

(c) that the order of court dated 8 March 2005 and any Mareva injunction granted therein against the defendant be discharged and/or set aside or, alternatively, that the said order be varied to reduce the limit of the Mareva injunction to US$1.25m; and

(d) that, in the event that the order of court dated 8 March 2005 and the Mareva injunction granted therein are set aside, there be an inquiry as to the damages, if any, the defendant may have sustained by reason of such injunction and an order that the plaintiff do pay such damages.

14 At the first hearing of the application, Mr S Mohan, counsel for the defendant, informed me that the defendant would concentrate on four broad issues in support of the application. These were:

(a) Whether the plaintiff had properly...