THE GRANTING OF MAREVA INJUNCTIONS IN SUPPORT OF FOREIGN COURT PROCEEDINGS

• Citation: (2016) 28 SAcLJ 503
• Published date: 01 December 2016
• Date: 01 December 2016
• Author: Philip JEYARETNAM SC MA (Cantab); Barrister (Gray's Inn);Advocate and Solicitor (Singapore); Managing Partner, Rodyk & Davidson LLP. LAU Wen Jin LLB (Summa) (Singapore Management University); Advocate and Solicitor (Singapore); Associate, Rodyk & Davidson LLP.

In an increasingly interconnected and borderless world, Mareva injunctions in support of foreign court proceedings can play an important role in preserving assets which the defendant might otherwise dissipate for the purpose of avoiding satisfaction of the foreign judgment. However, there is some uncertainty as to whether the Singapore court has the power to grant such Mareva injunctions. There appears to be some conflict between the judgments given in this area. This article examines the jurisdictional requirements and existence of power for such Mareva injunctions.

I. Introduction

1 Today, money flows quickly, instantly, across borders. People travel from one end of the globe to another faster and more conveniently than ever before. Legal systems remain national. The substantive jurisdiction of any particular legal system is likely tied to connecting factors of the dispute to that jurisdiction, but where assets are located or remain has no such correlation. Judgments and orders made in one country are toothless in another, unless recognised or enforced by that other country's courts. Legal proceedings are expensive and take time, and while a creditor is seeking judgment in one jurisdiction he may want to preserve the debtor's assets located in a different jurisdiction so that at the end of the process he is able to enforce his judgment, and his expenditure on legal costs will not have been in vain. To this end, he may want to obtain a Mareva injunction, also known as a freezing order, from the court of the jurisdiction where the assets are located. Depending on the applicable law and attitude of the court of the forum in which he is suing, a worldwide Mareva injunction from that court may not be forthcoming. Moreover, the enforceability and utility of a worldwide Mareva injunction against a foreign third party bank which is not subject to the jurisdiction of the court of the forum issuing the worldwide Mareva injunction may be limited. This is because the order of the issuing court is only enforceable against the foreign bank if declared to be enforceable by the foreign court, and the order so granted is likely to be worded such that it does not interfere with the legal obligations of the foreign bank imposed by the law of the foreign jurisdiction, so as not to offend the principles of international comity.1

2 Picture this scenario. A plaintiff is suing a defendant, who is resident in Hong Kong, for breach of contract. The plaintiff is suing the defendant in Hong Kong because Hong Kong is the natural forum due to the various connecting factors to Hong Kong, and the contract which the plaintiff is suing on contains a non-exclusive choice of court agreement specifying the Hong Kong courts as the forum for dispute resolution. However, the defendant's assets are all in Singapore and the value of his assets in Hong Kong is insufficient to satisfy the judgment sum if the plaintiff eventually succeeds in the Hong Kong suit. The plaintiff is worried that in the event that he succeeds in the Hong Kong suit, the judgment would be worthless because the defendant would in all likelihood have dissipated his assets in Singapore, or removed them elsewhere, so as to prevent meaningful enforcement of the plaintiff's prospective judgment from Hong Kong. The question to be answered is whether the plaintiff can obtain a Mareva injunction from the Singapore court over the defendant's assets in Singapore so as to prevent the defendant from dissipating or removing those assets. In other words, can the plaintiff get an interim Mareva injunction in Singapore in respect of assets in Singapore in aid of the Hong Kong proceedings?

3 Simply put, the Mareva injunction prevents the defendant from freely exercising his rights over his assets so as to protect the plaintiff's position by preserving assets which the defendant might otherwise dissipate for the purpose of avoiding satisfaction of the judgment. There are three requirements to obtain such a Mareva injunction in Singapore. First, the Singapore court must have in personam jurisdiction over the defendant. Second, the court must have the power to grant the injunction. Third, the court must decide that an injunction is appropriate on the specific facts of the case, namely, there is a good arguable case on the merits of the plaintiff's claim, and there is a real risk that the defendant will dissipate his assets to frustrate the enforcement of an anticipated judgment of the court. Here, the discussion will focus on the first two requirements.

4 It is important to draw a clear distinction between the first two requirements. The first requirement, which is about establishing

in personam jurisdiction of the court over the defendant, concerns territorial jurisdiction and is especially relevant when one deals with a foreigner outside the jurisdiction. On the other hand, the second requirement concerns whether the Singapore court has the power to grant the Mareva injunction after the court has properly assumed jurisdiction over the defendant.2 Some cases use the word “jurisdiction” to mean both in personam jurisdiction under the first requirement and the power to grant the Mareva injunction under the second requirement. As a matter of conceptual clarity, separate terminology shall be used in this article.

5 One should also consider whether the first requirement of in personam jurisdiction has been established before considering the second requirement of whether the court has the power to grant the Mareva injunction. Hence, if in personam jurisdiction of the court over the defendant is not established, then there is no need to consider the second requirement.

II. Establishing in personam jurisdiction: The need for a pre-existing cause of action

6 If the defendant is resident in Singapore, it is easy to establish in personam jurisdiction over the defendant: personal service of the writ on the defendant will suffice.3

7 However, in the scenario outlined earlier, the defendant is not resident in Singapore but in Hong Kong and that makes things a little more complicated. Pursuant to s 16(1)(a)(ii) of the Supreme Court of Judicature Act,4 the defendant can be brought within the in personam jurisdiction of the Singapore court by serving a writ on the defendant out of jurisdiction with leave of court, in accordance with the Rules of Court.5 The requirements for obtaining leave of court for service of originating process out of Singapore are clear. First, there must be a good arguable case that at least one of the specified heads of jurisdiction under O 11 r 1 of the Rules of Court is satisfied. Secondly, there must be at least a serious issue to be tried on the merits of the case. Thirdly, it must be shown that Singapore is clearly the appropriate forum for the trial of the dispute. The fundamental consideration for the third requirement is whether Singapore is the natural forum to hear the case,

and how much weight to be placed on the various connecting factors to Singapore is often open to argument.

8 Regarding the first requirement of having a good arguable case of at least one of the specified heads of jurisdiction under O 11 r 1, can the plaintiff simply rely on the fact that he is seeking a Mareva injunction against the defendant's assets in Singapore to argue that his case falls within the head of jurisdiction under O 11 r 1(b)? Order 11 r 1(b) provides that service of an originating process out of Singapore is permissible with the leave of the court if in the action, “an injunction is sought ordering the defendant to do or refrain from doing anything in Singapore”. So can the plaintiff simply say that since a Mareva injunction is an injunction, it automatically falls within O 11 r 1(b)?

9 The answer is “no”– the fact that the plaintiff is seeking a Mareva injunction does not automatically mean that the plaintiff's claim falls within the specified head of jurisdiction under O 11 r 1(b). The Court of Appeal considered this question in the case of Karaha Bodas Co LLC v Pertamina Energy Trading Ltd6 (“Karaha Bodas”). In that case, the Court of Appeal followed the English House of Lords case of Siskina v Distos Compania Naviera SA7 (“The Siskina”) and the Privy Council decision on appeal from Hong Kong of Mercedes Benz AG v Leiduck8 (“Mercedes Benz”) in holding that there must be a pre-existing cause of action to which the injunction was merely ancillary.9 The Court of Appeal reasoned that this position was borne out by reference in O 11 r 1 to an injunction being sought in “the action” and the fact that O 11 r 2(1)(b) required a plaintiff to state that he believed he had a “good cause of action”, hence implying that there must be a pre-existing cause of action to which the injunction was merely ancillary. In this connection, the Court of Appeal also held that in order to apply for a Mareva injunction, the plaintiff must possess a right of action against the defendant that had accrued at the time of the application.10 Practically speaking, that means that the plaintiff must first commence substantive proceedings against the defendant by asserting a cause of action before or at the time of application for a Mareva injunction.11 The plaintiff will have to show a prima facie cause of action against the

defendant.12 Therefore, without a good arguable case that at least one of the specified heads of jurisdiction under O 11 r 1 is satisfied, including that there is a prima facie accrued cause of action, the plaintiff would not be granted leave of court to serve the originating process out of Singapore.

10 On the facts of Karaha Bodas, in personam jurisdiction of the Singapore court over the foreign defendant was not established because the foreign defendant was a Hong Kong entity with no presence in Singapore but which simply held assets in Singapore, and the applicant did not make a substantive claim against the defendant.13 In that case, the plaintiff merely applied for a Mareva...