The State-Owned Company Yugoimport SDPR (also known as Jugoimport-SDPR) v Westacre Investments Inc and other appeals

JurisdictionSingapore
CourtCourt of Three Judges (Singapore)
JudgeSundaresh Menon CJ,Andrew Phang Boon Leong JA,Steven Chong J
Subject MatterCivil Procedure,Express Trusts,Trusts,Garnishee Orders
Plaintiff CounselGiam Chin Toon SC, Tan Hsuan Boon and Seow Ai Lin (Wee Swee Teow & Co),Gabriel Peter, Kevin Au, Shehzhadee Abdul Rahman (Gabriel Law Corporation)
Published date07 September 2016
Defendant CounselYap Yin Soon (Allen & Gledhill LLP),Francis Xavier SC, Amy Seow, Tng Sheng Rong, Ang Tze Phern and Joseph Lau (Rajah & Tann Singapore LLP) and Suresh Damodara and Clement Ong Ziying (Damodara Hazra LLP),and 6th respondent in CA 134 not in appearance.
Docket NumberCivil Appeals No 117, 118, 121 and 134 of 2015
Hearing Date19 January 2016
Date31 August 2016
Sundaresh Menon CJ (delivering the judgment of the court): Introduction

In April 2005, the judgment creditor in the present case obtained two ex parte provisional garnishee orders against a subsidiary of the judgment debtor and a bank where the subsidiary had deposited some funds. The provisional orders were obtained on the ground that the funds deposited in the subsidiary’s bank accounts (“the Funds”), which in March 2009 amounted to more than US$17m, belonged beneficially to the judgment debtor.

The judgment creditor’s path towards making those two provisional orders final and absolute has been fraught with difficulties. After more than a decade, it is still embroiled in court proceedings as it strives to bring this all to an end. The judgment debtor launched two attacks against the provisional orders. First, it applied in June 2005 to set aside the registration of the English judgment on which the garnishee action was predicated. After three years of litigation, that application was dismissed by this court. Then, the judgment debtor, together with its subsidiary and three companies from the former Socialist Federal Republic of Yugoslavia (“Yugoslavia”), whom we shall refer to as “the Other Parties”, contested the garnishee proceedings on the ground that the Funds in fact belonged beneficially to the Other Parties and not to the judgment debtor.

When the second of those two matters was heard in May 2011, the High Court summarily determined that the Funds belonged wholly and exclusively to the judgment debtor and not to the Other Parties. The two provisional orders were therefore made final and absolute. That decision was subsequently reversed on appeal in September 2011 when this court found that a trial was necessary to resolve the factual issues that had been raised.

After a trial that spanned 21 days between November 2013 and February 2015, the Judicial Commissioner (“the Judge”) found that the Funds were beneficially owned by the judgment debtor, and made final and absolute the garnishee order against the bank, but not that against the subsidiary (see Westacre Investments Inc v The State-Owned Company Yugoimport SDPR (also known as Jugoimport-SDPR) and others [2015] 4 SLR 529 (“the Judgment”)). This led the parties to file their respective appeals against the parts of the decision that were not in their favour, thus bringing this matter before this court for the third time.

The present case concerns four cross-appeals that arose from the Judgment. Three of the four appeals are brought by the judgment debtor, the subsidiary and the Other Parties respectively and are against the Judge’s finding that the Funds belong beneficially to the judgment debtor and his decision to make the garnishee order against the bank absolute. The last appeal is the judgment creditor’s appeal against the Judge’s decision not to make absolute the garnishee order granted against the judgment debtor’s subsidiary.

Three issues lie at the core of the appeals: (a) whether the Funds are beneficially owned by the Other Parties; (b) whether the garnishee order against the subsidiary should have been made absolute; and (c) whether the garnishee order against the bank should have been made absolute.

In our judgment, the Judge was correct to have found that the Funds are beneficially owned by the judgment debtor and not by the Other Parties. We do not, however, agree with his decision in respect of both the garnishee orders. In our judgment, there is no basis to make the provisional order against the bank absolute because the bank does not owe the judgment debtor a debt. On the other hand, the order against the subsidiary should have been made absolute because it owes the judgment debtor a debt in equity, which can be garnished. The debt in equity arose because the subsidiary held the Funds on a bare trust for the judgment debtor and the judgment debtor had demanded the Funds in 1995. For this and other reasons, which we elaborate on below, we reverse the Judge’s decision in part and make absolute the provisional garnishee order against the subsidiary, but not against the bank. We also make some other ancillary orders.

The parties

The judgment creditor, Westacre Investments Inc, is a consultancy company that was incorporated in Panama in 1988 to provide consultancy services to clients intending to do business in the Middle East, in particular in Kuwait. We refer to it as the Judgment Creditor. By 1992, the Judgment Creditor had largely suspended commercial activities, but continued to pursue its contractual and judicial claims through arbitration and, where necessary, to enforce arbitral awards in its favour in various jurisdictions, as it is doing in the present case. The Judgment Creditor is a respondent in Civil Appeals No 117, 118 and 121 of 2015 (which we will refer to as “CA 117”, “CA 118” and “CA 121” respectively), and is the appellant in Civil Appeal No 134 of 2015 (“CA 134”).

The judgment debtor, The State-Owned Company Yugoimport SDPR (formerly known as the Federal Directorate of Supply and Procurement), is a company that is wholly-owned by the Serbian government. We refer to it as the Judgment Debtor. It was founded in 1949 in Yugoslavia. It is the appellant in CA 117 and a respondent in CA 121 and CA 134.

The subsidiary of the Judgment Debtor, against whom the Judgment Creditor has sought a garnishee order, is a Singapore company, Deuteron (Asia) Pte Ltd (“Deuteron”). It is the appellant in CA 118 and a respondent in CA 121 and CA 134. It was formerly known as FDSP (Asia) Pte Ltd and was incorporated on 18 June 1991. On 28 October 1991, the Judgment Debtor became a shareholder of Deuteron, holding 51% of its shares, with representation on its board of directors. Nearly a decade and a half later on 23 December 2005, the Judgment Debtor came to wholly own Deuteron and gained complete control of its board.

The other garnishee in these proceedings is DnB Nor Bank ASA Singapore Branch (“the Bank”). It is the Singapore branch of a Norwegian bank (“DnB Nor Bank”). Although it is a respondent in CA 121 and CA 134, it is a neutral party, and is involved only because the Funds are held in Deuteron’s accounts with it.

The Other Parties, who entered the fray in early 2009 to contend that the Funds belonged beneficially to them, are (a) Teleoptik-Ziroskopic, a company registered in Serbia and Montenegro; (b) Zrak-Teslic, a company registered in Bosnia and Herzegovina; and (c) Cajavec (previously known as Rudi Cajavec), a company registered in Bosnia and Herzegovina. The Other Parties appear to be arms manufacturers.

Shortly before the trial, the court was informed by counsel for the Judgment Creditor that Teleoptik-Ziroskopi was under some form of restructuring, and that Zrak-Teslic and Cajavec were bankrupt. It appears that Cajevec has since been struck off the register. During the trial, counsel for the Other Parties applied to be discharged from acting for Cajevec. The Judge did not grant the application as he was not satisfied that counsel had taken sufficient steps to ascertain the status of Cajevec. For ease of reference, we will continue to use the term “the Other Parties” even when referring only to Teleoptik-Ziroskopi and Zrak-Teslic. Only Teleoptik-Ziroskopi and Zrak-Teslic (and not Cajavec) are appellants in CA 121, though all three are respondents in CA 134.

The parties, aside from the Bank, are split into two main camps along the following lines: the Judgment Debtor, Deuteron and the Other Parties align themselves arguing that the Funds belong beneficially to the Other Parties and there is thus no basis on which the garnishee orders can be made absolute; and the Judgment Creditor argues that the Funds belong to the Judgment Debtor, and therefore Deuteron and the Bank can be garnished. For ease of reference, we will retain the terminology used by the Judge and continue to refer to the Judgment Debtor, Deuteron and the Other Parties collectively as “the Defendants”.

Background

The history of the proceedings between a judgment creditor and a judgment debtor is not usually relevant to the determination of whether provisional garnishee orders ought to be made absolute. But it may be relevant in this case because at its core, the Judgment Creditor’s argument is that, consistent with its delay tactics and refusal to comply with court orders over the years, the Judgment Debtor is using the Other Parties as puppets to prolong the proceedings and to prevent the Judgment Creditor from enforcing its claim to the Funds.

On 28 February 1994, the Judgment Creditor prevailed in arbitration proceedings brought against the Judgment Debtor before a tribunal constituted under the auspices of the International Chamber of Commerce in Geneva. This arbitral award arose out of a dispute over an agreement pursuant to which the Judgment Creditor was to provide consultancy services to the Judgment Debtor. The total sum owed by the Judgment Debtor to the Judgment Creditor under the award stands at more than £56m. Over the last 22 years, the Judgment Creditor has endeavoured to realise its arbitral award in various jurisdictions, including the United Kingdom (“the UK”), Kuwait, Cyprus, and Switzerland. The Judgment Debtor, in turn, has opposed each and every one of those enforcement proceedings.

On 13 March 1998, the Judgment Creditor obtained an English judgment against the Judgment Debtor to enforce the arbitral award. Pursuant to various garnishee and receivership orders that were pursued in the UK, the Judgment Creditor managed to recover slightly more than £4m from the Judgment Debtor. The residual amount remained outstanding.

The dispute shifted to Singapore in July 2004, when the Judgment Creditor uncovered evidence that there were funds here that it believed belonged beneficially to the Judgment Debtor. These are the Funds that are in Deuteron’s accounts with the Bank. This led the...

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