Heng Holdings SEA (Pte) Ltd v Tomongo Shipping Co Ltd

• Judge: Karthigesu JA
• Judgment Date: 04 August 1997
• Neutral Citation: [1997] SGCA 32
• Citation: [1997] SGCA 32
• Defendant Counsel: Muthu Arusu (Drew & Napier)
• Published date: 19 September 2003
• Plaintiff Counsel: Michael Hwang SC and Yap Yin Soon (Allen & Gledhill)
• Date: 04 August 1997
• Docket Number: Civil Appeal No 171 of 1996
• Court: Court of Appeal (Singapore)
• Subject Matter: Whether Mareva injunction should have been set aside,Whether appeal against interlocutory injunction possible after injunction discharged,Whether appeal against interlocutory injunction possible after final judgment,Appeals,Mareva injunctions,Discharge of interlocutory injunction,Risk of dissipation of assets,Whether real risk of dissipation demonstrated,Lack of evidence of real risk,Whether right to inquiry as to damages extinguished by settlement agreement,Whether undertaking as to damages extinguished by discharge of injunction,Whether any live issue to be decided on appeal,Inquiry as to damages,Undertaking as to damages,Injunctions,Civil Procedure

The facts

The appellants are a company incorporated in Singapore, and carry on, inter alia, the business of holding and letting of immovable properties. The respondents are a company incorporated in Cyprus and are the owners of the motor vessel mv `Arosa` of the port of Limassol, Cyprus. The vessel is their sole asset.

By a time charterparty dated 14 February 1995, the respondents chartered the vessel mv `Arosa` to Bulktrans (HK) Ltd (Bulktrans), a company incorporated in Hong Kong. The performance of Bulktrans` obligations under the charterparty was guaranteed by the appellants under a performance guarantee of the same date. The appellants are the principal shareholders of Bulktrans, and the two companies share common directors.

Pursuant to the charterparty, a cargo of 1047 bundles of steel billets (the cargo) was shipped on board the vessel for carriage from Ilyichevsk to Bangkok under a bill of lading dated 27 February 1995. The shipper of the cargo was a Russian party, and the `notify party` named in the bill of lading was Nicco Industry Co Ltd (Nicco), a company incorporated in Thailand.

Prior to the vessel`s arrival in Bangkok, Bulktrans were informed by their agents in Bangkok, Pacific Ocean Shipping Ltd, that the bill of lading would not arrive in time and that Nicco would seek delivery of the cargo against a letter of indemnity. When the vessel arrived in Bangkok, the respondents in consideration of a letter of indemnity dated 27 March 1995 (the indemnity) provided by the appellants jointly and severally with Nicco and Bulktrans released the cargo to Nicco without the production of the original bill of lading. The indemnity provided, inter alia, the following:

1 To indemnify you your servants and agents and to hold all of you harmless in respect of any liability loss or damage of whatsoever nature whether direct or indirect which you may sustain by reason of your delivering the goods to Order/Nicco Industry Co Ltd/us in accordance with our request.

2 We further agree to indemnify you your servants and agents and hold all of you harmless in respect of any liability loss or damage of whatsoever nature whether direct or indirect which you may sustain by reason of delivery of the said cargo without production of the relevant original bills of lading in accordance with our request.

3 In the event of any proceedings being commenced against you or any of your servants or agents in connection with the delivery of the goods as aforesaid to provide you or them from time to time with sufficient funds to defend the same.

4 If the vessel or any other vessel, asset or property belonging to you or in the same associated or same beneficial ownership management or control should be arrested or detained or if the arrest or detention thereof should be threatened to provide such bail or other security as may be required to prevent such arrest or detention or to secure the release of such vessel, asset or property and to indemnify in respect of any loss damage or expenses caused by such arrest or detention whether or not the same may be justified.

The respondents subsequently received a letter dated 3 November 1995 from Watana Inter-Trade Co Ltd stating that their principals, Kanematsu GmbH (Kanematsu), a company incorporated in Germany, was the holder of the bill of lading and requesting immediate delivery of the cargo in Bangkok. The respondents were, of course, unable to do so, as the cargo had already been delivered to Nicco. On 28 November 1995, the London agents of the respondents, Seven Seas Maritime Limited (Seven Seas), sent a fax to Abraxas Maritime, the agents of Bulktrans, seeking clarification of the position. Further faxes were sent on 30 November 1995 and 5 December 1995. However, no response was forthcoming.

On 8 March 1996, Kanematsu`s solicitors, Clyde & Co, wrote a letter to Seven Seas, the respondents` agents, stating that their clients were the lawful holders of the bill of lading and that they had a claim for US$1,385,000 plus interest and costs for the alleged misdelivery of the cargo to Nicco. The respondents` agents then sent a fax dated 12 March 1996 to the appellants, requesting the appellants to take immediate steps to settle Kanematsu`s claim pursuant to the terms of the indemnity. Again, no response was received.

In the event, on 30 August 1995, mv `Arosa` was arrested in Newport, England at the instance of Kanematsu, in an admiralty action in the High Court of Justice, Queen`s Bench Division, Admiralty Court, England and Wales (the English proceedings). On the same day, the solicitors for Kanematsu asked the respondents` London solicitors, m/s Holman Fenwick & Willan (HFW), for security for Kanematsu`s claim of US$1,120,000 plus interest and costs to be furnished by a major P & I Club. Also on the same day, HFW wrote to the appellants, Bulktrans and Nicco, informing them of the arrest of the vessel and requiring them to perform their obligations under the indemnity, including their obligation to arrange for the necessary security for the release of the vessel. A further reminder was sent by HFW to the appellants on 31 August 1996.

On 2 September and 3 September 1996, the appellants` London solicitors, M/s Herbert Smith, replied stating it would be most unlikely that the appellants would be in a financial position to put up the security in respect of the claim as requested and, in mitigation of any loss arising, the respondents should make their own arrangements to secure the claim and ensure the release of the vessel.

The respondents then prevailed upon the Liverpool & London Steamship Protection and Indemnity Association (the Club) to issue a letter of undertaking to Kanematsu on 5 September 1996 to secure the release of the vessel. The letter of undertaking was issued by the Club, but it was issued on the basis that a counter-security or a substituted security would be provided by the appellants by 13 September 1996, failing which the respondents would have to provide such security themselves. The vessel was released from arrest on 6 September 1996.

On 7 September 1996, the respondents commenced this action against the appellants to enforce their rights under the indemnity. On the same day, the respondents obtained ex parte from Choo Han Teck JC an interim order containing, inter alia, a mandatory injunction and a Mareva injunction against the appellants on the following terms:

Mandatory injunction

(1) The defendants [the appellants] do forthwith provide such bail or security as may be necessary to procure the release of the vessel, `Arosa` of the Port of Limassol, Cyprus from arrest and/or to secure the claim against the vessel in Admiralty Action in Rem No 1996 Folio No 595 in the High Court of Justice, Queen`s Bench Division, Admiralty Court, England and Wales.

Disposal of assets [Mareva Injunction]

(2) That the defendants, whether by themselves or by their directors, officers, servants, agents or otherwise howsoever, be restrained until after judgment or until further order, from removing from Singapore in any way dispose of or deal with or diminish the value of any of their assets which are in Singapore whether in their own name or not and whether solely or jointly owned up to the value of S$3,100,000 provided that nothing herein shall prevent or preclude the performance by the defendants of its obligation to provide bail or security under paragraph 1 above.

(3) If the total unencumbered value of the defendants` assets in Singapore exceeds S$3,100,000, the defendants may remove any of those assets from Singapore or may dispose of or deal with them so long as the total unincumbered value of their assets still in Singapore remain above S$3,100,000 provided that nothing herein shall prevent or preclude the performance by the defendants of its obligation to provide bail or security under para 1 above.

Following the service of the interim order the appellants applied on 18 September 1996 to set aside the injunctions. In the meantime, on 17 September 1996, the respondents obtained leave to apply for an order of committal against a director of the appellants, one Tony Heng Boon Huat (Tony Heng), for contempt of court for failing to comply with the mandatory injunction by not providing any bail or security to secure the release of vessel from arrest. On 18 September 1996, the respondents applied by notice of motion for an order that Tony Heng be committed to prison for contempt of court.

On 1 October 1996, the appellants` application to set aside the injunctions was heard before Warren LH Khoo J. The learned judge after hearing full arguments dismissed the application. [See [1997] 2 SLR 550.] Against the decision of the learned judge the appellants have now appealed. They filed the notice of appeal only on 31 October 1996, which was the last day before the expiry of the time prescribed for the appeal.

For the purpose of this appeal, it is necessary to relate the material events that occurred since the date of the decision appealed against, as a crucial issue before us turns on certain of these events.

On 1 October 1996, there was also before Warren LH Khoo J the notice of motion taken out by the respondents to commit Tony Heng to prison for contempt. The learned judge adjourned the motion to 4 October 1996 to allow the appellants to proceed with their attempts to obtain security. At that time, the appellants were seeking from their banks, the Development Bank of Singapore Ltd (DBS) and/or Oversea-Chinese Banking Corporation Ltd (OCBC) facilities with a view to providing the security in compliance with the mandatory injunction. In particular, the appellants were negotiating with DBS for an additional line of credit of S$7m to be used for, inter alia, furnishing the security. The facilities were to be secured by, inter alia, a mortgage of the first and second floors of a building called Tong Nam Building owned by the...