Wallace Kevin James v Merrill Lynch International Bank Ltd

• Jurisdiction: Singapore
• Judgment Date: 08 January 1998
• Date: 08 January 1998
• Docket Number: Civil Appeal No 159 of 1997
• Court: Court of Appeal (Singapore)

Wallace Kevin James

Plaintiff

and

Merrill Lynch International Bank Ltd

Defendant

[1998] SGCA 2

M Karthigesu JA

and

L P Thean JA

Civil Appeal No 159 of 1997

Court of Appeal

Civil Procedure–Mareva injunctions–Enforcement of Mareva injunction–Appointment of receiver–Whether receiver could be appointed to aid enforcement of Mareva injunction–Whether imminent danger of loss or dissipation of assets without appointment of receiver–Purpose of appointing receiver

The appellant employee was a financial consultant employed by the respondent bank, responsible for servicing a number of high-net-worth clients of the bank. The bank brought an action against the employee alleging that he was in breach of: (a) conducting and/or causing to be conducted unauthorised trading in clients' accounts, resulting in losses in their accounts; (b) fraudulently forwarding to clients false and/or misleading statements of their accounts; and (c) signing documents in their names by forgery of their signatures. The bank claimed damages and sought an indemnity from the employee in respect of the claims made by clients against the bank. On the date of commencement of the action, the bank obtained a worldwide Mareva injunction against the employee. Later, they obtained a disclosure order and obtained a prohibition order preventing the employee from leaving Hong Kong until he complied with the Mareva injunction and disclosure order. Further, the bank obtained an order joining the employee's wife as second defendant, with a similar Mareva injunction and disclosure order against her. Despite various attempts at serving the writ and Mareva injunction, the bank faced some difficulties and it was only after effecting service, did the employee provide a list of assets which was by his own admission, incomplete. During this period, there were numerous movements of assets of the employee and/or his wife.

The bank applied successfully to the High Court for among other things, appointment of a receiver over all the employee's assets in aid of the Mareva injunction, on the grounds that: (a) the employee had been deliberately evading the service of process; (b) the employee knew of the existence of the Mareva injunction yet; (c) the employee persisted in acting in breach of the Mareva injunction; (d) the list of assets provided was unsatisfactory; and (e) the employee had the capability to write to his banks for the necessary information to enable disclosure of his bank accounts and the properties he owned. The High Court held that in the circumstances, it was just to appoint a receiver to locate and preserve the employee's assets to ensure these were not dissipated to frustrate enforcement of any judgment the bank might eventually obtain. The employee appealed.

Held, allowing the appeal:

(1) The bank had obtained a worldwide Mareva injunction both in Singapore and Hong Kong freezing all the employee's assets. The injunction had been extended to cover his wife's assets, and presumably, the same extension had been obtained in the Hong Kong proceedings. The additional remedy of appointment of a receiver would only be justified if, notwithstanding the considerable protection already afforded by the worldwide Mareva injunctions, there was nonetheless an imminent danger of loss or dissipation of the employee's and his wife's assets if a receiver was not appointed. The granting of an order of appointment of receivers was exceptional, and not justified in this case: at [18] and [22].

(2) The employee had been evading the service of process, and this was rightly taken into account by the High Court judge in his consideration of the application for the appointment of receivers, but such conduct alone did not justify the appointment of receivers: at [24].

(3) A sum had been transferred from the joint account in the names of the employee and his wife to the employee's father-in-law's account, but the instructions for the transfer were given by the employee's wife before she or the employee had knowledge of the Mareva injunctions over their assets. Moreover, the bank was not without remedy in respect of the transferred funds as it was open to the bank to apply to join the employee's father-in-law in the proceedings and apply for an extension of the Mareva injunction and disclosure order to him, thus freezing the funds in that account: at [25] and [26].

(4) The instruction by the employee's wife to her tenant to pay rent to an account outside Singapore, and the employee's confirmation of that instruction, amounted to a breach of the Mareva injunction. However, the employee's wife later reversed her instructions, and this latter instruction had to be taken into account in the consideration of the appointment of receivers: at [27].

(5) Paragraph 2 (a) of the Mareva injunction required the employee to inform the bank in writing “at once” of all his assets whether in or outside Singapore. The term “at once” had to be taken to mean “as soon as is reasonably practicable”. It was not realistic to expect the employee to make full disclosure of all his assets “at once” literally. His efforts in making the requisite disclosure had been hindered by the fact that his personal papers and documents had been seized by the Hong Kong police and the Commercial Affairs Department in Singapore, and in the circumstances, it was not unreasonable for the employee to have disclosed his assets late and incompletely: at [30] and [31].

(6) The list of assets disclosed were fairly comprehensive, including a listing of the immovable property owned by the employee, club memberships held, his Central Provident Fund account, retirement account and numerous bank accounts. It was understandable that the employee could not provide some of the account numbers and that many of the account balances were stated to be estimations or approximations: at [32].

(7) The terms of the disclosure order were extremely wide; in effect, it directed the employee and his wife to consent to the bank obtaining any information relating to the accounts they had with his banks and copies of the bank statements. This was plainly unjustified as the disclosure order was intended to aid the Mareva injunction and mandated that the employee should disclose all his assets whether in Singapore or abroad so that the bank would know what assets he possessed at the time, including the credit balances in the bank accounts. Requiring the employee and his wife to give letters of consent to all their banks in terms as required by the order went too far: at [34].

(8) Only two breaches of the Mareva injunction had occurred: firstly, the appellant's failure to give his consent in writing to his bankers authorising him to provide any information on his bank accounts and copies of the bank statements; and secondly, the instruction given by his wife to her tenant and confirmed by the employee, to pay rent of the wife's apartment to an account outside Singapore, but that breach had been remedied. The circumstances did not justify the extreme remedy of a receivership order. There was no imminent danger of loss or dissipation of any assets if the receivers were not appointed: at [35] and [37].

Beach Petroleum NL v Johnson (1992) 9 ACSR 404 (distd)

Buchmann v Haydon (8 October 1985) (distd)

Derby & Co Ltd v Weldon (15 November 1988) (distd)

Derby & Co Ltd v Weldon (Nos 3 and 4) [1990] Ch 65 (refd)

National Australian Bank Ltd v Bond Brewing Holdings Ltd [1991] 1 VR 386 (folld)

Republic of Haiti v Duvalier [1990] 1 QB 202 (folld)

SSAB Oxelosund AB v Xendral Trading Pte Ltd [1991] 2 SLR (R) 81; [1992] 1 SLR 600 (folld)

Sarjit Singh Gill and Rajiv Nair (Shook Lin & Bok) for the appellant

K Shanmugam and Andrew Ho (Allen & Gledhill) for the respondent.

L P Thean JA

(delivering the grounds of judgment of the court):

The facts

1 The respondents are a merchant bank incorporated in England and Wales with a branch in Singapore and provide, among other things, investment banking services. The appellant was, until April this year, a financial consultant employed by the respondents. As financial consultant, the appellant was responsible for the servicing of a number of high-net-worth clients of the respondents.

2 On 24 June 1997, the respondents brought an action against the appellant alleging, inter alia, that the appellant while in the respondents' employ committed the following breaches of duties:

(a) conducted and/or caused to be conducted, unauthorised trading in the accounts of their clients, resulting in losses in their accounts;

(b) fraudulently forwarded to these clients false and/or misleading statements of their accounts; and

(c) signed documents in their names by forging their signatures.

They claimed damages and also sought an indemnity from the appellant in respect of the claims made against them by their clients. Some of these claims had been settled, and as at 31 July 1997, the total amount of claims settled came to about US$14.3m.

The Mareva injunction

3 On the date of commencement of the action, the respondents obtained a worldwide Mareva injunction against the appellant. The injunction contained, inter alia, a disclosure order requiring extensive disclosure of the assets of the appellant. The material parts of the injunction read as follows:

1. 1 Disposal of assets;

…

1. 2 Disclosure of information on assets;

   1. (a) The defendants must inform the plaintiffs in writing at once of all their assets whether in or outside Singapore and whether in their own name or not or held by others on behalf and/or on trust for each or any of them and whether solely or jointly owned, giving the nature, value, location and details of all such assets including but without prejudice to the generality of the foregoing:

      1. (i) the identity of all bank or other accounts whether in the defendants' own names or jointly held or held by nominees or otherwise howsoever on...