19 December 2019
Bi Xiaoqiong v China Medical Technologies, Inc  SGCA 50
In Bi Xiaoqiong v China Medical Technologies, Inc the Singapore Court of Appeal held that the Singapore High Court has the power to grant a Mareva injunction (also known as a freezing order) in aid of foreign court proceedings, even if the main action in the Singapore court is stayed pending the resolution of the foreign proceedings.
This is a fraught issue which has resulted in sharply divergent views in the High Court. In Petroval SA v Stainby Overseas Ltd & Ors  3 SLR(R) 856, the High Court held that it has no power to grant a Mareva injunction in aid of foreign proceedings if the substantive proceedings in Singapore are stayed. In contrast, in Multi-Code Electronics Industries (M) Bhd & Anor v Toh Chun Toh Gordon & Ors  1 SLR(R) 1000, the High Court held that even if the substantive proceedings are stayed, the court retains a residual jurisdiction to grant a Mareva injunction in aid of foreign proceedings.
Given the importance of the issue under consideration, the appeal was heard by a full five-member bench of the Court of Appeal.
The second respondent, CMED Technologies Ltd (“CMED”), was the wholly-owned subsidiary of the first respondent, China Medical Technologies, Inc (“CMT”) (collectively, “respondents”). CMT, which was founded and run by Mr Wu Xiaodong (“Mr Wu”), was wound up in 2012.
After investigating the affairs of CMT and CMED, the liquidators of CMT (“Liquidators”) took the view that large sums had been fraudulently misappropriated from the respondents by members of their former management. The respondents therefore started a series of legal actions against these persons in Hong Kong and Singapore. The recipients of some of the sums were alleged to have included Mr Wu and his then wife, Ms Bi Xiaoqiong (“appellant”).
In August 2013, CMT commenced proceedings in Hong Kong against Mr Wu and four others in respect of certain payments made from CMT to another company (“first HK suit”). In December 2016, the respondents commenced another set of proceedings in Hong Kong against Mr Wu, the appellant and 21 others (“second HK suit”). The second HK suit involved causes of action similar to those pursued in the first HK suit, but in respect of a broader class of payments.
In December 2017, the respondents commenced an action in the Singapore High Court (“Singapore Suit”) pursuing substantially the same claims and causes of action as those in the second HK suit. The respondents also sought Mareva injunctions against Mr Wu and the appellant to prevent them from disposing of their assets in Singapore only (as opposed to a worldwide Mareva injunction).
In relation to the appellant, the order sought to restrain the disposal of a property and moneys in bank accounts allegedly owned by her. In February 2018, the respondents applied to stay the Singapore Suit (apart from the Mareva injunction proceedings) pending the final determination of the first and second HK suits.
The respondents’ application for a stay of proceedings was heard together with their application for a Mareva injunction.
In the Singapore High Court, the judge (“Judge”) found, contrary to the appellant’s case, that the court had the power to grant a Mareva injunction in the circumstances. As the requirements for a Mareva injunction had also been met, the Mareva injunction was granted. At the same time, the High Court also granted a stay of proceedings on the basis that Hong Kong was the more appropriate forum for the dispute.
Decision of the Court of Appeal
The Court of Appeal upheld the decision of the High Court.
A key question which arose was whether the High Court had the power to grant a Mareva injunction against the appellant. In this regard, the Court of Appeal examined the following issues:
- Whether section 4(10) of the Civil Law Act (“CLA”) confers on the court the power to grant a Mareva injunction in aid of foreign court proceedings; and
- Whether there is a requirement that, for the court to grant a Mareva injunction under section 4(10) of the CLA, the underlying cause of action will (or must) terminate in a judgment in Singapore.
Section 4(10) of the CLA
The Court of Appeal found that the broad language of section 4(10) of the CLA confers on the court a wide power to grant mandatory orders or injunctions. The only express requirements imposed by the language of section 4(10) of the CLA are that the injunction must be “interlocutory” in nature and that it can be made only where it is “just or convenient that such order should be made”. As there are no other limiting words, section 4(10) of the CLA would appear to be broad enough to encompass Mareva injunctions in aid of foreign court proceedings.
Cause of action in support of which Mareva injunction is granted need not terminate in judgment in Singapore
It was not disputed that the court’s power is subject to at least two conditions:
(1) the court must have in personam jurisdiction over the defendant; and (2) the plaintiff must have a reasonable accrued cause of action against the defendant in Singapore. The appellant argued that there was a third condition, namely, that the cause of action against the defendant must also terminate in a judgment rendered by the court that issues the injunction.
The Court of Appeal rejected the argument that the third condition was a requirement. The court stated that an order to stay an action or proceedings before the court simply indicates that the proceedings will be halted for the time being. The court would still retain its ancillary jurisdiction over the action and with it, a residual jurisdiction to grant a Mareva injunction.
Moreover, a Mareva injunction in aid of foreign court proceedings is ultimately still premised on, and in support of, proceedings in Singapore. The court said that the phrase “in aid of foreign court proceedings” is an acknowledgement that the plaintiff who obtains such a Mareva injunction intends to employ that Mareva injunction to aid in foreign court proceedings. Such a Mareva injunction may assist the plaintiff by aiding in the enforcement of a foreign judgment that the plaintiff might obtain.
The court also found that the Judge had acted appropriately in exercising the power to grant the Mareva injunction against the appellant. Thus, the appeal was dismissed.
This decision confirms that the Singapore courts have the power to grant a Mareva injunction in aid of foreign court proceedings, and that there is no requirement that the cause of action in support of which the Mareva injunction is sought must terminate in a judgment in Singapore.
This decision is welcome because it dispels much of the uncertainty in an area of law which has spawned sharply divergent views at the High Court level. The Court of Appeal also took the opportunity to clarify and explain a number of previous cases in which a Mareva injunction in aid of foreign proceedings was not granted.
From a practical perspective, even where the intention is for the main dispute to be litigated in a foreign jurisdiction while proceedings in Singapore are to be limited to obtaining relief in aid of subsequent enforcement, litigants should take care to ensure there is sufficient collaboration between Singapore counsel and the foreign counsel having conduct of the main dispute, so that positions taken in proceedings in one jurisdiction do not compromise the interests being pursued in the other jurisdiction. The need for such collaboration may be more pertinent where the foreign jurisdiction is not a common law jurisdiction.