W Power Group EOOD v Ming Yang Wind Power (International) Co Ltd [2023] SGHC(I) 15

The nature of the proceedings

The claimant is a company registered in Bulgaria. It described itself in the Statement of Claim as an international developer engaged in investing and developing wind farms in Bulgaria, Romania and other countries.

The defendant is a Chinese company incorporated in Hong Kong and is a wind turbine manufacturer engaged in the design, manufacture, construction, sales and services of wind turbines in the global market.

The claimant alleges that the claimant and defendant entered into a joint venture agreement on 3 July 2011 to establish a joint venture company for the purpose of developing two wind farm projects. It claimed that pursuant to the joint venture agreement, a joint venture company, MW Wind Power OOD (“MW Wind Power”) was established, the claimant holding one third of the shares in the company and the defendant holding the remaining two thirds.

The claimant claims the defendant breached its obligation under the joint venture agreement essentially by failing to secure financing for the one of the two wind farm projects (“Project 2”) and by withdrawing a performance guarantee for the same project. It claims as a result it was unable to exercise its rights under the joint venture agreement to sell its shares in the joint venture company after the second year of its operation at a price sufficient to pay all principal and accumulated interest of the joint venture company's borrowings. It claims as a result of the defendant's breach of the joint venture agreement, it suffered a loss of profits in the amount of €37.5 million.

The defendant has filed a somewhat detailed defence to the claim. Broadly speaking it states that following changes to the legal and regulatory regime introduced by the Bulgarian government which negatively affected renewable energy projects such as Project 2, Project 2 was no longer viable and the parties agreed not to proceed with it sometime in 2012. It denies any breach of the joint venture agreement and asserts the claimant is estopped from enforcing the agreement and has waived its right to do so. It also claims that the alleged causes of action are barred by s 6(1) of the Limitation Act 1959 and the claimant does not have standing to sue in respect of any alleged breaches of the joint venture agreement in relation to Project 2.

The above is an extremely broad summary of the claims which have been made and the defences to it but it is sufficient for the purpose of the present application.

The relevant rules and legislation

This being a case transferred to the Singapore International Commercial Court (the “SICC”), the parties agreed that the domestic Rules of the Supreme Court (ie, the Rules of Court 2021) apply. The relevant rule is Order 9 r 12 which for relevant purposes is in the following terms:

Section 388 of the Companies Act 1967 (2020 Rev Ed) (the “Companies Act 1967”) provides as follows:

The parties’ submissions

The defendant made five points in support of its application. The first was that the claimant was ordinarily resident outside the jurisdiction so what it described as the threshold in Order 9 r 12(1)(a) was met.

There was no dispute between the parties that the claimant was resident outside the jurisdiction. However, there was a dispute as to the effect. The defendant accepted the Court retains a discretion to refuse to grant security, even if that threshold was met but submitted that if the factors weighing for and against the grant of security were otherwise evenly balanced, then in those circumstances security should be granted. It referred to the decision of the Court of Appeal in Jurong Town Corporation v Wishing Star Ltd [2004] 2 SLR(R) 427 at [14] (“Jurong Town Corporation”) in support of that proposition.

By contrast the claimant submitted that Jurong Town Corporation was a domestic case and similar principles do not apply in cases where neither of the parties have a presence in Singapore. In that context the claimant referred to the decision of the High Court in Zhong Da Chemical Development Co Ltd v Lanco Industries Ltd [2009] 3 SLR(R) 1017 (“Zhong Da”). That case involved a challenge under s 24 of the International Arbitration Act 2002 (Cap 143A, 2002 Rev Ed) (“IAA”) to set aside a final award in an arbitration at the Singapore International Arbitration Centre, the defendant in the arbitration proceedings being an Indian company and the claimant being incorporated in China. The Court observed that in the particular circumstances in agreeing to the foreign arbitral forum, the defendant should have been mindful and must have been taken to have agreed that any future order to set aside the arbitral award would take place outside the jurisdiction in which the parties were resident. The Court stated the situation was different to that considered in Jurong Town Corporation and held in those circumstances (ie, in a case where parties seek relief under the IAA) where the factors for and against the granting of security were evenly balanced, it would ordinarily be just to dismiss the application for security: Zhong Da at [13].

As I am of the view that the factors are not evenly balanced it is unnecessary to resolve this issue.

Counsel for the defendant pointed to the financial statements which showed the company had liabilities which exceeded the amount of the receivables and its cashflow statement for that year which demonstrated that as at the end of 2012 it was not carrying out any commercial activities. In the defendant's written submissions reference was also made to the fact that in March 2018, March 2019 and March 2020, declarations were made by Mr Mann on behalf of the claimant under the Bulgarian Accountancy Act declaring that the claimant had not carried out any business activities in those years.

Counsel for the defendant also submitted there was no basis for stating that the receivables shown in the 2012 accounts, the only ones provided, are still due to the claimant.

Finally the defendant submitted there had been no delay in making the application so as to disentitle it to security. He pointed out that the statement of claim was not served until mid-September 2022 and the proceedings were then delayed whilst the parties were asked to consider transfer to the SICC, with such transfer being ordered on 7 March 2023. He submitted the defendant had indicated its intention to request security at the first case management conference called on 2 May 2023.

The claimant sought to place some reliance on the merits of the claim, although as counsel for the claimant stated there was no need for any detailed examination of the facts or circumstances. Counsel for the claimant noted that there was no notice of termination of the joint venture agreement, rather it was alleged that Project 2 was cancelled. He referred to the evidence of Mr Ye Fen at paragraph 24 of his first witness statement that the defendant's 66% shareholding in MW Wind Power was transferred to a company Ming Yang Holdings (Singapore) Pte Limited on 9 September 2015 and to paragraph 11(3) of Mr Ye Fen's second witness statement referring to an email of 28 April 2017 from Mr Simon Yu on behalf of the defendant to Mr Mann stating that the Ming Yang Group was considering closing Ming Yang Holdings (Singapore) Pte Limited and setting up a brand new subsidiary in Cyprus. Although it was not made entirely clear, it appears to be contended that such conduct was inconsistent with the joint venture agreement being terminated.

The claimant also contended that it was a special purpose vehicle with only one purpose, namely, to execute the joint venture agreement. Counsel for the claimant submitted that if there was a breach of the agreement and if the claimant had no other activities, it would only be natural that its balance sheet "would indeed be in the red". He submitted that if the impecuniosity was caused by the defendant, an application for security should not be used to stultify the claimant's claim.

The claimant finally contended that the defendant's delay in bringing the application for security meant that the application should not be granted.

Consideration

In light of the evidence it is clear that the requirements of s 388 of the Companies Act 1967 have been made out. Having regard to the 2012 accounts, the claimant was at that time insolvent and the evidence would suggest that it has not traded since that time. As counsel for the claimant properly conceded at the hearing, in these circumstances the fact that Bulgaria is a party to the Choice of Court Convention provides no assistance to the claimant.

Nor in my submission has there been any substantial delay in making the application such as to deprive the defendant of its right to security. The only substantive steps which took place prior to the application for security was the filing of the statement of claim and defence and as counsel for the defendant pointed out, the claimant was notified of the application at the first case management conference in the SICC. In these circumstances such delay as there was should not deprive the defendant of security if it was otherwise entitled to it.

The only issue which remains is whether security should not be granted because the claimant's case is a meritorious one and more importantly the provision of security would stifle a legitimate claim. Although no authority was cited to me, I am prepared to accept that if it was established that the impecuniosity of the claimant was caused by the conduct of the defendant or if the application was used to stifle a legitimate claim, then security should not be awarded (see Peng Ann Realty Pte Ltd v Liu Cho Chit and others [1992] 3 SLR(R) 178 and Sembawang Engineering Pte Ltd v Priser Asia Engineering Pte Ltd [1992] 2 SLR 806; see also Singapore Civil Procedure 2021 (Cavinder Bull SC gen ed) (Sweet & Maxwell, 2021) at para 23/3/5).

The difficulty in the present case is that no evidence has been brought to show, on the face of the materials before the court, that the claimant has a good chance of succeeding much less that the claimant’s impecuniosity was caused by the conduct of the defendant in the transaction the subject of the proceedings. All that has been done in the claimant's submissions is to repeat the allegations in the statement of claim. Further, although it was suggested in the submissions that the claimant was a special purpose vehicle, there is no direct evidence to support that assertion. Indeed, contrary to that assertion the claimant in its statement of claim stated that it is an international developer engaged in investing in and developing wind farms in Bulgaria, Romania and other countries.

In these circumstances it is my view that security should be ordered. In reaching this conclusion, I should add that in my opinion this is not a case where the reasons for and against the grant of security are evenly balanced. It is therefore unnecessary to consider whether if that was not in fact the case, there should be a grant of security.

The quantum of security

Taking all the matters to which I have referred into account and having regard to the complexity of the matter as it appears from the pleadings, in my view the appropriate amount to order up to the time of the trial is S$70,000 with the defendant having liberty to apply for further and subsequent security if necessary.

Conclusion

Accordingly, I would make the following orders:

(1) the claimant does, within seven (7) days from the date of this Order provide security in the sum of S$70,000 for the defendant's costs up to the commencement of trial;

(2) the said security for costs referred to in paragraph (1) above be by way of (a) payment into court; (b) the provision of a banker's guarantee issued by a bank licensed by the Monetary Authority of Singapore to transact banking business in Singapore on such acceptable wording to the defendant; (c) solicitors' undertaking on such acceptable wording to the defendant; or (d) in such manner as this Honourable Court may direct or order;

(3) pending the claimant's provision of the said security referred to in paragraph (1), all further proceedings in this action be stayed other than the giving of such security;

(4) the defendants be at liberty to apply for further and subsequent security from the claimant in relation to the action, if necessary;

(5) the costs of and incidental to this application be paid by the claimant to the defendant; and

(6) direct the matter be listed for a further case management conference following the provision of such security.