H&C S Holdings Pte Ltd v Mount Eastern Holdings Resources Co., Limited

Kan Ting Chiu SJ:

[1] This is an unusual and unsatisfactory application. H & C S Holdings Pte Ltd (“H Holdings”) applied by ex parte originating summons under the International Arbitration Act (Cap 143A, 2002 Rev Ed) (“IAA”) for relief:

1. That the award in the arbitral proceedings in Arbitration No. 223 of 2013 is not rendered ineffectual by the dissipation of assets by the Respondent; and/or

3. As an interim measure, the monies paid by the Applicant into Court on 19 October 2015, pursuant to DRI 102 and 103 of 2015 as ordered by the Learned Assistant Registrar Ms Ho Yee Tien Delphine in the Order of Court ORC No. 6799 and 6800 of 2015 dated 16 October 2015, shall remain in this Court, pending the determination and issue of the final award in Arbitration No. 223 of 2013, and the Applicant to have the right of set-off if such award determined by the arbitral tribunal in Arbitration No. 223 of 2013 is given in its favour; and/or

4. For an interim injunction to be given, restraining the Respondent from obtaining any payment out of this Court from the monies paid by the Applicant into this Court on 19 October 2015, pursuant to DRI 102 and 103 of 2015 as ordered by the Learned Assistant Registrar Ms Ho Yee Tian Delphine in Order of Court ORC No. 6799 and 6800 of 2015 dated 16 October 2015,

collectively, “the Prayers”.

[2] H Holdings and the respondent in this application, Mount Eastern Holdings Resources Co., Limited (“Mount Eastern”), were the counter-parties in two arbitration proceedings, SIAC Arbitration No 200 of 2013 (“Arb 200”) and SIAC Arbitration No 223 of 2013 (“Arb 223”), arising from two contracts for the sale of iron ore. Mount Eastern was the claimant in Arb 200 and H Holdings was the claimant in Arb 223. Arb 200 was completed with Final Award 48 of 2015 (“the Final Award”) issued in favour of Mount Eastern, while Arb 223 is still ongoing. After the Final Award, H Holdings applied to court in OS 870 of 2015 under s 24 of the IAA to aside the final award. Pending the hearing of that application, an Assistant Registrar made orders for the sums of US$1,527,660.00, US$188,417.40 and SGD$145,593.04 to be paid into court, and the payment was made on 19 October 2015 as stated in Prayer 3 of the application. When the application came before Quentin Loh J he dismissed it and ordered that the money paid into court be paid to Mount Eastern’s solicitors. An application to Loh J for a stay of his order pending appeal was dismissed as well. H Holdings is dissatisfied with the outcome and has appealed against the orders in appeals CA 197/2015 and CA 198/2015 against Loh J’s refusal to set aside the Final Award and the refusal to stay of enforcement pending appeal.

[3] The title to the originating summons states inter alia:

The purpose of the application is disclosed in an affidavit deposed by Wang Kaiyang (“Wang”), a director of H Holdings, and filed on 4 November 2015 in support of the present application, where he stated:

The “Final Award”, the “payment sum” and “this asset” all refer to the money paid into court on 19 October 2015 following the Final Award in Arb 200. Under “Urgency of the Application”, Wang stated:

Additionally, under “High risk of dissipation”, he elaborated that:

That is the only form of dissipation referred to in the affidavit.

[4] Wang referred to three matters which give rise to the risk of dissipation. First, he stated that Ma Xian Jun (“Ma”), whom he described as the “owner” of Mount Eastern, had been arrested for contractual fraud and was facing trial (without explaining the nature of the “ownership” and the charge(s) against Ma). Second, Mount Eastern owed two creditors a total sum of US$2,900,093.09. Third, Mount Eastern Holdings (Hong Kong) Co Limited (“Mount Eastern HK”) was wound up by a creditor on 15 April 2015. As regards this third matter, Wang added “…as I believe that they are for all intents and purposes the same company, I am certain that the insolvent state of Mount Eastern Holdings (Hong Kong) Co Limited is reflective of the Respondent’s own insolvency.” No connection was made of the investigations against Ma to Mount Eastern or the effect the investigations had on Mount Eastern, and no grounds were given for the belief that Mount Eastern HK was for all intents and purposes the same company as Mount Eastern, or for the assertion that the financial state of the former was reflective of the financial state of the latter.

[5] There were no allegations of any wrongdoing with respect to the anticipated payments to creditors. Using the money to pay creditors is a decision which Mount Eastern was entitled to make, and there is nothing objectionable or illegitimate about it if it is done in good faith. Furthermore, there was no evidence that Mount Eastern was unable to pay its debts, and the references to Ma’s arrest and the winding-up of Mount Eastern HK were of little relevance or assistance to the application.

[6] The provisions of the IAA under which the application is made is set out in the title of the originating summons

The powers of the Court or Judge in dealing with the application would be the powers conferred by those provisions.

[7] Section 12 deals with the powers of the arbitral tribunal, and s 12(1)(a) to (i) sets out the orders and directions which the arbitral tribunal can make. The IAA also gives the High Court or a Judge of the High Court powers to make orders in connection with arbitration proceedings. Section 12A(2) provides that:

The Court and the Judge have some, but not all, of the powers of the arbitral tribunal.

[8] The powers conferred by s12(1)(c) to (i) are the powers to make orders or give directions to any party for:

These powers will be referred to as power (c), (d) and (e) and so on, and the orders made pursuant to those powers as a (c) order, a (d) order, a (e) order and so on. The powers are discretionary powers, and a tribunal, Court or Judge would not make an order without being satisfied that that it should be made.

[9] The powers of the High Court or a Judge thereof to make orders and give directions differ in urgent and non-urgent cases. Section 12A(4) provides that:

Additionally, s 12A(5) provides that:

The effect of s 12A(4) is that in an urgent case, a Court or Judge has the power can make (c) to (i) orders when the Court or Judge thinks necessary for the purpose of preserving evidence or assets.

[10] When the Prayers were examined against the setting of the powers of a Court or Judge to grant relief under s 12A(4), the conclusions were as follows:

(a) No order could be made in respect of Prayer 1 as it did not state the measure(s) required to ensure that any arbitral award would not be rendered ineffectual.

(b) No order could be made in respect of Prayer 2 as it did not state the amount in dispute which was to be secured or the security to be provided. (In respect of Prayer 1 and Prayer 2, the affidavit filed in support of the application did not address the matters omitted in the prayers.)

(c) Prayer 3 came within powers (h) and (i).

(d) Prayer 4 was really not an application for an interim injunction. There was no threatened violation of rights, which is a prerequisite for the making of a restraining order, and the relief sought was not an interim injunction, but a permanent open-ended injunction. This prayer did not come within power (i).

[11] Prayers 1 and 2 were deficient and defective, and Prayer 4 fell outside the powers of the Court or Judge. That left Prayer 3, which has been referred to in [3]–[5] above. As noted, H Holdings’ case was simply that if the money in court is paid to out, Mount Eastern might use it to pay its creditors, and the money might not be recovered if the Final Award in Arb 200 is set aside. H Holdings’ case would be stronger if there was some basis to believe that the anticipated payments were intended to put the money out of its reach, but there was no assertion or indication of that. To the contrary, H Holdings acknowledged that there were judgment debts owing by Mount Eastern which needed to be paid.