PSONS Ltd v UPF Holding Pte Ltd and others

Choo Han Teck J:

[1] This is an application by the defendants to set aside the mareva injunction granted pursuant to Summons No 4333 of 2013. Summons No 4333 of 2013 concerned an application by the plaintiff in this case, before me on 29 August 2013, for an injunction against the defendants in this case, prohibiting the disposal of their assets in Singapore up to the value of US$900,000. For the first defendant, the injunction extended to monies in its corporate bank accounts, whereas for the second and third defendants, the injunction extended to their shares in the first defendant.

[2] The plaintiff is a company incorporated in Hong Kong, engaged in the business of mining and trading minerals. The first defendant is a trading company primarily involved in the wood and pulp business, incorporated in Singapore. The second and third defendants are directors of the first defendant, and are involved in the day-to-day running of the business. Each of them owns 50% of the shares of the first defendant.

[3] On 18 November 2009, after some negotiations, the plaintiff and the first defendant signed a Memorandum of Understanding (“MOU”). Under the MOU, the plaintiff was to pay US$610,000 to the first defendant in exchange for the first defendant’s help to procure a mining licence for the plaintiff in Laos. This sum was to be paid in stages. When the first defendant accomplished a certain goal in the process of obtaining the licence, a portion would be due. Altogether, the plaintiff had paid the first defendant an aggregate sum of US$841,350 (including expenses). However, no licence was obtained. The plaintiff and the defendants tried many times to resolve their dispute through negotiations. On 25 July 2012, parties arrived at a further agreement (“the Bangkok Agreement”), through which the plaintiff gave the defendants two to three weeks more to obtain the licence, failing which the defendants had to return the sum of US$841,350 to the plaintiff. However, the licence was not obtained, nor was the plaintiff repaid.

[4] On 20 August 2013, the plaintiff commenced Suit No 750 of 2013 in the High Court. It pleaded two causes of action, namely, breach of contract and the tort of deceit. On 29 August 2013, the plaintiff appeared before me seeking an urgent ex parte injunction order. I allowed the application. On 10 December 2013, proceedings against the first defendant were stayed in favour of arbitration – the plaintiff commenced arbitration against the first defendant and filed the notice of arbitration on 11 March 2014. The plaintiff wishes to continue the proceedings in Suit No 750 of 2013 against the second and third defendants. As such, the plaintiff prayed for the injunction order to remain in force against all three defendants.

[5] 5 Having now had the benefit of hearing submissions from both parties, I find that the foundation on which this mareva injunction was based is untenable. I am thus allowing the defendants’ application to set aside the injunction. When counsel appeared before me, both sides seemed keen to delve into whether the elements of the test for granting a mareva injunction had been made out. Both sides agreed there was a good arguable case, and the contention was on whether there was a risk of dissipation. I find it more appropriate, however, to review the equitable nature of a mareva injunction. It is from this perspective that I am allowing the defendants’ application, for I have found that the plaintiff did not come to this court with clean hands. I explain my decision by first highlighting the background as it was presented to me by parties both in their written and oral submissions. Second, I will briefly elaborate on the “clean hands” doctrine.

[8] The schedule was relied on by the plaintiff presumably as a ground for resisting the defendants’ application to set aside the injunction. That approach failed. So, too, did the plaintiff’s reliance on the case of Solvadis Commodity Chemicals GmbH v Affert Resources Pte Ltd [2014] 1 SLR 174 (“Solvadis”) for the proposition that evidence that the defendant had previously acted in a way which shows that his probity is not to be relied on can constitute evidence of a risk of dissipation of the defendant’s assets” (see Solvadis at [16], citing with approval Guan Chong Cocoa Manufacturer Sdn Bhd v Pratiwi Shipping SA [2003] 1 SLR(R) 157 at [18], which in turn cited with approval the words of Mustil J in Ninemia Maritime Corporation v Trave Schiffahrtsgesellschaft mbH (The Niedersachsen) [1983] 1 WLR 1412 at 406). The plaintiff tried to emphasise the defendants’ alleged “lack of probity” to bolster its case that there was a risk of dissipation of assets. The defendants had argued that the first defendant was a company worth more than S$12m, that the shares in the first defendant, which were owned by the second and third defendants, had always been in Singapore, and that the defendants had hitherto made no attempt to sell away the the shares, or dissipate the assets by any other means. In response, the plaintiff submitted that the defendants acted dishonestly by their forgery of a letter allegedly from a Deputy Minister in Laos. This forgery was discovered by the plaintiff on 21 June 2012. Although I accept that forgery of an official document would be a fraudulent act, all I have is the plaintiff’s word on this point. And although I am not prepared to make a conclusive finding as to whether the document was indeed forged (although, counsel for the defendants did not seem to dispute it), I note that the plaintiff continued to deal with the defendants even after it was made aware of the forgery – and even went so far as to sign a further agreement (the Bangkok Agreement, on 25 July 2012).

[9] If it was not clear to the plaintiff initially that it had encouraged the defendants to conduct illicit activities at the time of signing the MOU (which I doubt), it must surely have been clear by 21 June 2012. As such, the two points raised by the plaintiff, the schedule and the defendants’ alleged forgery, turned out to be its Achilles’ heel. The situation then seems to be a clear one: the plaintiff went into the deal with the defendants with full knowledge of what the defendants had to do.

[10] The authority of ICF Spry, The Principles of Equitable Remedies (Sweet & Maxwell, 7th Ed, 2007) at p 409 was cited by Judith Prakash J in Beckkett Pte Ltd v Deutsche Bank AG and another [2011] 1 SLR 524 (“Beckkett”) for its description of the “clean hands” doctrine. I think it is useful to set it out as well:

[11] Although Beckkett concerned an anti-suit injunction, I do not see why the clean hands doctrine should be any different when it comes to mareva injunctions. In this case, I am able to come to one of four findings, with regard to the parties’ eligibility for equitable remedies:

(a) that neither party was in the wrong;

(b) that the defendants were in the wrong;

(c) that the plaintiff was in the wrong; or

(d) that both the plaintiff and defendants were in the wrong.