First published on 19 August 2021.
In the modern era where assets may be easily moved from one country to another with relative ease, it is not uncommon for claimants to ask the Singapore courts to freeze a defendant’s assets in Singapore pending the conclusion of overseas legal proceedings.
The Singapore courts however have generally taken a very restricted approach towards these types of cases due to possible jurisdictional objections.
On 26 July 2021, the Ministry of Law proposed new laws to empower the General Division of the High Court of Singapore to grant interim relief in aid of foreign court proceedings, even where there are no substantive proceedings in Singapore.
In this commentary, we briefly trace the legal developments in this area and provide our preliminary views on the proposed amendment.
Introduction
Suppose a claimant sues a Hong Kong defendant in the Hong Kong Court for a breach of contract that took place in Hong Kong.
All of the defendant’s substantive assets however are located in Singapore and it has little assets in Hong Kong, even though Hong Kong is the most appropriate forum, legally-speaking, to determine the dispute.
In such a scenario, the claimant would be understandably concerned that the defendant could dissipate his Singapore assets even before the Hong Kong court issues its judgment.
Can the claimant obtain a Mareva Injunction order from the Singapore Court to prevent the defendant from dissipating his Singapore assets, so that he can enforce his judgment against those Singapore assets in the event that he wins the Hong Kong suit?
The present law in Singapore
In 2020, the Singapore Court of Appeal held in a landmark case that the Singapore courts have the power to grant Mareva Injunctions in support of foreign proceedings.
However, and more importantly, this power is subject to 2 important conditions:
(a) First, the Singapore courts must have “in personam jurisdiction” over the defendant. This means that the Singapore court must have the authority to hear and determine a dispute over that particular defendant.
(b) Second, the claimant must also have a reasonable accrued cause of action against the defendant in Singapore.
In order to establish that the Singapore courts have in personam jurisdiction over a foreign defendant, the claimant must show, among others, that Singapore, and not anywhere else, is the most appropriate country (or ‘forum’) to determine the dispute.
Difficulties with the present state of the law
In the hypothetical Hong Kong scenario that we set out, it is unlikely that both conditions would be met and a Mareva Injunction secured.
On condition (a), the connecting factors all point towards Hong Kong as the appropriate forum, so the fact that the defendant has assets in Singapore, without more, is insufficient to show that the Singapore courts have in personam jurisdiction over the defendant.
As for condition (b), there is no suit commenced in Singapore for the claimant’s claim, and it is unlikely that the claimant has a cause of action against the defendant in Singapore which would be accepted by the Court.
This is problematic for the claimant because it leaves the claimant caught between a rock and a hard place. On the one hand, the claimant cannot freeze the defendant’s Singapore assets, but on the other hand, the defendant has no Hong Kong assets to satisfy a Hong Kong court judgment either. By the time the Hong Kong judgment is rendered enforceable in a Singapore court, liquid assets or cash would have flown the coop.
This dilemma was recently identified by the Singapore High Court again just last year. Citing Lord Nicholls Birkenhead’s dissenting judgment from a 1996 UK House of Lords case – which dealt with a similar situation between the Hong Kong and Monaco courts – Lord Birkenhead writes:
“[t]he first defendant’s argument comes to this: his assets are in Hong Kong, so the Monaco court cannot reach them; he is in Monaco, so the Hong Kong court cannot reach him. That cannot be right. That is not acceptable today. A person operating internationally cannot so easily defeat the judicial process. There is not a black hole into which a defendant can escape out of sight and become unreachable.”
Noting Lord Birkenhead’s concerns, the Singapore High Court observed that “[i]t would make little sense if the courts are less equipped than arbitral tribunals to prevent injustices occasioned by international fraud”.
However, in a separate 2018 Singapore High Court case, a different Singapore judge opined that while he “accept[ed] the concerns expressed by Lord Nicholls of Birkenhead … that is a matter that has to be left to a higher court or to the legislature”.
What does the proposed new law say?
This legal position may now have to be re-considered in light of the new Courts (Civil and Criminal Justice) Reform Bill (the “Bill”).
Introduced in Parliament for the first time on 26 July 2021, the Bill proposes 3 brand new statutory provisions, namely sections 4(10A) to 4(10C) of the Civil Law Act, titled “Interim relief in aid of foreign proceedings”.
The Explanatory Statement of the Bill provides that the new section 4(10A) now confers “jurisdiction and power” on the General Division of the High Court to grant interim relief in aid of proceedings which have been or are to be commenced outside Singapore, if it appears to the court that it would be just and convenient to make such an order.
Such proceedings cover any civil or commercial matter, but excludes proceedings arising out of any fiscal, monetary or revenue law or measure.
The interim relief that the General Division of the High Court may grant under the new section 4(10A) is interim relief of any kind (except certain excluded reliefs), which the court has power to grant in proceedings relating to matters within its jurisdiction.
This appears wide enough to cover commonly sought relief by claimants, such as a Mareva Injunction order.
The Ministry of Law explained in a press release that the empowerment of the Singapore courts to grant interim relief in aid of foreign proceedings is designed to “enhance Singapore’s standing as a constructive player in international litigation and support our efforts to promote Singapore as a leading dispute resolution hub”.
The newly proposed sections 4(10A) to 4(10C) are also part of a bigger bundle of legislative amendments within the Bill intended to ensure our courts are “future-ready” and “equipped to meet the evolving needs of society”.
Does this mean the Singapore courts will now grant interim relief in aid of foreign proceedings in all cases?
Notwithstanding the wide wording of the proposed amendment, a new section 4(10C) also provides that the court may refuse to grant interim relief in 2 situations.
The first situation is where the court is of the opinion that, the fact that it has no jurisdiction apart from the new section 4(10A) in relation to the subject matter of the proceedings makes it inappropriate for the court to make the order. This suggests that the old judicial concerns will continue to carry weight.
The second situation is if the proceedings concerned are not capable of giving rise to a judgment which may be enforced in Singapore.
In effect, the proposed provisions suggest that the Singapore courts remain the ‘final gatekeeper’ in deciding whether or not to grant interim relief in aid of foreign proceedings.
Additionally, each type of interim relief – be it a Mareva injunction, a search order or otherwise – also has its own unique legal requirements which must still be satisfied before a Singapore court would grant the relief sought.
Is this development unique to Singapore?
Singapore is not the first in introducing laws that empower its courts to grant relief in aid of foreign proceedings.
In the United Kingdom, section 25 of the Civil Jurisdiction and Judgments Act 1982 (the “UK Act”) empowers the High Court in England and Wales or Northern Ireland to grant interim relief for proceedings that have been or are to be commenced in certain specified countries outside of the United Kingdom.
Similarly, in Hong Kong, its High Court Ordinance was amended in 2008 to make it clear that the court is able to order interim remedies in relation to proceedings that have been or are to be commenced in a place outside of Hong Kong.
In Australia, legislative reform has been eschewed because the courts there have taken a slightly different approach in analysing the juridical basis for freezing orders. In Australia, freezing orders stem from the court’s inherent power to prevent the frustration of its court processes, so the Australian courts effectively allow a more flexible approach to grant freezing orders in aid of foreign proceedings without the need for legislative reform.
Why is this law being introduced in Singapore, and why now?
As can be seen from the brief comparative review above, Singapore is certainly not the first among the Commonwealth countries to introduce legislative reform in this area.
It is possible that these legislative amendments are being introduced so as to finally bring Singapore in line with the way in which other Commonwealth countries have developed in this area, such as in the United Kingdom and Hong Kong. For instance, we note, parenthetically, that the newly proposed sections 4(10A) to 4(10C) in the Bill are modelled after section 25 of the UK Act.
Where could I find more information released on these new laws?
The Second Reading of the Bill is sometime in September this year.
We therefore expect more information to be released by the Ministry of Law once the matter is being debated in Parliament. We await further news with bated breath.
Disclaimer
Please note that the information in this article is correct as of the date of this article. The article does not constitute legal advice in any way. If you require any advice in relation to the contents of this article, please approach us for further assistance.
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Authors: Lim Ming Yi, Yeo Shan Hui, Jaryl Lim, Gabriel Kwek.