Judgment

Between

WAH HENG GLASS & METAL PRODUCTS PTE LTD ... Plaintiff

And

GAMMON-CCI CONSTRUCTION LTD ... Defendant

Headnotes:

Judgment:

1 The Plaintiff is a company incorporated in Singapore. The Defendant is a company registered in Vietnam.

2 In this SIC the Defendant sought to discharge a Mareva injunction obtained by the Plaintiff on 22 October 1997, as varied on 14 November 1997. After hearing the parties, I discharged the injunction with costs to the Defendant and ordered an inquiry as to damages sustained by the Defendant by reason of the injunction. However, in order to give the Plaintiff an opportunity to appeal against my order, I ordered that the injunction remain in force for 2 weeks and if the Plaintiff appealed within this time, that it should remain in force pending appeal. The Plaintiff has since appealed and I now give my grounds of decision.

3 The Defendant was the main contractor for the construction of the Prime Centre Project at Hanoi, Vietnam. In February 1996 the Defendant requested quotes from Wah Heng Glass & Metal Products Ltd, a Hong Kong company ("Wah Heng HK"), for the supply and installation of curtain wall, windows, metal doors, louvre and canopies (the "Works"). Wah Heng HK responded with a tender offer on 23 February. After some negotiations, the Works were split into supply and installation components and awarded to 2 related companies of Wah Heng HK. The contract for installation was awarded to the Plaintiff. The contract for the supply of the materials for the Works was awarded to Wel-Max Enterprises Pte Ltd ("Wel-Max").

4 The contract between the Plaintiff and the Defendant for installation (the "Installation Contract") is dated 14 May 1996 and is valued at US$150,000. The contract between the Plaintiff and Wel-Max for supply of materials (the "Supply Contract") is not dated (although it refers to a quote from Wel-Max dated 31 May 1996) and is valued at US$850,000.

5 The Installation Contract requires the Plaintiff to provide a performance bond. This is stated in clause 21 which provides as follows:

"The Sub-Contractor shall at his own expense obtain a performance bond ... from an insurance company or bank ... to be jointly and severally bound together with him to the Contractor to the extent of 10% of the value of the Sub-Contract for the due performance of the Sub-Contract."

6 There does not seem to be a similar provision in the Supply Contract for a performance bond. However according to the Plaintiff, such a bond was procured jointly by the Plaintiff and Wel-Max and a copy of it is exhibited as TKJ-3 in the Affidavit of Tan Kuo Jen, the Managing Director of the Plaintiff, filed 22 October 1997. This performance bond was given by HSBC Insurance (International) Ltd, a Singapore insurer and dated 17 July 1996. The opening paragraph states:

"This Guarantee is given the 1st day of September 1996 between HSBC Insurance (International) Limited, ... (hereinafter called the "Guarantor") in favour of the Gammon-CCI Construction Limited ... (hereinafter called "The Main Contractor") and is supplemental to:

(a) a contract made between Wel-Max Enterprises Pte Ltd ... (hereinafter called "The Supplier") of one part and the Main Contractor of the other part whereby the Supplier agreed to supply for the Prime Centre Curtain Wall Project (hereinafter called "The Supply Contract") in the sum of ... USD850,000 ... and

(b) a contract made between Wah Heng Glass & Metals Products Pte Ltd ... (hereinafter called "The Subcontractor") of one part and the Main Contractor of the other part whereby the Subcontractor agreed to install for the Prime Centre Curtain Wall Project (hereinafter called "The Installation Contract") in the sum of ... USD150,000...

7 In the course of the execution of the supply and installation contracts, both the Plaintiff and Wel-Max got embroiled in disputes with the Defendant in relation to performance. Firstly, the Defendant claimed that Wel-Max failed to deliver certain materials on time. This is supported by the Plaintiff - see paragraph 12 of the Affidavit of Tan Kuo Jen and paragraphs 6 and 9 of the Affidavit of Han Jee Juan. Secondly, the Defendant claimed that the Plaintiff had failed to properly install certain bolts which had delayed the issuance by the Architect of the completion certificate. These were the 2 grounds used by the Defendant in its letter dated 25 September 1997 to the Guarantor making a demand for payment under the performance bond.

8 The parties agree that the bond is an unconditional on-demand bond. Indeed the Plaintiff does not dispute that the Defendant is entitled to call on the bond in this case - see paragraph 16 of the Affidavit of Han Jee Juan. The Plaintiff claims that there is a bona fide dispute between the parties and seeks an order preventing the Defendant from removing the proceeds of the bond out of Singapore until the matter can be brought to trial.

9 On 22 October 1997, the Plaintiff commenced this action by writ for the payment of sums due under the Installation Contract. At the same time the Plaintiff made an ex parte application for an interlocutory injunction. An order was granted on the same day by Choo, JC restraining the Defendant from removing or disposing of monies payable under the performance bond up to the value of US$100,000. On 14 November 1997 the Plaintiff sought and obtained, also ex parte, a variation to the order after the Guarantor made some comments about the original order. This amendment is not relevant to my decision and I need not go further into it, except to say that it was this amended order that the Defendant sought to discharge in this application.

10 The Plaintiff's grounds for the injunction are given in the Affidavit of Tan Kuo Jen. These may be summarised as follows:

(a) The Plaintiff has a good cause of action against the Defendant for payments due for the work it had carried out under the Installation Contract.

(b) The Defendant is a Vietnamese company and the Plaintiff believes it has no other assets in Singapore apart from the proceeds of the bond.

(c) There is a good chance that the assets would be dissipated.

(d) The Plaintiff has been advised by its solicitors that if it succeeds at the trial of the main action, it would not be able to enforce the judgment in Vietnam as there is no arrangement for reciprocal enforcement.

11 On 19 November 1997 the Defendant applied to set aside the order of 22 October 1997, as amended on 14 November. In the same application, the Defendant also prayed for a stay of all other proceedings on the grounds that the parties had referred the dispute to arbitration pursuant to the arbitration clause (clause 20) in the Installation Contract. This arbitration is governed by the International Arbitration Act because the Defendant is a foreign-based entity and the place of performance is in Vietnam. The Plaintiff consented to this prayer and I gave the order to stay all other proceedings including the substiantial action in this one.

12 The Defendant's grounds for its application to discharge the injunction are:

(a) The Plaintiff had failed to complete the work under the Installation Contract in time and is liable to pay the D at least US$900,000 in liquidated damages.

(b) The Defendant had made payments of about US$53,700 to the Plaintiff and about US$667,500 to Wel-Max under the Installation and Supply Contracts. In addition, the Defendant had paid about US$100,000 to local companies on behalf of Wah Heng HK.

(c) The Defendant was ready and willing to do everything necessary to enable all matters in dispute to be determined in the arbitration.

(d) The Plaintiff had misled the court in its application for the injunction in that although it is true that there is no arrangement with Vietnam for reciprocal enforcement of judgments, there is a compulsory arbitration clause in the Installation Contract and, Singapore and Vietnam being parties to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards ("New York Convention"), any arbitral award against the Defendant will be enforceable in Vietnam.

(e) The Plaintiff had applied ex parte for the injunction on 22 October 1997 and the variation to it on 14 November when, under the circumstances, it ought to have made inter partes applications, if not for both then at least for the second order.

13 The Mareva injunction was first used in Nippon Yusen Kaisha v Karageorgis [1975] 3 All ER 282 and in Mareva Compania Naviera SA v International Bulk Carriers SA [1980] 1 All ER 213. In the Mareva case, the plaintiff-shipowners had issued a writ against the defendant-charterers to recover unpaid charter monies and damages for breach of the charter contract. The defendant had sub-chartered the vessel and had received payments for the sub-charter but failed to pay the plaintiff under the main charter due to financial difficulties. The defendant was not an English entity but it had moneys standing to its credit in an English bank which the court ordered to be frozen. Lord Denning MR, said, at p 215b:

"If it appears that the debt is due and owing, and there is a danger that the debtor may dispose of his assets so as to defeat it before judgment, the court has jurisdiction in a proper case to grant an interlocutory judgment so as to prevent him disposing of those assets." (emphasis added)

14 Subsequent cases have fleshed out the scope of the Mareva injunction. It is clear from the authorities that the jurisdiction is not invoked for the purpose of granting to the plaintiff any security for his claim - see Z Ltd v A [1982] 1 All ER 556 at p 571 - but to prevent injustice where there is a real risk of the defendant removing or disposing of his assets so as to defeat any judgment that the plaintiff may subsequently obtain. In Third Chandris v Unimarine [1979] 2 All ER 972 at p 984, the Court of Appeal set out guidelines that the court should bear in mind:

"(i) The plaintiff should make full and frank disclosure of all matters in his knowledge which are material for the judge to know ... (ii) The plaintiff should give particulars of his claim against the defendant, stating the ground of his claim and the amount thereof, and fairly stating the points made against it by the defendant. (iii) The plaintiff should give some grounds for believing that the defendants have assets here... (iv) The plaintiff should give some grounds for believing that there is a risk of the assets being removed before the judgment or award is satisfied. The mere fact that the defendant is abroad is not by itself sufficient. No one would wish any reputable foreign company to be plagued with a Mareva injunction simply because it has agreed to London arbitration. But there are some foreign companies whose structure invites comment. We often see in this court a corporation

which is registered in a country where the company law is so loose that nothing is known about it, where it does no work and has no officers and no assets. Nothing can be found out about the membership, or its control, or its assets, or the charges on them. Judgment cannot be enforced against it. There is no reciprocal enforcement of judgments. It is nothing more than a name grasped from the air, as elusive as the Cheshire cat. In such cases the very fact of incorporation there gives some ground for believing there is a risk that, if judgment or an award is obtained, it may go unsatisfied. Such registration of such companies may carry many advantages to the individuals who control them, but they may suffer the disadvantage of having a Mareva injunction granted against them. The giving of security for a debt is a small price to pay for the convenience of such a registration. Security would certainly be required in New York. So also it may be in London. Other grounds may be shown for believing there is a risk. But some such should be shown. (v) The plaintiffs must, of course, give an undertaking in damages, in case they fail in their claim or the injunction turns out to be unjustified..." (emphasis added)

15 The requirement to state grounds for the belief that there is a risk of dissipation was also laid down by the Court of Appeal in Chan Choy Keen Collin v PUB [1997] 1 SLR 604, in which the court stated at p 611F:

"19 On the material before us, there was no 'solid evidence' of any conduct on the third defendant's part which suggests that there was a risk of dissipation occurring, let alone a real risk. In Barclay-Johnson v Yuill [1980] 3 All ER 190, Sir Robert Megarry VC said, at p 194:

… the heart and core of the Mareva injunction is the risk of the defendant removing his assets from the jurisdiction and so stultifying any judgment given by the courts in the action. If there is no real risk of this, such an injunction should be refused; if there is a real risk, then if the other requirements are satisfied the injunction ought to be granted …

20 In The Niedersachsen; Ninemia Maritime Corp v Trave Schiffahrtsgesselschaft mbH & Co KG [1984] 1 All ER 398, Mustill J, whose judgment at first instance was upheld on appeal, held that the plaintiff would have to adduce 'solid evidence' to support his assertions of a real risk of dissipation. He said, at p 406:

It is not enough for the plaintiff to assert a risk that the assets will be dissipated. He must demonstrate this by solid evidence. This evidence may take a number of different forms. It may consist of direct evidence that the defendant has previously acted in a way which shows that his probity is not to be relied on. Or the plaintiff may show what type of company the defendant is (where it is incorporated, what are its corporate structure and assets, and so on) so as to raise an inference that the company is not to be relied on. Or again, the plaintiff may be able to found his case on the fact that inquiries about the characteristics of the defendant have led to a blank wall. Precisely what form the evidence may take will depend on the particular circumstances of the case. But the evidence must always be there.

21 At the minimum, a plaintiff in seeking a Mareva injunction must furnish 'some grounds for believing that there is a risk' of the assets being dissipated (per Lai Kew Chai J in Art Trend Ltd v Blue Dolphin (Pte) Ltd [1983] 1 MLJ 25 at p 29; 1982-1983 SLR 362 at p 367). A mere possibility or unsupported fear of dissipation is insufficient: O'Regan & Ors v Iambic Productions Ltd (1989) 139 NLJ 1378, at p 1379 where Sir Peter Pain said:

There are numerous paragraphs in the authorities relating to Mareva injunctions which make it plain that unsupported statements and expressions of fear carry very little, if any, weight. The court needs to act on objective facts from which the court can infer that the defendant is likely to move assets abroad or dissipate them within the jurisdiction."

16 In the present case the Plaintiff makes 2 bare assertions that "[t]here is a good chance that the assets would be dissipated" (paragraph 17 of the Affidavit of Tan Kuo Jen) and "there is a risk that the assets will be disbursed abroad such that any judgment obtained by the Plaintiff would be unsatisfied" (paragraph 17d of the affidavit of Han Jee Juan). To support these assetions, the Plaintiff relies on the fact that the Defendant is wholly based in Vietnam and has no other assets in Singapore. The Defendant does not deny these facts. Having no business in Singapore, the natural thing for the Defendant to do would be to repatriate the money to Vietnam where it can be put to better use. However by itself, this does not mean that the Defendant intends to remove the moneys out of the jurisdiction in order to defeat any judgment that may be obtained by the Plaintiff. In my view, under the circumstances it is incumbent upon the Plaintiff to show something more than mere intention to remove the money out of the jurisdiction.

17 The Plaintiff had stated that there was no arrangement between Singapore and Vietnam for reciprocal enforcement, thereby implying that any judgment against the Defendant that it can obtain from a Singapore court would be useless. However the Plaintiff failed to point out that there was an arbitration clause in the Installation Contract and that Vietnam was a party to the New York Convention. While I accept the explanation of counsel for the Plaintiff that this was an innocent omission, I do not accept her submission that this was not material to the decision to grant the injunction. The fact remains that the Plaintiff relied on it as one of its 3 principal grounds for the injunction. The Plaintiff did not specify what its grounds were for the belief that the Defendant's assets would be dissipated. It is clear that the assertion that there was no reciprocal enforcement arrangement with Vietnam was intended to imply that if the moneys were removed to Vietnam it would be out of reach of the Plaintiff should it succeed in its claim.

18 I therefore find that this fact materially changes the complexion of the matter because it means that the Plaintiff can enforce an arbitration award in its favour against the the Defendant in Vietnam whereas its position when it applied for the injunction was that the Defendant was out of reach in Vietnam. It is a material omission which would have been an important factor in the decision of the court in the grant of the injunction on the ex parte application.

19 The Defendant submits that the Plaintiff ought to have made an inter partes application, if not in the first application on 22 October 1997, then at least in the second application of 14 November. The last letter of demand (there were earlier demands) from the Defendant to the Guarantor is dated 16 October 1997. The Guarantor sent a letter dated 20 October to the Plaintiff advising that the Guarantor would release the money to the Defendant by noon on 22 October, i.e. in 2 days' time. Even if the circumstances did not permit the Plaintiff to notify the Defendant in time (the injunction was obtained on 22 October), the Defendant submits that the Plaintiff ought to have applied inter partes on 14 November as the writ was served on M/s Allen & Gledhill as solicitors for the Defendant on 11 November. The Defendant cited various authorities which stated that such applications should be made inter partes wherever possible. I need not go into this because I am satisfied that given the short period between 20 and 22 October, it was not unreasonable for the Plainitiff's solicitors to make an ex parte application in the circumstances. As for the variation order, although I agree that the Plaintiff ought to have given notice to the Defendant, I find that the Defendant suffered no substantial prejudice from the Plaintiff's omission because it would, at most, have meant that the Defendant would have been able to oppose the injunction earlier, on 14 November 1997.

20 The parties have joined issue as to who is in default in the Installation Contract. The Plaintiff asserts that it had performed its obligations under the Installation Contract and that any delay was not due to its default, and is therefore entitled to payment of the balance of the contract sum. The Defendant asserts that the Plaintiff

had failed to complete the work under the Installation Contract and claims liquidated damages for the delay. Both parties give its reasons why the other is liable and the court can only conclude that each has a reasonable case against the other.

21 There is one final point. The Plaintiff contracted with the Defendant to install curtain wall, windows, metal doors, louvre and canopies for the Prime Centre Project in Hanoi. Pursuant to the Installation Contract, the Plaintiff supplied the performance bond. This is an unconditional on demand bond, which gives the right to the Defendant to call on it so long as it has a bona fide claim against the Plaintiff. This is the nature of the bargain between the parties.

22 Performance bonds of this kind are quite common in the building industry. They are imposed by employers and main contractors to ensure satisfactory performance by contractors or subcontractors. Before their use became widespread, an employer would retain a certain percentage of the progress payments due to the contractor. This practice sometimes imposed financial strain on contractors and the practice grew of accepting a performance bond in lieu of the retention sum or in consideration of a reduction thereof. When a contractor procures a performance bond, the bank would require some collateral such as a charge or a mortgage or even a personal guarantee, and charge a fee. This frees up the cash that would otherwise be withheld in the retention sum. The employer benefits if this reduction in financing cost is reflected in the tender price. However for performance bonds to be acceptable to employers, they have to be treated "as being the equivalent of cash in hand" - per Donaldson, LJ in Intraco v Notis Shipping Corporation [1981] 2 Lloyd's Rep 256 at p 257.

23 The Defendant has now demanded payment under the peformance bond. The Plaintiff does not challenge the Defendant's right to make this demand, i.e. the Plaintiff does not say that the demand is mala fide. But to continue the injunction would mean that the Plaintiff is effectively preventing the Defendant from collecting payment on the money that the Plaintiff had agreed that the Defendant is entitled to collect. At the time of contract, the Plaintiff was well aware that the Defendant was a Vietnamese company with no operations in Singapore which meant that if money was to be paid under the performance bond it would, in all likelihood, be repatriated to Vietnam or elsewhere. The Plaintiff has not asserted any change in the circumstances and only makes a bare statement that there is a "good chance that the assets will be dissipated". By applying for an injunction, it seems to me that the Plaintiff is seeking to alter the bargain between the parties.

24 The basis for the jurisdiction to make a Mareva Injunction is found in section 4(8) of the Civil Law Act which states:

"A mandamus or an injunction may be granted or a receiver appointed by an interlocutory order of the court, either unconditionally or upon such terms and conditions as the court thinks just, in all cases in which it appears to the court to be just or convenient that such order should be made."

See Art Trend Ltd v Blue Dolphin (Pte) Ltd [1983] 1 MLJ 25 at p 29, and The Neidersachsen [1984] 1 All ER 398 at p 415b. In considering whether to make the order, the court has to consider whether it is just or convenient in the circumstances of the case to do so. In view of the circumstances of this case, in particular:

(i) the Plaintiff's failure to provide grounds or evidence of the alleged risk of dissipation of assets by the Defendant;

(ii) the Plaintiff's failure to disclose in the application the fact that an arbitration award would be enforceable in Vietnam against the Defendant because Vietnam and Singapore are parties to the New York Convention;

(iii) the fact that such an award is in fact enforceable; and

(iv) the fact that under the circumstances, the grant of the injunction would tantamount to changing the bargain between the parties,

I found that the court should discharge the order and ordered accordingly.

LEE SEIU KIN

JUDICIAL COMMISSIONER