MILAHA EXPLORER PTE. LTD. v PENGRUI LEASING (TIANJIN) CO. LTD.

Facts

Milaha Explorer Pte Ltd is a Singapore special purpose vehicle whose sole asset is the vessel "Milaha Explorer". It has a paid-up capital of $50,000, and its ultimate owner is Qatari Navigation QPSC, a company listed on the Qatar stock exchange. Under a memorandum of agreement (MOA) dated 31 May 2021, Milaha agreed to sell the vessel to Pengrui Leasing (Tianjin) Co Ltd, a Chinese ship-owning and leasing company, for US$26m. The MOA gave Milaha a right of resale if the buyer defaulted and provided for arbitration in London.

A dispute soon arose. Pengrui alleged the vessel did not meet the MOA's requirements; Milaha alleged Pengrui had failed to carry out variations agreed at a meeting on 2 August 2021, which Pengrui denied attending. By its 12 August 2021 letter Milaha cancelled the MOA and referred to its right to sell to someone else. Pengrui began arbitration in London and, in HC/OS 849/2021, obtained an ex parte Mareva injunction in aid of it. The Judge refused to set the injunction aside; that decision is reported as [2022] SGHC 80. The injunction covered Milaha's assets in Singapore up to US$23,760,473, including the vessel and its HSBC account. Milaha's appeal, Civil Appeal No 2 of 2022, was transferred to the Court of Appeal.

Issue

Whether there was a real risk that Milaha would dissipate its assets so as to justify a Mareva injunction.

Holding

The Court of Appeal allowed the appeal and set aside the Mareva injunction. It awarded Milaha costs fixed at $45,000 (inclusive of disbursements) for the appeal and the proceedings below, set aside the Judge's costs order, and ordered Pengrui to refund the costs below that Milaha had paid.

Reasoning

The court applied the test in JTrust Asia Pte Ltd v Group Lease Holdings Pte Ltd and others [2018] 2 SLR 159: whether there is objectively a real risk that a judgment may go unsatisfied because of unjustified dealings with assets, shown by solid evidence rather than bare assertion.

Milaha's corporate structure did not show such a risk. Holding a vessel through a one-ship company was explained by its purpose of ringfencing risk, and Milaha was owned by a listed company. Pengrui knew or could readily have found out about the structure, which was not concealed, unlike the opaque structures in JTrust. Having dealt with Milaha with its eyes open, Pengrui had accepted the risk of depending on the parent, and could have sought a corporate guarantee. A Mareva injunction is not meant to provide security or to guard against a counterparty's insolvency. Foreign origin is only one factor and cannot alone establish the risk.

Nor was there any unjustified dealing with assets. Dealing with assets is not enough; it must lack a legitimate commercial reason. The 12 August 2021 letter merely stated the consequence of Pengrui's alleged breach, the vessel had not been sold or contracted for sale, and a sale could have legitimate reasons. Guan Chong Cocoa Manufacturer Sdn Bhd v Pratiwi Shipping SA [2003] 1 SLR(R) 157 was distinguished: Milaha had always intended to sell the vessel, and the MOA itself gave a right of resale. The court also noted that Pengrui's deposit of US$5.2m had stayed largely untouched in the HSBC account before the injunction.

The court agreed with the Judge that Pengrui's hotly contested allegations of dishonesty should be disregarded, as they had no real bearing on the risk of dissipation and were for the London arbitration. It added that the injunction had a draconian effect on a company with a single asset, and that Pengrui's suggestion of security or escrow had no basis once the injunction fell away.

From the judgment