Bouvier, Yves Charles Edgar & Anor v Accent Delight International Ltd & Anor and another appeal  [2015] SGCA 45

In the ground breaking case of Bouvier, Yves Charles Edgar & Anor v Accent Delight International Ltd & Anor and another appeal, the Singapore Court of Appeal set aside worldwide Mareva injunctions that had been imposed on the appellants. In doing so, the Court of Appeal delivered a landmark judgment which, for the first time, clarified definitively the relationship between allegations of dishonesty against a defendant and a real risk of dissipation of assets (the latter being one of the key requirements for the grant of a Mareva injunction). Contrary to an earlier High Court decision which had suggested otherwise, the Court of Appeal held that an allegation of dishonesty in itself is not sufficient to found a real risk of dissipation unless the dishonesty alleged is of a nature or characteristic that sufficiently bears upon the risk of dissipation.

Referring to Mareva injunctions as generally “nuclear weapons” of civil litigation and a worldwide Mareva injunction as specifically “that and even more”, the Court of Appeal emphasised, at the outset of its judgment, the need to scrutinise the basis for such an injunction “with utmost care”.

Facts

This case was a joint hearing of two appeals. This article focuses on the appeal by Yves Charles Edgar Bouvier (“Mr Bouvier”) and MEI Invest Limited (“MEI Invest”). Mr Bouvier is a Swissbusinessman who runs an art-related transport and storage business. He also invests and deals in art. He holds a Singapore permanent residency. Mr Bouvier has control over and often acts through MEI Invest.

The dispute between the appellants and the respondents arose out of the respondents’ acquisition of 38 art masterpieces between 2003 and 2014. All the acquisitions were arranged by Mr Bouvier. Mr Bouvier in turn acted through MEI Invest. The respondents contended that unbeknownst to them until late 2014, when it came to light, Mr Bouvier had added undisclosed mark ups (the “Excess Payments”) on the prices of artworks that he had acquired for and on behalf of the respondents.The respondents claimed Mr Bouvier was not entitled to profit from the transactions beyond the 2% commission they paid him.

The nub of the dispute between Mr Bouvier and the respondents turned on the capacity in which Mr Bouvier was acting when he arranged the respondents’ acquisitions - whether he was acting as therespondents’ agent and therefore owed them fiduciary duties (as the respondents claimed), or whether he was acting as an independent seller transacting at arm’s length with the respondents (as Mr Bouvier claimed). The dispute as to the true nature of the relationship between Mr Bouvier and the respondents is the subject of the underlying suit (the “Singapore action”).

The respondents commenced the Singapore action on 12 March 2015 and simultaneously applied ex-parte (and without notice to the appellants) to the Singapore High Court for Mareva injunctions and ancillary disclosure orders against the appellants in support of their claims in the Singapore action.The judge in the High Court (the “Judge”) granted the applications on the same day. The cumulative value of the assets subject to the worldwide Mareva injunctions was US$1.1 billion. The appellantsapplied to set aside the Mareva injunctions and the ancillary disclosure orders. The Judge did not set aside either the Mareva injunctions or the ancillary disclosure orders, but attenuated them. It is against these orders that Mr Bouvier and MEI Invest appealed.

The Court of Appeal held that the Mareva injunction against the appellants should be discharged as the requirements for the grant of a Mareva injunction had not been satisfied. Furthermore, the Mareva injunction against Mr Bouvier was an abuse of process. The court also found that the respondents’ arguments premised on Mr Bouvier’s asset disclosures were wrong in principle.

Whether the requirements for the grant of Mareva relief were satisfied

The requirements for the grant of Mareva relief are well established. Two are relevant to these appeals, namely: (a) a good arguable case on the merits of the plaintiff’s claim; and (b) a real risk that the defendant will dissipate his assets to frustrate the enforcement of an anticipated judgment of the court. The Court of Appeal explained that while the legal test for a worldwide Mareva injunction may be the same as that for a Mareva injunction over assets within the jurisdiction, thecircumstances that will have to be established in order to cross the threshold of necessity will likely be more exacting where a worldwide Mareva injunction is concerned.

Good arguable case but no higher

As mentioned above, the dispute in the Singapore action between Mr Bouvier and the respondents turned on whether the relationship between them was an agent-principal relationship or a principal-to-principal relationship. Although there was e-mail correspondence which favoured the former characterisation, the Court of Appeal found that the circumstances of the transactions concerned as a whole cast doubt on such a characterisation. While the court held that the respondents’ claimsagainst Mr Bouvier crossed the threshold of a good arguable case (for purposes of a Mareva injunction), there remained too many gaps in the evidence to put it any higher than that. For example, there was evidence before the court to show that it was at least doubtful that the respondents genuinely believed that the remuneration for Mr Bouvier’s services was limited to the 2% commission they paid him. Also, the early transactions between the respondents and Mr Bouvier did not appear to have rested on a relationship built solely on trust.

However, the Court of Appeal noted that the main focus of the hearing of the appeals were not on a good arguable case, but on the real risk of dissipation. Indeed, this was the crux of the appeals, which ultimately decided the outcome of the appeals.

Dishonesty and a real risk of dissipation

The respondents argued that the court may infer a real risk of dissipation just from the fact that a good arguable case of dishonesty had been put forward against Mr Bouvier. In doing so, the respondents relied on a particular passage in the High Court decision in Spectramed Pte Ltd v Lek Puay Puay [2010] SGHC 112 (“Spectramed”), which appeared to obviate the need to separatelyestablish a real risk of dissipation once a good arguable case of dishonesty against the defendant has been established (referred to by the Court of Appeal in its judgment as the “Spectramedproviso”). The appellants, in turn, argued that, the Spectramed proviso was wrong, with reference to an earlier High Court decision by Chan Sek Keong J (as he then was) in European Grain & Shipping Ltd v Compania Naviera Euro-Asia SA & Ors (CN Jaya SA, intervener) [1989] 2 SLR(R) 445, as well as a number of cases in England and Australia, which have taken contrary views.

In the final analysis, the Court of Appeal agreed with the appellants’ submission and was of the view that the Spectramed proviso “goes too far”. The court disagreed with the Spectramed proviso, holding that an allegation of dishonesty cannot obviate the need to establish a real risk of dissipation. The Court of Appeal gave three key reasons for this conclusion.

The first, according to the Court of Appeal, was a matter of common sense. The fact that a defendant might be crooked does not in and of itself establish that there is therefore a real risk that he will bury his spoils to defeat a judgment that may in due course be rendered against him. Moreover, dishonest conduct can come in “different shades and hues”. Spectramed fails to distinguish between the different types of dishonest conduct, some of which might more readily support an inference of a real risk of dissipation than others.

The second reason was that it would be incorrect for a court to treat allegations of dishonesty made at an interlocutory stage as if they have already been established, bearing in mind that such allegations may eventually be refuted (at trial). The Court of Appeal therefore highlighted that, as a matter of principle, the grant of Mareva relief should not generally be wholly founded upon anunproven allegation of dishonesty. The existence of a real risk of dissipation must be assessedindependently from the prospect of the plaintiff’s eventual success (or failure) in establishing an allegation of dishonesty.

The third reason was that the Spectramed proviso was not borne out by the relevant case law or the larger body of jurisprudence dealing with Mareva injunctions. In this regard, the Court of Appeal embarked on an extended review of decisions in Singapore as well as other jurisdictions (in England and Australia), a significant number of which were cited by the appellants. It concluded that, if there is a unifying principle that can adequately rationalise and explain the circumstances in which a court may legitimately infer a real risk of dissipation from nothing more than a good arguable case of dishonesty, it is that the alleged dishonesty must be of such a nature that it has a real and materialbearing on the risk of dissipation.

In conclusion, the Court of Appeal stressed that in every case, the court has to examine the precise nature of the dishonesty that is alleged and the strength of the evidence relied on in support of the allegation, keeping fully in mind that the proceedings are only at an interlocutory stage and assessing, in that light, whether there is sufficient basis to find a real risk of dissipation. An allegation of dishonesty does not in itself form a substitute for an examination of the degree of risk of dissipation, unless that allegation is of a nature or characteristic that sufficiently bears upon the risk of dissipation.

Applying these principles to the present case, the Court of Appeal was of the view that the allegations of dishonesty levelled at Mr Bouvier did not have a real and material bearing upon therisk of dissipation. In arriving at this conclusion, the court observed that this was not a case where Mr Bouvier misappropriated the respondents’ assets through a series of fictitious or illusory transactions. The respondents received what they bargained for and at the price they were willing to pay. They knew that they were dealing with Mr Bouvier and that he was sourcing the artworks concerned from others. Furthermore, the alleged fraud or dishonesty was not in the nature of a complex machination or an elaborate scheme. The court noted that the alleged ploy in this case, if proved, was simple, i.e. a mere exploitation of the asymmetries of information inherent in an opaque market to turn a profit. It was also important to the court that there was no use of a complex web of companies to conceal the dealings in question. In the court’s view, Mr Bouvier had not misused his international financial expertise in the commission or furtherance of the allegedly deceitful behaviour, nor was there any solid evidence which suggested a real risk of dissipation on his part. In the final analysis, the real issue between the parties was the legal nature of the respondents’ relationship with Mr Bouvier.

Unsatisfactory asset disclosures

On appeal, the respondents added a new argument which was not before the Judge. The respondents argued that there were doubts over how forthright Mr Bouvier had been in his asset disclosures pursuant to the ancillary disclosure orders in support of the Mareva injunction against him. The respondents compared the amount of Excess Payments that Mr Bouvier was alleged to have received against the total amount of assets he disclosed, alleging a disparity between the two figures. They also questioned the type of assets that Mr Bouvier held. On this basis, they sought to persuade the Court of Appeal to draw the inference of a real risk of dissipation.

The Court of Appeal held that to allow a plaintiff to use information extracted from an ancillary disclosure order to support an otherwise unsustainable Mareva injunction would be to provide theplaintiff with an unfair and improper advantage. It would also be unreliable or even misleading to rely on information of this nature to establish whether or not a defendant has been concealing his assets, given that the information does not provide a “longitudinal view” of the defendant’s assets and is often “rough and ready”. Furthermore, the fact that a litigant complies with an asset disclosure order does not necessarily diminish the risk of dissipation if it existed in the first place. Conversely, his non-compliance would not necessarily fortify that risk if it was not sufficiently established to begin with. On the facts, the Court of Appeal was not satisfied that the information disclosed by Mr Bouvier was suspicious.

Abuse of process

Apart from contending that there was no real risk of dissipation in this case, the appellants also argued that the respondents’ conduct both before and after the grant of the Mareva injunction demonstrated clearly that the respondents had a collateral purpose in taking up the injunction. The Court of Appeal also accepted this argument and held that the Mareva injunction obtained against Mr Bouvier was an abuse of the court’s process as it was not obtained to prevent the enforcement of an anticipated judgment from being frustrated, but rather, it was deployed as “an instrument of oppression” to inflict commercial prejudice on Mr Bouvier. Four factors led the Court of Appeal to this conclusion:

  • The respondents’ lack of urgency in their application suggested that in fact, the respondents did not genuinely believe there was a real risk that Mr Bouvier would dissipate his assets. The relevant period of delay was found to be a little under four months. It was telling that the respondents did not put forward any reason as to why they waited so long to seek a worldwide Mareva injunction.
  • The respondents failed to comply with the Supreme Court Practice Directions which required an applicant for an ex parte Mareva injunction to give notice of the application to the other concernedparties prior to the hearing.
  • The Mareva injunction against Mr Bouvier when it was granted on 12 March 2015 as worded wasunnecessarily broad. The Mareva injunction not only prevented him from dealing with the shares that he held in the 14 companies he owned (which was not, in itself, objectionable), it included the assets and bank accounts held in the names of those 14 companies. There was no reason for the respondents to disregard the separate legal personality of the 14 affected companies and include the assets and bank accounts held by them in the Mareva injunction against Mr Bouvier.
  • The respondents’ conduct subsequent to obtaining the Mareva injunction was objectionable. The respondents were still placing in circulation the Mareva injunction against Mr Bouvier in the way it was worded when it was first granted on 12 March 2015, with the 14 affected companies as well as their assets and bank accounts listed in the accompanying schedule. This was more than three months after the orders originally made by the Judge on 12 March 2015 were varied to remove the14 companies.

The Court of Appeal also observed that when a plaintiff seeks a worldwide Mareva injunction from aSingapore court, the plaintiff should ordinarily undertake to the court that it shall not, without the court’s leave, enforce the injunction or seek an order of a similar nature in any jurisdiction outside Singapore. The respondents did not give this undertaking, and despite so, it appeared they tooksteps to enforce the Mareva injunction against Mr Bouvier overseas without obtaining any leave from the court to do so.

Comment

The Court of Appeal’s judgment has provided invaluable guidance and clarification for parties seeking Mareva relief from the court.

First, it makes clear that the court will scrutinise carefully the basis of every application for a Mareva injunction, especially a worldwide Mareva injunction. This is so as a worldwide Mareva injunction, which stretches far beyond the geographical confines of the jurisdiction of the court making the order, can have a “crippling effect” on those against whom it is directed. In particular, the Court of Appeal’s judgment underscores the need for the court to be thoroughly satisfied of the requirement that there is a real risk that the defendant will dissipate its assets to frustrate the enforcement of an anticipated judgment. It is this requirement which “lies at the heart of the court’s power to grant Mareva injunctions”.

Second, the Court of Appeal has cleared up any uncertainty that may have existed in Singapore (following the decision in Spectramed) pertaining to how allegations of dishonesty may have a bearing on the risk of dissipation. In this regard, the Court of Appeal clarified that the approach the court should take in assessing whether an inference of real risk of dissipation may be drawn from such allegations of dishonesty is to: (a) segregate the two questions of whether there is a good arguable case on the merits of the plaintiff’s claim and whether it has been shown that there is a real risk of dissipation; and (b) answer them separately.

According to the Court of Appeal, once the inquiries are segregated, it then becomes clear that whether the evidence pertinent to the first stage of the inquiry is sufficient also for the purposes of the second stage is an assessment that cannot - and emphatically must not - be made mechanistically. In each case, it is incumbent on the court to examine the precise nature of the dishonesty that is alleged and the strength of the evidence relied on in support of the allegation, keeping fully in mind that the proceedings are only at an interlocutory stage and assessing, in that light, whether there is sufficient basis to find a real risk of dissipation. Of upmost importance is that the alleged dishonesty must be of such a nature that it has a real and material bearing on the risk of dissipation. To take the Court of Appeal’s example, there is clearly a difference between a defendant against whom a plausible allegation of dishonesty is made but who may turn out otherwise after defending the suit, and one who might be motivated by the pending litigation against him to behave even more dishonestly. It is the latter case which may justify the grant of a Mareva injunction.

For a plaintiff applying for Mareva relief, this approach also makes it clear that it must adduce sufficient evidence for both stages of the inquiries. Unless the dishonesty alleged is such that it clearly has a real and material bearing on the risk of dissipation and/or that there is, for example, really no dispute that a grave fraud has been committed with the defendant’s involvement (leaving only the precise nature of his role to be determined), it would not be sufficient to seek to justify the grant of an Mareva injunction on an unproven allegation of dishonesty without more. Instead, solid evidence of real risk of dissipation must be adduced.

Third, the Court of Appeal’s judgment has also emphasised the need for applicants of Mareva relief to comply scrupulously with the relevant Practice Directions, especially those pertaining to the giving of notice (even for ex-parte applications, save in cases of “extreme urgency” or where the giving of prior notice may defeat the purpose of the application) and the standard undertakings for a worldwide Mareva injunction. Non-compliance with the Practice Directions without good reason may justify a finding by the court that the Mareva injunction was taken up as an abuse of the court’s process.

Finally, even if the circumstances justify the grant of a Mareva injunction, the onus is on the applicant to ensure that: (a) the breadth of the Mareva injunction is not unnecessarily broad, but worded appropriately to address the risk of dissipation at hand; and (b) subsequent to the grant of the Mareva injunction, it is not “put into wider circulation than [is] necessary for its efficacy”; rather, it is incumbent on the applicant to “exercise due care to ensure that no greater damage was done than necessary to uphold the efficacy of the injunction”. In this regard, the Court of Appeal explained that the gravity of the consequences of a Mareva injunction, especially one that extends worldwide, “mandates” that close and careful consideration be given to details such as its proper scope and the parties who will be affected.