The Singapore High Court in Parakou Shipping Pte Ltd (in liquidation) v Liu Cheng Chan & Orsgranted an application by a company in liquidation for a Mareva injunction to restrain its former officers and other companies which they controlled from dissipating assets. The court also considered the question of whether the company in liquidation acted with sufficient urgency and diligence in commencing the action and applying for the Mareva injunction.
The plaintiff was a shipping company in liquidation. The present liquidators of the plaintiff were appointed by a major creditor (“Galsworthy”) of the plaintiff. Some years prior to the action, in 2010, Galsworthy had obtained an arbitration award of US$45 million against the plaintiff.
There were a total of six defendants in this action. The first to fourth defendants controlled and managed the plaintiff prior to its liquidation. The third and fourth defendants took over the plaintiff from the first and second defendants (the parents of the third defendant) in 2008. The fifth and sixth defendants are companies owned by the first, second and third defendants.
Court considers whether application made in timely manner
The defendants had raised an objection that the plaintiff had taken too long before commencing the action and applying for a Mareva injunction. However, the court was satisfied that the delay was due to a lack of funds on the part of the plaintiff and that the liquidators had acted with sufficient diligence in the circumstances.
Court considers risk of dissipation
The key issue considered by the court in deciding whether to grant the plaintiff’s application for a Mareva injunction was whether there was a real risk that the defendants would dissipate assets to the detriment of the plaintiff and its creditors, in particular, Galsworthy. In considering whether there was a real risk of dissipation, the court took into account the following key factors:
- The court held that, based on the chronology of events, the actions of the defendants, singularly and in concert, were carried out with the intention of preventing Galsworthy from getting paid the arbitral award that it had won against the plaintiff.
- The court did not accept the defendants’ collective position that the disposal of the plaintiff’s assets (while the plaintiff was under the control and management of the defendants) was part of a group re-structuring process, and held that the defendants’ position did not seem plausible.
- The court observed that vessels transferred by the plaintiff (while the plaintiff was under the control and management of the defendants) to the fifth defendant (a company owned and controlled by the first, second and third defendants) had subsequently been sold off by the fifth defendant.
- The court observed that income earning contracts for vessel management made between the plaintiff and companies controlled by the defendants were cancelled (while the plaintiff was under the control and management of the defendants), with the management (and thus the income) of the vessels under contracts diverted from the plaintiff to the defendants.
Based on the above factors, the court was satisfied that a Mareva injunction should be granted to restrain the defendants from dissipating assets