Suntech Power Investment Pte Ltd v Power Solar System Co Ltd (in liquidation) [2019]

Decision of the Court of Appeal (delivered by Judge of Appeal Andrew Phang Boon Leong):

Outcome: CoA imposes unless order to the effect that unless the appellant pays into court by the stipulated deadline the value of a key asset which it dissipated in breach of a Mareva injunction, its appeal would be struck out as an abuse of the process of the court. [By way of a Postscript, as the appellant did not do so by 7 August 2019, the said appeal was automatically struck out as an abuse of the process of the court.]

Pertinent and significant points of the judgment:

• Where a party can show that the other party has been and continues to be in contumelious breach of a court order, it would be reasonable and logical for the court, especially when the latter party has already been held to be in contempt of court for breaching the said court order, to find that such conduct evidences that party’s lack of genuine or bona fide interest in obtaining the reliefs it is seeking from instituting legal proceedings: at [51].
• In determining whether a court order has been complied with, the court will scrutinise the language and the spirit of the court order. Where there is purported compliance by way of acts which do not comport with what the court order was intended to achieve in the first place, such acts would not suffice and the party concerned would continue to be in contumelious breach of the court order. The result of such continued legal recalcitrance will almost invariably be severe: at [2] and [52].

Background to the appeal

1 The respondent is a company incorporated in the British Virgin Islands and wholly owned by Suntech Power Holdings Co Ltd (“SPH”), a company incorporated in the Cayman Islands. The respondent operated as an investment holding company, whereas SPH was a solar panel producer. SPH was the ultimate holding company for multiple subsidiaries and affiliated companies (collectively, “the SPH Group”).

2 The appellant is a company incorporated in Singapore and was previously part of the SPH Group. It operated as an investment holding company engaged in equity investments. Between 8 October 2007 and 15 May 2013, the appellant was a wholly-owned subsidiary of the respondent. Thereafter, the respondent transferred its ownership of the appellant to another company. The appellant is now no longer part of the SPH Group nor a subsidiary of the respondent.

3 Prior to the breaking up of the SPH Group, the respondent had entered into a number of transactions with the appellant. Those transactions formed the basis of the respondent’s claims against the appellant in Suit No 59 of 2014 (“the Suit”), which was for a total sum of US$197,501,785. The respondent’s claims were for: (a) the amount due under three loans made by the respondent to the appellant which were repayable on demand; and (b) the purchase price of US$55.56m which was allegedly payable by the appellant to the respondent under a share transfer agreement between them dated 8 August 2008 (“the Share Price claim”).

4 The share transfer agreement in question in the Share Price claim was an agreement for the sum of US$55.56m to be paid by the appellant to the respondent for the appellant’s purchase of the respondent’s 100% shareholding in Suntech Power Co Ltd (“Shanghai Suntech”). Pursuant to this share transfer agreement, the appellant became the sole shareholder of Shanghai Suntech.

5 Pending the trial of the Suit, the respondent discovered that the appellant had sold its shares in four of its subsidiaries and suspected that the appellant was attempting to dispose of its shareholdings in two of its other subsidiaries. The respondent then filed a summons in the Suit seeking a worldwide Mareva injunction against the appellant (“the Mareva injunction”). This was granted on 4 September 2014. The Mareva injunction contained the usual orders. Among other things, it: (a) prohibited the appellant from disposing of any of its assets, including (among other assets) its shares in Shanghai Suntech; (b) required the appellant to file an affidavit disclosing all of its assets and their value, location and details (“disclosure of assets affidavit”); and (c) required the appellant to inform the respondent whenever it dealt with or disposed of any of its assets in the ordinary and proper course of business.

6 The trial for the Suit was held from 14 to 17 May 2018, and on 5 July 2018, the High Court judge (“the Judge”) gave judgment for the respondent for the sum of US$197,501,785. The appellant filed its notice of appeal ( viz, Civil Appeal No 109 of 2018 (“CA 109/2018”)) the next day. The respondent then applied to convert the Mareva injunction to a post-judgment Mareva injunction to aid the enforcement of the judgment. This was granted in December 2018.

7 As at late 2018, the appellant had yet to file the disclosure of assets affidavit required under the Mareva injunction even though more than four years had passed by then since the injunction was imposed. The respondent also discovered that the appellant had breached the Mareva injunction by disposing of its shares in Shanghai Suntech for a mere RMB2 in September 2018 and by disposing of two of its other subsidiaries.

8 The respondent then commenced committal proceedings against the appellant. The Judge found the appellant to be in contempt of court for committing the aforesaid breaches of the Mareva injunction. She ordered the appellant to: (a) pay a fine of S$100,000; (b) pay into court a sum of S$100,000 to secure its compliance with the Mareva injunction; and (c) pay the respondent the costs of the committal proceedings as well as the costs incidental to and also of the issue and execution of the committal order (“the Contempt Order”). The appellant did not comply with the Contempt Order and a number of costs orders made against it in the Suit.

9 The respondent then filed Summons No 58 of 2019 (“SUM 58”) for an unless order to the effect that unless the appellant paid into court the judgment sum awarded to the respondent in the Suit as well as complied with a number of other orders made by the Judge, its appeal in CA 109/2018 would be dismissed or, alternatively, stayed without further order. SUM 58 was subsequently amended, pursuant to leave granted by the Court of Appeal (“the CoA”), to include a prayer that CA 109/2018 be struck out because it was an abuse of the court’s process.

The CoA’s decision

10 The CoA has the inherent jurisdiction to strike out a notice of appeal where the appeal is plainly not competent, or where the appeal is frivolous, vexatious or an abuse of the process of the court: at [46].

11 The CoA held that where a party can show that the other party has been and continues to be in contumelious breach of a court order, it would be reasonable and logical for the court, especially when the latter party has already been held to be in contempt of court for breaching the said court order, to find that such conduct evidences a lack of genuine or bona fide interest on the part of that party in obtaining the reliefs it is seeking from instituting legal proceedings, and that the legal proceedings were brought for an ulterior or collateral purpose in abuse of the court’s process: at [51].

12 In determining whether the party in breach has complied with the court order concerned, the court will scrutinise the language and the spirit of the court order. Where there is purported compliance by way of acts that do not comport with what the court order was intended to achieve in the first place, such acts would not suffice and the party in breach would continue to be in contumelious breach of the court order. The result of such continued legal recalcitrance would almost invariably be severe: at [2] and [52].

13 In the present case, the appellant’s disposal of its shares in Shanghai Suntech in breach of the Mareva injunction and its failure to comply with its disclosure obligations thereunder were critical to the CoA’s finding that the appellant was and continued to be in contumelious breach of the Mareva injunction: at [53].

14 With regard to the disposal of the appellant’s shares in Shanghai Suntech, the CoA held that where assets had been dissipated in breach of a Mareva injunction, the party in breach must account for that disposal and must restore those assets or their equivalent in value back to its asset pool in order to comply with the said injunction. On a similar but related note, where the party in breach had been found to be in contempt of court for breaching an order of court (ie, the Mareva injunction in this case) and had been punished for it, that party must still comply with the underlying court order that gave rise to the contempt proceedings in the first place. In other words, in this case, the punishment for contempt of court meted out on the appellant for breaching the Mareva injunction did not absolve it from its obligation to comply with the said injunction by restoring the value of its shares in Shanghai Suntech to its asset pool (indeed, such restoration was all the more critical as the appellant’s shares in Shanghai Suntech were the subject matter of the Share Price claim brought by the respondent in the Suit). Put simply, one must distinguish the obligations to be complied with under a court order from the sanctions and punishments that are imposed when such obligations are not complied with. Both the obligations on the one hand and the corresponding sanctions and punishments on the other are related but distinct. The sanctions and punishments therefore do not in any way absolve the contemnor from complying with the underlying court order that gave rise to the contempt proceedings in the first place: at [62]– [66].

15 On the facts, the CoA found that the appellant’s explanation for the disposal of its shares in Shanghai Suntech in September 2018 for a mere RMB2 – namely, that Shanghai Suntech had been in financial distress since 2014 and had to be urgently sold to new owners who could inject fresh capital into the company – was not supported by any credible evidence. The appellant also made no attempts to comply with the Mareva injunction by restoring the value of its shares in Shanghai Suntech to its asset pool even though the appellant or its ultimate controller had the ability to do so and to thereby undo the breach of the Mareva injunction. The appellant’s contention that Shanghai Suntech and, in turn, its shares in Shanghai Suntech had little or no net value was without basis since it was not supported by any formal valuation of Shanghai Suntech and of the appellant’s shares therein: at [58]–[59] and [67]–[74].

16 With regard to the appellant’s failure to comply with its disclosure obligations under the Mareva injunction, the CoA found that the appellant provided no credible explanation as to why it did not file its disclosure of assets affidavit despite numerous reminders by the respondent for it to do so. The CoA also found that the disclosure of assets made in the appellant’s affidavit filed in the course of SUM 58 was inadequate as that affidavit did not provide any up-to-date financial information on the appellant’s subsidiaries. On this, the CoA further found that the appellant had provided no credible explanation as to why it was unable to obtain the information necessary to comply with its disclosure obligations: at [79]–[92].

17 For the foregoing reasons, the CoA found that the appellant was in contumelious breach of the Mareva injunction and had no intention of complying with the said injunction in relation to both its disposal of its shares in Shanghai Suntech and its disclosure obligations. This was sufficient to show that the appellant had brought CA 109/2018 for reasons other than to seek the court’s relief. CA 109/2018 was therefore an abuse of the court’s process and should be struck out. Nonetheless, in the interests of justice and fairness, the CoA ordered that unless the appellant paid into court the value of its shares in Shanghai Suntech, which the CoA took to be US$55.56m, by 7 August 2019, CA 109/2018 would be struck out as an abuse of the process of the court: at [95]–[98]. [By way of a Postscript, as the appellant did not do so by 7 August 2019, its appeal was automatically struck out as an abuse of the process of the court.]

This summary is provided to assist in the understanding of the Court’s grounds of decision. It is not intended to be a substitute for the reasons of the Court. All numbers in bold font and square brackets refer to the corresponding paragraph numbers in the Court’s grounds of decision.

Source : Supremecourt.gov.sg