23 October 2020 - Article
In the globalized world that we live in today, it is not uncommon for parties to have assets situated all around the globe. Some parties deliberately choose to spread out their assets all over the world, to make it more difficult to go after their assets should any legal dispute arise in the future. To preserve the rights of parties pending judgment, the courts have from time to time deployed the powerful tool known as a worldwide Mareva injunction. A worldwide Mareva injunction is incredibly useful as it prevents a defendant from disposing his assets while court proceedings are ongoing. This is to ensure that if a plaintiff obtains a favorable judgment, the plaintiff will be able to enforce the judgment against the assets of the defendant, and will not be left with a mere paper judgment.
However, one issue that a plaintiff may face is that a judgment does not bind third parties (e.g. financial institutions) located outside the jurisdiction where the judgment was made. This may pose issues when a plaintiff seeks to enforce a Mareva injunction in other jurisdictions where the defendant’s assets are situated. To ensure the effectiveness of a Mareva injunction, the Mareva injunction should be recognized as an order of the court in the jurisdictions where the assets are situated.
The position in Hong Kong
Under the laws of Hong Kong, foreign judgments can either be enforced through statutory regimes such as the Foreign Judgments (Reciprocal Enforcement) Ordinance (Cap. 319), or under the common law. Generally, a foreign judgment can only be enforced if it is for a sum of money. Thus, non-money judgments such as Mareva injunctions and orders for specific performance are not enforceable in Hong Kong. What this means is that a party who successfully obtains a Mareva injunction in a foreign jurisdiction will not be able to seek enforcement of that Mareva injunction in Hong Kong, even though the assets covered by the Mareva injunction is situated in Hong Kong. However, the litigant has the option of applying to the Hong Kong court for a separate Mareva injunction over the assets in Hong Kong, in aid of the proceedings commenced in the foreign jurisdiction.
Following the Civil Justice Reforms in April 2009, section 21M of the High Court Ordinance (Cap. 4) was introduced, conferring on the Hong Kong Courts the power to grant Mareva injunctions in aid of foreign proceedings, notwithstanding that:
- the subject matter of those proceedings would not give rise to a cause of action over which the Hong Kong court would have jurisdiction; or
- the Mareva injunction sought is not ancillary or incidental to any proceedings in Hong Kong.
In other words, the injunction that is granted is a free-standing one, and it is not necessary for there to be any substantive cause of action being pursued in a Hong Kong court. Generally, the Hong Kong courts will respect the informed views and approach of the foreign court (which is the founding court and has a better feel for the case) and will be slow to depart from the view of the foreign court. The option of a free-standing Mareva injunction is a very useful tool for litigants who have commenced litigation in other jurisdictions but would like to preserve the assets of the opposing party which are located in Hong Kong.
The position in Singapore
Unlike Hong Kong, the courts in Singapore do not have the power to grant a free-standing Mareva injunction in aid of foreign proceedings. There has been a long-standing debate on whether section 4(10) of the Civil Law Act (Cap. 43) empowers the Singapore court to grant a Mareva injunction in aid of foreign proceedings. Fortunately, this debate was resolved by the Singapore Court of Appeal in the decision of Bi Xiaoqing v China Medical Technologies  SGCA 50. In this case, the Court of Appeal clarified that section 4(10) of the Civil Law Act should be read as conferring on the court the power to grant Mareva injunctions, even when the injunction is sought in support of foreign proceedings. However, two pre-conditions will have to be satisfied before the court will be willing to grant such an order:
- the court must have in personam jurisdiction over the defendant; and
- the plaintiff must have a reasonable accrued cause of action against the defendant in Singapore.
In this regard, the ability of the Singapore courts to grant a Mareva injunction in support of foreign proceedings is more circumscribed as compared to the powers of the Hong Kong court. This said, it is open to litigants to seek recognition and enforcement of a Mareva injunction granted by a foreign court in Singapore pursuant to the Reciprocal Enforcement of Foreign Judgments (Amendment) Act 2019 (the “REFJA”), which came into operation on 3 October 2019. One of the most important features of the Act is that the scope of judgments which may be registered under the Act have been greatly widened to include, among other things, non-money judgments such as freezing orders, injunctions and orders for specific performance.
What does this mean for litigants?
The legislative amendments to the laws in Hong Kong and Singapore reflect the importance of Mareva injunctions in preserving the rights of a litigant before judgment is rendered, which may take up to months if not years, depending on the complexity of the dispute. It is also interesting to see how the laws in Hong Kong and Singapore have evolved, and the differing approaches adopted by the courts in both jurisdictions.
Having a good understanding of the different regimes across various jurisdictions is important, as it would shape the overarching litigation strategy of a court action. Recently, Withers successfully assisted a client in obtaining an order for recognition and enforcement of a Hong Kong Mareva injunction in Singapore. The court action against the Defendant was commenced in Hong Kong, and the client obtained a Mareva injunction against the Defendant in Hong Kong. However, some of the Defendant’s assets are situated in Singapore. Thus, it was important to the client that the Hong Kong Mareva injunction be recognized and enforced in Singapore to ensure that the client’s rights would be adequately protected. After obtaining the Mareva injunction in Hong Kong, Withers swiftly proceeded to make an ex-parte application for a declaration that the Hong Kong Mareva injunction be registered and enforced as a judgment of the Singapore High Court pursuant to the REFJA. Withers managed to obtain a favourable outcome for the client and the Singapore High Court ordered that the Hong Kong Mareva injunction is to be registered as a judgment / order of the Singapore High Court.
Both Hong Kong and Singapore have taken positive steps in ensuring that the rights of litigants are well-protected. Nonetheless, it remains to be seen whether Hong Kong will go a step further by allowing foreign non-money judgments to be recognized and enforced in Hong Kong.