- The High Court discharged a worldwide Mareva injunction granted in support of an arbitration after finding insufficient evidence of a real risk of asset dissipation.
- The applicant was ordered to fortify its undertaking as to damages by US$125,000.
Eugene Thuraisingam Asia LLC’s Ms Sophia Ng acted for the successful defendant in an unreported decision of the General Division of the Singapore High Court, where the Court considered the circumstances in which interim proprietary and freezing injunctions should be granted in support of anticipated arbitration proceedings involving cryptocurrency assets.
The decision provides important guidance on the evidential threshold for Mareva injunctions and the approach to fortification of undertakings where highly volatile digital assets are involved. Eugene Thuraisingam Asia LLC’s Ms Sophia Ng acted for the successful respondent in obtaining the discharge of the worldwide Mareva injunction and securing additional safeguards in relation to the remaining proprietary injunction.
BACKGROUND
A company incorporated in the British Virgin Islands (the “Company”) commenced proceedings against its former C-suite executive (the “Executive”), in connection with a dispute over the ownership of some proprietary cryptocurrency tokens (the “Proprietary Tokens”) and some USDT. Pending an anticipated arbitration, the Company obtained, on an ex parte basis, both a worldwide Mareva injunction and a proprietary injunction against the Proprietary Tokens.
Eugene Thuraisingam Asia LLC’s Ms Sophia Ng acted for the Executive in the applications to set aside both injunctions. The applications raised important issues concerning the evidential threshold for Mareva relief, the preservation of disputed cryptocurrency assets through proprietary injunctions, and the principles governing the fortification of undertakings as to damages.
THE DECISION
In an unreported decision, the Honourable Justice Alex Wong of the General Division of the High Court partially allowed the Executive’s applications. While the Court declined to discharge the proprietary injunction pending the determination of the parties’ dispute in arbitration, it set aside the worldwide Mareva injunction after finding that the Company had failed to establish the requisite evidential basis for such relief. The Court also ordered the Company to fortify its undertaking as to damages.
The Mareva Injunction
The Court held that the Company had not adduced sufficient evidence of a real risk that the Executive would dissipate assets so as to frustrate the enforcement of any future arbitral award. In particular, the Court found that the allegations of dishonesty and dissipation relied upon by the Company were either unsupported by the evidence or insufficiently connected to any genuine risk of asset dissipation.
While the Court acknowledged that the Executive no longer resided in Singapore and that cryptocurrency assets are inherently capable of being transferred with ease, it held that these factors, without more, were insufficient to justify the continuation of a Mareva injunction. In the absence of credible evidence demonstrating a real risk that the Executive would act to frustrate the enforcement of any future judgment or award, the Mareva injunction was set aside.
The Proprietary Injunction
The Court allowed the proprietary injunction to remain in force pending the anticipated arbitration. It was satisfied that the Company had met the relatively modest threshold required for proprietary relief, and that the balance of convenience favoured preserving the disputed cryptocurrency assets until the parties’ proprietary rights could be determined by the arbitral tribunal.
Fortification of the Undertaking as to Damages
The Court agreed with the Executive that the Company failed to disclose what assets that it had. It also recognised that the Company did not have assets in Singapore. The Court ultimately ordered the Company to fortify its undertaking as to damages by providing notional fortification in the sum of US$125,000.
While the Court acknowledged that there was no precise formula for determining the appropriate amount of fortification, it emphasised that the sum should not be fixed at a level that would effectively “hang an albatross around the [Company’s] neck“. The Court therefore struck a balance between ensuring that the Executive was afforded meaningful protection should the injunction ultimately prove to have been wrongly granted and avoiding the imposition of an unduly onerous burden on the Company. The Court further ordered that, failing such fortification, the proprietary injunction would be discharged.
| KEYPOINT A Mareva injunction will not be granted merely because cryptocurrency assets are easily transferable or the respondent resides overseas. A claimant must still establish, with cogent evidence, a real risk of dissipation. |
COMMENTARY
First, the decision reinforces the distinction between a Mareva injunction and a proprietary injunction. While both are interim remedies, they serve fundamentally different purposes and are subject to different legal thresholds. A claimant who seeks the more intrusive remedy of a Mareva injunction must adduce cogent evidence of a real risk that the respondent will dissipate assets so as to frustrate the enforcement of any future judgment or arbitral award. Mere allegations of dishonesty, an overseas residence, or the inherently transferable nature of cryptocurrency assets will not, without more, suffice.
Second, the judgment highlights the increasing importance of meaningful undertakings, especially when the applicant does not have assets in jurisdiction. The Court’s willingness to order fortification of the undertaking as to damages serves as an important reminder that applicants seeking interim relief must be prepared to provide real and effective protection against that risk, rather than merely offering an undertaking in form.
As digital asset disputes continue to grow in frequency and complexity, this decision provides timely guidance on the principles governing interim relief, while reaffirming Singapore’s position as a sophisticated forum for resolving cross-border cryptocurrency disputes.
Sophia Ng
Associate Director