Case Details
- Citation: [2023] SGCA 27
- Title: Parastate Labs Inc v Wang Li
- Court: Court of Appeal of the Republic of Singapore
- Court File No: Civil Appeal No 16 of 2023
- Date of Decision: 25 September 2023
- Date Heard: 4 September 2023
- Judges: Judith Prakash JCA; Steven Chong JCA
- Appellant/Claimant: Parastate Labs Inc
- Respondent/Defendant: Wang Li
- Originating Proceedings: Originating Claim No 130 of 2022
- Interlocutory Application: Summons No 2564 of 2022 (HC/SUM 2564/2022)
- Lower Court Decision: Parastate Labs Inc v Wang Li and others [2023] SGHC 153
- Legal Area: Civil Procedure — Mareva injunctions
- Key Topic: Quantum of Mareva injunction; undertaking as to damages; fortification; compliance with Supreme Court Practice Directions
- Judgment Length: 18 pages, 4,821 words
- Cases Cited (as per metadata): [2023] SGCA 27; [2023] SGHC 153
Summary
In Parastate Labs Inc v Wang Li [2023] SGCA 27, the Court of Appeal considered how Singapore courts should calibrate the quantum of a worldwide Mareva injunction and how strictly the court should enforce procedural requirements relating to the claimant’s undertaking as to damages. The appeal arose from the High Court’s grant of a Mareva injunction in the main action, but with a reduced quantum and additional fortification ordered against the claimant, Parastate Labs Inc (“Parastate”).
The Court of Appeal accepted that Mareva relief is a powerful and potentially draconian remedy, but reaffirmed that the court’s approach must remain anchored in the legal thresholds for Mareva injunctions: (i) a good arguable case; and (ii) a real risk that the defendant’s assets will be dissipated to frustrate any judgment. While the High Court found these thresholds met, it limited the injunction to half the claimed amount and required fortification based on irregularities in Parastate’s Mareva application. The Court of Appeal allowed Parastate’s appeal and ordered that the injunction cover assets up to the full claimed value of US$5 million, with only limited additional fortification.
What Were the Facts of This Case?
Parastate invested US$5 million worth of cryptocurrency Tether (“USDT”) into the Babel Quant Alpha USDT Fund (the “Fund”), which was managed by a cryptocurrency financial services provider trading as “Babel Finance”. The Fund was administered through entities connected to Babel Finance: Babel Asia Asset Management Pte Ltd (“Babel Asia”) contracted with Parastate, and Babel Holding Ltd (“Babel Holding”) was the sole shareholder of Babel Asia.
Parastate’s pleaded case implicated individuals and corporate actors connected to Babel Finance. In the main action (Originating Claim No 130 of 2022), Parastate sued Mr Wang Li (“Mr Wang”) and other defendants, including Mr Yang Zhou (“Mr Yang”), Babel Asia, and Babel Holding. Parastate alleged that Mr Wang and Mr Yang breached fiduciary and/or trustee duties owed to Parastate in relation to the investment, and that Mr Wang and/or Mr Yang dishonestly assisted those breaches. Parastate also sought liquidated damages of US$5 million on a joint and several basis.
As to the timeline, Parastate made its investment in March 2022. In June 2022, Parastate sought to withdraw the investment but was informed that Babel Finance was experiencing financial difficulties and could not meet the withdrawal request. Parastate’s account was that Deribit, a cryptocurrency exchange platform, had cross-liquidated Babel Finance’s sub-accounts maintained with Deribit, including the Fund’s sub-account, because certain sub-accounts had exceeded their maintenance margins.
Parastate commenced the main action on 13 July 2022 and, in parallel, sought interlocutory Mareva relief. Initially, Parastate applied for a worldwide Mareva injunction against both Mr Wang and Mr Yang via Summons No 2564 of 2022. However, Parastate later withdrew the application against Mr Yang. At the inter partes hearing before the High Court, the Mareva application therefore proceeded only against Mr Wang.
What Were the Key Legal Issues?
The appeal raised two closely connected issues. First, the Court of Appeal had to consider the proper approach to determining the quantum of a worldwide Mareva injunction. The High Court had found that Parastate established a good arguable case and a real risk of dissipation, but it nevertheless limited the injunction to US$2.5 million (half of the claimed amount), reasoning that it was “just and convenient” to do so having regard to Parastate’s conduct in the Mareva application.
Second, the Court of Appeal had to examine the legal significance of alleged non-compliance and irregularities in Parastate’s application materials—particularly the claimant’s undertaking as to damages and the related requirement to provide information demonstrating the claimant’s ability to satisfy that undertaking. The High Court had ordered fortification by requiring Parastate to pay S$50,000 into court, and the Court of Appeal had to decide whether that response was proportionate and legally justified in the circumstances.
How Did the Court Analyse the Issues?
The Court of Appeal began by restating the nature and purpose of Mareva injunctions. Mareva relief can be granted without notice, before trial, and with extraterritorial reach, freezing a defendant’s assets. Because it can be “draconian” and susceptible to abuse, the court requires claimants to satisfy the threshold of a good arguable case and to show a real risk of dissipation. The Court emphasised that the purpose of Mareva injunctions is to prevent a defendant from taking steps to frustrate any eventual judgment, rendering it nugatory.
At the same time, the Court acknowledged the practical risk that a claimant may obtain an interim Mareva injunction but later fail at trial. In that event, the defendant may suffer loss due to the injunction’s operation. This is why Singapore’s procedural framework requires an undertaking as to damages. The Court referred to Order 13 rr 1(6) and 1(7) of the Rules of Court 2021 (“ROC 2021”), and to the use of Forms 24 and 25 in the Supreme Court Practice Directions 2021 (“SCPD 2021”). These forms require the claimant to undertake to compensate the defendant if the court later finds that the defendant sustained damages by reason of the injunction.
In explaining the rationale for the undertaking as to damages, the Court drew on the historical and doctrinal origins articulated by Lord Diplock in F Hoffmann-La Roche & Co AG v Secretary of State for Trade and Industry [1975] AC 295, as cited in later Singapore authorities. The Court highlighted that the undertaking mitigates the risk to the defendant because, at the time of an interim injunction (especially ex parte), the court cannot be absolutely certain the claimant will succeed at trial. The undertaking is therefore a safeguard that aligns with the exceptional nature of interim injunctive relief.
The Court then addressed fortification. It noted that an undertaking as to damages should not be illusory. Accordingly, the court may require the claimant to fortify its undertaking—typically by paying money into court or providing security. However, fortification is not automatic. The Court referred to the principle that fortification depends on whether a real risk of loss could be shown by the defendant, and that fortification should not unjustifiably deprive a plaintiff of rights where the plaintiff has established the merits of the injunction. The Court stressed that the decision to order fortification must be sensitive to the risk profile demonstrated by the defendant.
Against this doctrinal background, the Court of Appeal considered the High Court’s reasons for limiting the quantum and ordering fortification. The High Court had found two irregularities in Parastate’s Mareva application. First, Parastate’s supporting affidavit for the ex parte application did not comply with paragraph 73(1)(f) of the SCPD 2021, which required the affidavit to state what assets were available to meet the undertaking as to damages and to whom those assets belonged. The High Court observed that Parastate’s undertaking language was generic and that Parastate failed to provide the missing information even after being directed to do so at the inter partes stage. Parastate’s second affidavit did not provide financial statements or bank statements; instead, it referred to funding raised (US$11.8 million) with supporting news articles.
Second, Parastate failed to include prescribed undertakings 9 and 10 in Form 25 of the SCPD 2021, without explanation and without drawing the omissions to the Judge’s attention. These failures were treated as material non-disclosures and deliberate omissions in relation to Parastate’s ability to meet its undertaking as to damages. The High Court therefore limited the quantum to US$2.5 million and required fortification of S$50,000.
On appeal, the Court of Appeal accepted that the Mareva relief should be calibrated to the claim and the risk of dissipation, but it disagreed with the High Court’s reduction of quantum as a response to the procedural irregularities. The Court’s approach indicates that non-compliance with the SCPD requirements is relevant, but it is not necessarily determinative of the quantum in the manner adopted below. The Court of Appeal instead treated the irregularities as factors that could affect the security/fortification question, rather than as a basis to halve the injunction where the substantive Mareva thresholds were met.
In the result, the Court of Appeal allowed Parastate’s appeal and ordered that the injunction cover assets up to US$5 million with immediate effect. It also ordered additional fortification, but in a different and more limited way than the High Court. The Court ordered that Parastate provide further fortification so that the total amount available would be US$100,000. The Court also granted liberty to apply in respect of both the injunction and the fortification, preserving flexibility for further adjustments if circumstances changed.
What Was the Outcome?
The Court of Appeal set aside the High Court’s limitation of the Mareva injunction to US$2.5 million. It ordered that the worldwide Mareva injunction should instead cover assets of up to US$5 million with immediate effect. This restored the injunction to the full value sought by Parastate in the main action against Mr Wang.
In relation to fortification, the Court of Appeal required Parastate to provide additional security so that the total amount available for fortification would be US$100,000. The Court granted parties liberty to apply concerning the injunction and the fortification, enabling further procedural and substantive refinements as the litigation progressed.
Why Does This Case Matter?
Parastate Labs Inc v Wang Li is significant for practitioners because it clarifies how Singapore courts should balance two competing imperatives in Mareva applications: (i) the need for effective asset freezing to prevent frustration of judgments; and (ii) the need to protect defendants from the consequences of an interim injunction that may later prove unjustified. The decision reinforces that the substantive Mareva thresholds remain central to the quantum of relief, and that procedural irregularities should be handled through the appropriate remedial mechanism—typically fortification—rather than by automatically reducing the injunction amount.
For claimants, the case underscores the importance of strict compliance with the SCPD 2021 requirements governing undertakings as to damages and the provision of information about available assets. The High Court’s concerns about non-disclosure were not ignored; instead, the Court of Appeal recalibrated the response. This means that while non-compliance can affect the security ordered, it does not necessarily justify a substantial reduction in the injunction quantum where the court is satisfied that the Mareva thresholds are met.
For defendants, the case provides reassurance that the court will scrutinise the claimant’s undertaking as to damages and may require fortification where there is a real risk of loss. The Court’s emphasis on fortification being tied to demonstrated risk will be particularly relevant in future disputes about whether security should be increased, decreased, or maintained.
Legislation Referenced
- Rules of Court 2021 (ROC 2021), Order 13 rr 1(6) and 1(7)
- Rules of Court 2021 (ROC 2021), Order 13 r 1(7)
- Supreme Court Practice Directions 2021 (SCPD 2021), Forms 24 and 25
- Supreme Court Practice Directions 2021 (SCPD 2021), paragraph 72(2)
- Supreme Court Practice Directions 2021 (SCPD 2021), paragraph 73(1)(f)
Cases Cited
- Bouvier, Yves Charles Edgar and another v Accent Delight International Ltd and another and another appeal [2015] 5 SLR 558
- JTrust Asia Pte Ltd v Group Lease Holdings Pte Ltd and others [2018] 2 SLR 159
- Bank Mellat v Nikpour [1985] FSR 87
- F Hoffmann-La Roche & Co AG v Secretary of State for Trade and Industry [1975] AC 295
- CHS CPO GmbH (in bankruptcy) and another v Vikas Goel and others [2005] 3 SLR(R) 202
- Parastate Labs Inc v Wang Li and others [2023] SGHC 153
Source Documents
This article analyses [2023] SGCA 27 for legal research and educational purposes. It does not constitute legal advice. Readers should consult the full judgment for the Court's complete reasoning.