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 Claim: Originating Claim No 130 of 2022
- Summons: Summons No 2564 of 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; non-disclosure/irregularities in Mareva applications
- Judgment Length: 18 pages, 4,821 words
- Statutes Referenced: Rules of Court 2021 (ROC 2021); Supreme Court Practice Directions 2021 (SCPD 2021)
- Cases Cited: [2023] SGCA 27; [2023] SGHC 153; 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
Summary
In Parastate Labs Inc v Wang Li ([2023] SGCA 27), the Court of Appeal considered how the court should calibrate the quantum of a worldwide Mareva injunction and the extent to which a claimant’s non-compliance with procedural requirements affects the relief granted. The dispute arose from Parastate’s investment of US$5 million in a cryptocurrency fund (the “Fund”), and its allegation that the respondent, Mr Wang, was the controlling mind behind the relevant entities and that Parastate was induced to invest through breaches of fiduciary or trustee duties and dishonest assistance.
The claimant obtained an interlocutory Mareva injunction at first instance, but the High Court limited the injunction to US$2.5 million and required fortification of the undertaking as to damages by paying S$50,000 into court. On appeal, 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 immediate effect. The Court of Appeal also adjusted the fortification requirement, increasing the total amount available to US$100,000, and granted liberty to apply in relation to the injunction and fortification.
While the Court of Appeal recognised the draconian nature of Mareva relief and the need for strict compliance and candour, it ultimately held that the High Court’s approach to quantum and fortification did not sufficiently reflect the proper balance between (i) the claimant’s merits and the risk of dissipation and (ii) the protective function of the undertaking as to damages and any fortification ordered in response to demonstrated risk.
What Were the Facts of This Case?
Parastate invested US$5 million worth of Tether (USDT) in the Babel Quant Alpha USDT Fund. The Fund was managed by a cryptocurrency financial services provider trading as “Babel Finance”, which, in the proceedings, was associated with Babel Asia Asset Management Pte Ltd (“Babel Asia”) and Babel Holding Ltd (“Babel Holding”). Babel Asia was the entity Parastate contracted with, while Babel Holding was the sole shareholder of Babel Asia.
Mr Wang and Mr Yang Zhou were co-founders of Babel Holding and directors of Babel Asia at relevant times. At the time of the key events leading to the originating claim, Mr Wang was the sole director of Babel Asia. Parastate’s case was that Mr Wang was the controlling mind and will of Babel Finance at the material time, and that he was implicated in the alleged wrongdoing that caused Parastate’s investment to become unrecoverable.
Parastate made its investment in March 2022. In June 2022, Parastate sought to withdraw its investment but was informed that Babel Finance was experiencing financial difficulties and could not meet the withdrawal request. Parastate alleged that it was informed that Deribit had cross-liquidated Babel Finance’s sub-accounts maintained with Deribit, including the Fund’s sub-account, because certain sub-accounts had exceeded maintenance margins.
On 13 July 2022, Parastate commenced Originating Claim No 130 of 2022 seeking, among other reliefs, liquidated damages of US$5 million from Mr Wang and Mr Yang on a joint and several basis. Parastate alleged breaches of fiduciary duties and/or trustee duties by Babel Asia and Babel Holding, and dishonest assistance by Mr Wang and/or Mr Yang. Parastate initially sought a Mareva injunction against both Mr Wang and Mr Yang via Summons No 2564 of 2022, but later withdrew the application against Mr Yang. At the inter partes hearing before the High Court judge, the Mareva application was therefore only against Mr Wang.
What Were the Key Legal Issues?
The appeal centred on the proper approach to the quantum of a worldwide Mareva injunction. Although the court must be satisfied that the claimant has a “good arguable case” and that there is a real risk of dissipation, the question here was how those requirements should translate into the amount of assets to be frozen, particularly where the claimant’s application contained irregularities relating to the undertaking as to damages and the prescribed undertakings in the relevant forms.
A second key issue concerned the undertaking as to damages and fortification. The Rules of Court 2021 and the Supreme Court Practice Directions 2021 require claimants seeking Mareva relief to provide an undertaking to compensate the defendant if loss is later shown to have been suffered as a result of the injunction. Where necessary, the court may order fortification of that undertaking. The legal question was how the court should respond to non-compliance with the prescribed requirements—especially failures to state available assets and omissions of prescribed undertakings—without undermining the claimant’s substantive entitlement to Mareva relief where the merits and risk thresholds are met.
In short, the Court of Appeal had to decide whether the High Court’s decision to reduce the quantum by half (from US$5 million to US$2.5 million) and to require only limited fortification was correct in law and principle, given the nature of the irregularities and the evidence before the court.
How Did the Court Analyse the Issues?
The Court of Appeal began by emphasising the exceptional and potentially abusive character of Mareva injunctions. Mareva relief can be granted without notice, pre-judgment, and with extraterritorial effect, freezing a defendant’s assets. Because of its “draconian” nature, the court requires a claimant to satisfy two core thresholds: (i) a good arguable case and (ii) a real risk of dissipation of assets. The court also recalled that Mareva relief is intended to prevent deliberate frustration of any eventual judgment.
The Court of Appeal then turned to the protective rationale for the undertaking as to damages. It noted that where a claimant obtains an interim injunction but later fails to establish its claim at trial, the defendant may suffer loss during the period the injunction is in force. The undertaking as to damages mitigates this risk by requiring the claimant to compensate the defendant if the court later finds that damages were sustained “by reason of” the injunction. The Court of Appeal traced the practice and purpose of undertakings to the historical development described by Lord Diplock in F Hoffmann-La Roche & Co AG v Secretary of State for Trade and Industry, and it also referred to the Singapore authorities explaining that undertakings should not be illusory.
In this context, the Court of Appeal highlighted that fortification is not automatic. It depends on whether a real risk of loss could be shown by the defendant. Further, fortification should be ordered with sensitivity: it should not unjustifiably deprive a plaintiff who has established the merits of the injunction of its rights. This framing is important because it links procedural irregularities to the court’s remedial response—namely, whether the irregularities justify reducing the injunction’s quantum or instead justify increasing fortification (or other directions) to ensure the undertaking is meaningful.
Applying these principles, the Court of Appeal reviewed the High Court’s findings. The judge below accepted that Parastate had established a good arguable case against Mr Wang and that there was a real risk of dissipation. However, the judge limited the quantum to US$2.5 million on the basis that it was “just and convenient” having regard to Parastate’s conduct. The conduct identified by the High Court related to two irregularities in Parastate’s Mareva application.
First, Parastate failed to comply with the SCPD requirement (paragraph 73(1)(f)) to state what assets were available to meet the undertaking as to damages and to whom those assets belonged. The Court of Appeal noted that Parastate’s initial affidavit for the ex parte application contained only a generic undertaking and a vague statement that it would fortify if necessary. At the inter partes stage, Parastate filed a second affidavit but still did not provide the missing information. Instead, it referred to funding raised (US$11.8 million) with the last funding date being 14 July 2021, supported by news articles, but without financial statements or bank statements. The High Court therefore found Parastate’s evidence on its ability to meet the undertaking unsatisfactory and held that Parastate remained in breach of the SCPD and the court’s directions.
Second, Parastate omitted prescribed undertakings 9 and 10 in Form 25 of the SCPD 2021, without explanation and without bringing the omissions to the judge’s attention. The Court of Appeal treated these as procedural failures relevant to the court’s assessment of whether the undertaking as to damages was sufficiently robust and whether the court should adjust the relief granted.
However, the Court of Appeal’s analysis ultimately focused on whether those irregularities warranted a reduction in quantum rather than a recalibration of fortification. The Court of Appeal allowed the appeal and ordered that the injunction cover assets up to US$5 million with immediate effect. This indicates that, while the irregularities were serious enough to justify additional safeguards, they were not, on the facts, a sufficient basis to halve the frozen amount where the thresholds for Mareva relief were met and where the court could instead address the risk of loss through fortification.
Consistent with the principle that fortification should be ordered based on demonstrated risk and should not unjustifiably deprive a claimant of its rights, the Court of Appeal increased the fortification requirement. It ordered additional fortification so that the total amount available would be US$100,000. The Court of Appeal also granted liberty to apply, allowing parties to return to court if circumstances changed or if further directions were needed regarding the injunction and fortification.
What Was the Outcome?
The Court of Appeal allowed Parastate’s appeal against the High Court’s decision. It ordered that the worldwide Mareva injunction cover assets up to US$5 million with immediate effect, rather than being limited to US$2.5 million.
In addition, the Court of Appeal ordered that Parastate provide further fortification, increasing the total amount available to US$100,000. The Court of Appeal granted parties liberty to apply in respect of both the injunction and the fortification, preserving flexibility for future adjustments.
Why Does This Case Matter?
This decision is significant for practitioners because it clarifies how courts should respond to non-compliance in Mareva applications. While the Court of Appeal affirmed that Mareva relief is exceptional and that claimants must satisfy strict thresholds and provide proper undertakings, it also reinforced that the remedy for procedural irregularities should be proportionate and principled. In particular, where the merits and dissipation risk are established, the court should be cautious about reducing the quantum of the injunction solely as a response to failures relating to the undertaking as to damages, especially when the court can address the protective function through fortification.
For litigators, the case underscores the practical importance of complying with the SCPD forms and directions. Failures to state available assets and omissions of prescribed undertakings can lead to adverse consequences, including increased fortification and judicial scrutiny. However, Parastate also suggests that the court’s focus will remain on whether the undertaking is meaningful and whether the defendant’s risk of loss is adequately mitigated, rather than treating every procedural lapse as automatically warranting a reduction in the frozen amount.
Finally, the decision provides a useful framework for advising clients seeking Mareva relief—particularly in asset-freezing cases involving complex financial instruments such as cryptocurrency funds. Counsel should ensure that affidavits provide the specific asset information required by the SCPD, support fortification evidence with credible financial documentation, and treat the undertaking as to damages as a substantive safeguard that must be capable of being honoured.
Legislation Referenced
- Rules of Court 2021 (ROC 2021), in particular:
- Order 13 r 1(6)
- Order 13 r 1(7)
- Supreme Court Practice Directions 2021 (SCPD 2021), in particular:
- Paragraph 72(2)
- Paragraph 73(1)(f)
- Form 25 (including prescribed undertakings 9 and 10)
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
- Parastate Labs Inc v Wang Li [2023] SGCA 27
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.