Case Details
- Citation: [2023] SGHC 153
- Title: Parastate Labs Inc v Wang Li and others
- Court: High Court of the Republic of Singapore (General Division)
- Date of Decision: 26 May 2023
- Judgment Date(s) / Hearings: 14 July 2022 (ex parte hearing); 28 November 2022 (inter partes hearing)
- Judge: Andre Maniam J
- Originating Claim No: 130 of 2022
- Summons No: SUM 2564 of 2022
- Plaintiff/Applicant: Parastate Labs Inc
- Defendants/Respondents: Wang Li; Yang Zhou; Babel Asia Asset Management Private Limited; Babel Holding Limited
- Legal Area: Civil Procedure — Mareva injunctions
- Key Procedural Context: Ex parte application for Mareva injunction; later inter partes hearing; quantum of injunction adjusted
- Statutes Referenced: Civil Law Act 1909
- Cases Cited: [2023] SGHC 153 (as reported); JTrust Asia Pte Ltd v Group Lease Holdings Pte Ltd and others [2018] 2 SLR 159
- Judgment Length: 15 pages, 3,555 words
Summary
In Parastate Labs Inc v Wang Li and others [2023] SGHC 153, the High Court dealt with an application for a Mareva injunction in aid of civil proceedings arising from a cryptocurrency investment scheme. The claimant, Parastate Labs Inc (“Parastate”), sought urgent, worldwide freezing relief against Mr Wang Li (“Mr Wang”) and other defendants. The court ultimately granted a Mareva injunction against Mr Wang, but only in a reduced quantum.
The central theme of the decision is the court’s insistence on strict compliance with the Supreme Court Practice Directions 2021 governing Mareva applications, particularly the requirement that the applicant provide adequate evidence of its ability to meet its undertaking as to damages. The court found Parastate’s evidence on this point unsatisfactory and treated it as part of the broader “clean hands” and disclosure expectations applicable to ex parte applications.
Although the court did not refuse Mareva relief entirely, it reduced the amount of the freezing order from the US$5m sought to US$2.5m. The court’s reasoning reflects a calibrated approach: where disclosure and evidential support fall short, the appropriate remedy may be to limit the scope of the injunction rather than to deny it outright, while still signalling that non-compliance has consequences.
What Were the Facts of This Case?
Parastate invested in the Babel Quant Alpha USDT Fund (the “Fund”), a cryptocurrency investment vehicle managed by a cryptocurrency financial services provider trading as “Babel Finance”. The contractual counterparty for Parastate was Babel Asia Asset Management Private Limited (“Babel Asia”), which was wholly owned by Babel Holding Limited (“Babel Holding”).
Mr Wang and Mr Yang Zhou (“Mr Yang”) were co-founders of Babel Holding. At incorporation, Mr Wang held 30% and Mr Yang held 40% of Babel Holding’s shares. They were also directors of Babel Asia for certain periods. The management agreement between Parastate and Babel Asia led to Parastate investing US$5m into the Fund in the form of USDT cryptocurrency.
Parastate’s claims against the defendants were connected to the performance and handling of the Fund and the investment. The litigation context included stays of proceedings: the court granted a mandatory arbitration stay in relation to Parastate’s claims against Babel Asia, and a case management stay for the remainder of the action. Parastate later sought to lift the case management stay in relation to Mr Wang and Mr Yang, given that Babel Asia was subject to a moratorium against proceedings.
Against this background, Parastate applied for a Mareva injunction. The application was initially brought ex parte (SUM 2564/2022). The court declined to grant the injunction on an ex parte basis and directed that the matter proceed inter partes, with specific directions for Parastate to address certain issues at the inter partes hearing. By the time of the inter partes hearing, Parastate had decided to pursue the injunction only against Mr Wang, not Mr Yang.
What Were the Key Legal Issues?
The first key issue was the appropriate quantum of the Mareva injunction. While Parastate sought a worldwide freezing order against Mr Wang in the amount of US$5m, the court had to determine what amount was justified on the evidence and legal standards applicable to Mareva relief.
The second issue concerned Parastate’s compliance with the Supreme Court Practice Directions 2021, particularly the requirements relating to the applicant’s undertaking as to damages. Mareva injunctions are exceptional remedies that restrain a defendant’s dealings with assets. Because such orders can cause loss if the claimant’s case fails, the applicant must give an undertaking to compensate the defendant for loss caused by the injunction. The Practice Directions require applicants to provide specific information about the undertaking and the assets available to satisfy it.
A further issue was whether Parastate’s conduct in seeking the ex parte relief amounted to material non-disclosure such that the court should refuse Mareva relief altogether or impose a more restrictive remedy. The court considered the “clean hands” principle and the heightened disclosure expectations in ex parte applications, as articulated in JTrust Asia Pte Ltd v Group Lease Holdings Pte Ltd and others [2018] 2 SLR 159.
How Did the Court Analyse the Issues?
The court began by setting out the procedural and remedial context. At the ex parte stage on 14 July 2022, the court declined to grant the Mareva injunction outright and instead directed the application to proceed inter partes. This was significant: it demonstrated that the court was not satisfied at the outset that the evidential and procedural requirements for Mareva relief had been met. At the inter partes hearing on 28 November 2022, the court granted a Mareva injunction against Mr Wang but fixed the quantum at US$2.5m, half of the amount sought.
On the undertaking as to damages, the court scrutinised Parastate’s supporting affidavit. Parastate included the formal undertaking in the application materials, stating that if the court later found the injunction had caused loss and ordered compensation, Parastate would comply. However, the court held that this was not enough. The Practice Directions 2021 required Parastate, under clearly defined headings, to provide information about what assets were available to meet the undertaking and to whom those assets belonged. Parastate’s supporting affidavit did not provide that required detail.
The court emphasised that the affidavit evidence was deficient not merely in form but in substance. At the ex parte hearing, counsel’s explanation was that Parastate could meet an order for damages and that fortification could be taken if necessary. The court found this fell short of what the Practice Directions demanded. The court treated the absence of asset-specific information as a failure to provide the court with the assurance needed to justify freezing relief, which can have serious consequences for defendants.
At the inter partes hearing, Parastate attempted to cure the deficiency by filing a second affidavit of Mr Chen Jiayi dated 11 August 2022. Mr Chen stated that Parastate was incorporated in Delaware, that founders used their own money to invest in September 2020, and that a corporate restructuring had recently been completed, so no financial statements were available. He then asserted that Parastate had raised US$11.8m over the prior 1.5 years, citing funding dates and amounts, and concluded that Parastate was “financially sound.”
However, the court held that this still did not meet the Practice Directions requirement. Mr Chen did not state what assets were available to meet the undertaking or to whom those assets belonged. The court also noted that the last funding date was more than a year before the inter partes hearing, and that the evidence did not show what portion of the raised funds remained available. Given the financial difficulties Babel Asia had mentioned, the court reasoned that funds invested into Babel Asia might not be available to satisfy an undertaking if Parastate failed in its claims against Mr Wang.
More broadly, the court criticised the lack of disclosure about the nature and value of Parastate’s remaining assets. For example, if assets were held in cryptocurrency, the court expected evidence of the amount and value, as well as any issues with how those assets were held. The court rejected the explanation that the absence of financial statements excused the lack of asset valuation information. The court’s reasoning indicates that, in Mareva contexts, the court expects a practical evidential showing of capacity to pay, not merely assertions of solvency or past fundraising.
Turning to the “clean hands” and disclosure principles, the court relied on JTrust for the proposition that Mareva relief may be refused where the plaintiff has not come with clean hands, including where there has been a failure to make full and frank disclosure in seeking ex parte relief. The court treated Parastate’s unsatisfactory evidence on its ability to meet the undertaking as one aspect of material non-disclosure.
The court also identified another aspect of non-compliance: Parastate’s deliberate omission of prescribed undertakings 9 and 10 in Form 25 of Appendix A of the Practice Directions. Those undertakings relate to (i) not beginning proceedings in other jurisdictions or using information obtained as a result of the order for proceedings elsewhere without the court’s permission, and (ii) not seeking to enforce the Mareva order outside Singapore without permission, including not seeking similar orders conferring security against the defendant’s assets abroad. The Practice Directions require the prescribed forms to be used unless the judge hearing the application considers there is a good reason for adopting a different form, and any departure must be justified in the supporting affidavit.
Although the judgment extract provided is truncated after this point, the reasoning reflected in the portions quoted shows how the court linked procedural non-compliance and disclosure failures to the remedy. Rather than granting the full amount sought, the court reduced the quantum to US$2.5m. This approach is consistent with a judicial balancing exercise: the court was prepared to grant Mareva relief because the case warranted protection against dissipation, but it adjusted the scope to reflect the claimant’s evidential shortcomings and the heightened disclosure expectations in ex parte applications.
In effect, the court’s analysis demonstrates that the undertaking as to damages is not a mere formality. It is a substantive safeguard that enables the court to justify freezing relief. Where the applicant cannot show, with asset-based evidence, that it can satisfy the undertaking, the court will treat the deficiency as affecting the appropriate quantum and may view it as part of material non-disclosure.
What Was the Outcome?
The court granted a Mareva injunction against Mr Wang, but set the quantum at US$2.5m rather than the US$5m sought by Parastate. The practical effect of the order is to restrain Mr Wang from disposing of assets worldwide up to the frozen amount, thereby preserving assets that might be available to satisfy any judgment or damages order.
The decision also reflects that the court’s willingness to grant Mareva relief is conditional on compliance with procedural safeguards. Parastate’s evidence and disclosure failures did not lead to a complete refusal of relief, but they materially affected the extent of the injunction granted.
Why Does This Case Matter?
This case is significant for practitioners because it underscores that Mareva injunctions in Singapore are governed by strict procedural requirements, especially those concerning the undertaking as to damages. The court’s insistence on asset-specific evidence—what assets are available, their value, and who owns them—means that claimants must prepare Mareva applications with evidential discipline, not merely with assertions of solvency or past fundraising.
From a precedent perspective, Parastate Labs reinforces the JTrust principle that ex parte applications demand full and frank disclosure and that failures can justify refusal or, at minimum, a reduction in the relief granted. Even where the court ultimately grants an injunction, the claimant’s non-compliance can lead to a narrower order than requested, which may reduce the practical protection afforded to the claimant.
For lawyers, the case also highlights the importance of using the prescribed forms in the Practice Directions. The deliberate omission of undertakings 9 and 10 in Form 25 illustrates that technical non-compliance can have substantive consequences. Counsel should ensure that all prescribed undertakings are included and that any departure is properly justified with evidence in the supporting affidavit.
Finally, the decision is particularly relevant in modern asset contexts involving cryptocurrency and cross-border asset structures. The court’s critique of the lack of evidence about the nature and value of remaining assets signals that, where assets are volatile or held in complex forms, the evidential burden on the applicant increases. A claimant should be prepared to provide valuation and ownership information sufficient to satisfy the court that the undertaking as to damages is meaningful.
Legislation Referenced
- Civil Law Act 1909
Cases Cited
- JTrust Asia Pte Ltd v Group Lease Holdings Pte Ltd and others [2018] 2 SLR 159
- Parastate Labs Inc v Wang Li and others [2023] SGHC 153
Source Documents
This article analyses [2023] SGHC 153 for legal research and educational purposes. It does not constitute legal advice. Readers should consult the full judgment for the Court's complete reasoning.