Candey Ltd v Russell Crumpler

• Jurisdiction: British Virgin Islands
• Judge: Jack, J
• Judgment Date: 02 October 2020
• Judgment citation (vLex): [2020] ECSC J1002-2
• Docket Number: CLAIM NO. BVIHC (COM) 2014/0116
• Court: High Court (British Virgin Islands)
• Date: 02 October 2020

[2020] ECSC J1002-2

EASTERN CARIBBEAN SUPREME COURT

IN THE HIGH COURT OF JUSTICE

(COMMERCIAL DIVISION)

CLAIM NO. BVIHC (COM) 2014/0116

In the Matter of Peak Hotels and Resorts Ltd (In Liquidation)

And in the Matter of the Insolvency Act 2003

Between:

Candey Ltd

Applicant

and

(1) Russell Crumpler

(2) Christopher Farmer (As Joint Liquidators of Peak Hotels and Resorts Ltd)

Respondents

Appearances:

Mr. Muhammed Haque QC instructed by Forbes Hare for the Applicant

Ms. Felicity Toube QC and Mr. Andrew Willins of Appleby for the Respondents

1 Jack, J [Ag.]: By an application dated 7 ^th August 2020, Candey Ltd (“Candey”) apply for orders in the liquidation of Peak Hotels and Resorts Ltd (“PHRL”) under section 273 of the Insolvency Act 2003 1 as follows:

Candey no longer rely on rule 199(i), but now seek to rely additionally on rule 199(h). Nothing turns on this.

• (a) That the sum of £3,860,637.48 sterling together with interest thereon payable by PHRL to Candey under a fixed fee agreement (“the FFA”)

  dated 21 ^st October 2015 be paid as an expense of the liquidation pursuant to rule 199(a), (i) and/or (k) of the Insolvency Rules 2005 2;

• (b) That following payment on account of £643,248.75 sterling by the liquidators to Candey on 7 ^th November 2018, the remaining balance of £3,217,388.73 sterling due under the FFA be paid to Candey in accordance with section 207(1)(a) of the Insolvency Act 2003;

• (c) That interest be paid;

• (d) That any costs payable by Candey to the liquidators arising from various proceedings in England may be off-set against the outstanding sum and interest;

• (e) That the liquidators be prevented from making any further distributions until Candey's claim be determined.

The background

2 In a separate case, Peak Hotel and Resorts Group Ltd and another v Stuart Mackellar and others, 3 I described some of the background as follows:

“[2] …The facts go back to 2013, when an Indian company put a luxury hotel group, Aman Resorts, on the market. Mr. Vladislav Doronin heard of the investment possibility. He was introduced to Mr. Omar Amanat, an American. They agreed to purchase the hotel group together.

[3] The structure which the two men put together was this. Mr. Amanat used a company, [PHRL], to own a 33.77 per cent share in a holding company, Peak Hotels and Resorts Group Ltd (‘PHRGL’). Mr. Doronin used a company, Tarek Investments Ltd (‘Tarek’), to hold the remaining 66.23 per cent of PHRGL. PHRGL in turn owned all the share capital in Aman Resorts Group Ltd (‘ARGL’). ARGL has been renamed AHL Hotels (2017) Ltd… ARGL in turn owned all the shares in Silverlink Resorts Ltd (‘Silverlink’), which is or was the operating company for the hotel chain.

[4] Another Doronin company, Pontwelly Holding Co Ltd (‘Pontwelly’), made a loan of US$168 million to ARGL. This loan was secured by a pledge of all the shares in Silverlink.

[5] Unfortunately, Mr. Amanat, it turns out, was a fraudster. He was in December 2017 convicted before District Judge Gardephe and a jury in the Southern District of New York of various fraud offences involving securities. None of the offences concerned the current case. The judge refused him bail pending sentence on the basis that he had shown ‘a disregard and a distain for the Court and for legal process.’ Notwithstanding the long period which has elapsed, I am told Mr. Amanat has still not been sentenced and is presumably still languishing in gaol. 4

[6] Relations between Mr. Doronin and Mr. Amanat broke down soon after completion of the purchase. By July 2015 ARGL had defaulted on its loan repayments to Pontwelly. Pontwelly commenced foreclosure proceedings in New York (which was the governing law and jurisdiction of the loan). These resulted in a judgment on 11th August 2015 whereby Pontwelly became the legal and beneficial owner of the shares in Silverlink. Pontwelly subsequently transferred the shares in Silverlink to Aman Hotels Overseas Ltd (‘AHOL’).

[7] PHRL had earlier [in June 2014] issued proceedings [‘the London Litigation’] in London, initially against Tarek, PHRGL and two other individuals which were amended to include a challenge [to] the transfer of ownership in the hotel chain. On 2 ^nd October 2015 Leon J (Ag) granted PHRL leave to bring derivative proceedings as a minority shareholder in PHRGL and as an ultimate minority shareholder of ARGL. The Particulars of Claim in the London action were subsequently amended to reflect this change. Mr. Doronin was added as an additional defendant, as was AHOL, and others.

[8] In the meantime, PHRL lost an arbitration in Hong Kong between it and some Chinese investors.”

Jinpeng's claims: the appointment of liquidators

3 The background to the arbitration was that PHRL had borrowed US$35 million from Jinpeng Group Ltd (“Jinpeng”), which was a vehicle of Beijing Tourism Group Company (“BTG”). There was a formal loan agreement lending the money for one year, but also a memorandum of understanding intended to give BTG the right to

convert the loan into shares. Both documents are dated 24 ^th January 2014 and included an agreement to arbitrate in Hong Kong. A dispute soon arose between Jinpeng and BTG on the one hand and PHRL and Mr. Amanat on the other. The US$35 million had disappeared

4 On 18 ^th September 2014 Jinpeng issued an originating application in this Court seeking the appointment of a liquidator on the just and equitable ground (section 162(1)(b) of the Insolvency Act 2003) and provisional joint liquidators. On 25 ^th September 2014 PHRL issued a cross-application seeking to strike out Jinpeng's application. Jinpeng's application was heard ex parte on notice on 25 ^th and 26 ^th September 2014, at the conclusion of which Bannister J (Ag) appointed provisional joint liquidators from KPMG on the basis that PHRL's assets were “in some jeopardy”. Although there have over time been some changes in the persons acting as liquidator, the first respondent to the current proceedings (“Mr. Crumpler”) has been the lead liquidator throughout. Para 3 of Bannister J's order permitted the directors of PHRL to continue to have conduct of inter alia the London Litigation and denied the provisional liquidators access to information and documents subject to legal professional privilege in the London Litigation.

5 On the return date of Jinpeng's application on 17 ^th October 2014, the judge acceded to PHRL's cross-application, struck out Jinpeng's application and discharged the provisional liquidators. Jinpeng appealed. On 8 ^th December 2015, the Court of Appeal allowed the appeal and restored the original order of Bannister J. 5 Webster JA held that there was no genuine and substantial dispute between Jinpeng and PHRL as to the fact that PHRL owed Jinpeng US$35 million. (The one year period for repayment of the loan had in any event by this time elapsed.) The existence of the Hong Kong arbitration proceedings did not prevent the reappointment of the provisional joint liquidators, which is what the Court of Appeal did. After the arbitration award was issued, this Court on 8 ^th February 2016

directed that PHRL be wound up and appointed the provisional liquidators as (final) liquidators

The London Litigation

6 Candey acted for PHRL in the London Litigation from its commencement in June 2014. What then happened is helpfully recounted in the English High Court judgment 6 of 23 ^rd June 2017 of His Honour Judge Davis-White QC (formerly Davis-White J (Ag) when he sat in this jurisdiction):

“40. In the London Litigation, Peak obtained various injunctions in June and July 2014. The return date in relation to such injunctions took place in September 2014. By order of His Honour Judge Pelling QC, sitting as a judge of the Chancery Division, dated 19 September 2014, Peak was required to pay US$10 million into court to fortify its cross-undertaking in damages given to the court.

41. More detail about the BVI proceedings and the London Litigation is set out in judgments in the London Litigation, first of His Honour Judge Pelling QC (sitting as a judge of the Chancery Division), 7 and secondly, Henderson J… 8

42. In December 2014 Peak discovered that at least US$35 million of the money lent by Sherway had been misappropriated by two entities, Peak Venture Partners LLC and Peak Venture Partners (II) LLC. These entities were connected with Mr. Amanat, who had ceased, at least formally, to be a director of Peak in September 2014. This resulted in further proceedings, conveniently referred to as the ‘Power Capital Litigation’.

43. On 20 February 2015, Henderson J made an order in the London Litigation that Peak should provide £3,138,000 by way of security for the Defendants' costs which was paid into court.

44. In July 2015, Pontwelly demanded repayment of the Pontwelly Loan in full from ARGL, relying on an alleged event of default said to have occurred in February 2015. On 13 August 2015, purportedly pursuant to the relevant share pledge, Pontwelly appropriated ARGL's shares in Silverlink, transferring them to another company. In August 2015 Peak

amended its claims in the London Litigation to seek relief against Pontwelly and others.

45. It was against this background that the Fixed Fee Agreement and Charging Deed came to be entered into on 21 October 2015. Prior to such agreements, and under its terms of business, Candey's invoices fell due for payment within 7 days. Arrears built up. On 8 October 2015, Candey sent an email complaining that ‘this firm is now owed in excess of £1.2 million.’ As I have mentioned the Fixed Fee Agreement in terms dealt with then outstanding unpaid invoiced costs of £941,358.94.

46. When Peak entered liquidation in February 2016, the London Litigation was at a critical stage. There was a liability in respect of Counsel's brief fees and an outstanding obligation pursuant to a court order to pay additional security for costs. There was a risk of adverse costs in respect...