Chia Hsing Wang v XY
| Jurisdiction | British Virgin Islands |
| Judge | Farara JA |
| Judgment Date | 06 June 2023 |
| Judgment citation (vLex) | [2023] ECSC J0606-2 |
| Docket Number | BVIHCMAP2022/0055 |
| Court | Court of Appeal (British Virgin Islands) |
Heard Together with:
The Hon. Mde. Gertel Thom Justice of Appeal
The Hon. Mr. Paul Webster Justice of Appeal [Ag.]
The Hon. Mr. Gerard St. C. Farara Justice of Appeal [Ag.]
BVIHCMAP2022/0055
BVIHCMAP2022/0056
THE EASTERN CARIBBEAN SUPREME COURT
IN THE COURT OF APPEAL
Interlocutory appeal — Application to adduce fresh evidence — Principles in Ladd v Marshall — Whether documents that did not exist at the time of hearing should be allowed as fresh evidence — Whether documents would have important influence on court's determination of issues in court below and on appeal — Appointment of receivers over shares held by XYZ in RAGOF — Appointment of joint provisional liquidators (JPLs) in RAGOF — Whether judge erred in his general observations so as to reach a misconceived conclusion about the real purpose for bringing the Receivership and JPL applications and the artificiality of proceeding with the applications ex parte — Exercise of court's discretion to appoint receivers — Whether it is just or convenient to grant Receivership Order — Factors of particular case to be considered in deciding just or convenient — Duty of full and frank disclosure and fair presentation — Judge's finding of a breach of the duty of full and frank disclosure at the ex parte Receivership and JPL applications — Non innocent breaches of duty — Principles to be applied when dealing with breaches of duty of full and frank disclosure at ex parte hearing for interim relief — Whether the risk of forced redemption raised by counsel misled ex parte judge — Alternative remedies to Receivership and JPL Orders available — Judge's discharge and refusal to regrant Receivership and JPL orders — Whether errors in judgment vitiates judge's conclusion that Receivership and JPL orders ought be set aside and not regranted
Real Assets (RA) Global Opportunity Fund I Ltd (“RAGOF”) is a professional fund incorporated in the Territory of the Virgin Islands (“the BVI”). Its main purpose is to invest in real estate worldwide. RAGOF is one of four investment funds, the other three Global Fixed Income I Fund (“GFIF”), Principal Investing Fund I Limited (“PIF”) and Long View II Limited (“Long View”), are registered in the Cayman Islands (“the Cayman Funds”) and were managed by what is referred to as ‘the Floreat Parties’. By orders of the Cayman Islands court in May 2023 liquidators were appointed over two of these funds, namely, PIF and Long View.
Floreat Real Estate Limited (“FRE”) is a company incorporated in the United Kingdom. It is the investment adviser of RAGOF and part of the Floreat Group of Companies which also consists of Floreat Real Asset Investment Management Ltd — the investment manager of RAGOF. Mutaz Otaibi (“M. Otaibi”) owns FRE and Floreat Real Asset Investment Management Ltd. He together with his brother, Hussam Otaibi (“H. Otaibi”), and James Wilcox (together “the Floreat Principals”) own and control the Floreat Group of Companies.
Mr. Chia Hsing Wang (“Mr. Wang”) is the ultimate beneficial owner of 97.2% of the shares in RAGOF (“the shares”). The shares (or most of them) are registered in the name of XYZ, a company incorporated under the laws of the United Kingdom and are held pursuant to the terms and conditions of certain private placement memoranda with XY, a Swiss bank.
The Floreat Group of Companies manage the assets of RAGOF which include real properties in England. Mr. Wang discovered what he alleges is serious wrongdoing in the management of RAGOF and its assets, as well as the Cayman Funds. The alleged wrongdoing included the use of the real properties in England for the personal use of the Floreat Principals and their families, impermissible management fees of US$12 million, and the purchase of expensive art. This alleged wrongdoing is said to have led to a loss of trust and confidence with the Floreat Principals and caused Mr. Wang to commence proceedings in the Commercial Court in the BVI, including ex parte applications for certain interim relief. This was part of a strategy conceived by Mr. Wang and those advising him to ultimately have the shares in RAGOF put into Mr. Wang's name or the name of a new nominee designated by him. The strategy was to be implemented through various legal proceedings in the court in the BVI and through parallel proceedings in the Cayman Islands in relation to the Cayman Funds.
In the BVI, the first limb of this strategy was to have the BVI court appoint receivers ex parte to take control of the shares held by XYZ, as nominee, in RAGOF and for the court to give to the receivers certain express powers, including the power to commence winding up proceedings against RAGOF and to have provisional liquidators appointed pending the making of a winding up order. The second limb of the strategy was for the receivers so appointed to apply to wind up RAGOF, and to place RAGOF under the control of provisional liquidators. On 20 th August 2021, Mr. Wang commenced Claim No. BVIHC(COM)2021/0144 against XY and XYZ as part of his strategy to gain full control of the shares in RAGOF. The claim sought an order requiring XY to take all steps required on their part to procure the transfer(s) of the shares in RAGOF, which XYZ holds on behalf of Mr. Wang as beneficial owner, to Mr. Wang and/or such other third party as Mr. Wang may direct; and, alternatively, for specific performance of the nominee arrangements between Mr. Wang and XY. On the same day, Mr. Wang made an ex parte application for the urgent appointment of receivers over the shares held by XYZ in RAGOF (“the Receivership Application”). The Receivership Application was granted ex parte on 26 th August 2021 (“the Receivership Order”). By the Receivership Order, Anna Silver of FFP (BVI) Limited (in the BVI) and Michael Pearson of FFP Limited (in the Cayman Islands) were appointed joint receivers over the shares beneficially owned by Mr. Wang in RAGOF through his nominee, XYZ, with immediate effect. The receivers were empowered, inter alia, to – (a) commence the just and equitable winding up proceedings with respect to RAGOF (“the BVI J&E Liquidation Proceedings”), and to make an application seeking an order for the appointment of joint provisional liquidators over RAGOF; and (b) to commence such related or ancillary applications as the receivers shall deem appropriate, including but not limited to an application for the appointment of provisional liquidators. On 15 th September 2021, Mr. Wang applied to continue the Receivership Order and by order dated 4 th November 2021, the Receivership Order was continued until the trial of Claim No. BVIHC(COM)2021/0144. Upon obtaining the Receivership Order, Mr. Wang commenced the second limb of his strategy. This involved XYZ (acting by the joint receivers) and Mr. Wang filing an application on 30 th August 2021 in Claim No. BVIHC(COM)2021/0150 for orders under sections 159(1)(a) and 162(1)(b) of the Insolvency Act, 2003 (“Insolvency Act”) for the appointment of Mr. Kent Benjamin McParland and Mr. Cosimo Borrelli as joint liquidators of RAGOF, on the ground that it is just and equitable for RAGOF to be wound up on the basis ‘that there has been a justifiable and irretrievable loss of confidence in the management of the Fund, being the Floreat Management… due to serious issues of wrongdoing’.
On the same day, 30 th August 2021, XYZ (acting by the joint receivers) applied ex parte on an urgent basis for an order appointing the said Mr. Kent Benjamin McParland and Mr. Cosimo Borrelli as joint provisional liquidators (“JPLs”) of RAGOF, pursuant to section 170 of the Insolvency Act (“the JPL Application”). The JPL Application was granted and an order was made in the Commercial Court on 1 st September 2021, appointing the said two persons as JPLs of RAGOF, without the requirement to give security for their appointment (“the JPL Order”). The JPLs were empowered to do several things, including: (i) terminate the investment management and the investment advisory agreement in place between RAGOF and Floreat Real Estate Limited; (ii) commence winding up or insolvency proceedings against any subsidiary of RAGOF; (iii) investigat e and report on the affairs of RAGOF and its subsidiaries within and outside the BVI generally, and with specific regard to the identity of the current beneficial owners of all the shares in RAGOF; and (iv) investigate and report on the circumstances leading to the prior ownership by the Otaibi family of the real property in Reading, Berkshire, United Kingdom known as ‘Springs Farm’ (owned by RAGOF); the extent to which RAGOF and/or the company Springs Farm Limited has received or is due to receive payment of rent in respect of the Otaibi family's occupation of the Springs Farm property; and the sums expended by RAGOF and/or Springs Farm Limited ‘as a result of the Otaibi family's occupation of Springs Farm’.
Subsequently, three interlocutory applications came up for hearing inter partes before the court below. The first in time was an application by XYZ (acting by the joint receivers) and Mr. Wang dated 23 rd September 2021 to continue the JPL Order obtained ex parte on 1 st September 2021 (“the Continuation Application”). The other two applications were by FRE, filed respectively on 9 th November 2021 to discharge the JPL Order, and on 22 nd December 2021 to discharge the Receivership Order obtained ex parte on 26 th August 2021 on grounds which included alleged breaches of the duty of full and frank disclosure and failure to make a fair presentation; that the said ex parte order ought not to have been made and/or continued by the judge; that the said ex parte order was not necessary to avoid giving advance...
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