Jinpeng Group Ltd v Adriaan Zecha
| Jurisdiction | British Virgin Islands |
| Judge | Adderley J |
| Judgment Date | 17 December 2018 |
| Neutral Citation | VG 2018 HC 17 |
| Docket Number | CLAIM NO. BVIHC (COM) 47 OF 2016 |
| Court | High Court (British Virgin Islands) |
| Date | 17 December 2018 |
IN THE HIGH COURT OF JUSTICE
(COMMERCIAL)
Adderley J: (AG)
CLAIM NO. BVIHC (COM) 47 OF 2016
Mr. Gerard Clarke and with him Mr. Oliver Clifton of Walkers for the Applicant
Mr. Alexander Cook for the First Respondent and with him Mr. Daniel Mitchell of Forbes Hare.
Civil practice and procedure - Order — Provisional charging order — Receiver — Whether real risk of dissipation of assets — Whether just to continue interim receivership order — Whether final charging order over shares in third and fourth defendants ought to be granted.
(AG) This is the decision on the inter partes hearing held on the return date following an ex parte hearing in this matter. There were three applications before me by the claimant. Firstly, pursuant to rule 48.8(4) of the Eastern Caribbean Supreme Court Civil Procedure Rules (CPR) the applicant seeks a final charging order over the shares ( “the charged assets”) in the second, third and fourth defendants. Secondly, it seeks enforcement by way of sale of the charged assets pursuant to CPR 48.11(1). Thirdly, it asked that the extant order appointing the interim receivers Russell Crumpler and Christopher Farmer of KPMG (BVI) be continued by way of equitable execution in respect of the first defendant's interest in the second defendant.
On 1 February 2018 the court granted an ex parte provisional charging order over the direct and indirect interest of the first respondent in the shares of the second, third, and fourth respondents. The court also made an interim appointment of receivers in the following terms: “4. The Provisional Charging Order be secured and the value of the Applicant's interest in the Second to Fourth Respondents be preserved by the appointment of interim receivers pending the hearing of the Applicants application for a final charging order or further order.”
At the hearing the first respondent agreed to a final charging order in respect of the second and fourth respondents subject to certain terms, but seeks a discharge of the provisional charging order granted over the shares in the third respondent, and a discharge of the interim receivers.
The applicant is a judgment creditor pursuant to an order of the British Virgin Islands (“BVI”) court entitling it to enforce a final award made in arbitration proceedings held in the Hong Kong International Arbitration Centre. The amount of the award with interest as at the 22 December 2017 was US$38,329,780 ( “the final Award”). This comprised US$ 42,769,366.63 due under the final award, plus interest of US$ 6,360,413.10 (daily rate of US$ 8,630.14 x 737 days from 16 December 2015 up to and including 22 December 2017); minus (iii) US$ 10,800,000 from the sale of the first respondent's ownership of 75% of the shares in General Hotel Management Limited ( “GHM”).
Mr Zecha incurred the primary liability as a guarantor of a loan in the sum of US$35 million to Peak Hotels and Resorts Limited ( “PHRL”) to purchase the Aman Resorts Group of Companies, a group of exclusive global luxury resorts and hotels in Asia, Europe and the Americas.
The claimant took related security over Mr Zecha's shares in General Hotel Management Limited representing a 75% shareholding (the “GHM Shares”). Mr Hans Jenni is the co-shareholder in GHM. It is a company involved in the business of management and operation of luxury hotels and resorts.
It was the default on that loan which led to various proceedings eventually leading to the final arbitral award against Mr Zecha on 25 February 2015. The award was recognized in the BVI by order of the BVI court on 19 April 2016. At the same hearing of 19 April the court appointed Mr Crumpler and Mr Farmer as interim joint receivers of the GHM shares. At a hearing of 12 April 2016, Bannister J had refused Mr Zecha's proposal to have his English lawyers, CANDEY, manage the sale of the GHM shares.
According to the evidence, Mr Zecha is a renowned individual in the luxury hotel industry. He is the creator of Aman Resorts. The US$ 35 million loan from Jinpeng to PHRL was made for the purpose of the acquisition of Aman Resorts following Mr Zecha's decision in 2013 to sell his stake in Aman Resorts, having previously sold his controlling interest to DLF Global Hospitality Limited (“ DLF”). DLF's equity stake in Aman Resorts was purchased by Mr Omar Amanat (“Mr Amanat”) and his partner Mr Vladislav Doronin (“Mr Doronin”). Unbeknownst to Mr Zecha, in a case unconnected with Aman Resorts, Mr Amanat had a conviction for fraud in the United States. They purchased Aman Resorts from DLF for US$358 million and the bid was effected through PHRL. Jinpeng stepped in to enable PHRL to meet its share of the US$358 million purchase consideration, together with the Beijing Tourism Group ( “BTG”). The loan was governed by two documents between PHRL and Jinpeng and BTG: A Memorandum of Understanding (the “MOU”) and a Loan Agreement (the “Loan Agreement”) both dated 24 January 2014. The MOU is governed by the laws of Hong Kong.
Following the acquisition of Aman Resorts, the relationship between Mr Amanat and Mr Doronin deteriorated, resulting in litigation commenced by PHRL in June 2014 (the “English proceedings”), relating to who had the right to control the business of Aman Resorts. Mr Zecha describes how he felt caught in the middle of a deal “…that was rapidly unraveling in relation to which I had been instrumental in securing an investment of US$35 million from trusted business associates.” (Zecha 4).
In September 2014 Jinpeng had initially sought an order for the appointment of liquidators over PHRL, which was subsequently refused by Bannister J, but on 1 October 2015 the Court of Appeal allowed Jinpeng's appeal against the decision. By this stage, arbitration proceedings had commenced on 28 October 2014 between PHRL and Jinpeng and a cross-arbitration launched by Jinpeng against Mr Zecha, where Jinpeng sought payment under the guarantee and enforcement of the obligations undertaken in the second MOU. Shortly before the handing down of the award and in compliance with the Court of Appeal's decision, Bannister J had made an order appointing liquidators over PHRL on 8 February 2016. PHRL submitted that Jinpeng would not receive anything from PHRL if the English proceedings were not pursued and won, because liquidators had been appointed. The English proceedings were ultimately settled including the participation of the liquidators. According to the Respondents the settlement did not leave PHRL with sufficient assets with which to discharge its liability to Jinpeng, leading Jinpeng to pursue Mr Zecha by these proceedings.
Jinpeng was able to identify Mr Zecha's interest in the relevant shares through a Norwich Pharmacal disclosure order granted by this court on 26 October 2017 against Vistra Trust (BVI) Ltd ( “Vistra”) its registered agent. The disclosure occurred during November and December 2017.
Jinpeng states that since liquidators were appointed to PHRL, no distributions to creditors have been made and noted that the English High Court had found in February 2015 that PHRL had “taken steps to denude itself of most of the liquid resources” and that “there are no firm grounds for believing that any substantial further recoveries will be made in the foreseeable future.” 1
The final charging order was sought under CPR 48.8(4)(c). This rule provides that any person served with the order must not permit the transfer of any stock specified in the order or pay any interest or dividend payable out of the stock to any person whilst the order remains in force (CPR. r.48.9(2)). If any transfer or payment is made, then that person would be liable to pay the judgment creditor an equivalent amount of the value of the transfer, or as much as is necessary to satisfy the judgment debt and costs (r.48.9(3)).
The provisions are set out as follows:
“Effect of provisional or final charging order
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48.9 (1) A disposition by a judgment debtor of an interest in property subject to a provisional or final charging order is not valid against the judgment creditor.
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(2) Any person or body on whom an order was served under rule 48.6 (2) (a) or (e) must not permit the transfer of any stock specified in the order or pay any interest or dividend payable out of the stock to any person while the order remains in force.
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(3) If after service of the order the person or body listed in rule 48.6 (2) (a) or (e) makes a transfer or payment prohibited by paragraph (2), that person or body is liable to pay the judgment creditor an amount equivalent to the value of the stock transferred or payment made or as much of it as is necessary to satisfy the judgment debt and costs.”
A judgment creditor can also apply for the protection of a stop notice under CPR 49.7. This prohibits future dealings with the shares in question without the consent of the judgment creditor.
Finally, the judgment creditor may seek sale of the charged asset. In such case the court may give directions for its sale. The relevant rule 48.11 is set out below:
“Enforcement of charging order by sale
48.11(1) If a judgment creditor wishes to enforce a charging order of stock or personal property by sale, the judgment creditor may apply to the court for an order for sale of the stock or personal property.
(2) The application must be supported by evidence on affidavit.
(3) Notice must be served on the judgment debtor.
(4) The court may give such directions as seem appropriate to secure the expeditious sale of the stock or...
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