JTrust Asia Pte. Ltd v Mitsuji Konoshita
| Jurisdiction | British Virgin Islands |
| Judge | Wallbank, J. |
| Judgment Date | 19 August 2020 |
| Judgment citation (vLex) | [2020] ECSC J0819-2 |
| Court | High Court (British Virgin Islands) |
| Docket Number | CLAIM NO. BVIHCM 2017/0226 |
| Date | 19 August 2020 |
EASTERN CARIBBEAN SUPREME COURT
IN THE HIGH COURT OF JUSTICE
COMMERCIAL DIVISION
CLAIM NO. BVIHCM 2017/0226
Mr. Vernon Flynn, QC, with him Mr. Peter Ferrer, Ms. Lucy Hannett and Ms. Marcia McFarlane for the Claimant
Mr. Stephen Midwinter, QC, with him Mr. Christopher Bromilow for the Defendants
Mr. Iain Tucker, with him Ms. Catherine O'Connell for the Receivers
Wallbank, J. (Ag.): This is the judgment of the Court on the Defendants' application filed on 19 th February 2020 to discharge a freezing order and receivership order. Those orders had been made in support of claims commenced in this jurisdiction. When the claims were stayed on grounds that this jurisdiction is not the appropriate forum for determination of the disputes, the freezing and receivership orders were continued. A claim was pursued in Singapore. There are also proceedings on foot in Thailand. In Singapore, the High Court had also granted injunctive relief pending trial. Upon trial, the action was dismissed. Flowing from this, the injunctive relief granted by the Singapore High Court would consequently fall away. The injunctive relief was continued on a temporary basis pending determination of an application before the Singapore Court of Appeal.
The Defendants' discharge application came before this Court on 5 th March 2020. During preparation of the judgment and indeed only a few days before it was ready for delivery, the parties brought to the Court's attention three new matters:
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(1) the Singapore Court of Appeal's decision dated 1 st June 2020 to continue injunctive relief in Singapore pending an appeal from the judgment upon trial;
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(2) our Court of Appeal's decision in Convoy Collateral Ltd v Broad Idea International Limited et al. 1 (‘ Convoy Collateral’), and
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(3) our Court of Appeal's decision in Broad Idea International Limited v Convoy Collateral Limited 2 (‘ Broad Idea’).
At a directions hearing the parties were then directed to file written submissions on the effect, if any, of these matters and a further oral hearing was held on 7 th July 2020.
This judgment thus takes the form of two parts. First this judgment will address the matters raised on 5 th March 2020. Then it will address the further matters raised and argued on 7 th July 2020. As I shall explain below the new matters do not affect the outcome of this application. In this Court's judgment the freezing order and receivership order should be maintained until further order.
The Defendants argued that the terms of the stay have been fulfilled by reason of the Singapore trial judgment and, since the claims were dismissed, the freezing and receivership orders should be discharged.
The Claimant (‘JTrust Asia’) commenced these proceedings in the Territory of the Virgin Islands (‘BVI’) on 21 st December 2017. By way of an extremely basic summary, the Claimant
For background purposes only, and without making any findings of fact, the Claimant is a company incorporated in Singapore. It invested monies on five occasions in a company called Group Lease Public Company Limited (‘Group Lease’) that is listed on the Thai stock exchange. The investments took place between March 2015 and September 2017. As a result, the Claimant came to hold 8.01% of the issued share capital, US$180 million in convertible debentures, and Thai Bhat 2.4 million in 500,000 units of warrants, in Group Lease.
The Claimant alleges that on 16 th October 2017 the Thailand Securities and Exchange Commission announced that it had filed a criminal complaint against the First Defendant, Mr. Mitsuji Konoshita (‘Mr. Konoshita’), for committing fraud, misappropriating Group Lease's assets and falsifying Group Lease's accounting records. Mr. Konoshita was or is a director of Group Lease and was its Chief Executive Officer until 16 th October 2017. The essence of the alleged fraud was that some 38% of Group Lease's consolidated profits derived ostensibly from interest on a number of purported loans. These loans were said to be high-interest, under-collateralized, short-term loans to two groups of borrowers in Singapore and Cyprus respectively. The total of the loans was about US$95 million. Allegedly, Mr. Konoshita was the controller and ultimate beneficial owner of one of the Singapore borrowers and of all the Cyprus borrowers, making the purported loans a circular fraud, a dishonest and abusive practice known as ‘round-tripping’.
The Claimant claimed that the purpose of the loans was to defraud investors in Group Lease, by procuring their investments by overstating and thus misrepresenting Group Lease's real income.
There was also an alleged investment in a Sri Lankan company associated with Group Lease which appeared significantly to over-value the Sri Lankan company.
The Second Defendant (‘APF’) is a BVI company. It is allegedly a nominee of Mr. Konoshita, as well as a holding company through which he operates a number of investments. It also holds the controlling stake in Group Lease. In its Amended Statement of Claim filed in these proceedings, the Claimant accuses the Second Defendant of assisting in the misappropriation of the Claimant's funds by receiving, concealing and/or laundering some or all of the funds in question.
The Claimant claimed that it had relied upon representations made by Mr. Konoshita as to the purportedly sound basis for investing in Group Lease, and also upon Group Lease's accounts, which the Claimant says were intentionally misstated by Mr. Konoshita.
The Claimant seeks a declaration that the US$95 million be held upon trust for the benefit of the Claimant, consequential relief, and various permutations of relief that would see the Defendants liable to pay the Claimant that amount of money.
The Claimant asserted that the Defendants knew that the Claimant's money had been paid over as an investment in Group Lease and so the First and Second Defendants knowingly received them in breach of trust and/or they had obtained these monies by fraud.
The Claimant thus asserts that it has a substantive claim before this Court against both the First and the Second Defendants. The Second Defendant is not presented as a non-cause of action Defendant.
On 13 th February 2018 the Claimant obtained a worldwide freezing injunction in support of its claim here over the assets of both Defendants. After some variations the amount frozen was set at US$45million. The injunction required the Defendants to provide details of all their assets by a deadline. On 5 th July 2018 the Claimant obtained a receivership order over the assets of APF. Mr. Nicholas Gronow and Mr. John Ayres were appointed as joint and several receivers, for the purpose of identifying, protecting, preserving and (if appropriate) recovering the assets of APF. The grounds for the appointment of receivers were primarily that Mr. Konoshita had been in a state of continuous contempt of the asset disclosure orders contained in the freezing order, and that he had the means and capability to dissipate his assets and had demonstrated an inclination and capacity to do so. Also on 5 th July 2018, this Court continued the worldwide freezing order.
The Defendants applied to have the freezing and receivership orders set aside. Both were ultimately upheld by the Court of Appeal in a judgment dated 18 th December 2018. Upon that appeal, four issues fell for determination: whether JTrust Asia had a good arguable case, whether the ex parte order should have been discharged on grounds of material nondisclosure, whether there was a real risk of dissipation of the Defendants' assets, and whether costs should have been granted to the Defendants. Issues of the Court's jurisdiction, that is, its powers, were not raised.
In late 2018 the Defendants applied for a stay of these proceedings on grounds that the BVI is not the appropriate forum for the trial of this claim. That application was determined by the Honourable Justice Adderley on 16 th April 2019. The Court granted the stay. The Court also set aside service of the Claim Form outside the jurisdiction on Mr. Konoshita.
For the purposes of the present application, the reasons why the stay was granted are found only in the transcript of the Court's oral decision. I was not provided with the evidence in support of the stay application. The transcript is nonetheless sufficiently clear on this point. Adderley J. cited that the Defendants had ‘put forward two more convenient fora, namely Singapore as their first choice and then Thailand’. 3 He continued, that ‘the Claimant has not shown that the BVI is clearly an appropriate forum for a trial and the Applicant has shown that there are two alternative venues which are more suitable, namely Singapore and Thailand’. 4 He then narrated that he had taken into consideration a number of factors, including that the governing law of the investment agreements was either Singaporean or Thai law 5 upon an examination of the pleadings in Singapore, the BVI and Thailand, as well as a perusal of the agreements; 6 furthermore, that the alleged wrongdoing took place in a number of countries and that the ‘center of gravity of the dispute was either in Singapore or Thailand’. 7
The focus of this part of Adderley J.'s decision was not so much upon where the disputes might eventually be determined but more upon the fact that the BVI was not the appropriate...
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