JTrust Asia Pte Ltd v Mitsuji Konoshita

• Jurisdiction: British Virgin Islands
• Judge: Blenman JA
• Judgment Date: 31 May 2021
• Judgment citation (vLex): [2021] ECSC J0531-3
• Docket Number: BVIHCMAP2020/0022
• Court: Court of Appeal (British Virgin Islands)
• Date: 31 May 2021

[2021] ECSC J0531-3

THE EASTERN CARIBBEAN SUPREME COURT

IN THE COURT OF APPEAL

Before:

The Hon. Mde. Louise Esther Blenman Justice of Appeal

The Hon. Mr. Gerard St. C Farara Justice of Appeal [Ag.]

The Hon. Mde. Vicki-Ann Ellis Justice of Appeal [Ag.]

BVIHCMAP2020/0022

Between:

JTrust Asia Pte Ltd.

Appellant

and

[1] Mitsuji Konoshita

[2] A.P.F. Group Co. Ltd. (In Receivership)

Defendants

and

Nicholas James Gronow and John David Ayres (as Receivers of the Second Defendant)

Receivers

and

Showa Holdings Co., Ltd.

Respondent

Appearances:

Mr. Vernon Flynn, QC with him, Mr. Peter Ferrer for the Appellant

Mr. Adrian Francis and Ms. Olga Osadchaya for the Respondent

Mr. Hefin Rees, QC with him, Mr. Iain Tucker and Ms. Yegâne Güley for the Receivers

Commercial appeal — Insolvency Law — Appointment of receiver on application of JTrust — Application by appellant for information from receivers — Locus standi — Whether JTrust had legitimate interest in the outcome of the receivership — Whether the learned judge erred in holding that appellant lacked standing to seek a variation of the independent review committee order — Whether the learned judge erred by not exercising case management powers to substitute the Receivers in place of JTrust — Whether Court of Appeal ought to consider judge's failure to substitute Receivers where this was not pleaded or argued in the court below

In July 2018, JTrust Asia PTE Ltd. (“JTrust”) obtained a receivership order (“Receivership Order”) over A.P.F. Group Co. Ltd. (“A.P.F.”), a company incorporated in the Territory of the Virgin Islands (the “BVI”), with Mr. Nicholas Gronow and Mr. John Ayres (“the Receivers”) being appointed joint and several receivers.

A.P.F is also the majority shareholder of Showa Holdings Co. (“Showa”), the latter which is a Japanese company. By virtue of A.P.F.'s receivership, the Receivers are entitled to exercise majority shareholder voting rights over Showa. Pursuant to their powers under the Receivership Order, the Receivers changed the Board of Directors of A.P.F. and appointed Mr. Nicholas Gronow and Mr. Atushi Hosono as additional directors of Showa together with Showa's President and Showa's Chief Executive Officer, Mr. Tatsuya Konoshita, the Chief Financial Officer and Chief Operating Officer, Mr. Tomohiko Shoji, and five further directors, two of whom are designated ‘independent’ directors.

The Receivers then filed an application (“the Receivers' Application”) seeking relief against Showa regarding an investigation into certain questionable transactions. At the hearing of the application (“the IRC Hearing”), the court made an order (“the IRC Order”) by which Showa and the Receivers were required to agree to the terms of an order to establish an independent review committee (an “IRC”) by 25 ^th December 2019. The IRC Order made time of the essence for the IRC to be formed. At this hearing, JTrust was invited by the court to make submissions in relation to the Receivers' Application.

Less than a month after the IRC Order was made, JTrust filed an application (“the JTrust Application”) seeking: (i) an update from Showa as to the status of the establishment of the IRC; (ii) that the IRC Order be varied so that the Receivers be put in control of the IRC rather than the directors of Showa; and (iii) the Receivers be directed to call an extraordinary general meeting of the shareholders of Showa for the purposes of a vote on removing members of Showa's Board (together “the Three Heads of Relief”).

In response, Showa filed an application to strike out the JTrust Application (“the Showa Application”), relying on several grounds which related to JTrust's lack of standing to make the JTrust Application, the court's lack of jurisdiction over Showa and JTrust's non-entitlement to an update.

On 30 ^th September, the learned judge delivered a written judgment in which he dismissed the JTrust Application in relation to the Three Heads of Relief and held that the Receivers' support of the JTrust Application was immaterial to its determination. He acceded to Showa's Application to strike out the JTrust Application and further ordered that JTrust should pay Showa's costs on both the JTrust and Showa Applications. Additionally, the learned judge determined that JTrust should pay the Receivers' costs on those applications.

JTrust, being dissatisfied with the decision of the learned judge has appealed. The two issues that emerge for determination by this Court are: (i) whether the learned judge erred in finding that JTrust lacked standing to seek a variation of the IRC Order; and (ii) whether the learned judge erred in law by not exercising his case management powers to substitute the Receivers in place of JTrust in JTrust's Application.

Held: dismissing the appeal; affirming the judgment of the judge and ordering that JTrust pays costs to Showa to be assessed by a judge of the Commercial Court at no more than two-thirds of the costs in the court below, if not agreed within 21 days of this judgment, that:

• 1. It is settled law that receivers are officers of the court and therefore are answerable to the court and not to the party at whose behest they were appointed. As an exception to the general rule, the party who was instrumental in securing the appointment is entitled to bring an application against the receivers if they have acted in bad faith or their decision was so perverse that no reasonable receiver could have come to it. Accordingly, absent any bad faith and utter unreasonableness, the decision-making process is a matter for the receiver and the court will only interfere with the acts of a receiver in very limited and defined circumstances.

  Deloitte & Touche AG v Johnson and Another [1999] 4 LRC 281 applied; Portman v Mill [1835–42] All ER Rep 669 applied; Re Edennote Limited [1996] 2 BCLC 389 applied; Re Hans Place Ltd (in liquidation) [1993] BCLC 768 applied.

• 2. Neither section 24(1) of the Eastern Caribbean Supreme Court (Virgin Islands) Act nor the court's inherent jurisdiction places any restrictions on the persons who may apply for the appointment of a receiver. Nonetheless, where the court is asked to exercise its statutory or inherent powers in relation to receivership, the applicant must demonstrate that he is the proper person to invoke the court's jurisdiction. Consequently, the applicant must show that he not merely has an interest in making the application or is one who may be affected by its outcome but one who has a legitimate interest in the relief sought. It is common ground that the Receivers were appointed on the application of JTrust and while it was not disqualified from making the application and does have a general interest in the outcome of the receivership, that is not the same as a legitimate interest in the outcome which accords with the threshold as outlined in Deloitte & Touch AG. Furthermore, neither the fact that JTrust was permitted to make submissions nor the Receivers' support for the application was sufficient to confer standing on JTrust. Accordingly, the learned judge did not err in the exercise of his discretion and cannot be faulted for concluding that JTrust lacked the requisite standing to request that the Receivers provide it with updates. The judge's decision cannot be impugned.

  Deloitte & Touche AG v Johnson and Another [1999] 4 LRC 281 applied; ABN AMRO Fund Services (Isle of Man) 24 Nominees Limited formerly Fortis (Isle of Man) Nominees Limited and Others v Kenneth Krys et al [2017] ECSCJ No. 255 (delivered 20 ^th November 2017) followed; Kevin Gerald Stanford v Stephen John Akers et al (as Joint Liquidators of Chesterfield United Inc) [2018] ECSCJ No. 200 (delivered 12 ^th July 2018) followed.

• 3. As a general rule, a party is unable to prosecute a point before the appellate court unless it was taken in the court below, save in limited circumstances. The complaint about the judge's failure to substitute the Receivers, being an entirely new point, cannot and should not be interrogated in this appeal. In the totality of the circumstances, it would be unfair to criticise the judge for not doing so in circumstances where this argument was not canvassed with the judge either during or after the hearing and before the rendering of the judgment.

  Marie Makhoul v Cicely Foster et al [2015] ECSCJ No. 34 (delivered 23 ^rd February 2015) followed.

Introduction

Blenman JA

1 This is an appeal by JTrust Asia PTE Ltd. (“JTrust”) against the judgment and order of Wallbank J [Ag.] by which the learned judge dismissed JTrust's application for relief (“the JTrust Application”) in respect of the receivership over A.P.F. Group Co. Ltd. (In Receivership) (“A.P.F.”). JTrust also appeals the judge's decision to grant the application by Showa Holdings Co., Ltd. (“Showa”) to strike out JTrust's Application (“the Showa Application”). JTrust appeals the judge's decisions on the basis that he erred both in law and in fact in dismissing its application and in granting Showa's application. The learned judge did so on the basis that JTrust had no standing to seek and obtain the relief contained in its application, JTrust's appeal against the learned judge's judgment and order is vigorously resisted by Showa, which contends that JTrust's challenges to the learned judge's decision is without basis in law or principle.

2 It is necessary to set out the relevant background in some detail in order to provide the requisite context. I do so now.

Background

3 JTrust is a company incorporated in Singapore. It had on several occasions between March 2015 and September 2017, invested in a company called Group Lease Public Company Limited (“Group Lease”) that is listed on the Thai Stock Exchange. In October 2017, the Thailand Securities and Exchange Commission announced that it had filed a criminal complaint against Mr. Mitsuji Konoshita (“Mr. Konoshita”), for committing fraud, misappropriating...