Russell Crumpler and Christopher Farmer (as joint liquidators of Peak Hotels & Resorts Ltd ((in Liquidation))) v Jinpeng Group Ltd
| Jurisdiction | British Virgin Islands |
| Judge | Green QC, J |
| Judgment Date | 04 April 2019 |
| Neutral Citation | VG 2019 HC 16 |
| Court | High Court (British Virgin Islands) |
| Docket Number | CLAIM NO: BVIHC (COM) 0116/2014 |
| Date | 04 April 2019 |
IN THE EASTERN CARIBBEAN SUPREME COURT
IN THE HIGH COURT OF JUSTICE
COMMERCIAL DIVISION
Green QC, J (Ag.)
CLAIM NO: BVIHC (COM) 0116/2014
Mr Andrew Willins of Appleby for the Applicant
Mr Robert Levy QC with Oliver Clifton and Rhonda Brown of Walkers for the Respondent
Mr Muhammed Haque QC with Mr Robert Nader of Forbes Hare for Candey Limited, an interested party
The meaning of Rule 199(e) of the Insolvency Rules 2005 — whether certain items of costs are included within the “costs of the application on which the liquidator was appointed” — whether the costs of an appeal are within Rule 199(e) — whether the costs of an arbitration directed by the Court to establish the debt are within Rule 199(e) — whether the costs of foreign lawyers are claimable after the Legal Profession Act 2015 came into force — the appropriate process for determining the quantum of costs within Rule 199(e)
Green QC, J (Ag.): This is an application by the Joint Liquidators (“ the JLs”) of Peak Hotels & Resorts Limited (“ the Company”) under section 186(5) of the Insolvency Act 2003 (“ the Act”) in relation to the priority of costs and expenses of the liquidation as specified in Rule 199 of the Insolvency Rules 2005 (“ the Rules”). The points in dispute in this application have not been considered before in the British Virgin Islands (“ BVI”); nor is there much by way of authority from England and Wales or other relevant jurisdictions. The JLs, represented by Mr Willins, properly adopt a neutral stance but make valuable submissions on the general principles that require to be resolved in their application. In doing so, the JLs have sought to advance all of the arguments that could properly be made on behalf of the Company to ensure that the Court has the benefit of adversarial argument upon the relevant principles.
The application concerns the costs incurred by Jinpeng Group Limited (“ Jinpeng”). Jinpeng is the creditor of the Company that made the ultimately successful application for the appointment of the JLs. It claims an enormous sum in respect of the alleged costs of that application, namely $6,270,071.14. Various elements of that sum are in dispute but Jinpeng says that it is all within Rule 199(e) of the Rules (“ Rule 199(e)”) giving priority over other expenses and floating charge holders to:
“the costs of the application on which the liquidator was appointed”.
Candey Limited (“ Candey”) is an English law firm that has acted for the Company including in relation to resisting Jinpeng's application for the appointment of the JLs, the Company's application to strike out and the appeal therefrom and the arbitration between the Company and Jinpeng. Candey has, at least, a floating charge over the Company's assets in respect of its fees (it may have more than a floating charge, depending on the outcome of extensive English litigation between Candey and the JLs — see below). Its interest in this application is that the amount of Jinpeng's costs held to be within Rule 199(e) will affect its recovery under the floating charge. Neither the JLs nor Jinpeng object to Candey being heard on this application.
Before turning to the application, I should say that at the start of the hearing, Mr Willins informed me that the JLs had, the previous night, received an offer and reached an agreement with Jinpeng that they would agree to Jinpeng's offer to accept $3.2m of its claim to priority under Rule 199(e). Their agreement was conditional on sanction to the settlement agreement being given by the Court and for that application to be made at the start of the hearing. Mr Willins did invite the Court to consider that sanction application, and showed me the letter of the JLs to Jinpeng's legal practitioners, Walkers, dated 26 February 2019 setting out the terms of their agreement.
Mr Haque QC on behalf of Candey opposed me considering the oral sanction application. He produced a letter dated 24 April 2018 written by Stephenson Harwood, the JLs' lawyers in England, to Candey following a hearing that day before Hildyard J in which they stated that 21 days notice would be given by the JLs to Candey of any application to the BVI Court by the JLs in respect of, inter alia, the determination by the BVI Court of the quantum of costs of Jinpeng or any other payment out of the liquidation estate. In the light of that letter and Candey not having any notice of the sanction application, I declined to deal with it and we moved to considering the substantive application in relation to Jinpeng's costs.
The issues as to which of Jinpeng's costs are within Rule 199(e) are as follows:
-
(a) The costs of an arbitration directed to be heard;
-
(b) The costs of an appeal by Jinpeng on the dismissal of its application;
-
(c) The costs of the application for Joint Provisional Liquidators (“ JPLs”);
-
(d) The costs of Weil Gotshal & Manges LLP (“ Weil”) incurred after 1 November 2015 when the Legal Profession Act 2015 (“ LPA”) came into force.
Once these issues have been determined I have also been asked to consider the appropriate route that the JLs should take to have Jinpeng's costs quantified. There are three alternatives:
-
(a) By the Court, in the same way as a liquidator's remuneration application;
-
(b) By the JLs as they would in relation to any other debt in the liquidation; or
-
(c) By the Court, as it would on a detailed assessment following a costs order.
There is quite a complicated history to the various proceedings that are relevant to this application. The background facts are not seriously in dispute. I will set out the factual background in the following order:
-
(a) The Company's short history and London litigation;
-
(b) Jinpeng's application for the appointment of the JLs;
-
(c) The JLs' settlement of the London litigation;
-
(d) The JLs' litigation with Candey.
The Company was incorporated on 14 January 2014. Its purpose was to act as a holding company for shares in a joint venture vehicle, Peak Hotels and Resorts Group Limited (“ PHRGL”) which in turn indirectly held Aman Resorts, a boutique luxury hotel group. The principal joint venture parties were:
-
(a) Mr Omar Amanat, who controlled, directly or indirectly, the Company through a family trust with which he is associated;
-
(b) Mr Vladislav Doronin, who controls Tarek Investments Limited (“ Tarek”); and
-
(c) Mr Adriaan Zecha who is a minority shareholder in the Company and who founded Aman Resorts over twenty years ago.
On the day the Company was incorporated, it and Tarek agreed to acquire Aman Resorts for $358 million. Following the acquisition, PHRGL held all the shares in Aman Resorts Group Limited which in turn held all the shares in Silverlink Resorts Limited which wholly owned Aman Resorts.
On 24 January 2014, the Company entered into a Memorandum of Understanding with Jinpeng (“ MOU”) and a loan agreement providing for a loan to the Company of $35 million. The loan was advanced that same day. The MOU contemplated that the loan would be repayable by 24 January 2015 unless the Company and Jinpeng had first agreed to a conversion of the debt to equity. This formed the basis of the purported dispute on Jinpeng's application to appoint liquidators — see below.
In April 2014, Mr Amanat on behalf of the Company agreed to a loan from Sherway Group Limited (“Sherway”) in the sum of $50 million. Related agreements were entered into at the same time which provided for conversion of part of the loan into shares in an intermediate holding company to hold the Company's interest in PHRGL. The Sherway loan was fully drawn down on 2 April 2014.
Almost immediately after the acquisition and the loan agreements, the relationships broke down. On 25 June 2014, the Company issued proceedings in the Chancery Division of the High Court in England and Wales against Tarek, PHRGL and Sherway (amongst others) seeking declaratory and injunctive relief as well as damages for breach of contract. A further set of proceedings was begun by the Company on 17 July 2014 seeking rescission of the Sherway Loan Agreement and other agreements for misrepresentation (together “the London Litigation”).
The Company was represented in the London Litigation by Candey or its sister firm, Candey LLP. Various applications for injunctions were made by the Company, the details of which are not relevant to the application before me. By an Order made on 19 September 2014, the Company gave the usual cross undertaking in damages and this was fortified by an undertaking by Candey LLP on behalf of the Company to pay the sum of $10 million into Court to stand as security for any damages ordered to be paid by the Company on its crossundertaking.
Some of the Defendants in the London Litigation then applied for security for costs against the Company. In a judgment delivered on 20 February 2015, Henderson J (as he then was) decided that the $10 million already paid into Court could not be used by way of security for the Defendants' costs, and therefore that the Company should pay an additional £3,138,000 into Court. The result was that the Company had paid into Court $10 million and £3,138,000 (the “Monies in Court”). In his judgment, Henderson J referred to Mr Amanat as a “blatant fraudster who had arranged international fraudulent conveyances…and that there was overwhelming evidence that he had acted in bad faith with actual or constructive knowledge of a fraudulent scheme”. Mr Amanat has subsequently been convicted in the US of involvement in an unrelated fraud.
On 17 September 2014, Jinpeng applied for...
To continue reading
Request your trial