XYZ v Real Assets (RA) Global Opportunity Fund
| Jurisdiction | British Virgin Islands |
| Judge | Wallbank, J. |
| Judgment Date | 19 August 2022 |
| Judgment citation (vLex) | [2022] ECSC J0819-2 |
| Docket Number | CLAIM NO. BVIHCM2021/0150 |
| Court | High Court (British Virgin Islands) |
EASTERN CARIBBEAN SUPREME COURT
IN THE HIGH COURT OF JUSTICE
COMMERCIAL DIVISION
CLAIM NO. BVIHCM2021/0150
CLAIM NO. BVIHCM2021/0144
Mr. John Wardell, KC, Mr. David Mumford, KC, and with them Ms. Tamara Cameron for XY, XYZ and Mr. Chia Hsing Wang
Mr. Andrew Hunter, KC, with him Mr. Tom Mountford, Mr. Carmine Conte and Mr. William Hare for Floreat Real Estate Ltd
Mr. Brian Child, with him Ms. Laura Gunn and Ms. Natasha Partos for Real Assets (RA) Global Opportunity Fund (on a watching brief only)
Mr. Ben Valentin, KC, with him Mr. Usman Roohani and Ms. Sara Malik for the Joint Provisional Liquidators of Real Assets (RA) Global Opportunity Fund
Wallbank, J. (Ag.): This is the Judgment of the Court in relation to the following matters:
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(1) An application to continue an Order made on 1 st September 2021 on an ex parte basis for the appointment of Joint Provisional Liquidators (‘the JPL Order’) over Real Assets (RA) Global Opportunity Fund (‘RAGOF’), in Claim No. BVIHC ( Com) 0150 of 2021 (‘the Continuation Application’);
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(2) An application to discharge the JPL Order (‘the JPL Order Discharge Application’);
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(3) An application seeking the setting aside of an ex parte Order made on 26 th August 2021 appointing receivers over shares in RAGOF in Claim No. BVIHC ( Com) 0144 of 2021 (‘the Receivership Order’ and ‘the Receivership Order Set Aside Application’ respectively).
For the reasons set out below, the Continuation Application fails and the JPL Order Discharge Application and the Receivership Order Set Aside Application succeed.
The Continuation Application and the JPL Order Discharge Applications were essentially opposite sides of the same coin, such that if one failed the other ought to succeed.
Names of two of the parties have been anonymized. No wrongdoing is alleged against those parties. Their names are anonymized merely to protect their reputations from any harm, through any supposition, which would be entirely misplaced, that they are somehow to be criticized with regard to any of the matters or circumstances herein. I should further stress that this judgment does not seek to pronounce judgment upon the allegations of wrongdoing concerning other parties. Those are matters for another day, if ever. Equally, this judgment should not be taken as an exoneration, or vindication, from such allegations. They are potentially serious, and not hopeless at first sight.
On 20 th August 2021 a certain self-styled businessman, Mr. Chia Hsing Wang, filed an application seeking receivership orders and permission to serve the proceeding outside of the jurisdiction upon a company that will be referred to as XY (‘XY’) and upon a company related to this, which will be referred to as XYZ (‘XYZ’), as Respondents. Mr. Wang sought an ex parte in private hearing of his receivership application (‘Receivership Application’) under a Certificate of Urgency. The application was heard ex parte and in private by this Court, before me, on 26 th August 2021. I granted the orders sought.
The receivership orders sought and granted were for the appointment of receivers over shares in RAGOF. Mr. Wang explained that RAGOF is a ‘Professional Fund’ investing in global real estate regulated by the BVI Financial Services Commission. According to Mr. Wang, those shares in RAGOF were held by XYZ as nominee for Mr. Wang, pursuant to nominee shareholding arrangements between Mr. Wang and XY (a company related to XYZ).
A further provision sought and granted as part of the receivership orders gave the Receivers the power to commence winding up proceedings in respect of RAGOF on the just and equitable ground and to apply for the appointment of joint provisional liquidators over RAGOF.
The background evidence for the Receivership Application was supplied by a First Affidavit of Mr. Wang and a First Affidavit of a certain Dr. Nicolas Herzog.
Mr. Wang opened his First Affidavit with what appeared at first sight to be a casual observation, but which later on showed itself to have much significance:
“I am not particularly experienced or knowledgeable in financial matters.”
In short, Mr. Wang gave evidence that the individuals controlling RAGOF have given inconsistent explanations for financial matters, such that they cannot be relied upon for truthful information, have serious conflicts of interest and have skewed the management of assets contributed by Mr. Wang, including fees charged by them, heavily in their own favour, for their own personal benefit and enjoyment, and contrary to the best interests of RAGOF. Mr. Wang urged that this combination of circumstances renders the appointment of provisional liquidators over RAGOF necessary for the purpose of maintaining the value of assets owned or managed by it, before liquidation of RAGOF is sought. Mr. Wang explained that he could only achieve this if receivers would be appointed first over the shares in RAGOF, in the hands of his nominees, as he himself would have no standing to apply for the appointment of liquidators over RAGOF, since he himself was not a shareholder. A transfer of the shares to himself could then also be a possibility, with appropriate legal proceedings being brought to achieve this, at which point the receivership could be brought to an end.
Mr. Wang recounted that his father had been a financially very successful businessman. In 2000 Mr. Wang's father was diagnosed with cancer and gifted his portfolio of assets to Mr. Wang. He died some five years later at an advanced age.
Mr. Wang explained that a large portion of the portfolio is held by banks in a certain onshore/offshore jurisdiction.
Mr. Wang recounted how, whilst pursuing his interest in ‘energy healing’ and ‘mindfulness’, he met one Mr. James Wilcox, who was an investment advisor from London, at ‘group healing seminars’ run by a Brazilian ‘faith healer’ in 2013 and 2014. Mr. Wang was soon introduced to Mr. Wilcox's business, the Floreat Group, and Mr. Wilcox's colleague, Mr. Hussam Otaibi. The Floreat Group is a UK-based asset management, private office and investment business which provides services to ultra-high net worth families. It is organised through a number of corporate vehicles, which are ultimately owned by Mr. Hussam Otaibi, Mr. Mutaz Otaibi, and Mr. Wilcox. For the purposes of this judgment, I will refer to the business and its principals as ‘Floreat’ and ‘the Floreat Principals’, respectively.
Mr. Wang said that Floreat persuaded him that they could manage the portfolio ‘much better’ than the banks. Mr. Wang then, in December 2014, executed an Investment Advisory Agreement with a Floreat related entity and a Supply of Services Agreement with another Floreat related entity. Mr. Wang stated that Floreat is a ‘regulated financial institution’.
Mr. Wang explained that whilst the portfolio managers within the banks managed the assets held by the banks, Floreat closely controlled the relationships with the banks and soon Mr. Hussam Otaibi and Floreat had substantially assumed control of all aspects of his financial affairs; as a result, Mr. Wang said, he became very dependent upon them. This led to Mr. Wang entering into a second Investment Advisory Agreement with another Floreat related entity in 2016 and a second Supply of Services Agreement in 2018. Mr. Wang entered into this second suite of agreements indirectly, using Cayman companies ultimately beneficially owned by him.
Mr. Wang explained that Floreat persuaded him to invest in a number of funds managed ultimately by Floreat, including in RAGOF. Mr. Wang says he invested about US$500 million in these funds, with about US$200 million invested in RAGOF.
Mr. Wang stated that in or around June 2020, he raised questions with Floreat about the Floreat funds (‘Floreat Funds’) and Mr. Wang's investments in them. Mr. Wang received evasive responses (he said), and Floreat substantively failed to provide requested documents. Mr. Wang stated that this caused him to become concerned that some problem with the Floreat Funds and his investments in them was being concealed. Mr. Wang thus engaged forensic accountants and advisors, FFP (Cayman) Limited (‘FFP’), to conduct a review of his relationship with Floreat
According to Mr. Wang, FFP's report, given to Mr. Wang in March 2021, identified numerous related-party transactions and apparent conflicts of interest which suggested that Floreat, the Floreat Principals and those involved in the management of the Floreat Funds might have engaged in serious wrongdoing.
Mr. Wang stated that he also obtained a third-party disclosure (‘Norwich Pharmacal’) order in the Cayman Islands against the fund administrator of the Floreat Funds. The resulting documentary disclosure was provided to FFP, who found further instances of serious apparent wrongdoing.
Matters of particular concern to Mr. Wang relate to a 300-acre farm (‘Springs Farm’) situated in England. Amongst information that came to light, FFP's review showed that Springs Farm was owned by RAGOF through a wholly owned subsidiary. Mr. Wang stated that he had, inconsistently with this information, been told by Mr. Hussam Otaibi that Springs Farm is owned by his family (the ‘Otaibi Family’), with documents showing that the local parish council had also thus been informed, and had also been told by Mr. Hussam Otaibi that Springs Farm had been gifted to Mr. Hussam Otaibi by a very wealthy middle eastern client, a Sheikh Shaker, out of gratitude for Mr. Hussam Otaibi's hard work. Mr. Wang stated that he believed...
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