JTrust Asia Pte Ltd v Group Lease Holdings Pte Ltd and others

• Jurisdiction: Singapore
• Judge: Steven Chong JA
• Judgment Date: 01 June 2018
• Neutral Citation: [2018] SGCA 27
• Plaintiff Counsel: Chan Leng Sun SC, Sheik Umar, Michelle Lee and Nicolette Oon (Wong & Leow LLC)
• Docket Number: Civil Appeal No 46 of 2018
• Date: 01 June 2018
• Hearing Date: 16 April 2018
• Subject Matter: Civil Procedure,Interlocutory appeals,Mareva injunctions,Adducing fresh evidence
• Year: 2018
• Defendant Counsel: Edric Pan, Melissa Thng, Chia Huai Yuan and Zheng Huaice (Dentons Rodyk & Davidson LLP),and Pradeep Pillai and Simren Kaur Sandhu (PRP Law LLC)
• Court: Court of Appeal (Singapore)
• Citation: [2018] SGCA 27
• Published date: 06 June 2018

Steven Chong JA (delivering the judgment of the court): Introduction

Mareva injunctions occupy a significant role in modern commercial litigation due to their powerful effect, extraterritorial reach, and correspondingly, potential for abuse. While the court’s jurisdiction to grant Mareva relief is well established, as are the basic principles that govern its exercise, the variety of equitable considerations which necessarily feature in any proper assessment of whether such relief should be granted continues to raise questions which probe at the boundaries of the court’s discretion to grant it. This appeal is concerned with a number of those questions, the principal one being whether the presence of a collateral or ulterior purpose in seeking Mareva relief is sufficient to deny a plaintiff such relief even if he has established a good arguable case on his claim and demonstrated a real risk that the defendant will dissipate his assets to frustrate any eventual judgment.

The appellant, JTrust Asia Pte Ltd (“JTrust”), has brought an action against the respondents in the High Court in the tort of conspiracy, alleging that the respondents conspired to defraud JTrust of its investment in the parent company of the first respondent. The respondents are alleged to have conspired to facilitate the making of sham loans by the first respondent to certain borrowers (namely, the third to seventh defendant, the third defendant being the third respondent in this appeal), who then paid the interest on those loans using the loan principals under a round-tripping scheme. This artificially inflated the operating results of the parent company, which JTrust claims misled it into investing in the parent company. Pursuant to this action, JTrust applied for ex parte and obtained a Mareva injunction against the respondents. The respondents later successfully applied to set aside the Mareva injunction before the High Court Judge (“the Judge”), whose decision is reported at JTrust Asia Pte Ltd v Group Lease Holdings Pte Ltd and others [2018] SGHC 38 (“the Judgment”). JTrust now appeals against that decision.

Having carefully considered all the evidence adduced and the parties’ submissions, we have decided to allow JTrust’s appeal. We reinstate the domestic Mareva injunctions that were granted against all three respondents, and expand the injunctions against the first and third respondents to worldwide Mareva injunctions, in the terms proposed by JTrust. We turn now to explain our reasons, beginning with the factual background, which we will describe with some granularity because it is of crucial importance in examining whether the two principal requirements for the grant of Mareva relief, namely, a good arguable case on the claim and a real risk that the defendant will dissipate his assets, have been made out.

Background Parties to the dispute

JTrust is a company incorporated in Singapore which is in the investment business. Its managing director and CEO is Mr Nobuyoshi Fujisawa, and its other director is Mr Shigeyoshi Asano. Both of them are Japanese nationals. JTrust is wholly owned by a Japanese public company called JTrust Co, Ltd (“JTrust Japan”).

The first respondent, Group Lease Holdings Pte Ltd, is a company also incorporated in Singapore. It is wholly owned by a Thai public company called Group Lease Public Company Limited. Like the Judge below, we shall refer to these two companies as “Group Lease Singapore” and “Group Lease Thailand” respectively. Both are principally in the business of hire purchase financing for motorcycles.¹ Group Lease Singapore has four directors, including Mr Mitsuji Konoshita, who is the second respondent in this appeal, and Mr Tatsuya Konoshita, who is his brother and is also a director of Group Lease Thailand. To avoid confusion, we shall refer to the two brothers as Mr Konoshita and Mr Tatsuya respectively.

Mr Konoshita is a Japanese national and a Singapore Permanent Resident. He was chairman of Group Lease Thailand until October 2017, when he relinquished his office after the publication of an incriminating news release by the Securities and Exchange Commission of Thailand (“the Commission”), which is the regulatory body in Thailand that oversees listed companies there. After Mr Konoshita stepped down, Mr Tatsuya assumed his office.

The third respondent, Cougar Pacific Pte Ltd (“Cougar”), is a company incorporated in Singapore. It has the same registered address as Group Lease Singapore. Its sole shareholder is a company incorporated in Luxembourg called Pacific Opportunities Holdings S.a.r.l. (“Pacific”). Pacific is owned by Mr Tep Rithivit, a Cambodian businessman. He was from August 2015 to end 2017 a director of Cougar. He was also a former director of Group Lease Thailand’s subsidiary in Cambodia, GL Finance Plc. The current director of Cougar is one Mr Khith Sipin, who appears to be Mr Rithivit’s business associate.²

JTrust’s case JTrust invests in Group Lease Thailand

Between March 2015 and September 2017, JTrust made a number of investments in Group Lease Thailand. During this time, Mr Konoshita was chairman of the company, and was also one of its directors. Group Lease Thailand filed accounts every year and every quarter, and before deciding on its investments, JTrust reviewed those accounts and relied on their accuracy.

In March 2015, JTrust invested US$30m in Group Lease Thailand under an investment agreement which provided that JTrust would subscribe to US$30m worth of Group Lease Thailand’s convertible debentures.³ JTrust completed the subscription in May 2015. In December 2015, it exercised its right to convert the debentures into shares at THB 10 per share.⁴ This gave JTrust 98.1m shares in Group Lease Thailand, which was 6.43% of the company’s shareholding. In June 2016, JTrust invested a further US$130m in Group Lease Thailand under a second, similar investment agreement,⁵ but has yet to convert the debentures into shares. If JTrust elects not to do so, it is entitled to be repaid its investment in 2021. In December 2016, JTrust invested a further US$50m in Group Lease Thailand under a third, similar investment agreement⁶ and has likewise not converted the debentures into shares. If it chooses not to do so, it is entitled to be repaid its investment in 2020. A fourth set of investments was made between March and September 2017 which we shall mention below.

The Stock Exchange of Thailand requests information

On 9 March 2017, the Stock Exchange of Thailand (“the Exchange”) issued a public notice to Group Lease Thailand, requiring it to provide to its investors information on loans that it had extended to two sets of borrowers.⁷ The first set is referred to in these proceedings as the “Singapore Borrowers”. They comprise Cougar, Pacific, Mr Rithivit, and a Brazilian company called Kuga Reflorestamento Ltda (“Kuga”), which like Cougar is also wholly owned by Pacific (and, ultimately, by Mr Rithivit). The second is referred to as the “Cyprus Borrowers”. They comprise four Cyprus companies who constitute the fourth to the seventh defendants in the present conspiracy action commenced by JTrust. We shall refer to this action as the “Conspiracy Action” and to the Singapore and Cyprus Borrowers collectively as “the Borrowers”.

On 13 March 2017, Group Lease Thailand responded to the Exchange’s notice by issuing a clarificatory note which contained various assurances.⁸ In the note, Group Lease Thailand stated that it had loaned approximately US$56.3m to the Singapore Borrowers from May 2015 to January 2017⁹ and approximately US$39.5m to the Cyprus Borrowers from September 2015 to December 2016.¹⁰ Group Lease Thailand stated that the Singapore Borrowers and the Cyprus Borrowers were each part of a well-established group of companies owned respectively by a Japanese family and a Cambodian family.¹¹ Group Lease Thailand also explicitly disclaimed any directorship of or ownership in either set of borrowers, but noted that some of them or their affiliates owned shares in Group Lease Thailand.

On the same day Group Lease Thailand’s clarificatory note was released, JTrust purchased approximately 8.1m units of warrants from Group Lease Thailand for about THB 34.8m.¹² JTrust later sold all but 500,000 of those units, which it still holds. From April to September 2017, JTrust purchased 24m shares in Group Lease Thailand for approximately THB 492.5m.

The Securities and Exchange Commission of Thailand issues a news release

The next significant development occurred seven months later, on 16 October 2017, when the Commission published the news release that we have referred to at [6] above. The Commission stated that they had found that Group Lease Singapore in 2016 had, under Mr Konoshita’s directions, issued loans totalling US$54m to four registered companies in Cyprus (ie, the Cyprus Borrowers) and to a Singapore company (ie, Cougar), and that Mr Konoshita was the “controller and ultimate benefactor” of all of these companies.¹³ The Commission found that this “contradicted” the information that Group Lease Thailand had provided in the clarificatory note of 13 March 2017.¹⁴ The Commission went on in the news release to state that the principal in the loans had been used by the borrower companies to repay the interest on those loans to Group Lease Singapore. That interest was recorded as income in Group Lease Singapore’s 2016 financial statements, which was in turn a “fabrication of accounting records and exaggeration of [Group Lease Thailand’s] operating results”.¹⁵ As a result, the Commission said, it had decided to lodge a criminal complaint against Group Lease Thailand and had banned Mr Konoshita from occupying directorships in Thai companies.

After the Commission’s news release, Ernst & Young, who was the independent auditor of Group Lease Thailand and its subsidiaries, issued on 13 November 2017 a “Report on Review of Interim...