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

• Judge: Andrew Phang Boon Leong JA
• Judgment Date: 06 October 2020
• Neutral Citation: [2020] SGCA 95
• Citation: [2020] SGCA 95
• Defendant Counsel: and Pillai Pradeep G, Simren Kaur Sandhu and Caleb Tan Jia Chween (PRP Law LLC),Deborah Evaline Barker SC, Hewage Ushan Saminda Premaratne and Yvonne Mak Hui-lin (Withers KhattarWong LLP),Teh Kee Wee Lawrence, Pan Xingzheng Edric, Chia Huai Yuan, Elias Benyamin Arun and Sean Sim (Dentons Rodyk & Davidson LLP),Daniel Tan Shi Min and Abhinav Ratan Mohan (Shook Lin & Bok LLP)
• Published date: 08 October 2020
• Hearing Date: 07 July 2020
• Plaintiff Counsel: Chan Leng Sun SC and Colin Liew (instructed counsel), Ang Hsueh Ling Celeste, Shirleen Low, Danitza Hon Cai Xia, Lee Zhe Xu and Yiu Kai Tai (Wong & Leow LLC)
• Docket Number: Civil Appeal No 21 of 2020 and Summons Nos 41 and 42 of 2020
• Court: Court of Appeal (Singapore)
• Date: 06 October 2020
• Subject Matter: Pleadings,Conspiracy,Misrepresentation,Civil Procedure,Tort,Fraud and deceit

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

This is the third occasion this case has found its way to this court. The first concerned an appeal to reinstate a Mareva injunction, which was allowed, while the second also concerned the reinstatement of the Mareva injunction but this time following the dismissal of the claim after the trial below. The present appeal is against the Judge’s dismissal of the claims by the appellant, JTrust Asia Pte Ltd (“JTA”), in deceit and conspiracy against the respondents in HC/S 1717/2017 (the “Suit”) in JTrust Asia Pte Ltd v Group Lease Holdings Pte Ltd and others [2020] SGHC 29 (the “Judgment”).

On the two earlier occasions, we were satisfied that there was sufficient evidence to support a prima facie case in JTA’s claim for the tort of deceit against the first respondent, Group Lease Holdings Pte Ltd (“GLH”), and the second respondent, Mr Mitsuji Konoshita (“MK”), as well as in the tort of conspiracy against the first to seventh respondents in the present appeal.

The heart of the case concerns a series of loans which the Judge found to be “undoubtedly unusual” and “suspicious” which we agree with. However, our finding does not stop there. We are satisfied that the loans were shams which directly resulted in creating a false and misleading picture of the financial health and profitability of the parent company of GLH which induced JTA to make several substantial investments in the parent company of GLH, Group Lease Public Co Ltd (“GL Thailand”), a Thai public listed company. Having examined the evidence which was adduced at the trial as well as the fresh evidence which was adduced for the appeal with leave, we allow the appeal for the reasons set out below.

Summary of facts

In the decision of JTrust Asia Pte Ltd v Group Lease Holdings Pte Ltd and others [2018] 2 SLR 159 ("JTrust (CA 46)"), we allowed JTA’s appeal against the Judge’s decision to set aside the Mareva injunctions (CA/CA 46/2018) and we reinstated the domestic Mareva injunctions ordered against MK, GLH and the third respondent, Cougar Pacific Pte Ltd (“Cougar”) and expanded the Mareva injunctions against GLH and Cougar to worldwide Mareva injunctions (collectively referred to as the “Injunctions) (at [3] and [122]).

Following the trial of the Suit, the Judge dismissed JTA’s claims in deceit and conspiracy against the first to seventh respondents on 12 February 2020. The extinction by judgment of JTA’s claims discharged the Injunctions. The Judge ordered a temporary stay of the discharge to allow JTA the opportunity to make an application to this court. On 13 February 2020, JTA filed an appeal in CA/CA 21/2020 (“CA 21”) against the Judge’s dismissal of JTA’s claims in the Suit.

On 1 June 2020, this court allowed JTA’s application in part under CA/SUM 21/2020 (“SUM 21”) for an order that the Injunctions be continued or renewed, pending the determination of CA 21 in JTrust Asia Pte Ltd v Group Lease Holdings Pte Ltd and others [2020] SGCA 54 (“JTrust (SUM 21)”). We reinstated the domestic Mareva injunction against MK and the worldwide Mareva injunction against GLH, but dismissed the application to reinstate the Mareva injunction against Cougar (at [103]).

The key facts for CA 21 have been summarised in our previous judgments in JTrust (CA 46) at ([8]–[30]) and JTrust (SUM 21) at ([10]–[21]), and it would suffice for the purposes of this decision to reproduce the material facts.

We start with the main parties involved. JTA is a Singapore-incorporated investment company and is wholly owned by J Trust Co, Ltd ("J Trust Japan"). GLH is a wholly owned subsidiary of GL Thailand. GLH has four directors, including MK and his brother, Mr Tatsuya Konoshita (“TK”), who is also a director of GL Thailand. MK was the chairman of GL 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”), the regulatory body in Thailand that oversees listed companies. After MK stepped down, TK assumed his office.

Cougar is a Singapore incorporated company with the same registered address as GLH. Its sole shareholder is a company incorporated in Luxembourg called Pacific Opportunities Holdings SARL (“Pacific”), which was owned by Mr Tep Rithivit (“Rithivit”), a Cambodian businessman, until 12 June 2018. Rithivit was a director of Cougar from August 2015 to end 2017. Pacific was acquired by Saronic Holdings Ltd (“Saronic”) on 12 June 2018, after the Suit was filed but prior to the commencement of the trial.

On 9 March 2017, the Stock Exchange of Thailand (“the Exchange”) issued a public notice to GL Thailand, requiring it to provide to its investors information on loans that it had extended to two sets of borrowers (“the GLH Loans”). The first set is known as the “Singapore Borrowers”, who comprise Cougar, Pacific, Rithivit and a Brazilian company called Kuga Reflorestamento Ltda (“Kuga”), which was also wholly owned by Pacific (which Rithivit was the sole shareholder of prior to 12 June 2018). The second set is referred to as the “Cyprus Borrowers”. They comprise the fourth to seventh respondents, which are companies incorporated in Cyprus.

Yoichi Kuga (“YK”), who claimed to be the beneficial owner of Cougar, joined the action on 8 May 2019 and affiliates himself with the first to seventh respondents.

APF Group is a corporate group of companies with a complex structure which includes APF Group Co Ltd (“APF BVI”), APF Holdings Co Ltd (“APF Thailand”), Showa Holdings Co Ltd (“Showa”), Wedge Holdings Co Ltd (“Wedge”) and a wholly-owned subsidiary of Wedge, Engine Holdings Pte Ltd (“Engine”). Engine was incorporated in Singapore to hold part of APF Thailand’s stake in GL Thailand. JTA’s case is that the APF Group is controlled by MK, who was at the apex of the APF Group, through the use of APF BVI which was in turn MK’s “personal asset management and investment vehicle”. The evidence will, as elaborated below, demonstrate that MK’s use of the entities through the internal circulation of money within the APF Group gave rise to JTA’s claims.

Between March 2015 and September 2017, while MK was the chairman of GL Thailand, JTA made a number of investments in GL Thailand. The investments were as follows: On 20 March 2015, JTA invested US$30m in GL Thailand under the first investment agreement (“1st IA”) which provided that JTA would subscribe to US$30m worth of GL Thailand’s convertible debentures. JTA completed the subscription on 22 May 2015. In December 2015, JTA exercised its right to convert the debentures into shares at 10 Thai Baht per share. In June 2016, JTA entered into a second similar investment agreement (“2nd IA”) with GL Thailand, under which JTA subscribed for US$130m of GL Thailand’s convertible debentures. The subscription for the convertible debentures was completed on 1 August 2016. JTA has yet to convert the debentures into shares. If JTA elects not to do so, it is entitled to be repaid its investment in 2021. On 1 December 2016, JTA entered into a third similar investment agreement (“3rd IA”) with GL Thailand, under which JTA subscribed for a further US$50m of GL Thailand’s convertible debentures and has likewise not converted the debentures into shares. The subscription of the convertible debentures was completed on 20 March 2017. If JTA chooses not to do so, it is entitled to be repaid its investment in 2020. The debentures are already due for repayment. A fourth set of investments consisted of purchases of GL Thailand’s shares and warrants on the open market. These purchases were made between March and September 2017.

The three investment agreements each contained an express warranty in respect of the accuracy of GL Thailand’s consolidated financial statements. GL Thailand provided express warranties that its year-end 2014 financial statement (in the 1st IA) and year-end 2015 financial statement (in the 2nd IA and 3rd IA) were accurate and were prepared in accordance with the applicable accounting standards.

GL Thailand’s financial statements were prepared on a consolidated basis (ie, that GL Thailand’s financial statements incorporated the financial information of its subsidiaries, including GLH) (Judgment at [9]). Further details on the financial statements can be found at JTrust (SUM 21) ([6] supra at [18]) and will be explored in the main analysis below. The chronology of JTA’s respective investments in GL Thailand and the dates on which GL Thailand’s financial statements were released is also summarised at Annex A.

Prior to each of JTA’s investments in GL Thailand, representations were made as to GL Thailand’s financial health and profitability by MK to Mr Nobuyoshi Fujisawa (“Fujisawa”), the managing director and Chief Executive Officer of JTA, and Mr Shigeyoshi Asano (“Asano”), a director of JTA and J Trust Japan. Evidence adduced at the trial of the said representations will be explored in the main analysis (see below at [146]–[156]).

On 9 March 2017, the Exchange required information from GL Thailand on the loans that it had extended to (a) the Singapore Borrowers; and (b) the Cyprus Borrowers (collectively referred to as “the Borrowers”). On 13 March 2017, GL Thailand responded to the Exchange’s notice by issuing a clarificatory note.

On 16 October 2017, the Commission issued a news release stating that GLH had issued sham loans the interest on which was repaid using the loan principals under a round-tripping scheme designed to inflate GL Thailand’s operating results and announced that it had filed a criminal complaint against MK (the “SEC Release”). Evidence was adduced at the trial of the alleged round-tripping scheme and that JTA’s investments were routed in a circular way other than for the retail financing business of GL Thailand, the details of which will be examined below.

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