Zhang Lan v La Dolce Vita Fine Dining Group Holdings Ltd and other appeals

• Jurisdiction: Singapore
• Judge: Woo Bih Li JAD
• Judgment Date: 27 June 2023
• Neutral Citation: [2023] SGHC(A) 22
• Court: High Court Appellate Division (Singapore)
• Docket Number: Civil Appeal Nos 4 to 7 of 2023
• Hearing Date: 27 March 2023
• Citation: [2023] SGHC(A) 22
• Year: 2023
• Plaintiff Counsel: Tham Lijing (Tham Lijing LLC) (instructed), Darren Tan, Kevin Cheng, Siew Wei Ying Silas and Yeo Hsien Yang Shane Anthony (Yang Xianyang) (Invictus Law Corporation),Thio Shen Yi, SC, Koh Li Qun Kelvin (Xu Liqun), Kevin Elbert, Tan Shi Ying Crystal and Phoon Wuei (TSMP Law Corporation)
• Defendant Counsel: and Han Guangyuan Keith and Angela Phoon Yan Ling (Oon & Bazul LLP)
• Subject Matter: Civil Procedure,Judgments and orders,Enforcement,Equitable execution,Appointment of receivers,Trusts,Resulting trusts
• Published date: 27 June 2023

Woo Bih Li JAD (delivering the judgment of the court): Introduction

AD/CA 4/2023, AD/CA 5/2023, AD/CA 6/2023 and AD/CA 7/2023 (“AD 4” to “AD 7”, respectively) are appeals against the decision of the General Division in HC/SUM 2703/2021 (“SUM 2703”) and HC/SUM 2704/2021 (“SUM 2704”; collectively referred to as “SUMs 2703 and 2704”).

The present dispute arises from a sale and purchase agreement for shares dated 10 August 2013 (the “SPA”) between La Dolce Vita Fine Dining Company Limited (“LDV”), La Dolce Vita Fine Dining Group Holdings Limited (“LDV Group”), and Mdm Zhang Lan (“Mdm Zhang”) (amongst other parties). LDV Group wholly owns LDV. Under the SPA, the LDV and LDV Group (collectively, the “LDV Entities”) acquired 86.2% of South Beauty Investment Company Limited (“SBIC”), a company owned by Mdm Zhang. SBIC was the holding company of the well-known ‘South Beauty’ restaurant chain that Mdm Zhang had founded and developed.

After the SPA was complete, SBIC experienced a decline in its financial performance. Following internal investigations into the matter, the LDV Entities each commenced arbitration in the China International Economic and Trade Arbitration Commission (“CIETAC”) against Mdm Zhang, claiming that Mdm Zhang had made fraudulent and negligent representations in connection with the SPA. The CIETAC found for the LDV Entities in their claim for negligent representation (the “Arbitral Awards”). The LDV Entities then obtained judgments in Hong Kong recognising the Arbitral Awards (the “HK Judgments”).

Following this, the LDV Entities successfully registered the HK Judgments in Singapore (the “SG Registration Order”). LDV and LDV Group then respectively filed SUMs 2703 and 2704 against Mdm Zhang in a bid to enforce the SG Registration Order. SUMs 2703 and 2704 were applications for the appointment of receivers over the bank accounts of Success Elegant Trading Limited (“SETL”), a company incorporated in the British Virgin Islands pursuant to a trust arrangement established under Mdm Zhang’s instructions. SETL was later added as a defendant in SUMs 2703 and 2704. The central issue before the High Court judge (the “Judge”) in SUMs 2703 and 2704 was whether the moneys in the bank accounts of SETL (the “Bank Accounts”) were beneficially owned by Mdm Zhang. The Judge held in the affirmative: see La Dolce Vita Fine Dining Co Ltd v Zhang Lan and others and another matter [2022] SGHC 278 (the “HC Judgment”). Accordingly, he appointed the receivers over the Bank Accounts.

Dissatisfied, Mdm Zhang filed AD 4 against LDV Group and AD 5 against LDV, which are appeals against SUM 2704 and SUM 2703 respectively. SETL also appealed against the Judge’s decision, filing AD 6 against LDV and AD 7 against LDV Group. AD 6 and AD 7 are appeals against SUMs 2703 and 2704 respectively. In these appeals, the issue of the beneficial ownership of the moneys in SETL’s Bank Accounts (the “Assets”) remains the main bone of contention between the various parties. In our judgment, and for reasons that will be explained below, the Judge did not err in finding that Mdm Zhang was the beneficial owner of the Assets. In light of this, we affirm his decision in SUMs 2703 and 2704.

Background

We begin our judgment by setting out the necessary background. The genesis of the dispute between the parties stretches back to around May 2012, when the international private equity and investment firm CVC Capital Partners (“CVC”) approached Mdm Zhang to discuss the acquisition of the well-known ‘South Beauty’ restaurant chain she had founded and developed. These discussions culminated in the SPA dated 10 August 2013. The parties to the SPA were the LDV Entities (which were subsidiaries of CVC incorporated for the purpose of the acquisition), Mdm Zhang, and other companies ultimately owned by Mdm Zhang (the “BVI Companies”).

Under the SPA, the LDV Entities would acquire 86.2% of the shares in SBIC, the ultimate holding company for the South Beauty restaurant chain. In exchange, a total of US$286,850,887 was paid over three tranches to Mdm Zhang between 16 December 2013 and 13 June 2014. The bulk of this purchase price was paid into Mdm Zhang’s Safra Sarasin bank account in Hong Kong (the “SS Account”).

Prior to and amidst these transfers, Mdm Zhang sought advice from one Ms Xiao Yanming (“Ms Xiao”), the chairman and CEO of an asset management company known as Cornucopiae Asset Management Ltd (“CAM”) on the setting up of a family trust for the benefit of her son, Mr Wang Xiaofei (“Mr Wang”). The first step of the trust arrangement was the incorporation of SETL in the British Virgin Islands on 2 January 2014, with Mdm Zhang being the owner of the sole share in SETL and its director. From February to March 2014, Mdm Zhang set up bank accounts with Credit Suisse AG Bank (“CS”) and Deutsche Bank AG (“DB”) both in Singapore under SETL’s name. From 10 March 2014 to 21 July 2014, US$142,051,618 in cash and securities was transferred from Mdm Zhang’s SS Account to SETL’s bank account with CS (the “CS Account”). US$85,225,000 was also transferred from the CS Account to SETL’s DB bank account (the “DB Account”) between 27 March 2014 and 27 November 2014. On 3 June 2014, a Declaration of Trust was executed over the sum of US$10 in favour of “Wang Xiaofei and his children and remoter issue” (the “Declaration of Trust”), with Asiatrust Limited (“Asiatrust”), a company that provides professional trustee services, named as the trustee. This trust was referred to as the “Success Elegant Trust”. The following day, Mdm Zhang executed a Deed of Addition of Assets (the “Deed of Addition”), in which the sole share in SETL was transferred from Mdm Zhang to Asiatrust. The Declaration of Trust and Deed of Addition are collectively referred to as the “Trust Documents”.

Some months after the LDV Entities’ acquisition of SBIC was complete, SBIC began experiencing a significant decline in its financial performance. After conducting internal investigations, the LDV Entities decided to take legal action against Mdm Zhang and the BVI Companies. On 26 February 2015, the LDV Entities sought injunctive relief against Mdm Zhang and the BVI Companies in the Hong Kong Court of First Instance (“HKCFI”). This included an injunction to restrain them from disposing of any of their assets whether within or outside Hong Kong. Mimmie Chan J granted the injunction on an urgent basis on 26 February 2015 (the “HK Freezing Orders”). The LDV Entities also filed HC/OS 178/2015 (“OS 178”) and HC/OS 180/2015 (“OS 180”), seeking freezing orders over Mdm Zhang’s assets in Singapore. OS 178 and OS 180 were granted on 2 March 2015 (the “SG Freezing Orders”). Upon receiving notice from the LDV Entities of the SG Freezing Orders, the respective banks froze the CS Account and DB Account.

On 5 March 2015, the LDV Entities commenced the CIETAC arbitration (mentioned at [3] above) and obtained the Arbitral Awards on 28 April 2019. While Mdm Zhang applied to set aside these awards before the China International Commercial Court and in Hong Kong, those applications were dismissed. The Arbitral Awards were successfully enforced in Hong Kong (ie, in the HK Judgments). The LDV Entities then filed HC/OS 1139/2020 and HC/OS 1140/2020 (“OS 1139 & 1140”), which were the LDV Entities’ applications for leave to register the HK Judgments in Singapore pursuant to s 4 of the Reciprocal Enforcement of Foreign Judgments Act (Cap 265, 2001 Rev Ed). The Singapore High Court allowed OS 1139 & 1140 on 11 November 2020.

SUMs 2703 and 2704 were then filed on 9 June 2021, and SETL was added as a defendant to the action on 16 September 2021. In SUMs 2703 and 2704, the LDV Entities sought the appointment of receivers nominated by the LDV Entities to “receive the monies and securities in respect of the interest of [Mdm Zhang] in … the monies and securities in [the Bank Accounts], in or towards satisfaction of the monies and interest due to the [LDV Entities] under the [SG Registration Order]”. This application was motivated by the fact that SETL was the legal owner of the Bank Accounts, thus precluding the LDV Entities from availing themselves of the various modes of legal execution such as a writ of seizure and sale.

The LDV Entities took the position that Mdm Zhang was the beneficial owner of the moneys in the Bank Accounts. In support of this, the LDV Entities relied on the following evidence: bank documents filed with CS and DB which identified Mdm Zhang as beneficial owner of the Bank Accounts, such as the form completed by Mdm Zhang for the opening of the CS Account dated 11 February 2014 (the “CS Account Opening Form”) and a Client Investment Risk Profile Form dated 7 March 2014 with DB (the “DB Risk Profile Form”); that CS and DB themselves considered that the Bank Accounts fell within the scope of the SG Freezing orders despite these orders only being directed at Mdm Zhang; A letter dated 6 March 2015 by Mdm Zhang’s then-solicitors Reed Smith Richards Butler (“Reed Smith”) to DB’s solicitors which stated that Mdm Zhang “maintains” the DB Account (the “6 March 2015 Letter”); that SETL took no action to correct the documents listed in subparagraph (a) above, nor any action to set aside the SG Freezing Orders for seven years; that Mdm Zhang directed the transfer of around US$32.3m from the CS Account and US$35,832,587 from the DB account to herself or to Mr Wang. This was after she had divested her share in SETL to Asiatrust on 4 June 2014; and that Mdm Zhang also gave urgent instructions to DB to make transfers out of the DB Account (amounting to US$35,832,587) to various entities one day after receiving notice of the HK Freezing Orders.

The Judge’s decision

SUMs 2703 and 2704 were heard before the Judge in chambers on 28 and 29 September 2021, with the parties electing not to cross-examine the various deponents on their affidavit evidence. The Judge issued the...