YOICHI KUGA v. SARONIC HOLDINGS LTD

HCMP 1180/2018

[2023] HKCFI 1027

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 1180 OF 2018

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D E C I S I O N

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INTRODUCTION

1.  Before this Court are three summonses, two regarding interrogatories served by the plaintiff (“P”) on the defendant (“D”) without order, and another earlier summons issued by D for an inquiry as to damages suffered by D as a result of its undertakings obtained by P in these proceedings.

2.  All 3 summonses arose out of section 21M injunction proceedings commenced by P in August 2018 against D, in aid of proceedings brought by P against D (amongst others) in Luxembourg concerning the beneficial ownership of shares in a Luxembourg company Pacific Opportunities Holdings Sarl (“POH”) held in the name of D (“Luxembourg Proceedings”).

3.  At an urgent hearing on 10 August 2018 before Anthony Chan J when P sought an interim injunction, and pending the substantive hearing, D gave certain undertakings concerning the shares in POH (“POH Shares”) and also concerning POH (“D’s 1^st Undertakings”) and P gave cross-undertaking as to damages (“P’s Cross Undertaking”), with fortification of USD 1m which was subsequently paid into court by P on 30 August 2018. D’s 1^st Undertakings were replaced by another set of undertakings at the substantive hearing of the originating summons before this Court on 14 November 2019 (“D’s 2^nd Undertakings” and collectively with D’s 1^st Undertakings will be referred to herein as “D’s Undertakings”) while P’s Cross Undertaking remained essentially undisturbed. During the substantive hearing, P obtained leave to amend its originating summons, and the amended originating summons was then adjourned sine die with liberty to restore, upon D’s 2^nd Undertakings and P’s Cross Undertaking.

4.  On 3 December 2021, the Luxembourg Proceedings were concluded and P’s claims were dismissed on jurisdictional grounds and P was ordered to pay judicial cost to D[1]. There was no appeal by P against the dismissal.

5.  On 13 April 2022, P issued two summonses, respectively for release of the sum of USD 1m under P’s Cross Undertaking and (ii) for release of the sum of HKD 1.2m paid by P for security of costs for D (collectively “Release Summonses”).

6.  Thereafter, 16 May 2022, D issued a summons (“Inquiry Summons”) to (i) dismiss P’s originating summons herein, (ii) for D to be released from D’s Undertakings, and (iii) there be an inquiry as to damages suffered by D, as a result of D’s Undertakings (“Inquiry”).

7.  On 19 May 2022, this Court granted an order, amongst other things, that (i) D be released from all D’s Undertakings[2], (ii) the Inquiry Summons be adjourned to a further hearing, for this Court to determine the question as to whether the Court should exercise the discretion to enforce P’s Cross Undertaking (“Question”), and (iii) P’s Release Summonses were adjourned sine die until after the determination of the Question or further order.

8.  Subsequent thereto, on 17 June 2022, P served interrogatories on D without an order in relation to the underlying dispute (“Interrogatories”)[3]. D then issued a summons on 29 June 2022 seeking an order that P should withdraw the Interrogatories. This was followed by P issuing a summons on 25 July 2022 for leave to serve the Interrogatories (collectively “Interrogatories Summonses”)[4].

9.  Counsel Mr David Fong and Mr Jason PH Wong appeared for P at the hearing, and Ms Eva Sit SC and Mr Cedric Yeung appeared for D.

BRIEF BACKGROUND

10.  This Court has previously handed down two decisions in these proceedings, namely (1) a decision dated 11 December 2019 on costs (“Costs Decision”)[5] and (2) a decision dated 18 May 2021 on release of P’s Cross Undertaking (“Release Decision”)[6]. The brief background leading to these proceedings can be gleaned from those decisions.

11.  To summarise, there had been multi jurisdictional disputes and litigations between JTrust Asia Pte Ltd (“JTrust”), which is the Singapore investment company of J Trust Co Ltd (a Japan public company) (“JTrust Japan”) on one side and on the other, P’s friend Mitsuji Konoshita (“MK”) and companies controlled by MK which include the Group Lease group of companies (“GL Group”) consisting amongst which Group Lease Public Co Ltd (a Thai public company) (“GL Thai”) and Group Lease Holdings Pte Ltd (“GL SG” or “GLH” as referred to in the SGCA Final Judgment defined below).

12.  The primary forum of the litigations was in Singapore and the Singapore Proceedings consisted of Suit 1212/2017 issued by JTrust on 26 December 2017 against 7 defendants, namely GL SG (ie GLH), MK, Cougar Pacific Pte Ltd (“Cougar SG”, which has also been referred to simply as “CP”), and 4 Cyprus companies said to be controlled by MK (“Cyprus Borrowers”). Suit 1212/2017 was based on the allegation of JTrust of deceit and conspiracy of those 7 defendants involving sham loans and perpetrated by MK to defraud JTrust of its investments. Later P claiming to be the beneficial owner of Cougar SG was joined as the 8^th defendant.

13.  P is said to be the President and Chief Executive Officer of Kuga Corporation Company Limited (“Kuga Corporation” or “Kuga JP”), a family business which is said to have over 110 years of history in Japan and which is principally engaged in the business of wholesale supply of construction materials and pre-cut wood. According to P, in around 2013 to 2014, Kuga Corporation wanted to expand its business into ASEAN countries and appointed a company of which MK was a director as the corporate structuring consultant for Kuga Corporation.

14.  According to P, through MK’s recommendation, a Cambodian businessman Tep Rithivit (“Tep”) was appointed as the business representative of Kuga Corporation and P for ASEAN countries, and that the Singaporean company Cougar SG was incorporated on 8 December 2014 as a wholly owned subsidiary of Kuga Corporation, with a Singapore lawyer assigned by MK as local director together with Tep, to purchase the entire share capital of a Brazilian company, a member of Kuga Corporation (“KR Brazil”). It was for this purpose and for tax reasons that POH, a shelf company in Luxembourg was acquired, and that the Cougar SG’s shares in KR Brazil were then sold to POH. It was then agreed between P and Tep that the POH Shares would be registered in Tep’s name but Tep would hold the POH Shares on trust for P who would be the beneficial owner of the POH Shares.

15.  It was P’s case that on 14 June 2018, he discovered that Tep had, without P’s knowledge and/or authorization, transferred the POH Shares to D, a company unknown to P. D was incorporated on 29 May 2018, about two weeks prior to the transfer. One Gwynn David Nevill Hopkins (“Hopkins”) was the sole shareholder and director of D. Within days after the transfer, and amongst other things, D had appointed itself as a corporate director of POH, removed the existing directors of Cougar SG and appointed instead new directors including Hopkins himself.

16.  On the other hand, Hopkins’ evidence was that in about mid-2018, Tep wanted to extricate himself from the dispute between JTrust and MK, and thereafter Tep entered into an arrangement whereby the POH Shares were transferred to D, a corporate vehicle formed by Hopkins, who is an independent insolvency practitioner of Perun Consultants (“Perun”), to hold the POH Shares and to provide independent and objective professional services for POH pending determination of Suit 1212/2017[7].

17.  The Luxembourg Proceedings were commenced by P on 27 July 2018 against Tep, D, Hopkins and POH claiming amongst other things, (i) P was the ultimate beneficial owner (“UBO”) of POH (with Tep as his trustee); (ii) Tep had transferred the POH Shares to D in breach of his duties to P and that the transaction was void for an unlawful cause; and (iii) damages against D/Hopkins as “third-party accomplices” of such breach.

18.  The originating summons herein for the section 21M injunction was then issued by P against D on 1 August 2018.

19.  As mentioned earlier, D’s 1^st Undertakings were given by D at the urgent hearing before Anthony Chan J. The 1^st Undertaking consisted of amongst other things, to preserve the status quo of the POH Shares, and assets and personnel of POH or its subsidiaries and not to divulge financial and confidential and/or privileged information belonging to POH, KR Brazil or Cougar SG or its subsidiaries to JTrust, save as required by court order or as advised by legal advisers of POH, KR Brazil or Cougar SG or with approval of the court. D’s 1^st Undertakings were later replaced by D’s 2^nd Undertakings, and the main change was that the undertaking in D’s 1^st Undertakings regarding the non divulging of financial information was replaced by D’s undertaking not to take any step to diminish the assets and/or increase the liabilities of POH and its subsidiaries and an undertaking not to take any steps to procure the liquidation of POH and its subsidiaries.

20.  The Singapore High Court delivered its judgment in Suit 1212/2017 on 12 February 2020 after a trial of some 10 days and dismissed all claims in torts of deceit and conspiracy brought by JTrust against the defendants therein (“SGHC Judgment”)[8]. It was found therein that after joining as the 8^th defendant, P had affiliated himself with MK and the other defendants, although Cougar SG later took a neutral stance in that action. As further seen in the judgment, after D obtained control of Cougar SG through POH, Cougar SG was said to be under the control, indirect or otherwise, of JTrust which had funded D’s role in the litigation. A day after the delivery of the above judgment, on 13 February 2020, JTrust filed a Notice of Appeal and the appeal was heard by the Singapore Court of Appeal on 7 July 2020 with judgment reserved.

21.  On 6 October 2020, the Singapore Court of Appeal (“SGCA”) handed down its judgment under [2020] SGCA 95 (“SGCA Final Judgment”)[9], allowing the appeal of JTrust and reversing the High Court decision in the SGHC Judgment. The SGCA Final Judgment has brought Suit 1212/2017 to a conclusion.

22.  As said, the Luxemburg Proceedings were later dismissed. There was no appeal by P against the dismissal.

23.  In short, there are at present no pending proceedings in any jurisdiction concerning the beneficial ownership of the POH Shares.

THE SGCA FINAL JUDGMENT

24.  It was found in the SGCA Final Judgment, amongst other things, that:

(1)  Between March 2015 and September 2017, JTrust made 4 sets of investments into GL Thai[10].

(2)  During this period, (i) the GL Group “round-tripped” its funds at 2 levels by creating sham loans with ostensibly independent borrowers which were in fact beneficially owned by MK, so as to generate false turnover and create the false impression of profitability of GL Thai; and (ii) such borrowers included the POH companies (described by the SGCA as the “Singapore Borrowers”)[11].

(3)  On 26 December 2017, JTrust commenced the Suit 1212/2017 against amongst others GLH (ie GL SG), MK and Cougar SG for deceit and conspiracy in respect of the sham loans. Since there was a dispute as to whether (i) the POH companies were vehicles beneficially owned by MK/GL Group to perpetrate the fraudulent scheme or (ii) they were independently owned by P as Kuga Corporation’s investment, P subsequently intervened in the Suit 1212/2017 and affiliated himself with the 1^st to 7^th respondents to advance the latter position in (ii)[12].

25.  It was then found by the SGCA that the POH companies (ie the Singapore Borrowers), were in fact beneficially owned by MK[13].

THE INTERROGATORIES SUMMONSES

The Interrogatories

26.  The Interrogatories concern (1) who is the UBO of POH and (2) whether D had taken steps to verify the UBO of POH before accepting the transfer of the POH Shares[14].

The legal principles on interrogatories

27.  The applicable principles in interrogatories have been summarised in Ng Shek Wai v Hong Kong Institute of Certified Public Accountants [2019] HKCFI 2439 by Au J, as Au JA then was, at paragraphs 31-32 as follows:-

“31. The relevant principles governing whether interrogatories should be permitted are not and cannot be disputed. They can be conveniently summarized as follows:

(1) The interrogatories must relate to a matter in question between the parties: Order 26, rule 1(3) of the Rules of the High Court (Cap 4A).

(2) The interrogatories must be necessary either for disposing fairly of the cause or matter or for saving costs: Order 26, rule 1(1) of the Rules of the High Court.

(3) Even where the interrogatories comply with the requirements of the rules, the Court nevertheless retains an overriding discretion as to whether or not to allow them to be administered: Lee Nui Foon v Ocean Park Corp (No 2) [1995] 2 HKC 395.

32. In determining whether the interrogatories relate to a matter in question between the parties, the court applies a test which is akin to the Peruvian Guano test in discovery. The right to interrogate is not confined to the facts directly in issue, but extends to any facts the existence or non-existence of which is relevant to the existence or non-existence of the facts directly in issue: Lee Nui Foon at 398F-G, Kao Lee & Yip v Koo Hoi Yan (unreported, HCA 8847/1993, 26 February 2002) at paragraph 7(1).”

Discussion on the Interrogatories Summonses

28.  It is submitted on behalf of P that the Interrogatories are necessary as it concerns the question as to whether D is liable as a constructive trustee for knowing receipt and dishonest assistance[15], and that the Court is asked to decide whether D is a constructive trustee as this would affect the exercise of this Court’s discretion in deciding whether to order the Inquiry[16].

29.  First, I agree with Ms Sit’s submission, namely the present proceedings are section 21M proceedings, and by their very nature, the underlying substantive claims and issues are to be tried elsewhere and are thus wholly outside the purview of these ancillary proceedings.

30.  Second, as pointed out by Ms Sit, Hopkins had already given answers to the Interrogatories. In this respect, Ms Sit had referred to the transcript (“Transcript”) of the trial in Singapore in Suit 1212/2017 (“SG Trial”) and she had set out the following table in her Skeleton Submissions (“Table”):

	Interrogatories	Answers Already Given by D/Hopkins
1	Who is ultimate beneficial owner of POH	D does not know: Transcript pp 17:7-21; 32:7-17; 33:16-22; 72:24-73:1; 74:8-19 [B3: 703, 718, 719, 758-759, 760].
3	For whom did D hold the POH Shares as nominee	Whomever the court determines to be the ultimate owner: Transcript p 30:6-9 [B3:716]
2 4 5	Any (i) written authorisation from or (ii) communication with ultimate beneficial owner before transfer of POH shares	Given D’s above answers to items 1 & 3, it necessarily follows that D did not communicate with POH’s ultimate beneficial owner
6	Did D/Hopkins do client due diligence	No because the ultimate of POH was disputed and subject to determination by a court: Transcript pp 17:11-21; 18: 12; 19:2-21 [B3:703-705].

31.  However, Mr Fong argued that Hopkins never answered the Interrogatories 2,4,5 and 6 until the date of D’s Skeleton Submissions[17], ie until the Table was produced.

32.  From what Mr Fong was saying, he seemed to accept at the hearing that Interrogatories 1 and 3 had already been answered by Hopkins in the SG Trial, and that by the time of the hearing, the rest of the Interrogatories had also been answered by what was set out in the Table. Anyway, upon reading the Transcript, I find that Hopkins had indeed answered Interrogatories 1 and 3 during the SG Trial, and that it follows from his answers to those Interrogatories that as the identity of the UBO of POH was not known to him, he did not communicate with the UBO of POH and that he did not conduct client due diligence on the unknown UBO.

33.  Third, whether D is a constructive trustee, this issue had already been decided by this Court, as seen in the Release Decision. Mr Fong however argued that there was no issue estoppel as amongst other things there had been a change of circumstances. For reasons set out later in this decision, I am of the view that there had not been any change of circumstances or new evidence as submitted by Mr Fong, and in any event, for reasons set out later, I maintain my previous finding in the Release Decision that D was/is not a constructive trustee, as alleged by P.

34.  In light of all above reasons, I do not find that the Interrogatories relate to a matter in question between the parties, nor are they necessary either for disposing fairly of the cause or matter or for saving costs. I am not prepared to grant leave for P to serve the Interrogatories, and that the Interrogatories must be withdrawn, and P’s summons issued on 25 July 2022 is to be dismissed.

THE QUESTION - WHETHER THE COURT SHOULD EXERCISE ITS DISCRETION TO ENFORCE P’S CROSS UNDERTAKING

General legal principles

35.  The practice of requiring an undertaking in damages and the principle of equal protection for parties is trite and has been explained in 10.140 and 10.141 of Zuckerman on Civil Procedure: Principles of Practice (4^th ed; 2021) as follows:

“10.140 The practice of requiring an undertaking in damages as a condition to the grant of an interim injunction was well established by the mid-nineteenth century. The undertaking is considered to be a “matter of elementary fairness when an interlocutory injunction is granted in advance of the determination of the parties’ rights at a trial”. By giving an undertaking in damages the applicant accepts the responsibility for the respondent’s losses as the quid pro quo for obtaining the interim injunction …...

10.141 It is important to appreciate why the undertaking in damages is dictated by considerations of fairness and equal protection. An applicant obtains an interim injunction to protect rights that it has yet to establish at trial, but the respondent asserts a freedom to do that which is sought to be restrained. Given that the true legal position will be determined only in final judgment, it remains possible that the respondent would prevail and that it would therefore turn out that the injunction prevented the respondent from exercising their lawful freedoms. Where the applicant has obtained an interim injunction to protect its rights, the principle of equal protection requires that the respondent should get comparable protection......”

(emphasis added)

36.  It is further set out in 10.182 of Zuckerman that:

“It has been suggested that in the absence of final judgment concerning the disputed rights, the respondent should not be entitled to recover damages for harm to their rights. But the better view is that an applicant who has obtained an interim injunction to protect an alleged right should be liable to compensate the respondent if, for any reason, they have failed to obtain judgment vindicating their claim. If it were otherwise, an applicant would be able to obtain the benefit of an interim injunction and then avoid any risk of compensation by simply discontinuing their action or causing it to be dismissed other than on the merits.”

(emphasis added)

37.  Mr Fong submitted that the above view of the learned author is not settled law. However, as submitted by Ms Sit, such view is consistent with authorities.

38.  In Ming Sieh and Xu Zhe & Ors HCMP 3072/2014, unrep, 22.09./17, Lok J had set out the two separation questions to consider in an application to enforce an undertaking as to damages, namely (i) as a matter of discretion, should the court order that the undertaking be enforced? And (ii) If so, what loss had the defendant suffered in terms of money, was it caused by the injunction and was it too remote?[18] Lok J then went on to say in relation to the 1^st question[19], there was no reason why the court should depart from the general principle stated in Gee: Commercial Injunctions, 6^th Ed, 2016 at 11-041:

“Once it is established that the injunction was wrongly granted, even though without fault on [the claimant’s part], the court will ordinarily order an inquiry as to damages”

(emphasis added)

39.  In Universal Thermosensors Ltyd v Hibben and Ors [Ch D]. [1992] WLR 840, the plaintiff obtained an interlocutory injunction against the defendants which was granted by consent. The plaintiff then discontinued proceedings against two of the six defendants, and shortly before trial the plaintiff gave notice that at the trial it would not seek injunctive relief against any of the defendants and then on the 17^th day of the trial, a settlement was reached of all claims by the defendants against the plaintiff’s solicitors and against the plaintiff. In that case, even though the interim injunction was obtained by consent, and the plaintiff later abandoned/settled its claim, the defendants were awarded damages on the plaintiff’s cross undertaking.

40.  Ms Sit also referred the Court to MGA Entertainment Inc v Toys & Trends (Hong Kong) Ltd (2014) 17 HKCFAR 27. In this case, the plaintiff obtained an interim injunction in an action against the defendants and later the plaintiff withdrew the action and the interim injunction was discharged. The defendants then sought to enforce the cross-undertaking in damages given by the Plaintiff when obtaining the interim injunction. Although the sole issue in the appeal was what loss the defendants sustained as a result of the injunction, Lord Clarke of Stone-cum-Ebony NPJ had in paragraph 14 of his judgment mentioned that it had been submitted on behalf of MGA before the first instance judge that the court should not enforce the cross-undertaking, and that this argument was unsurprisingly summarily rejected by the judge and was not renewed in the Court of Appeal or before the Court of Final Appeal. In paragraph 17, Lord Clarke had cited a passage of Norris J in Les Laboratoires Servier v Apotex Inc [2009] FSR 3:

“…The principle of “liberal assessment” seems to me equally applicable in the present context. Although a party who is granted interim relief but fails to establish it at trial is not strictly a “wrongdoer” but rather one who has obtained an advantage upon consideration of a necessarily incomplete picture, he is to be treated as if he had made a promise not to prevent that which the injunction in fact prevents ……”

41.  Ms Sit submitted that the rationale is that even if the party who is granted interim relief is not a “wrongdoer”, this is not a reason why the restrained party should not be compensated. I agree with her submission.

42.  Mr Fong had referred to 29/1/25 and 29/1/26 of the Hong Kong Civil Procedure 2023, Vol 1 which states as follows:

“29/1/25 Enforcing undertaking — inquiry as to damages — application to enforce — The undertaking in damages is given to the court and not to the party enjoined. However, if it should be held at the trial that the plaintiff had not been entitled by interlocutory injunction to restrain the defendant from doing what he was threatening to do, or if it is established before trial that the injunction ought not to have been granted in the first instance, the party enjoined may apply to the court for the undertaking to be enforced. An undertaking in damages does not found an independent cause of action to recover losses sustained as a result of the injunction; the defendant’s only remedy is to enforce the cross-undertaking in the proceedings in which the cross-undertaking was given.

On an application to enforce an undertaking as to damages, there are two separate points to consider: first, as a matter of discretion, should the court order that the undertaking be enforced? Secondly, if so, what loss has the defendant suffered in terms of money, was it caused by the injunction and was it too remote?

29/1/26 Decision to Enforce — In a case where it is determined that the injunction should not have been granted the court is likely to enforce the undertaking if asked to do so, though the court retains discretion not to do so …...

An inquiry as to damages should not be ordered unless there is at least some reasonably arguable case that the injunction has caused the complaining party some loss or damage for which compensation ought to be paid … It is necessary for the injuncted party to adduce credible evidence that he has suffered loss as a result of the injunction being granted”

(emphasis added)

43.  I accept that as set out above, for the court to enforce an undertaking as to damages, the party enjoined must, first of all, establish that the injunction ought not to have been granted in the first instance. This was not disputed by Mr Sit.

44.  However, once it is established that the injunction ought not to have been granted in the first instance, the court will ordinarily order an inquiry as to damages and that it is for the unsuccessful plaintiff to demonstrate “special circumstances” to justify the court not giving effect to the undertaking. This can be seen in 11-043 in Gee on Commercial Injunctions, 7^th ed:

“In Graham v Campbell, James LJ, delivering the judgment of the Court of Appeal, said that the undertaking ought to be given effect to by the court except “under special circumstances.”. The Court, in deciding whether to enforce the undertaking, has a discretion. The discretion is to be exercised by reference to all the circumstances of the case, bearing in mind that since the injunction should not have been obtained, prima facie the claimant ought to bear the loss …...

This places the burden of persuasion on the unsuccessful claimant, and recognises that once it is established that the injunction was “wrongly granted”, even though without fault on his part, the court will ordinarily order an inquiry as to damage.”

45.  With the above principles in mind, I turn to the present case.

Whether the injunction ought not to have been granted

46.  As seen above, if the party who is granted interim relief fails at trial, then normally it would follow that the injunction was “wrongly granted”. In the present case, even though no actual injunction order was made against D, and D’s Undertakings were voluntary, such undertakings were obtained by P in these section 21M proceedings in aid of the Luxembourg Proceedings. The same legal principles set out earlier should apply, and the issue is where D’s Undertakings had been obtained “wrongly”.

47.  First, that the Luxembourg Court dismissed P’s claims on jurisdiction ground without going into the merits of P’s claim is in my view immaterial. The fact is P has failed to obtain judgment in the Luxembourg Proceedings in aid of which D’s Undertakings were obtained, and in my view, it thus follows that such undertakings ought not have been obtained by P, or were “wrongly” obtained by P. P should be liable to compensate D, subject to P demonstrating to the Court that there are “special circumstances” to justify the Court not to give effect to P’s Cross Undertaking.

48.  Second, even though there was no determination on the underlying claim in the Luxembourg Proceedings, there has been in the Singapore Proceedings Suit 1212/2017, and that the SGCA has found that MK was/is the UBO of POH. As Ms Sit submitted, there is now ample evidence before this Court to indicate that MK was/is the UBO of POH, and not P.

49.  As seen in the background set out earlier, prior to D/Hopkins coming into the picture, it was Tep who was the registered shareholder of the POH Shares, and it was P’s case that it was agreed between P and Tep that the POH Shares were held on trust for P.

50.  Notwithstanding P’s case that Tep knew and agreed that the POH Shares were held on trust for P, in Tep’s statutory declaration of 12 June 2018 filed in the BVI Proceedings and produced by MK in his 1^st affirmation herein in support of P’s case[20], there was no mention by Tep of P or Kuga Corporation, and there was nothing therein to indicate that Tep knew that P was the UBO of the POH Shares or that he was holding or had agreed to hold the POH Shares for P. Tep only mentioned in his statutory declaration how he met MK and his relationship with MK and that at around end of 2013/early 2014 MK had asked Tep to sign various papers for him including purchase of some land by MK in Brazil, which Tep said he never read. According to Tep, that it was only in October 2017 when he learnt that MK was found by the Thailand Securities and Exchange Commission to be involved in fraud using GL Thai, that he started to look into MK’s background and those dealings involving himself, and learnt that he was the sole director and sole shareholder of POH since 28 September 2015 and that POH was the sole shareholder of Cougar SG and KR Brazil, and that these companies had borrowed USD 56,346,950 from GL SG of which he was completely unaware of until October 2017. According to Tep, when he found out, he tried to extricate himself from those companies, ie including Cougar SG and POH.

51.  MK had produced various emails between 3 December 2017 and 23 February 2018 between Tep and/or Tep’s then Singapore lawyer Mr Justin Lee of Gateway Law and the Chief Legal Officer of GLH, Mr Ishida[21]. It was MK’s evidence that Mr Ishida was acting on the instructions of P[22]. What can be seen in those emails is that in early December 2017, Tep was reiterating that he had no interest in and had never claimed or received any benefit from POH and he was taking steps to liquidate POH and that he asked Mr Ishida to appoint another individual to replace him as the “corporate representative”. In reply, Mr Ishida said they wished to appoint a new representative and already had a candidate. Subsequently, the name of “the new candidate”, namely Mr Sipin Khith (“Sipin”) was supplied to Tep’s Singapore lawyer Mr Lee. There was no mention that Sipin was the UBO, and it seemed clear that Sipin was to simply to take over Tep’s role in POH as a respresentative/nominee.

52.  As seen in the emails, Mr Lee then contacted POH’s company secretary Intertrust to effect the changes aforesaid, and on 17 January 2018, Mr Ishida was told by Mr Lee that in order to proceed with Sipin’s appointment, Intertrust would require the name of the UBO of POH and Mr Ishida was further asked to provide the name of the UBO and to confirm acceptance and payment for a share purchase agreement to be prepared by Intertrust.

53.  There was no reply for about a week. It was only on 24 January 2018 that Mr Ishida replied and informed Mr Lee that the UBO was Kuga Corporation. Then, on 21 February 2018, Mr Lee informed Mr Ishida that the UBO had to be a physical person owning the majority of the shares of Kuga Corporation, and Mr Lee further asked for the identity of the UBO(s) as well as members of Kuga Corporation and whether the shares were to be transferred to Sipin or to Kuga Corporation. It would appear that Mr Lee was in fact asking for the identity of the UBO(s) and members of Kuga Corporation.

54.  On 22 February 2018, Mr Lee was then informed by Mr Ishida that the shareholder was Kuga Corporation and the UBO was P who held the majority shares of Kuga Corporation.

55.  On the same day, namely 22 February 2018, Mr Lee sent to Mr Ishida an email with a list of documents/information which were required from P, as the UBO and majority shareholder of Kuga Corporation (in particular, a UBO declaration including source of funds) and from Kuga Corporation (in particular including the latest annual accounts). In Mr Ishida’s reply email of 23 February 2018, he then informed Mr Lee that the new shareholder was to be Sipin and that the UBO was P.

56.  MK did not produce any emails after 23 February 2018.

57.  As seen in paragraph 44 of the Release Decision, P’s evidence was that he and MK and Tep met for dinner in December 2015 and that during the dinner P had told Tep to hold the POH Shares for P and that P said there had been no evidence from Tep to rebut this. Suffice to say, notwithstanding P’s such evidence and what MK had said in his affirmations, there was no evidence in those emails produced by MK to indicate that Tep himself knew who the UBO of POH was prior to 24 January 2018 or that P was the UBO of the POH Shares. Even after 24 January 2018, the information provided by Mr Ishida (whether acting for MK or P) was confusing, in that the UBO of POH was said to be Kuga Corporation, and as seen in the emails mentioned above, P’s name was given to be the UBO of Kuga Corporation, and not of POH/POH Shares.

58.  Further, notwithstanding MK’s evidence that Mr Ishida was acting on instructions of P, none of the emails were copied to P or to Kuga Corporation, and in fact in the email of 3 December 2017, Mr Ishida was saying to Tep that he had talked with MK who understood Tep’s then difficult position, and again there was no mention of P. In any event, it was not clear as to whether Mr Ishida had responded to Mr Lee’s email of 22 February 2018 by sending him all the requested information/documents of P and Kuga Corporation. If so, such had not been exhibited in MK’s affirmations.

59.  There was in fact a lack of information before this Court as to what happened between 22 February 2018 and 12 June 2018 when Tep signed the Share Transfer Agreement with D.

60.  MK had lodged a criminal complaint in Cambodia against Tep, Hopkins and other officers of JTrust. It appeared in the Dismissal Ruling of the Cambodian Court that Tep resigned as director of Cougar SG on 28 November 2017 and he resigned as “share manager” of POH on 1 February 2018[23]. According to the Dismissal Ruling, Tep had agreed to transfer the POH Shares to Sipin but according to Tep, GLH did not allow Tep to do so, and that due to his fear to be involved with the act of MK and his associated friends, and that it was after having consultation with his lawyer and with the lawyer of JTrust, that Tep entered into an agreement to transfer the POH Shares to D on 12 June 2018. In the end, it was found by the Cambodian Court on 18 April 2019 that there was no sufficient element of criminal offence against Tep and Hopkins and the others.

61.  What is clear is that it was MK who lodged the criminal complaint against Tep, Hopkins and the others, and not P, nor Kuga Corporation. There was no mention of P or Kuga Corporation being the UBO (s) of POH in the Dismissal Ruling.

62.  Further, as mentioned earlier, the finding in the SG CA Judgment was that MK was/is the UBO of POH. Ms Sit has referred to the various documentary evidence now before the Court to demonstrate that P was/is not the UBO of POH. Apart from Tep’s statutory declaration and those emails mentioned above between Mr Lee and Mr Ishida, Ms Sit had also referred to the account opening documents for the opening of bank account for Cougar SG at the Bank of Cyprus[24]. In the “Customer Profile” for Cougar SG, under the section of “RELATED PERSONS TO THE COMPANY”, it was stated, amongst other things, that the shareholder was “Luxembourg Investment Company 19 S.A.R.L. B192188, Luxembourg, 28/11/14” (ie the former name of POH and also referred to as “Lux Co” in various documents including the SG CA Judgment)[25] and under “Ultimate Beneficial Owners”, the UBO was stated to be MK[26]. Tep was stated to be one of the two directors of Cougar SG and the account was to be opened through Fidescorp Limited (a firm of chartered accountants & business advisor).

63.  Further, in the email exchanges between MK and Fidescorp, MK was also instructing Fidescorp to open a bank account for POH (described as the mother company of Cougar SG)[27] and in one of the emails to Fidescorp it was stated by MK that POH was owned by a Canadian-Cambodian businessman and that MK was supporting his financials, and that [POH] - Cougar SG are related to [GL] and GLH in the form of partnership and that POH also holds some shares in [GL] through its subsidiaries[28]. There was no mention of P.

64.  Having considered all the above documents, I agree that all the documentary evidence supported the finding of the SGCA that MK was/is the UBO of POH.

65.  In any event, for whatever reason that Tep failed to transfer the POH Shares to Sipin/Kuga Corporation, there was no sufficient evidence that D/Hopkins knew who the UBO of POH actually was at the time of the transfer of the POH Shares to D on 12 June 2018. Hopkins had produced email exchanges between him and Harneys, a firm of lawyers acting for JTrust which indicated that Hopkins was first approached on 15 May 2018 to arrange for a Hong Kong company incorporated by Perun Consultants to take assignment of the POH Shares held by Tep as a nominee[29]. As seen in these emails, Hopkins was only informed that POH was involved in litigation with various parties, and that at the end of the litigation, the POH Shares will be dealt with in accordance with the outcome of the litigation.

66.  The emails and agreements between Hopkins/Harneys/JTrust would in fact support Hopkins’ evidence in the SG Trial that he did not know who the UBO of POH was and that this was pending the determination of the court.

67.  In paragraph 218 of the SGCA Final Judgment[30], it was stated that there was evidence during the SG Trial that JTrust had paid Tep to transfer his shares in POH to D and that JTrust had also paid for Hopkins’ and Perun’s fees of SGD 3m, and there was also reference to a collaboration agreement referred to by Tep before the Cambodian courts, between Tep, JTrust and JTrust Japan and that as a result, Cougar SG had maintained a “neutral stance” during the SG Trial.

68.  However, there was no sufficient evidence that D/Hopkins was involved in the collaboration agreement.

69.  Mr Fong pointed out on behalf of P that JTrust had admitted that due to MK’s loss of control over Cougar SG, Cougar SG’s new directors discovered and procured the disclosure of highly material evidence to support JTrust’s case[31].

70.  On the other hand, it was JTrust’s case that such highly material evidence was previously hidden by MK and/or GL SG and that there had been material non-disclosure on the part of MK and/or GL SG, and that JTrust only uncovered such highly material evidence in its proceedings against GL Thai or as disclosed by Cougar SG’s new management. In any event, it would appear that Cougar SG had acted on independent legal advice in procuring the highly material evidence to be disclosed, and further, this involved Cougar SG, and not D.

71.  Having considered all the above and the evidence, that JTrust was the party who instructed Perun/Hopkins through Harneys and that Perun/Hopkins was paid by JTrust does not mean that D/Hopkins was “acting in cahoots”, or conspiring with JTrust and Tep as Mr Fong sought to demonstrate in Annex 1 of his Skeleton Submissions, or as alleged by P.

72.  Finally, as pointed out by Ms Sit, in the Release Decision, after setting out all the relevant background in paragraphs 26 to 58, this Court found in paragraph 59 that there was no sufficient evidence that there was a breach of trust on the part of Tep and there was no sufficient evidence that there was any deliberate concealment of the “Material Facts” on the part of D and that, there was also no sufficient evidence of any dishonest assistance and/or knowing receipt on the part of D, or that D was/is a constructive trustee of the POH Shares, as alleged by P.

73.  Mr Fong argued that issue estoppel does not apply. It was his submission that all this Court said was that there was no sufficient evidence and did not say there was no evidence that D was/is a constructive trustee. Mr Fong further argued that this Court’s ruling on the issue pertained to the sufficiency of evidence as opposed to the merits of the Plaintiff’s case. Mr Fong submitted that there had been a significant change in circumstances since the hearing 26 March 2021 hearing and there was also new evidence/materials before this Court upon which this Court should consider this issue afresh.

74.  The significant change in circumstances relied on by P was that the “holding the ring” theory which D relied on during the 26 March 2021 hearing failed to stand the test of time because, amongst other things, notwithstanding the SGCA’s finding that MK is the UBO of the POH Shares, no steps have been taken by D to return the POH Shares to MK pursuant to the terms of Perun’s own engagement letter with JTrust. However, there was no evidence before this Court to show that MK had claimed for the return of the POH Shares to him and/or upon such claim, D had refused to retain the same.

75.  In my view, the argument was misconceived. There was the full SG Trial and P was a party in Suit 1212/2017. He had had plenty of opportunity to produce as much evidence as possible to convince the Singapore Courts that he was/is the UBO of the POH Shares. He was not able to do so, and instead, MK was found to be the UBO.

76.  Thus, if there were any complaints about breach of trust by D, it should be MK who should be the one making these claims against D, and not P.

77.  In any event, I do not find that there has been any sufficient change of circumstances or new evidence for this Court to find that D was/is a constructive trustee of the POH Shares, and as said earlier I maintain my previous view in the Release Decision and that D was/is not a constructive trustee of the POH Shares, as alleged by P.

78.  P has also complained that D’s conduct was dishonest and that D did not come with clean hands. I find there was no sufficient evidence to support P’s such complaints.

79.  On the other hand, D also complained that P had obtained D’s Undertakings by fraudulent and improper means, as that based on the contemporaneous documents, P must have known that he was/is and has never been the UBO of POH. These are serious allegations made by D. Although P should be aware of Tep’s statutory declaration and emails between Mr Lee and Mr Ishida which were produced by MK in his affirmations to support P’s application of the interim injunction, there was no sufficient evidence that D’s Undertakings were obtained by P by fraudulent and improper means.

80.  To summarise, having considered all the circumstances in this case, I have come to the view that P has not been able to establish that there are special circumstances in the present case to justify the court not giving effect to P’s Cross Undertaking.

D’s failure to make good its case on the alleged damages suffered and the Causation Issue

81.  There are 5 heads of loss relied upon by D:

(1)  operating expenses of KR Brazil

(2)  legal fees incurred in the SG Proceedings

(3)  legal fees incurred in HK

(4)  legal fees incurred in Brazil

(5)  costs payable by D to P in these proceedings

82.  As seen in paragraphs 60-62 of the Release Decision, P’s case is that as D does not beneficially own the POH Shares, it could not have suffered any damage/loss from D’s Undertakings.

83.  Suffice to say, I am prepared to accept that there is at least some reasonably arguable case that D’s Undertakings had caused D some loss or damage for which compensation ought to be paid. I do not propose to say any more at this stage as the Causation Issue should in my view be dealt with at the Inquiry stage before the Master.

Conclusion on the Question

84.  In light of all said above, I exercise my discretion and order that P’s Cross Undertaking be enforced.

ORDER

85.  The effect of my order is:

(1)  P’s interrogatories served without order on 17 June 2022 on D be withdrawn.

(2)  P’s summons issued on 25 July 2022 for leave to serve the Interrogatories be dismissed.

(3)  Costs of D’s summons issued on 29 June 2022, and P’s summons issued on 25 July 2022, including all reserved costs, of the Interrogatories Summonses shall be paid by P to D, to be taxed if not agreed, on party and party basis, with certificate for two counsel.

(4)  As for D’s summons issued on 16 May 2022, D be allowed to enforce P’s Cross Undertaking a hearing for directions (estimated length of hearing: 30 minutes) be fixed before a Master for the Inquiry.

86.  P shall pay for D’s costs of the determination of the Question, including any reserved costs, to be taxed if not agreed, on party and party basis, with certificate for two counsel. All costs orders are orders nisi, which shall be final after 21 days.