SANG CHEOL WOO v. YOO SHIN CHOI(naturalized name CHARLES C. SPACKMAN)

HCA 1586/2016

[2020] HKCFI 2706

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1586 OF 2016

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DECISION

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I. INTRODUCTION

1.  There are 3 summonses for determination:

(1)  The summons dated 4 June 2019 (“the continuation summons”) for continuation of an ex parte worldwide Mareva injunction obtained by Sang Cheol Woo (“the Plaintiff”) dated 3 June 2019 (“the HK Injunction”) against Yoo Shin Choi (naturalized name Charles C Spackman) (“the Defendant”) and the 3 respondents to the summons, namely Richard Lee (“Lee”), Azur Investissement Limited (“Azur”) and Trinity Capital Advisors Limited (“Trinity”) (collectively “the Respondents”);

(2)  The summons of the Defendant (“the setting aside summons”) dated 11 June 2019 to set aside the HK Injunction; and

(3)  The Plaintiff’s summons dated 18 June 2019 to lift the stay of the Defendant’s disclosure obligations under the HK Injunction (“the lifting of stay summons”).

At the conclusion hearing, the decision was reserved which I now give.

2.  The Plaintiff obtained a judgment against the Defendant in Korea in 2011. Since then, the Plaintiff has been seeking to enforce the Korean Judgment. The HK Injunction prohibits the diminution of assets up to the value of the judgment sum, namely, KRW15,886,902,275.51 (“the injunction sum”) equivalent to approximately US$13.66 million. The Korean Judgment remains unsatisfied to this day.

II. BACKGROUND

A. The Korean Judgment

3.  In July 2003, the Plaintiff unsuccessfully brought an action against the Defendant and 9 others[1] in the Seoul Central District Court alleging that they had induced him to acquire certain shares.

4.  In 2011, the Seoul High Court allowed the Plaintiff’s appeal and entered judgment against the Defendant and the other defendants jointly and severally. As the Defendant had been personally served with both sets of proceedings[2] in Hong Kong and had chosen not to appear or defend the proceedings in Korea, the Seoul High Court entered judgment against the Defendant and the others for KRW5,207,884,800 (or approximately US$4.5 million) with interest.

5.  In 2013, the Supreme Court of Korea affirmed the judgment against the Defendant based on his non-appearance despite having been served with notice of the Korean proceedings[3]. It ordered a retrial in respect of only 2 of the remaining defendants (whose retrial was successful) and not of the others.

6.  In April 2017, the Defendant sought to reopen the Korean Judgment in the Seoul High Court.

7.  The Defendant’s application was dismissed by the Seoul High Court[4] in December 2017 which decision was affirmed on 30 May 2018 by the Supreme Court of Korea.

8.  By 30 May 2018, the Defendant had exhausted all avenues open to him to challenge the Korean Judgment[5] which is final and conclusive.

B. Enforcement proceedings

9.  After the Korean Supreme Court’s dismissal of the Defendant’s appeal in 2013, the Plaintiff sought to enforce the Korean Judgment in jurisdictions where the Defendant’s assets are suspected to be present.

(1) Proceedings in Hong Kong

10.  On 15 June 2016, the Plaintiff commenced these proceedings in Hong Kong to recognise the Korean Judgment. The Hong Kong proceedings were set down for trial earlier this year but had to be rescheduled. The new trial date is 2 September 2021.

(2) US proceedings

11.  The Plaintiff commenced proceedings in the State of New York on 23 May 2017 for summary judgment in recognition of the Korean Judgment which the Defendant opposed.

12.  On 10 July 2018, the Supreme Court of the State of New York entered judgment in favour of the Plaintiff in the sum of approximately US$13.8 million.

(3) BVI proceedings

13.  The Plaintiff commenced proceedings to recognise and enforce the Korean Judgment in the BVI on 18 April 2019[6].

14.  On 4 June 2020, the BVI Commercial Court entered judgment against the Defendant in recognition of the Korean Judgment.

(4) Singapore proceedings

15.  On 25 February 2019, the Plaintiff commenced an action in Singapore to recognise the Korean Judgment. The Defendant appeared in the Singapore proceedings to challenge jurisdiction but was not successful.

C. Mareva applications

16.  As will become apparent, circumstances arose that prompted the Plaintiff to apply for Mareva relief in the jurisdictions described below.

(1) BVI Injunctions

17.  With a view to enforcing the Korean Judgment, the Plaintiff investigated a Hong Kong company called Spackman Media Group Limited (“SMG”). His investigations revealed sales of SMG’s shares to BVI companies, namely, GD Enterprises Holdings Limited (“GD”),  Azur Investissement Ltd (“Azur”) and DVG Limited (“DVG”) at a low cost, with DVG transferring a portion of the SMG shares to another BVI company, Trinity Capital Advisors Ltd (“Trinity”), also at a low cost. GD, Azur, DVG and Trinity (collectively “the BVI Entities”) resold the SMG shares to Spackman Entertainment Group Limited (“SEGL”), a Singapore listed company, several months later at 23 times their purchase price.

18.  The pattern of disposition of shares in SMG by the BVI Entities between 18 August 2017 and September 2018[7] and at the share prices involved (mostly at US$1 or $3 with two transfers at HK$1[8]) were suspicious and prima facie inexplicable. 

19.  Norwich Pharmacal discovery was obtained in the BVI in early February 2019 in aid of enforcement of the Korean Judgment.

20.  The Plaintiff learnt that Trinity was owned (on paper) by the Defendant’s wife who is a housewife and unemployed and that GD, Azur and DVG were owned (on paper) by the Defendant’s brother-in-law Jae Seung Kim (“Kim”) both of whom were believed to be nominees for the Defendant.

21.  The grounds for the Plaintiff’s belief that the BVI Entities appear in the supporting affirmations presented to the BVI court, the substance of which is also to be found in Kang Jian’s affirmation dated 31 May 2019 in support of the application for the HK Injunction (“Kang 1^st”) and considered in a later part of this Decision.

22.  On 11 April 2019, the BVI court granted the Plaintiff worldwide freezing injunctions against the BVI Entities (“the BVI Injunctions”) restraining each of them from causing any change in its share register and restraining any dealings with its assets worldwide up to the value of US$13.8 million.  

23.  Although the BVI Entities were ordered to disclose their worldwide assets by 18 April 2019, none of the entities has complied with the orders.  The BVI Entities are challenging the BVI Injunctions and that hearing is pending in the BVI.

(2) Singapore Injunctions (“SG Injunctions”)

24.  The Defendant was Chairman of SEGL from June 2014 to December 2017 and also its CEO for most of that period.

25.  The Plaintiff’s investigations revealed that DVG, Azur and Trinity owned shares in SEGL as a result of share swaps of SMG shares for SEGL shares. Azur was one of the top 20 shareholders of SEGL and Trinity and DVG were also substantial shareholders.

26.  That meant that the primary assets of the BVI Entities in the form of SEGL shares were located in Singapore. As the directors of the BVI Entities were not amenable to the jurisdiction of the Singapore courts and the assets of the BVI Entities were likely in Singapore, the Plaintiff applied for Mareva relief in Singapore.

27.  On 23 April 2019, the Plaintiff obtained a worldwide Mareva injunction against the Defendant and Lee and domestic Mareva injunctions against each of the BVI Entities (collectively, “the SG Injunctions”).

28.  In respect of the SG Injunctions against the Defendant and Lee, the Plaintiff gave, inter alia, the following undertaking (“the SG undertaking[9]“):

“The plaintiff shall not without the leave of the Court seek to enforce this order in any country outside Singapore or seek an order of a similar nature in any jurisdiction outside Singapore against the Defendant.”

(3) The HK Injunction

29.  On a further inspection[10] of SMG’s register of members which the Plaintiff’s solicitors were only able to carry out on 27 May 2019[11], it emerged that on 24 April 2019[12] Azur[13] and Trinity[14] sold over 3.175 million and 2.5 million SMG shares respectively to Plutoray Pte Ltd (“Plutoray”) a Singapore company for HK$1 per share.

30.  Those disposals breached the BVI Injunctions (and the spirit of the SG Injunctions) which restrained transfer of their worldwide assets.

31.  The dispositions by Azur and Trinity of their SMG shares to Plutoray occurred on the day the SG Injunctions[15] were served but after the application for the SG Injunctions was made and granted.

32.  Since SMG is a Hong Kong company, the immediately effective way to stop further transfers of SMG shares would be to seek injunctive relief in Hong Kong. It was in those circumstances that the Plaintiff made its ex parte application on 31 May 2019 to restrain the Defendant and the Respondents from disposing of assets.

D. Further injunctions

(1) The SG Funvest Injunction

33.  On 24 September 2019, Plutoray transferred all its shares in SMG[16] to Republic Park Productions Limited (“Republic Park”) a Cayman Islands company. On the same day other Singapore companies by the name of Starlight and Vaara also transferred SMG shares acquired from GD to Republic Park in August 2017 at HK$1 per share.

34.  On 21 November 2019, a total of 6,353,968 SMG shares were transferred from Republic Park to Funvest Global Pte Ltd (“Funvest”), its wholly-owned subsidiary. As illustrated in a flowchart[17] provided to the court, all those SMG shares can be traced to GD and DVG.

35.  On 28 November 2019, ESA agreed with Funvest to purchase all the SMG shares held by Funvest at the time for US$14 million.

36.  On 27 May 2020, the Singapore Court granted injunctions against Funvest to restrain the sale of SMG shares or to preserve the proceeds of sale (“the SG Funvest Injunction”).

(2) The HK Funvest Injunction

37.  On 16 June 2020, the Plaintiff obtained an injunction in Hong Kong against Funvest and SMG prohibiting any change in SMG’s register of members as regards Funvest’s holding of shares in SMG  (“the HK Funvest Injunction[18]“).

38.  Shortly thereafter, Funvest filed evidence that it had paid US$10 million received from its sale to ESA to Plutoray, Starlight and Vaara.

(3) SG Plutoray, Vaara and Starlight Injunction

39.  On 14 August 2020 the Plaintiff obtained an injunction in Singapore against the recipients of the ESA sale proceeds.

40.  A few days later, on 19 August 2020, Funvest changed its sworn evidence and asserted that it had spent the US$10 million on loans, investments and other expenses.

E. Post HK Injunction events

41.  On 11 June 2019, the Defendant’s solicitors raised with the Plaintiff the latter’s alleged breach of the SG Undertaking.

42.  On 14 June 2019, (i) the Plaintiff confirmed that the SG Undertaking was not brought to the ex parte Judge’s attention of 14 June 2019 and on the same day applied for a declaration that the obtaining of the HK Injunction was not in breach of the SG Undertaking, and alternatively for retrospective leave (“the SG Declaration Application”); and (ii) DHCJ MK Liu stayed[19] the Defendant’s disclosure obligations under the HK Injunction.

43.  On 30 March 2020, the Singapore Court allowed the Defendant’s application to set aside the SG Injunction against him and at the same time dismissed the Plaintiff’s SG Declaration Application.

44.  On 24 July 2020, the SG Court dismissed the Plaintiff’s application for leave to appeal against the setting aside of the SG Injunction and dismissal of the SG Declaration Application.

45.  Meanwhile, on 7 July 2020, as a result of the Defendant’s failure/refusal to comply with the New York subpoena to disclose assets, the New York Court held the Defendant in contempt of court. 

III. THE DEFENDANT’S SETTING ASIDE SUMMONS

46.  Mr Dennis Kwok counsel for the Defendant submitted that the HK Injunction should not be continued but set aside. The issues which arise are: material non-disclosure; abuse of process; whether Chabra jurisdiction was engaged; and risk of dissipation.

47.  Further, if the HK Injunction were to be set aside against the Defendant, the Court was invited to set it aside against the Respondents (who did not appear and whom Mr Kwok did not represent) on the basis that the injunctions against them are “parasitic” to the HK Injunction against the Defendant.

A. Material non-disclosure

(1) Applicable principles

48.  It is common ground that when the Plaintiff applied for the HK Injunction, the SG Undertaking was not drawn to the Court’s attention.

49.  Materiality is decided by the Court and not by the applicant. The test of materiality is whether the facts are relevant to the exercise of the discretion, regardless of whether they are relevant to the merits of the claim, and irrespective of whether the matters, if disclosed, would have caused the Court to refuse to grant the ex parte application. If established, the practice of the Court is to discharge the order without going into the merits : Velatel Global Communications Inc v Chinacomm Limited, unreported, HCA 1978/2011, 26 October 2012 at §§27 and 31.

50.  The key point made by the Defendant in regard to nondisclosure and in this application concerns an alleged breach of the SG Undertaking to which I now turn.

(2) The SG Undertaking

51.  The Defendant submitted that the Plaintiff’s failure to refer to the SG Undertaking amounted to material non-disclosure because it was a fact relevant to the exercise of the Court’s discretion.

52.  Pausing here, it needs to be highlighted that no such undertaking was given in respect of the SG Injunctions against the BVI Entities.  

53.  Mr Mike Lui, counsel for the Plaintiff, submitted that there was no material non-disclosure because the SG Undertaking was not engaged, citing Bankas Snoras AB v Antonov & Ors [2018] 1 CLC 834 a case where the court had to consider the meaning and scope of a similar undertaking.

54.  In that case, the judge identified twin concerns that underpinned the origin of the undertaking: (1) avoiding the oppression of the defendant by the institution of multiple proceedings for enforcement of the English freezing order in several countries at the expense of the ability of the defendant to defend the English proceedings; and (2) preventing the enforcement of the freezing order in a foreign jurisdiction having a more far-reaching effect in that jurisdiction than in England: at §44.

55.  Looking at the wording of the undertaking, the judge considered (at §52) that

“there appears to be a potential ambiguity in the Undertaking in that the phrase ‘order of a similar nature’ could refer to an order which is similar in nature or effect to the Freezing Order (the wide interpretation) or to an order which is similar to an order enforcing the Freezing Order (the narrower interpretation)”.

56.  After reviewing the judgment in Re an LMAA Arbitration E, F, G v M (F v M) [2013] EWHC 895 (Comm), the judge concluded (at §53) that it is the narrower interpretation that is the correct construction and, apart from the twin concerns noted above, made the following additional observations:

“ …

(3) The English court would wish to police the circumstances in which the applicant sought to use the English Freezing Order as a means to obtain further or greater or oppressive relief abroad. It is this concern which gave rise to the Undertaking.

(4) The Undertaking is not concerned with the situation where the order sought abroad does not amount to the direct or effective enforcement of the Freezing Order. The Undertaking is not concerned with the situation where the foreign court in making the relevant order is exercising its own independent jurisdiction, irrespective of the English Freezing Order, even if the existence of the Freezing Order granted in England is referred to in support of the application abroad for that order and even if the order of the foreign court is of a similar nature or effect as the English Freezing Order. Therefore, if the jurisdiction of the foreign court to grant the order does not depend upon or derive from the making by the English court of the Freezing Order for the purposes of the direct or effective enforcement of the Freezing Order, but arises from a different and independent right or jurisdiction, the Undertaking is not engaged.”

57.  I find the reasoning in §53(4) persuasive and I respectfully agree that the narrower construction of the undertaking is the correct construction. In my view, the HK Injunction was not an enforcement of the SG Injunctions. Rather, it was an exercise by the HK Court of its own independent jurisdiction based on the circumstances then prevailing on the evidence before it. That jurisdiction did not depend on the SG Injunctions. Accordingly, there was no breach of the SG Undertaking.

58.  Mr Kwok submitted that whether or not there had been a breach of the SG Undertaking is a matter for the Singapore Court. He relied on the fact that in the Singapore proceedings, the judge chose to dismiss the SG Declaration Application rather than make no order on the summons which was open to him given the setting aside of the SG Injunction.

59.  While the Snoras case had evidently been cited to the Singapore Court at some point during the hearing which obviously lasted more than one day, the transcript exhibited was limited to the submissions of the parties on the morning of 30 March 2020 to address the issue of the remand judgment of the Korean Court[20] and there were no submissions made on Snoras on that occasion.

60.  At the conclusion of the hearing, the Court set aside the worldwide Mareva injunction not only against the Defendant but also against Lee and the BVI Entities although the latter were not represented. No reasons (written or oral) appear to have been given. After refusing the Plaintiff’s application for an Erinford[21] order the Singapore Court dismissed the SG Declaration Application. Again, no reasons (written or oral) were given.

61.  The Plaintiff’s application for the HK Injunction was made 9 months before the dismissal of the SG Declaration Application. In my view, whether the SG Undertaking was a material factor to be disclosed in the Plaintiff’s application would be a matter for the Hong Kong Court which was asked to exercise its discretion. 

62.  While I take the view that there was no breach of the SG Undertaking for the reasons set out above, in May 2019, there was no Hong Kong authority on the point. It is thus arguable that Snoras and the absence of any Hong Kong authority should have been drawn to the Court’s attention.

63.  Whether, for that reason, the HK Injunction should be set aside will be addressed at §§111-113 below.

64.  As to the Defendant’s submission that the SG Injunctions against the non-appearing Respondents should also be set aside because they are “parasitic”, no question of any breach of undertaking arises in respect of the SG Injunctions against Azur and Trinity as no similar undertakings were given.   

B. Abuse of process

(1) Multi-jurisdictional proceedings

65.  The Defendant submitted that suing the same party in two different jurisdictions in respect of the same claim might well be oppressive citing Eastgate Partners Limited v Suthi Tejavibulya, CACV 289/2005, unreported, at §11. Here, it was said that the Plaintiff sued the Defendant in 4 jurisdictions over the same claim.

66.  Having obtained the Korean Judgment, since the Defendant failed/refused to satisfy it in any way, the Plaintiff sought to enforce the Korean Judgment in jurisdictions where the Plaintiff believed the Defendant to have assets, namely Hong Kong (2016), the US (2017), the BVI (April 2019) and Singapore (February 2019): see Section II B above.

67.  Eastgate was not about the enforcement of a judgment that was rendered final and conclusive. No authority has been cited for the proposition that it is an abuse of process for a judgment creditor to seek to enforce the judgment obtained in more than one jurisdiction.

68.  Bluntly put, the irresistible inference to be drawn from the evidence presented in the present case is that the Defendant has gone to great lengths to evade adjudged liability since 2011. The fact that Mareva applications had to be made in different jurisdictions in succession (in the BVI, Singapore and Hong Kong in 2019) to preserve assets were dictated and necessitated by changes in circumstances as new evidence came to light.

(a) BVI

69.  As will become apparent, evidence relating to the control/ownership of the BVI Entities, the sharing of the same addresses by the Defendant, the Defendant’s wife and Kim and suspicious dealings in SMG’s shares were presented to the BVI court upon which the BVI Injunctions were granted.

70.  Leaving aside the suspicious dealings, when the Plaintiff applied for the BVI Injunctions, the Plaintiff had good reason to believe that Azur and Trinity together still held over 5.75 million SMG shares with a notional value of US$17.2 million.

(b) Singapore

71.  The SG Injunctions were rendered necessary because it transpired from investigations that through share swaps mentioned earlier[22], some of the SMG shares held by the BVI Entities were swapped for shares in SEGL, a Singapore company and so were not caught by the BVI Injunctions. That meant that significant assets of the BVI Entities were located in Singapore in the form of SEGL shares. Thus, the SG Injunctions were directed at the SEGL shares held by three of the BVI Entities.

72.  The SG Injunctions extended to the Defendant who was the defendant in the Singapore recognition and enforcement proceedings and believed on reasonable grounds to be holding assets through BVI Entities.

73.  Insofar as Lee is concerned, there is ample evidence that Lee had acted as the Defendant’s nominee:

(i)  Apart from being a longtime associate/friend and college classmate of the Defendant, it is apparent from the website of the Spackman Group that he has held very senior positions within the Group including SEGL, Spackman Equities, Spackman Media Group Pte Ltd and SMG.

(ii)  He has also acted as the corporate secretary for DVG, Azur and Trinity and had custody of their company records at his Singapore residence.

(iii)  Significantly, between 24 May 2017 (the day after the commencement of the New York action) and 11 January 2019, he disbursed just shy of US$300,000 for the Defendant’s benefit by payment for the Defendant’s legal fees and US taxes.

(c) Hong Kong

74.  Lee was a director of SMG at the time of the transfers to Plutoray. As such, he must have known of the changes to SMG’s register well before the inspection on 27 May 2019 but he made no disclosure despite having been notified of the SG Injunction.

75.  The Plaintiff did not know that Trinity and Azur had closed out their remaining holdings of SMG shares by transferring them to Plutoray on 24 April 2019 until his inspection of SMG’s register on 27 May 2019. The BVI Entities only made the belated disclosure on 4 June 2019 through Kim[23]. 

76.  Some of the circumstances that gave rise to need for the HK Injunction have already been mentioned[24]. Then, from about mid-May 2019, the Defendant made applications to challenge the jurisdiction of the SG Courts over the Defendant and to set aside the SG Injunctions.

77.  The disposals by Trinity and Azur to Plutoray speak to the ineffectiveness of the BVI and SG Injunctions in preventing dissipation of assets believed to be owned and/or controlled by the Defendant. Those transfers were in breach of both BVI and Singapore Injunctions.

78.  In my view, the Plaintiff had good reason and cannot be criticised for making each of the 4 applications for Mareva injunctions in different jurisdictions when the Defendant as judgment debtor has been evading payment since 2011. Assets of the BVI Entities believed to be beneficially owned/controlled by the Defendant assumed chameleonic qualities, seemingly designed to frustrate enforcement of the Defendant’s liability.

(2) The Plaintiff’s “campaign of oppression”  

79.  The New York Judgment was granted against the Defendant in September 2018. The Defendant is a US citizen who was legally represented throughout and defended the New York proceedings but never took steps to appeal it.

80.  The matters about which the Defendant complains were no more than legitimate actions in aid of the execution of that judgment. Moreover the actions taken by the Plaintiff in the US, whether discovery pre-and post-judgment, registration of judgment, dissemination of notices to preserve documents, securing depositions by the Defendant’s daughter in aid of execution of the judgment were all contested and argued by lawyers representing the Defendant.

81.  The Defendant also complained about the wide circulation of the SG Injunction to at least 63 persons/entities including media outlets.

82.  However, in the course of the New York proceedings and through enforcement actions, the Plaintiff obtained evidence[25] that Lee had access to the Defendant’s assets.

83.  I have little difficulty in rejecting the submission that the Plaintiff had been conducting a “campaign of oppression” against the Defendant. Taking a broad view, the actions taken do not amount to “oppression” when the Defendant has put up a wall of resistance against all efforts on the Plaintiff’s part to enforce the Korean Judgment.

C. Chabra

(1) The Plaintiff’s case

84.  Underpinning the Plaintiff’s case that the BVI Entities are the Defendant’s nominees (the common thread running through all the applications for injunctions in the different jurisdiction) are the transfers of SMG shares from GD/DVG to Azur and Trinity at an undervalue:

(i)  on 21 November 2017, GD transferred 4 million SMG shares to Azur at US$1 per share; and

(ii)  on 22 February 2018 DVG transferred approximately 3.5 million SMG shares to Trinity at HK$1 per share.

85.  Those transfers were in all probability at an undervalue given that both Azur and Trinity sold a portion of their respective holdings of SMG shares to SEGL a few months later (on 14 June 2018) at US$3 per share.  

86.  The connection between the Defendant and Azur and Trinity is through GD and DVG. The Plaintiff’s evidence[26] in that regard may be summarised as follows.

(1) GD:

(a)  It was incorporated in the BVI, struck off and currently restored in the register.

(b)  It held 10 million SMG shares being SMG’s largest shareholder.

(c)  The affirmation of Yi Liu dated 20 December 2018 (“Liu’s affirmation) deposed to the visit he made with John Han on 20 November 2017 to the offices of Triolink Corporate Services Ltd (“Triolink”), GD’s corporate secretary, to serve a copy of the Notice to Preserve Documents in connection with the New York litigation. On that occasion, they were told by a person who identified herself as Melody that Triolink worked with the Defendant and GD and that the Defendant was the owner of GD.

(2) DVG

(a)  The Defendant founded a company in 1998 which changed its name to DVG in 2003.

(b)  DVG owned a substantial number of SMG shares, a portion which was sold to, inter alia, Trinity in February 2018 at HK$1 per share which Trinity resold 4 months later to a SEGL at US$3 per share.

(c)  The last legal owner of the shares was Wan Kim Poon (a former employee of the Spackman Group), the listed beneficial owner being the Defendant’s brother-in-law Kim.

(d)  In 2015 DVG obtained a loan of US$0.5 million from Spackman Equities which loan was subsequently written off. The Defendant was the CEO and director of Spackman Equities both when the loan was made to DVG and when it was written off.

(e)  Kim resided at the Defendant’s residence (in Las Pinadas[27]) in Hong Kong. Kim was the registered account holder of an account with the Water Supplies Department for supplying water not only to the Las Pinadas address but also to One Island South being office premises and the address used by the Defendant in these proceedings.  

(f)  In November 2017 and February 2018, Azur and Trinity became substantial shareholders of SMG. Prior to that, GD and DVG were substantial shareholders of SMG.

(g)  Significantly, since August 2017, Spackman Media Group Pte Ltd (SMG SG), a wholly owned subsidiary of SMG, paid the Defendant’s rent in the US of almost US$1 million, his personal legal fees of over US$400,000 for the New York proceedings, and US$500,000 towards a scholarship fund.

(h)  The Plaintiff submitted that if the Defendant had no interest in or control over the BVI Entities (and hence no control over SMG or SMG SG), there would have been no business purpose for the payments set out in (g) above.

(i)  Kim has not filed any evidence in these proceedings but has filed 3 affirmations[28] opposing the BVI Injunctions: Kim 1^st and Kim 3^rd in his capacity as director of the BVI Entities in relation to the BVI Injunctions and Kim 2^nd was specifically as director of Azur.

(2). The Defendant’s evidence  

87.  The Defendant adopted Kim’s evidence filed in the BVI in opposition to the BVI Injunctions.

88.  Kim claims to be the beneficial owner of GD, DVG and Azur and a director of each of the BVI Entities. His evidence is that

(a)  he acquired (i) GD from DVG in 2008, (ii) DVG in 2010 (at a time when it was worthless), and (iii) Azur in 2008.

(b)  SEGL was incorporated in January 2014 and is the largest shareholder of SMG which was incorporated in October 2015.

(c)  The Defendant did not personally invest in SMG or SEGL although he did provide advice and ideas and he has never been a shareholder of SMG.

(d)  The BVI Entities are owned by Kim and his sister (the Defendant’s wife) and the so-called ‘low-cost’ transfers were effected for internal restructuring purposes.

89.  As regards Liu’s visit to Triolink on 20 November 2017, in response to the Defendant’s solicitors letter of 1 June 2020, Triolink acknowledged that at that time they did have an employee by the name of Melody but who had since left. In a further response to a follow-up enquiry from the Defendant as to whether inter alia Liu was authorised by GD to receive information about GD from Triolink, the answer was that “[t]hese people are unknown to Triolink”.

90.  The Defendant relied on that correspondence to show that the Melody incident never happened. However, that correspondence was not contemporaneous but took place 18 months after Liu’s affirmation. In any event, it stretches ones credulity to think that if the Liu affirmation been made up as the Defendant suggests, Liu could have hit the jackpot as it were with a name as unusual as “Melody”.  

91.  In the present case, the question whether Chabra should be exercised is inextricably linked with the outcome of the risk of dissipation. That is because to negate the risk of dissipation the Defendant simply adopted Kim’s explanations regarding 2 transactions on which the Plaintiff relies. Thus, Kim’s credibility lies at the heart of both Chabra and the risk of dissipation issues.  

D. Risk of dissipation

92.  The Plaintiff relies on two post BVI Injunctions acts of dissipation considered below.

(1). Transfers of SMG shares to Plutoray on 24 April 2019[29]

93.  Kim’s evidence is that (a) he acquired 9,999,999 SMG shares through GD in December 2015 financed by a loan of US 1 million from Monetary Management Consultancy Ltd (“MMC”) with the SMG shares as collateral; (b) Kim distributed SMG shares to Azur and Trinity at a nominal price; (c) MMC enforced its security; (d) the SMG shares held by Azur and Trinity were transferred to Plutoray.

94.  Kim 3^rd (§§44-51) describes in detail the complicated arrangements devised that gave rise to the barebones framework in §92 above which replicates §42 of Kim 3^rd. The Plaintiff’s written submissions at §§66-71 set out in meticulous detail the numerous difficulties that arise with the arrangements described.

95.  For present purposes, it suffices to highlight the following:

(a)  MMC’s alleged enforcement on 27 March 2019 preceded the maturity dates[30] of the promissory notes given by Azur and Trinity[31] which did not contain acceleration provisions;

(b)  a loan agreement was said to exist between MMC and GD for US$1 million to fund a share swap between GD and SMG but which loan agreement Kim was unable to produce;

(c)  the cash consideration of US$0.9 million[32] is not mentioned anywhere in the share swap agreement between GD and SMG dated 13 January 2015;

(d)  the bank statement said to show receipt by Crystal Planet Limited of US$1 million on 2 November 2015[33] does not reveal the name of the transferor or payer;

(e)  no evidence was adduced to show that Plutoray was a “designee” of MMC; and

(f)  the Defendant[34] exhibited the business profile of Plutoray showing MMC as its sole shareholder as at 1 July 2019 but evidence adduced by the Plaintiff shows that Yoo Jaemin only ceased to be Plutoray’s sole shareholder on 3 June 2019, the day before the filing of Kim 1^st.  

96.  Central to Kim’s explanations (adopted by the Defendant) is that the transfers of SMG shares to Plutoray after service of the BVI Injunctions as nominee of MMC had been arranged on 27 March 2019 before those injunctions were granted and served. But the evidence[35] before the Court shows otherwise: MMC did not have the alleged relationship with Plutoray prior to 4 June 2019.

97.  In view of the matters set out above, Kim’s explanations do not withstand scrutiny.

(2) Transfers of SEGL shares by Azur to JS Lee

98.  In Kim 2^nd, he disclosed that while Azur had no shareholding in SEGL when he made his first two affirmations, it was in possession of approximately 36.4 million ordinary shares in SEGL as at 11 April 2019 that was subject to a share transfer agreement of 25 March 2019 (“the STA”).

99.  Kim’s explanation for the STA is that in January 2019

(a)    he offered to buy 48 million SEGL shares from a long-time friend John Ko (“Ko”) when the latter was looking to sell them (for regulatory reasons) prior to being appointed CEO of SEGL on the assumption that Kim “would eventually pay him for the consideration in the future”;

(b)    on 28 January 2019, Ko transferred 48 million SEGL shares[36] to GD;

(c)    by mid-March 2019, Ko requested Kim to discharge a financial obligation[37] he owed to a mutual friend Lee Jae Seung (“JS Lee”), a non-related party;

(d)    because of Kim’s financial obligation[38] towards Ko, Kim agreed to transfer 36,446,300 shares in SEGL (which Azur owned) to JS Lee;

(e)    on 25 March 2019, at Kim’s direction, Azur provided a pre-signed copy of the STA to JS Lee; and

(f)    JS Lee did not register the shares until 18 April 2019.

100.  Further elaboration made in Kim 3^rd at §§53-57 in some respects differed from, if not at odds with, the earlier version:

(a)    repayment, rather than being left at large[39], would be made when Kim resold the shares;

(b)    Kim delayed selling those shares because the share price of SEGL had declined but in March 2019, because Ko had to repay JS Lee US$700,000[40], he asked Kim to make the payment;

(c)    as Kim did not want to sell the shares at a loss[41], he told Ko that he would give JS Lee the 36.4 million SEGL shares owned by Azur to be transferred to JS Lee at SGD0.023[42] per share; and

(d)    Kim gave JS Lee an undated copy of the STA on about 25 March 2019.

101.  The thrust of the evidence is that there had been no breach of the BVI Injunction brought about by that transfer by Azur which was said to be ‘involuntary’.

102.  Despite the attempt to improve on Kim 1^st, Kim 3^rd could be said to be a different or second version. The evidence adduced is hardly believable when the fundamental question, namely, the price at which it was agreed that the 48 million SEGL shares were to be acquired was never stated[43]. Further, the explanation for the STA makes no sense when, on the one hand, Kim did not want to sell the shares because of the “low” price[44] and, on the other, it is not explained how, by entering to the STA, Kim was avoiding a “sale” of the 36.4 million SEGL shares. There is no suggestion of any arrangement for a buyback at some specific price or that JS Lee could not deal with the SEGL shares as he saw fit.

103.  In short, whether it is version 1 or version 2, the explanations given simply do not add up, seriously undermining Kim’s credibility.

104.  In my view, the Plaintiff has discharged the burden of showing a risk of dissipation of assets.

IV. CONCLUSION ON THE CONTINUATION AND SETTING ASIDE SUMMONSES

105.  Those summonses are in reality 2 sides of the same coin and can conveniently be addressed together.

A. The SG and HK Funvest Injunctions[45]

106.  The Defendant submitted that as the Plaintiff applied for the Funvest Injunctions in Singapore and Hong Kong on the basis that the assets covered by those injunctions represent the Defendant’s assets and the Funvest Injunctions were necessary to prevent dissipation of the Defendant’s assets, the HK Injunction is duplicative and redundant. In other words, according to the Defendant, the Funvest Injunctions provide ample protection for the Plaintiff

107.  However, both the SG and HK Funvest Injunctions are being challenged. ESA, a company listed on the KOSDAQ, is involved as a 3^rd party. It is not known whether, for example, the defence of bona fide purchaser without notice will be invoked. One cannot rule out the possibility that the court may order registration of the SMG shares that form the subject matter of the ESA agreement.

108.  So far as concerns the proceeds of sale, Funvest asserted in or about June 2020 that it had paid US$10 million received from ESA to Plutoray, Vaara and Starlight. Then on 19 August 2020 it asserted that it has spent the US$10.8 million received from ESA on expenses. What can be said at this stage is that there is considerable uncertainty as to what protection the Funvest Injunctions can actually provide.

109.  In those circumstances, it cannot be said that the HK Injunction is duplicative and redundant.

B. Material non-disclosure

110.  The Plaintiff plainly has satisfied all the requirements for the court to exercise its discretion to grant the HK Injunction. The only reservation stems the matters raised in §63 above.

111.  As earlier noted[46], if established, the practice of the Court is to discharge the order without going into the merits: see Velatel. Nevertheless, the Court retains a discretion whether or not to discharge the injunction.

112.  The Plaintiff’s failure to draw the Court’s attention to the matters in §63 is regrettable but in the scheme of things, it is a borderline matter that pales into insignificance. When one takes a holistic view of all the evidence in this long-running saga, it is clear that it would hardly serve the ends of justice to penalise the Plaintiff by depriving him of the protection that the HK Injunction provides.

113.  I do not consider that I am bound to discharge the HK Injunction but if I am wrong in this regard, I have no hesitation in exercising the Court’s discretion afresh and re-grant the HK Injunction.

V. THE LIFTING OF STAY SUMMONS

114.  Since the Court has come to the conclusion that the HK Injunction should continue or re-granted afresh, there is no reason for not lifting the stay. 

VI. Order

115.  Accordingly, in summary:

(1)  the HK Injunction is continued until trial or further order;

(2)  the stay granted by the order dated 14 June 2019 is lifted;

(3)  the setting aside summons is dismissed.

116.  There is to be an order nisi of costs in favour of the Plaintiff with certificate for counsel, such costs to be summarily assessed and payable forthwith. Directions for summary assessment will be given separately.