In the recent Court of Appeal judgment in Konoshita and A.P.F. Group Co Ltd v JTrust Asia Pte Ltd (BVIHCMAP 2018/0020 and 0047) the Court provided helpful guidance on its approach to freezing and receivership orders.
The case involves a US$180 million fraud purportedly committed by Mr Konoshita and APF (the Defendants) against JTrust. JTrust obtained a freezing order against the Defendants in December 2017 in support of its claim. The freezing order contained various disclosure requirements which the Defendants failed to comply with. Receivers were appointed over APF seven months later. The Defendants appealed both the freezing order and receivership order. The appeals were heard together in October 2018.
The Defendants' appeals were dismissed. In its judgment the Court of Appeal held:
- When considering whether there is a good arguable case for a freezing order, the Court does not need to conduct a mini-trial of the claim. The Judge is required to assess the claim and evidence before him to determine whether it meets the threshold of a good arguable case.
- A failure to make full and frank disclosure to the Court of all material facts when obtaining a freezing order will not lead to the automatic discharge of the freezing order. The Court retains a discretion to discharge, continue or vary the freezing order.
- A finding of dishonestly against a party by another court or tribunal is insufficient to evidence a real risk of dissipation alone. However, where dishonesty is at the heart of the claim, the Court may be able to draw an inference that the finding establishes a sufficient risk for the dissipation of assets.
- The failure of a party to comply with a disclosure obligation in a freezing order is a significant factor in determining whether it is just and convenient that a receiver be appointed. Where there is a continuous failure by a party to comply with its disclosure obligations invariably the Court will appoint a receiver.
- If there is solid evidence that there is a risk of dissipation by a party then a delay in applying for a freezing order will not necessarily mean that an application for a freezing order will be unsuccessful.
The case provides helpful commentary from the Court of Appeal on some of the most common challenges to freezing and receivership orders, for example material non-disclosure, delay, and real risk of dissipation. All points which both applicants and respondents should bear in mind when applying for or responding to a freezing order and/or receivership order.
Harneys acted for the successful party, JTrust Asia Pte Ltd.