Kabushiki Kaisha Sigma Plaintiff v 1. Trustcorp Ltd ((in Liquidation)) 2. Hideo Seto (in His Capacity as Trustees of the Estate of Kenshin Oshima, a Bankrupt) Defendants
| Jurisdiction | Cayman Islands |
| Judge | The Hon. Justice Nigel R.L. Clifford, QC |
| Judgment Date | 29 July 2015 |
| Court | Grand Court (Cayman Islands) |
| Docket Number | CAUSE NO. FSD 154 OF 2013 CQJ |
| Date | 29 July 2015 |
The Hon. Justice Nigel R.L. Clifford, QC
Mr. Alan Steinfeld, QC instructed by Ms. Shelley White and Ms. Joanne Verbiesen of Walkers for the Plaintiff
Ms. Catherine Newman, QC instructed by Mr. Rupert Coe and Ms. Victoria King of Appleby for the Second Defendant
Ms. Anna Peccarino and Ms. Denise Owen of Travers Thorp Alberga on behalf of Trustcorp Limited, the First Defendant
In this matter three applications have come before the Court for determination. These are as follows:
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(1) An application by the Plaintiff (‘Sigma’) by summons issued on 31 December 2014 to strike out certain paragraphs from the Points of Defence of the Second Defendant (‘Mr. Seto’) dated 1 December 2014 (the ‘Strike Out Application’);
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(2) An application by the Second Defendant by summons issued on 29 January 2015 for an order directing the Plaintiff to give security for his costs of this action (the ‘Security for Costs Application’); and
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(3) An application by Mr Seto by summons issued on 23 April 2015 for directions (the ‘Directions Summons’).
Mr Seto is the Japanese Trustee in Bankruptcy (‘TIB’) of the estate of Mr Kenshin Oshima (‘Mr Oshima’).
In support of the Strike Out Application Sigma has filed the Fourth Affidavit of Yoshihito Oshima (‘Yoshihito’) sworn on 6 January 2015.
In support of the Security for Costs Application Mr Seto has filed his Fifth Affirmation affirmed on 28 January 2015 and his Sixth Affirmation affirmed on 2 April 2015.
In opposition to the Security for Costs Application Sigma has filed the Fifth Affidavit of Yoshihito sworn on 11 March 2015.
The First Defendant (‘Trustcorp’) has not filed any evidence in relation to any of the Summonses. Although represented at the hearing, this was on the basis of it adopting a neutral role and no submissions were made on its behalf.
Sigma is a company registered in Japan which sues as the successor to another Japanese company originally called Kabushiki Kaisha Ken Enterprise (‘Ken Enterprise’) subsequently renamed Kabushiki Kaisha Q & Company (‘Q&Co’). Prior to October 2008 Mr Oshima was a substantial, albeit a minority, shareholder in Q&Co, as were other members of his family. The shareholders of Sigma are solely members of Mr Oshima's family, his son Yoshihito, his daughter Yuki Scott (‘Yuki’) and his wife Yuriko Oshima (‘Yuriko’). The directors of Sigma are Yoshihito, Yuki and Yuriko. Yoshihito holds the position of ‘representative director’ which means he holds the company seal and may represent Sigma in transactions. It is a requirement of Japanese law that a company board has at least one such director.
Mr Oshima is a Japanese national and formerly an extremely wealthy business man. Mr Seto believes that the principal source of Mr Oshima's former wealth was his shareholding in a company called Kabushiki Kaisha SFCG (‘SFCG’), which was a company controlled by Mr Oshima prior to its bankruptcy. Mr Seto is also SFCG's trustee in bankruptcy.
Mr Seto, the TIB, is a senior Japanese lawyer who has been in practice for more than 35 years. He is also an insolvency practitioner of more than 30 years' standing with considerable experience of conducting both individual and corporate bankruptcies under the supervision of the Japanese Court. He complains of a lack of co-operation from Mr Oshima in the bankruptcy and is concerned that attempts are being made by Mr Oshima and/or his family to defeat Mr Oshima's creditors.
The First Defendant, Trustcorp, is the trustee of two unit trusts governed by Cayman law. Mr Oshima is the registered holder of the majority of the issued units in one of the trusts, the Diamond Trust, and all the issued units in the other trust, the Attila Unit Trust (collectively ‘the Trusts’ and ‘the Units’). Trustcorp is a company registered in Jersey and is in liquidation in Jersey. By way of an order made in separate Beddoe proceedings in the Grand Court of the Cayman Islands, Jones J. directed that Trustcorp should take a neutral role in this action.
There have been various proceedings in Japan to set aside certain transactions entered into by SFCG while under Mr Oshima's control which benefitted Mr Oshima and persons closely connected to him. An action was also brought in Japan by the TIB against Mr Oshima personally for breach of his fiduciary duties as representative director of SFCG. In addition Mr Oshima has been prosecuted in Japan for two criminal offences related to the transfer of assets out of SFCG's bankruptcy estate. He was convicted on one of two counts and sentenced to 18 months' imprisonment with labour, suspended for three years. He has appealed this conviction and therefore, in accordance with Japanese law, is entitled to enjoy a presumption of innocence until the determination of the appeal.
In this action Sigma makes claims in respect of the Units in the Trusts based upon two documents in substantively identical form in Japanese said to have been executed in Japan on 14 March 2003. These instruments are known as ‘Joto Tanpos’. By one of them Mr Oshima was expressed to charge all his units in the Diamond Trust and by the other all his units in the Attila Unit Trust in favour of Ken Enterprise to secure claims against him. The signatories to the Joto Tanpos are said to be Mr Oshima on his own behalf and Yuriko on behalf of Ken Enterprise. There is an issue as to the signatures.
Prior to the start of the action, on 24 October 2012, the TIB issued an application for recognition of his appointment in Jersey, to seek to take control of the assets in the Trusts. Those proceedings have since been stayed on terms.
The present proceedings were issued by Sigma by Originating Summons in the Civil Division of the Grand Court on 12 December 2012. Trustcorp was the only named Respondent. The TIB did not learn of the proceedings until sometime after they had been issued.
It is necessary to refer to the procedural background because the TIB makes complaint about how Sigma has conducted the proceedings. This is said to be relevant in revealing that Sigma has attempted to assert a claim to be the rightful owner of the Units behind the back of Mr Seto, the TIB. There are also various issues about the course which the action has taken which the Court has been asked to consider in dealing with the present applications.
Mr Seto complained that, as Mr Oshima's trustee in bankruptcy, it was entirely inappropriate for him not to have been named as a party to the proceedings, given that they are designed to transfer assets which fall into the bankruptcy estate into the hands of an Oshima family company. That issue was resolved when the TIB was joined as Second Defendant by way of amendment to the Originating Summons on 12 November 2013.
The TIB also objected to the proceedings taking place in the Civil Division. This was on the basis that the action involves cross-border insolvency, unit trusts, a Jersey-based trustee, a Japan-based trustee in bankruptcy, and financial instruments worth millions of dollars. Accordingly, it was contended that it is the type of matter which should be dealt with in the Financial Services Division. Initially Sigma did not accept this and there was some debate of the issue. However, ultimately a transfer was agreed and this was effected by an Order dated 23 December 2013.
There was a further objection by the TIB that the proceedings were by way of Originating Summons. It was contended on his behalf that such proceedings are appropriate for summary determination of matters on a point of law where there is no substantial dispute as to fact. This, it was said, is not the case in these proceedings as Sigma well knew. Initially Sigma refused to accept that the proceedings should continue as if begun by writ and the issue was debated in correspondence 1. The TIB then issued a Summons seeking that the proceedings be converted into a writ action which was listed for hearing on 20 October 2014. However, before the hearing Sigma's attorneys consented to the action continuing as if begun by writ and there followed a Consent Order to this effect dated 22 October 2014.
The TIB complains that having to resolve these issues has caused significant delay.
It is Sigma's case that each Joto Tanpo has an effect similar in law to an all moneys charge by a debtor in favour of his creditor over the Units. It is also Sigma's case that (a) prior to his bankruptcy Q&Co had advanced to or for the benefit of Mr Oshima sums totalling nearly 5 billion Japanese Yen (equivalent at current rates of exchange to over US$42 million) which by the terms of each Joto Tanpo were charged on the Units; and (b) by the express terms of each Joto Tanpo on the presentation of the bankruptcy petition against Mr Oshima, Q&Co became entitled to become the owner of the Units.
Sigma came into the picture in 2012 because as a result of the merger between it and Q&Co which came into effect on 1 September 2012, it took over all the liabilities of Q&Co and became entitled to all its assets. Such assets it is claimed included Mr Oshima's indebtedness to Q&Co for the sums advanced and the benefit of each Joto Tanpo whereby that indebtedness was secured.
Points of Claim were served by Sigma on 11 November 2014. Essentially they rely on the two Joto Tanpo Agreements as entitling Sigma in the events that have occurred to the relief which it seeks.
In his Points of Defence the TIB raises a...
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