Elektromotive Group Ltd (A Singaporean Company) v Christopher Pan
| Jurisdiction | England & Wales |
| Judge | Mr Justice Eder |
| Judgment Date | 18 October 2012 |
| Neutral Citation | [2012] EWHC 2742 (QB) |
| Court | Queen's Bench Division |
| Docket Number | Case No: HQ12XO1575 |
| Date | 18 October 2012 |
[2012] EWHC 2742 (QB)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr Justice Eder
Case No: HQ12XO1575
Mr Peter de Verneuil Smith (instructed by Clyde & Co LLP) for the Claimant
Mr Tiran Nersessian (instructed by Rollingsons Solicitors Limited) for the Defendant
Hearing dates: 2, 3, 4 October 2012
Introduction
There are before the Court two main applications. First, an application on behalf of the defendant ("Mr Pan") to set aside a freezing order originally made on a hearing without notice by Nicola Davies J on 23 April 2012 and subsequently continued by Lang J on 30 April 2012. Second, an application by the claimant ("EGL") for a further order in relation to disclosure of assets.
The original application for the freezing injunction was made at a hearing without notice before Collins J on 20 April 2012 supported by an affidavit of Mr Julian Connerty, a partner at Clyde & Co, solicitors acting for EGL. In the event, Collins J adjourned the application as there was no evidence before him to demonstrate that the application was urgent. The application was then heard by Nicola Davies J on 23 April 2012. Leave was granted to serve Mr Pan out of the jurisdiction. Since then, various further affidavits have been served together with a very large number of documents by way of exhibits including four affidavits by Mr Pan and, by way of response on behalf of EGL, affidavits from Mr Ang, Mr Navasero, Mr Tan and a further affidavit from Mr Connerty.
At the end of the hearing on 4 October 2012, I informed the parties of my decision. This judgment sets out my reasons.
Background
For present purposes, the background to the proceedings can be summarised as follows — although I should make plain that since these are interlocutory proceedings I make no findings of fact and that the summary which I set out below is based simply upon what seems to me the relevant background as appears at this stage from the numerous affidavits and witness statements which have been submitted by the parties.
EGL is a Singaporean investment holding company with interests in media, publishing, event management, food retailing and technology businesses. The Executive Vice-Chairman of EGL is Mr Ricky Ang Gee Hing ("Mr Ang"). EGL is registered in Singapore and its shares are traded on the secondary board of the Singapore Exchange, Catalist.
At the time of the events giving rise to this claim EGL was known as The Lexicon Group Limited ("Lexicon"). The present dispute arises out of the acquisition of certain shares by Lexicon in a company called Elektromotive UK Limited ("EUK"), a company registered in and operating from the United Kingdom. EUK's business is primarily concerned with the provision of charging bays for electronic vehicles and software associated with the operation of such charging bays. The Managing Director of EUK is Mr Calvey Taylor-Haw. After the acquisition took place, Lexicon changed its name to EGL but, for convenience only, I shall refer to the company throughout as EGL.
Mr Pan is a UK born businessman with a background in investment banking, accounting, auditing and asset management. He originally owned at least a 70% shareholding and was the sole Director of a BVI company, Calypso Group Holdings Limited ("Calypso Group") which wholly owned a Singaporean Company, Calypso Capital Pte Limited ("Calypso Capital"). According to the evidence, Mr Pan sold his interest in Calypso Group (and therefore also his indirect interest in Calypso Capital) sometime in August 2011. In the course of the hearing, I was told that this sale took place on 18 August 2011, the same date as he resigned as Director of Calypso Group.
In addition, Mr Pan and his wife, Ms Aslinda Diam, were also originally beneficial owners of the shares in another BVI company, Calypso Holdings and Investments Limited ("CHIL"). According to the evidence, Mr Pan sold his shares in CHIL sometime in February 2012. In the course of the hearing I was told that in fact both Mr Pan and his wife sold their shares in CHIL on the same date i.e. 10 February 2012.
In early November 2010, Calypso Capital entered into an agreement with EUK (the "Mandate") to assist EUK in a proposed merger with EGL in consideration of certain fees as described further below.
Calypso Capital employed Mr Tom Navasero as a management consultant who played an important role in the merger. In so doing, he was, to some extent at least, directed and supervised by Mr Pan — although the extent of such direction and supervision is a matter in issue in these proceedings.
On 6 December 2010, EGL agreed to buy a majority shareholding (51%) in EUK from various vendors including Prince Hakeem, Mr Simmons, Mr Earle and CHIL (the "Vendors"). The agreement (as amended by a supplemental agreement dated 2 March 2011) (the "SPA") provided that the value of the consideration was conditional on EUK achieving a net profit after tax ("NPAT") of at least £459,498 for the accounting year ending 28 February 2011. If the NPAT figure was lower, the amount of consideration reduced pursuant to a contractual formula. The form of the consideration was shares in EGL.
In essence, EGL's case is that Mr Pan fraudulently conspired with Mr Navasero and others to inflate the NPAT artificially. The artificial increase in the NPAT allegedly consisted of two elements:
a. An order dated 14 February 2011 for £218,400 was sent by a Philippine company named Philab Industries Inc ("Philab") for software licences, in circumstances where Philab had neither interest in the software nor the ability to pay for it and was given assurancess by the conspirators that it would be put in funds in order to pay the invoice. The invoice remains unpaid. Philab is owned by the family of Mr Navasero.
b. Services being provided by H Technologies (UK) Limited ("H Technologies") and Grand Prix Design Services Limited ("Grand Prix Design"), two companies in substance owned and to a greater or lesser extent controlled by Messrs Simmons and Earle, both directors and shareholders of EUK, and Vendors. EUK had made payment for those services. In order to satisfy those considering the accounts of EUK, letters were fraudulently obtained from those companies waiving the invoices. No repayments were made and in the circumstances the "waivers" were a fiction.
On 4 July 2011 at an emergency general meeting, EGL approved the SPA and the allotment of the consideration shares.
On 19 July 2011 the SPA completed and shares were issued to the Vendors (including 100 million shares to CHIL) and/or their nominees.
EGL's case is that as a result of the fraudulent NPAT figure it was wrongfully induced to pay an excessive price for its takeover of EUK. Specifically, EGL says that the true NPAT figure for the year ending 28 February 2011 was only £236,624 i.e. a "shortfall" of some £222,874 from the "target" of £459,498 and that, in consequence, it overpaid 494,737,780 shares issued by EGL equivalent to S$7,421,081.69.
Under the Mandate, it would seem that EUK was responsible for the payment of Calypso Capital's fees although it is EGL's case that in the event (i) these fees were in fact met by an allotment of shares by each of the Vendors pro rata to their respective shares issued by EGL pursuant to the SPA; and (ii) various entities (viz Calypso Capital, Calypso Group and Sharp Consultants) and one individual all allegedly associated with Mr Pan (the "Allotees") received a total of 320 million shares with a cash value of approximately S$4.8 million. This is disputed in part by Mr Pan. In particular, it is his evidence that only approximately 180 million of these shares were allotted to companies associated with him i.e. Calypso Capital and Calypso Group.
According to Mr Navasero, under the terms of his service agreement with Calypso Capital, it was originally agreed that he would be entitled to a success fee of one-third (i.e. 33.3%) of the net revenue generated by Calypso Capital on any deals he worked on although he says that it was later agreed that he would be entitled to 45% of the net revenue to be earned from the sale of shares in EUK. As I understand, Mr Pan accepts that the success fee payable to Mr Navasero was increased to 45% of the net revenue but he (i.e. Mr Pan) says, in effect, that Mr Navasero has received all sums properly due and that there are no further sums outstanding. This is disputed by Mr Navasero who maintains that there is a substantial amount (i.e. approx S$2 million) which has never been paid and remains due and outstanding to him from Mr Pan or his companies. The contemporaneous documents show that this has given rise to considerable animosity by Mr Navasero against Mr Pan. For example, Mr Navasero describes his actions against Mr Pan as a "battle march", "chasing him down", "being a desperate man" and "having nothing to lose".
It appears that the fact that the NPAT figure was inaccurate was discovered by EGL within a short time after completion of the SPA i.e. in August 2011. However, at that stage EGL says that it was not clear exactly how this had come about nor which individuals were involved although contemporaneous emails even at that relatively early stage certainly show that EGL was contemplating pursuing injunctive relief against Calypso Capital and also considering its strategy against Mr Pan and others.
Between 12 August 2011 and 16 November 2011, all shares issued to CHIL and the Allottees (i.e. a total of some 420 million) were sold and transferred to third parties and/or nominees. Some of these shares were pre-sold; some were sold on the open market; and some were sold off-market. EGL alleges that some at...
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