Cross-Border Bankruptcy

Hiroshi Morimoto (As Trustee in Bankruptcy of Masahiko Nishiyama pursuant to the Order of the Kyoto District Court) v Masahiko Nishiyama & 4 Ors, Case No HC/OS 210/2017

1. Introduction

Prior to this case, it was unclear whether a Singapore Court would recognise a foreign bankruptcy order (in respect of an individual) and the private trustee appointed thereunder. Foreign insolvency orders (in respect of companies) have previously been recognised.

In this ground-breaking case, we persuaded the Singapore High Court to extend recognition to a Japanese bankruptcy order obtained in the Kyoto District Court. Our client was the trustee in bankruptcy appointed thereunder.

We also obtained a declaration that the bankrupt, Masahiko Nishiyama, was the beneficial owner of several bank accounts in Singapore which he held in the names of nominees and offshore-incorporated entities.

2. Background

Nishiyama was a director of Japanese company Pexim Co. Ltd (“Pexim”) between 1971 and 2003. He held approximately 16,850 Pexim’s shares worth 16.85 million yen. Pexim was dissolved in 2004.

From 1989 to 1992, Pexim entered into a series of loan and quasi-loan agreements with the predecessor of The Resolution and Collection Corporation (“RCC”), a government-owned subsidiary of the Deposit Insurance Corporation of Japan which deals with salvaging bad loans from failed housing companies. Nishiyama underwrote these agreements.

In 2012, the Kyoto District Court ordered that Nishiyama, jointly and severally with Pexim, pay RCC the outstanding loans which by then amounted to approximately 43 billion yen (USD 395 million) including interest. It later emerged that Nishiyama had dissipated his assets worldwide on a massive scale, including bank accounts in Singapore, Hong Kong and Canada. Criminal proceedings were brought in Japan and he was convicted and sentenced to prison for concealing assets for the purposes of defeating enforcement proceedings.

3. Recognition of the Japanese Bankruptcy Order

We were then instructed by Nishiyama’s Japanese-appointed trustee in bankruptcy, Mr Hiroshi Morimoto, to pursue Nishiyama’s assets in Singapore.

We successfully persuaded the High Court to recognise the bankruptcy order made by the Kyoto District Court, which included recognising that Nishiyama was a bankrupt and that Morimoto was his trustee in bankruptcy. We also obtained a declaration that certain bank accounts in Standard Chartered, Bank Julius Baer and Credit Suisse were beneficially owned by Nishiyama, though they may not have been held in his name. We did this by undertaking a tracing exercise based on documents flushed out through a worldwide mareva injunction obtained in the course of the proceedings.

The combined value of these accounts stood at approximately SGD 124 million (US 90 million). Our client was allowed to proceed to seize these assets.