Japanese gaming mogul Kazuo Okada has scored a crucial win over his former company, Universal Entertainment Corp, after the High Court of the Hong Kong SAR dismissed a summons brought by Universal seeking to prevent Okada from disposing of assets in Hong Kong.
The summons, which sought a Mareva injunction against Okada, is related to a damages claim whereby Universal is seeking US$620 million for alleged mismanagement that saw the cost of developing Philippines integrated resort Okada Manila run over budget.
According to information provided to the court, the Okada Manila project had an approved development budget of US$2.43 billion but by September 2019 had accrued costs of US$3.05 billion – over by US$620 million.
Universal is alleging that Okada “undermined all control measures put in place to minimize risk, prevent the diversion of funds and prevent cost overruns” before his ousting as a director of the company in June 2017.
The company had also proposed a “fallback figure” of US$112.6 million, being the amount over budget at the time of Okada’s ousting.
With the substantive case on hold due to Hong Kong’s General Adjournment Period on legal matters due to COVID-19, the interim Mareva injunction had sought to prevent Okada from offloading any assets that may be used to pay damages should Universal win its case. Those assets include Okada’s shares in Hong Kong incorporated companies Okada Holdings Ltd and Okada Fine Art Ltd.
But in a lengthy judgement dated 17 July 2020, Judge Russell Coleman said Universal could not satisfy the “necessary good arguable claim test” to obtain a Mareva order due to the damages claim figure being unrealistic.
In particular, Judge Coleman noted some “obvious difficulty” in asserting that loss equates to the extra development costs paid over and above the approved budget because, “Ordinarily, monies paid out receive some value in return.”
“Until the submissions at the hearing, the plaintiffs do not seem to have countenanced that the damages claim is realistically not simply the dollar figure of overspend,” he said. “Once it is acknowledged that US$620 million is unlikely to be the right answer, and the alternative figure offered by reference to a different date (US$112.6 million) suffers the same intrinsic difficulties, I am afraid that I do not think there is really any evidence demonstrating a good arguable claim to any particular figure.
“Even doing the best on the available evidence, I think that if I were to alight on any damages figure, I would be doing no more than choosing that figure in effect arbitrarily.”
The ruling includes an order for Universal to pay Okada’s costs of the summons.
According to people familiar with the matter, those costs are estimated at around US$250,000 for each party.