michael b. lubic (sbn 122591) kevin s. asfour (sbn 228993...

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NEW TARGET’S OPPOSITION TO TRUSTEE’S MOTION FOR LETTER OF REQUEST

MICHAEL B. LUBIC (SBN 122591) KEVIN S. ASFOUR (SBN 228993) K&L GATES LLP 10100 Santa Monica Boulevard, Eighth Floor Los Angeles, California 90067 Telephone: 310.552.5000 Facsimile: 310.552.5001 Email: [email protected] [email protected] Attorneys for New Target Investments Limited

UNITED STATES BANKRUPTCY COURT

CENTRAL DISTRICT OF CALIFORNIA

LOS ANGELES DIVISION In re ZETTA JET USA, INC., a California corporation,

Debtor and Debtor in Possession.

Lead Case No. 2:17-bk-21386-SK Jointly Administered With: 2:17-bk-21387-SK (Zetta Jet PTE, Ltd., a Singaporean corporation) Chapter 7 NEW TARGET’S OPPOSITION TO TRUSTEE’S MOTION FOR ORDER APPROVING LETTER OF REQUEST; DECLARATIONS OF GUOYUE (GRACE) HUANG AND MAURICE G. R. LYNCH [Relates to Docket No. 839] Date: November 28, 2018 Time: 9:00 a.m. Pacific Place: Courtroom 1575 255 East Temple Street Los Angeles, CA 90012

In re ZETTA JET PTE, LTD., a Singaporean corporation,

Debtor and Debtor in Possession.

Affects Both Debtors

Affects Zetta Jet USA, Inc., a California corporation only

Affects Zetta Jet PTE, Ltd., a Singaporean corporation only

Case 2:17-bk-21386-SK Doc 855 Filed 11/06/18 Entered 11/06/18 12:15:22 Desc Main Document of 12

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1 NEW TARGET’S RESPONSE TO TRUSTEE’S MOTION FOR APPROVAL OF CASH DISBURSEMENT

New Target Investments Limited (“New Target”) hereby submits its opposition (the

“Opposition”) to the Chapter 7 Trustee’s Motion for Order Approving Letter of Request and

Authorizing Communication under 11 U.S.C. §§ 105 and 1505 and 28 U.S.C. §1781 [Dkt. No. 839]

(the “Motion”)1,2:

INTRODUCTION

The Motion requests that this Court issue a Letter of Request to the Australian court

encouraging that court to issue an injunction freezing the yacht, Dragon Pearl so that it can be

available for levy pending the outcome of an adversary proceeding recently filed in this bankruptcy

case3. Effectively, the Trustee wants this Court to request the assistance of a foreign court to fashion

a cross-border prejudgment remedy. For a variety of reasons, this is not appropriate under the

circumstances and this Court should refrain from issuing a Letter of Request and deny the Motion.

BACKGROUND

A. Zetta’s Scheme to Defraud New Target: The Jet Sale Transaction

Kebo Wu (“Mr. Wu”) and Canning Fok Kin Ning (“Mr. Fok”) were the shareholders of

Falconwing Limited (“Falconwing”), which owned a Bombardier Global Express luxury jet aircraft,

serial number 9115 (the “Jet”). On or about August 15, 2017, Zetta Jet PTE, Ltd. (“Zetta Singapore”)

entered into an Aircraft Purchase Agreement (the “APA”) with Falconwing, Mr. Wu and Mr. Fok.

Under the terms of the APA, Falconwing, as Seller, transferred the Jet to Zetta Singapore, as buyer,

1 The Motion is not supported by any declarations or other written evidence as required by LBR 9013-1(c)(3)(A) and (i). On this basis alone, it should be denied. 2 New Target received notice of the Order Granting Application and Setting Hearing on Shortened Notice (“OST”) by email at 11:41 a.m. on October 31. The OST set the hearing for November 28 but, without explanation, set an expedited briefing schedule requiring oppositions be filed before noon on November 6. As a result, New Target had only four business days to prepare this Opposition, instead of what would have been eleven business days under LBR 9013. New Target reserves its rights with respect to the shortened briefing schedule.

3 On October 29, 2018, the Trustee filed his “Adversary Complaint for Fraudulent Conveyance under 11 U.S.C. §§548(a)(1)(A), 548(a)(1)(B) and 550, Declaratory Judgment Under An Alter Ego Theory, Imposition of Constructive Trust Under 11 U.S.C. §541(d), Willful Violation of the Automatic Stay Under 11 U.S.C. §362 and 541(a), Avoidance of Postpetition Transfers under 11 U.S.C. §549(a) Turnover of Estate Property under 11 U.S.C. §542(a), and Disallowance of Claims Under 11 U.S.C.§502(d) (the “Complaint”) commencing the adversary proceeding known as Adv. Proc. No. 2:17-bk-21386-SK (the “Adversary Proceeding”).


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NEW TARGET’S RESPONSE TO TRUSTEE’S MOTION FOR APPROVAL OF CASH DISBURSEMENT

for a purchase price of $11,000,000 (the “Jet Sale Transaction”).4 Declaration of Guoyue (Grace)

Huang (“Huang Decl.”), ¶4.5

Falconwing was not paid in cash. Instead, Zetta Singapore entered into a series of agreements

with Mr. Fok, Mr. Wu, and New Target for the prepayment and allotment of Flight Hours (the “Flight

Hour Agreements”). Delivery of the executed Flight Hour Agreements was a condition to closing

under the APA. Huang Decl., ¶5.

The performance by Zetta Singapore of the Flight Hours Agreement between Mr. Wu and

Zetta Singapore, and the Flight Services Agreement between New Target and Zetta Singapore, were

guaranteed by way of personal guaranties issued by Geoffery Owen Cassidy (“Cassidy”) on or about

August 10, 2017 (the “Personal Guaranties”). Huang Decl., ¶6.

On September 15, 2017, Zetta Singapore commenced its voluntary chapter 11 bankruptcy

case. On September 19, 2017, Zetta Singapore wrote New Target to advise that the services under

the various Flight Hours Agreements, described above, could not be honored and that services under

those Agreements were suspended. The effect of the failure to honor the Flight Hour Agreements

was that in effect the Jet had not been paid for by Zetta Singapore. Accordingly, in the period of a

few weeks, Mr. Wu and Mr. Fok went from owning an $11,000,000 Jet free and clear to being

unsecured creditors in this bankruptcy case. On September 21, 2017, Falconwing, Mr. Wu and Mr.

Fok each assigned their rights, interests and obligations under the APA and their respective Flight

Hour Agreements to New Target. New Target is, therefore, the successor in interest to each of

Falconwing, Mr. Wu and Mr. Fok. Huang Decl., ¶7.

B. Adversity to Cassidy; Transfer of Yacht in Partial Satisfaction of Personal Guaranties

Following the breach of the Agreements by Zetta, New Target attempted to enforce the

Personal Guaranties. Around the time of the commencement of this bankruptcy case, Cassidy was

4 The Trustee disputes that the Jet was worth $11 million, but admits that it was immediately sold to Jetcraft for $5.5 million cash and that the proceeds of the sale were used to pay down a loan to Zetta Singapore from ECN. Consequently, there is not dispute that the Jet was worth at least $5.5 million. See, e.g., Complaint, 3:15.

5 The Huang Decl. was originally filed as Dkt. No. 528 in connection with the Trustee’s initial budget motion.


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meeting with personnel affiliated with Mr. Wu with the goal of inducing Mr. Wu to invest in Zetta as

part of a “rescue package.” Concurrently, New Target was negotiating with Cassidy regarding his

obligations under the Personal Guaranties. On or about September 28, 2017, while these negotiations

were in progress, Cassidy agreed to transfer his shares in Dragon Pearl Ltd. (the “Shares” of “DPL”)

to a nominee of New Target. DPL was the owner of the yacht, Dragon Pearl (the “Yacht”). At the

time the Shares were transferred, Cassidy did not deliver the possession of the Yacht to New Target.

New Target commenced actions against Cassidy in Hong Kong and, subsequently, Singapore. New

Target had no reason to know of the Trustee’s alleged interest in the yacht until it was arrested in

Australia at the request of the Trustee. Indeed, the location of the Yacht was not confirmed to New

Target until after its arrest. This occurred several weeks after the September hearing on the

appointment of a trustee. Huang Decl., ¶¶8, 10.

C. Australia Proceedings.

There has been a final determination that the Trustee did not own the Yacht at the time it was

titled in DPL. The Trustee has lost the First Proceeding, the appeal of the order in the First

Proceeding, the Second Proceeding and the appeal of the order in the Second Proceeding.

Declaration of Maurice Gerard Rowley Lynch (“Lynch Decl.”), ¶5-12. The Trustee is already out

approximately AUD$550,000 in attorneys fees awarded to DPL under the Australian “loser pays”

system and could in the future be out another AUD$200,000. Lynch Decl., ¶¶19-22. The Trustee has

now commenced the Third Proceeding, which is an avoidance action under the Australian analog to

our fraudulent transfer laws. Lynch Decl., ¶¶14-15. A summary judgment type motion in that matter

is currently under submission and the Australian court is expected to rule in the near future, possibly

prior to the November 28 hearing on the Motion.

D. Letter of Request

In the event that the Trustee loses the fraudulent transfer claims in Australia, the Trustee seeks

the Letter of Request in support of an injunction to freeze the Yacht pending a resolution of the

Adversary Proceeding recently filed in this Court. Motion, 12:2-4.


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ARGUMENT

E. U.S. Fraudulent Transfer Laws Do Not Apply Because The Transfers At Issue Have No Connection To The United States

The transfers described in the Trustee’s Complaint appear to be:

1. Transfer of money from Zetta Singapore (a Singapore company) to Maritimo, the

yacht builder (an Australian company).

2. Transfer of the Yacht from Maritimo (an Australian company) to DPL (a Marshall

Islands company).6

3. Transfer of the shares of DPL from Cassidy (an Australian citizen resident in

Singapore) to Du Yan (believed to be a citizen and resident of China).

4. Transfer of the Yacht (registered in the Marshall Islands and docked in Australia) from

DPL (a Marshall Islands company) to Linkage Access (a British Virgin Islands

company).

None of these transfers can be avoided in the Adversary Proceeding because sections 548 and 550 of

the Bankruptcy Code do not apply extraterritorially to transactions outside the United States. “It is a

basic premise of our legal system that, in general, ‘United States law governs domestically but does

not rule the world.’” RJR Nabisco, Inc. v. European Community, 136 S. Ct. 2090, 2100 (2016)

(quoting Microsoft Corp v. AT&T Corp., 550 U.S. 437, 454, 127 S. Ct. 1746 (2007)). Therefore,

when construing the application of federal laws, courts apply the “presumption against

extraterritoriality.” The presumption provides that “[a]bsent clearly expressed congressional intent to

the contrary, federal laws will be construed to have only domestic application.” Id. (citing Morrison

v. Nat’l Australia Bank Ltd., 561 U.S. 247, 255, 130 S. Ct. 2869 (2010)). The question is whether

Congress has “affirmatively and unmistakably instructed that the statute” will apply to foreign

conduct.” Id. The presumption “serves to protect against unintended clashes between our laws and

6 Marimoto received funds from Zetta Singapore and transferred the Yacht to DPL. In sworn testimony in Singapore, Cassidy stated that he was owed these funds by Zetta Singapore, making the transfers potentially preferential but not fraudulent transfers. If the Trustee is correct that these funds were not owed to Cassidy by Zetta Singapore, this seems to be a classic fraudulent transfer, yet the Trustee inexplicably is not pursuing Marimoto.


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those of other nations which could result in international discord.” Barclay v. Swiss Fin. Corp. Ltd.

(In re Bankr. Estate of Midland Euro Exch. Inc.), 347 B.R. 708, 718 (Bankr. C.D. Cal. 2006).

Under Morrison, the court examines whether there is clear, affirmative indication that the

statute applies extraterritorially. If not, the court then determines whether the case involves a

domestic application of the statute by considering whether the conduct relevant to the statute’s focus

occurred in the United States. “If the conduct relevant to the focus occurred in a foreign country, then

the case involves an impermissible extraterritorial application regardless of any other conduct that

occurred in U.S. territory.” Nabisco, 136 S. Ct. at 2101.

In In re Bankr. Estate of Midland Euro Exch. Inc., 347 B.R. 708 (Bankr. C.D. Cal. 2006), this

court (Judge Geraldine Mund, presiding) considered whether Section 548 of the Bankruptcy Code

applies extraterritorially. The trustee sought to set aside, under Section 548, monies paid to a foreign

exchange brokerage incorporated under the laws of England and headquartered in London. The funds

transferred “originated from a bank account in London and, although transferred through a bank

account in New York, eventually ended up in another bank account in England.” Id. at 715. The

court concluded that nothing in the text of Section 548 indicates a congressional intent for

extraterritorial application and that any policy considerations could not overcome the presumption

against extraterritoriality, especially in light of the Ninth Circuit’s pronouncement that policy

considerations alone are insufficient to overcome the presumption. Id. at 718 (citing Subafilms, Ltd. v.

MGM-Pathe Commc’n Co., 24 F.3d 1088, 1096 (9th Cir. 1994)). The Midland court dismissed the

trustee’s complaint without leave to amend.

As set forth in Midland, section 548 does not include a clear indication that it was meant to

apply extraterritorially. Additionally, the Trustee’s complaint in this case does not concern a domestic

application of the statute. As set forth above, each and every individual transfer described in the

Complaint takes place among foreign entities abroad. As such, the Trustee’s attempt to apply Section

548 to the transfers described above is impermissible. Other courts have reached similar conclusions

with respect to the avoidance provisions of the Bankruptcy Code. See, e.g., LaMonica v. CEVA

Group PLC (In re CIL Ltd.), 582 B.R. 46, 96 (Bankr. S.D.N.Y. 2018) (transfer trustee sought to

avoid and recover under section 548 and 550 of the Bankruptcy Code was not a domestic transfer and


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therefore could not be avoided); Sec. Investor Prot. Corp. v. BLMIS (In re BLMIS), 513 B.R. 222,

231 (S.D.N.Y. 2014) (the “Trustee therefore may not use section 550(a) to pursue recovery of purely

foreign subsequent transfers”); Maxwell Commc’n Corp. PLC v. Societe Gen. PLC (In re Maxwell

Commc’n Corp. PLC), 186 B.R. 807 (S.D.N.Y. 1995) (“Because Congress has not ‘clearly express’

its desire that § 547 govern extraterritorial conduct, . . . that section cannot apply to the foreign

transfers at issue in this case”), aff’d on other grounds, 93 F.3d 1036 (2d Cir. 1996).

F. The Trustee’s Claim That He Has an Interest in the Yacht Is Barred by the Doctrine of Res Judicata

Among the relief sought by the Trustee in his Complaint is a request that this Court impose a

constructive trust for the Dragon Pearl under the theory that the estate has always retained beneficial

title to and equitable interest in the Yacht because Cassidy purchased it with funds that were

misappropriated from Zetta Singapore. Based on this same theory that Zetta Singapore is and has

always been the true owner of the Dragon Pearl, the Complaint asserts counts for violation of the

automatic stay under section 362, avoidance of a postpetition transfer of estate property under section

549, and turnover of estate property under section 542. To the extent that the Trustee argues that the

court ought to issue the Letter of Request on the grounds that the Dragon Pearl is property of the

estate, the Federal Court of Australia has already ruled on that issue and the Trustee is barred by the

doctrines of res judicata from relitigating the issue. See below 7:17 to 8:4.

Res judicata, or claim preclusion, provides that a final judgment on the merits by a court of

competent jurisdiction bars further claims by parties or their privies based on the same cause of

action. See U.S. v. Bhatia, 545 F.3d 757, 759 (9th Cir. 2008); In re International Nutronics, Inc., 28

F.3d 965, 969 (9th Cir. 1994). In determining whether successive lawsuits involve the same cause of

action, the court considers (1) whether rights or interests established in the prior judgment would be

destroyed or impaired by prosecution of the second action, (2) whether substantially the same

evidence is presented in the two actions, (3) whether the two suits involve infringement of the same

right, and (4) whether the two suits arise out of the same transactional nucleus of facts. See Clark v.

Bear Sterns & Co., Inc., 966 F.2d 1318, 1320 (9th Cir. 1992).

U.S. courts may give res judicata effect to foreign judgments on the basis of comity, although

application of the doctrine is discretionary. In re Metcalfe & Mansfield Alternative Investments, 421


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B.R. 685, 699 (Bankr. S.D.N.Y. 2010). Comity is the recognition which one nation allows within its

territory to the legislative, executive or judicial acts of another nation. See Dependable Highway

Exp., Inc. v. Navigators Ins. Co., 498 F.3d 1059, 1067 (9th Cir. 2007). Neither a matter of absolute

obligation nor “mere courtesy,” a U.S. court will not apply comity where enforcing the foreign

interests is fundamentally prejudicial to those of the domestic forum. See id. If, however, the foreign

forum provides “a full and fair trial abroad before a court of competent jurisdiction, conducting the

trial upon regular proceedings, after due citation or voluntary appearance of the defendant, and under

a system of jurisprudence likely to secure an impartial administration of justice between the citizens

of its own country and those of other countries, and there is nothing to show either prejudice in the

court, or in the system of laws under which it is sitting,” the U.S. court should enforce the judgment.

See In re Metcalfe & Mansfield Alternative Investments, 421 B.R. at 698 (quoting Hilton v. Guyot,

159 U.S. 113 202-03 (1895)). Here, the Federal Court of Australia has entered a final judgment

denying the Trustee’s request for a constructive trust for the Dragon Pearl in an action that he brought

against DPL. When the Trustee commenced a similar action against Linkage Access, the court

applied the doctrine of res judicata in dismissing the action. That judgment was later affirmed on

appeal, where the court discussed the doctrine of res judicata extensively and stated as follows:

52 The trial of the original proceedings that was listed was of all causes of action then raised. So, there was no need to consider whether only some of the causes of action may have been determined on the merits by the final judgment. It follows that the judgment in the original proceedings brought by Zetta Jet and Mr King was final in respect of all causes of action raised. The fact that it was entered after an application to adjourn was refused and counsel indicated that he was not in a position to open the case and call evidence, does not mean that it was not final and on the merits. In dismissing the original in rem proceedings, the trial judge put to counsel that he must either commence the case and advance arguments in support of it or indicate that he was not in a position to do so and the case should be dismissed. Counsel then stated that he was not in a position to call any witnesses. He stated that he also had no instructions to close the case. After further questions from the Court in which it was made clear that if the case did not proceed then it must be dismissed, counsel then said “I can’t lead evidence, and I can’t take the matter further. I’ve made the submission”.

53 There was no application made for leave to discontinue. There was no order staying the proceedings for want of prosecution. The matter was listed for trial and the trial proceeded, but Zetta Jet and Mr King took no steps to advance a case. The case was then dismissed. An appeal was brought against the dismissal. The appeal appears to have been treated as an appeal against final orders. The appeal was refused.

54 In those circumstances, the principles of res judicata as that term has been consistently used by the High Court apply.


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Judgment on Second Appeal, Lynch Decl., §12 (attached to Lynch Decl. as Exhibit D).

The Australian appellate court concluded that “there has been a final adjudication that neither

[Zetta Singapore nor the Trustee] had a claim in rem to the vessel at the time it was owned by

[DPL].” Id. at ¶55. Accordingly, the Court should deny the Motion and decline to issue the Letter of

Request on the grounds that the Trustee had the opportunity to try his action for a constructive trust in

Australia and a final judgment was entered and later affirmed denying him that relief. See Clark v.

Bear Sterns & Co., Inc., 966 F.2d 1318, 1320 (9th Cir. 1992) (res judicata bars all grounds for

recovery that could have been asserted in a prior suit, whether they were or not.).

G. The Trustee Has Not Met The Standard For An Injunction.

This Court should not issue the Letter of Request seeking an injunction in Australia when the

Trustee has not met the standard for the issuance of an injunction in the U.S. A movant seeking to

obtain a restraining order or preliminary injunction must show (1) strong likelihood of success on the

merits; (2) that irreparable harm to plaintiff is likely to result absent the issuance of the injunction; (3)

the balance of hardships favors to the plaintiff; and (4) the injunction advances the public interest (in

certain cases). In re Rinard, 451 B.R. 12, 22 (Bankr. C.D. Cal. 2011) (citing Morgan-Busby v.

Gladstone (In re Morgan-Busby), 272 B.R. 257, 261 (9th Cir. BAP 2002)). Here, it is highly unlikely

that the Trustee can prevail on the merits. As discussed in section E above, the §548 and §550 claims

must fail because they cannot be applied outside the United States. The claims under §§362, 541 and

549 fail because they are res judicata. See section above. They also fail because property that has

been fraudulently transferred only becomes property of the estate after the transfer has been set aside.

Midland, 347 B.R. at 718, 719. That leaves only the claim objection, which cannot yield an

affirmative recovery so no injunction can properly issue.

H. If The Trustee Loses Its Fraudulent Transfer Claim In Australia, No Injunction Should Be Issued Because The Trustee’s Claims In The Adversary Proceeding Will Be Barred By Res Judicata

Even if it is possible for the Trustee to pursue fraudulent transfer claims in the U.S. and

Australia simultaneously, the ruling in the first matter will be res judicata in the second matter.

“When related cases are before two different sovereigns the appropriate procedure is to permit both

jurisdictions to proceed, with any decision of one becoming res judicata on the other.” Cliffs-


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Neddrill Turnkey Int’l - Orgnjestad v. M/T Rich Duke, 734 F. Supp. 142, 151 (D.Del. 1990), cited in

In re SK Foods, 2013 WL 6488275 at *13 (BAP 9th Cir. Dec. 10, 2013). A copy of SK Foods is

attached hereto as Exhibit “1”. The Australian court is about to rule on Linkage Access’s summary

judgment motion. Lynch Decl., ¶15. The Trustee has requested the Letter of Request because “there

is no guarantee that the Australian Court will order that the Injunction remain in place if the

Australian Court declines to adjudicate the Chapter 7 Trustee’s fraudulent transfer claims under

Australian law.” Motion, 12:2-4. However, if the Australian court does indeed rule against the

Trustee, most of the counts in the Adversary Proceeding will need to be dismissed because they are

res judicata. As a result, this Court cannot issue the Letter of Request for the reasons given by the

Trustee.

I. The Letter of Request Should Not Be Issued Because Letters of Request May Not Seek Injunctive Relief

As the threshold matter, while the Judicial Act allows federal courts to issue letters of request

to foreign tribunals, the procedure is limited to requests for evidence or service of process on a person

within the foreign jurisdiction. See Black’s Law Dictionary 916 (7th ed. 1999); see generally In re

Letters of Request to Examine Witnesses from Court of Queen's Bench for Manitoba, Canada, 488

F.2d 511, 512 (9th Cir. 1973). It is inappropriate, however, to use this procedure to ask a U.S. court

to seek substantive relief in a foreign court on behalf of a litigant, which is precisely what the Trustee

has requested by his Motion. Indeed, the decision In the Matter of Lehman Brothers Australia

Limited, which the Trustee has attached to his Motion as Exhibit J, denied a litigant’s request for

similar relief. In Lehman Brothers, the liquidators of Lehman Brothers Australia Limited (in

liquidation) (“LBA”) asked the Federal Court of Australia to issue a letter to United States

Bankruptcy Court for the Southern District of New York request that it lift the stay it had entered in

an adversary proceeding. See Motion, Ex. J, p. 12. Citing issues of comity, the Australian court

refused to make the request observing:

It seems to me that a request in those terms may pre-empt the consideration of the matter by Judge Peck when the [adversary proceeding] comes before him. It would therefore impinge upon the principle of comity which is based on common courtesy and mutual respect. Indeed, it may be seen by Judge Peck as an unwarranted interference by me in the [adversary proceeding].


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I do not consider it appropriate for this court to enter into substantive discussions with the United States court on matters of controversy between the parties which may come before the court for decision.

See id. at 13.

The instant request by the Trustee is identical to the relief that the Australian court denied in

Lehman Brothers. The Trustee is asking the Court to formally request on his behalf that the

Australian court extend its prior injunction indefinitely. This request for substantive relief is a far cry

from traditional use of a letter of request. Moreover, the Trustee is fully capable of arguing the

matter himself in Australia.

Chapter 15 of the Bankruptcy Code does not augment or expand the power of a letter of

request. Section 1525 acknowledges that a bankruptcy court is entitled to communicate directly with

or request assistance directly from a foreign court. 11 U.S.C. § 1525(b). The purpose of this section,

however, is to facilitate the coordination of procedures between foreign courts in cross border

insolvencies. See e.g., In re Nortel Networks, Inc., 532 B.R. 494, 531 (Bankr. D. Del. 2015); see also

8 Collier on Bankruptcy ¶ 1525.01 (Richard Levin & Henry J. Sommer eds., 16th ed.) (“The use of

the term ‘directly’ in section 1525(b) is intended to avoid the need to pursue time consuming

formalities (such as letters rogatory or consular activities) before the United States court can gain

access to communicate with a foreign court but is not intended to deny due process to parties.”).

Communication and cooperation between courts is critical to the success of a cross-border insolvency

proceeding, and it is reasonable for the courts to discuss with or without counsel present whether they

can arrive at consistent rulings. See id. at 531. The provisions of chapter 15 were not intended,

however, to allow a litigant to ask its home court to persuade a foreign court to rule in its favor. Such

relief is beyond the scope of the Bankruptcy Code (including section 105) and offensive to the

principle of comity. Accordingly, the Court should deny the Motion and refuse to issue the Letter of

Request as drafted.


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CONCLUSION

Based on the foregoing, this Court should deny the Motion and not issue a Letter of Request. Respectfully submitted,

Michael B. Lubic Kevin S. Asfour K&L GATES LLP

Dated: November 6, 2018 By: /s/ Michael B. LubicMichael B. Lubic

Attorneys to New Target Investments Limited


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1 DECLARATION OF GUOYUE (GRACE) HUANG

DECLARATION OF GUOYUE (GRACE) HUANG

Case 2:17-bk-21386-SK Doc 855-1 Filed 11/06/18 Entered 11/06/18 12:15:22 Desc Declaration of Guoyue (Grace) Huang Page 1 of 5

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I, Guoyue (Grace) Huang, hereby declare:

1. I am the Secretary of New Target Investments Limited (“NT”) and am authorized to

make this Declaration on its behalf. I am over 18 years old. Unless otherwise stated, I have personal

knowledge of the facts set forth herein and, if sworn as a witness, could and would testify

competently thereto.

2. I make this Declaration in response to Supplemental Declaration of the Trustee [Dkt.

No. 511].

3. In his Supplemental Declaration, the Trustee makes various allegations against NT

that are scurrilous and defamatory and that have no basis in fact. NT submits these brief comments to

correct the record with respect to some of these allegations. These comments do not contain all of

NT’s arguments with respect to the matters raised in the Supplemental Declaration as these matters

are not at issue with respect to the pending motion. NT fully reserves all or its rights and remedies

with respect to the Supplemental Declaration and the allegations made therein.

BACKGROUND

Zetta’s Scheme to Defraud NT: The Jet Sale Transaction

4. Kebo Wu (“Mr. Wu”) and Canning Fok Kin Ning (“Mr. Fok”) were the shareholders

of Falconwing Limited (“Falconwing”), which owned a Bombardier Global Express luxury jet

aircraft, serial number 9115 (the “Jet”). On or about August 15, 2017, Zetta Jet PTE, Ltd. (“Zetta

Singapore”) entered into an Aircraft Purchase Agreement (the “APA”) with Falconwing, Mr. Wu and

Mr. Fok. Under the terms of the APA, Falconwing, as Seller, transferred the Jet to Zetta Singapore

for a purchase price of $11,000,000 (the “Jet Sale Transaction”).

5. Falconwing was not paid in cash. Instead, Zetta Singapore entered into a series of

agreements with Mr. Fok, Mr. Wu, and NT for the prepayment and allotment of Flight Hours (the

“Flight Hour Agreements”). Delivery of the executed Flight Hour Agreements was a condition to

closing under the APA.

6. The performance by Zetta Singapore of the Flight Hours Agreement between Mr. Wu

and Zetta Singapore and the Flight Services Agreement between NT and Zetta Singapore were


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3DECLARATION OF GUOYUE (GRACE) HUANG

guaranteed by way of personal guaranties issued by Geoffery Owen Cassidy (“Cassidy”) on or about

August 10, 2017 (the “Personal Guaranties”).

7. On September 15, 2017, Zetta Singapore commenced its voluntary chapter 11

bankruptcy case. On 19 September, 2017, Zetta Singapore wrote NT to advise that the services under

the various Flight Hours Agreements, described above, could not be honored and that services under

those Agreements were suspended. The effect of the failure to honor the Flight Hour Agreements

was that in effect the Jet had not been paid for by Zetta Singapore. Accordingly, in the period of a

few weeks, Mr. Wu and Mr. Fok went from owning an $11,000,000 Jet free and clear to being

unsecured creditors in this bankruptcy case. On September 21, 2017, Falconwing, Mr. Wu and Mr.

Fok each assigned their rights, interests and obligations under the APA and their respective Flight

Hour Agreements to NT. NT is, therefore, the successor in interest to each of Falconwing, Mr. Wu

and Mr. Fok.

Negotiations with Cassidy

8. Around the time of the commencement of this bankruptcy case, Cassidy was meeting

with personnel affiliated with Mr. Wu with the goal of inducing Mr. Wu to invest in Zetta as part of a

“rescue package.” Concurrently, NT was negotiating with Cassidy regarding his obligations under

the Personal Guaranties. On or about September 28, 2017, while these negotiations were in progress,

Cassidy agreed to transfer his shares in Dragon Pearl Ltd. (the “Shares” or “DPL”) to a nominee of

NT1. The Shares were owned by Cassidy. DPL was the owner of the yacht, Dragon Pearl (the

“Yacht”). At the time the Shares were transferred, Cassidy did not deliver the possession of the

Yacht to NT. NT commenced actions against Cassidy in Hong Kong and, subsequently, Singapore.

RESPONSE TO THE TRUSTEE’S ALLEGATIONS

9. NT did not collude with Cassidy. NT merely attempted to enforce the Personal

Guaranties. Following the Trustee’s argument, because the Trustee asserts that Cassidy is in

possession of property of the estate, no creditor of Cassidy could take any steps against Cassidy

1While Cassidy agreed on or about September 28, 2017 to transfer the shares, registration of the share transfer and issuance of a certificate of encumbrance did not occur until later.


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4DECLARATION OF GUOYUE (GRACE) HUANG

without first seeking permission from the Trustee or seeking relief from stay. While the Trustee may

have valid claims against Cassidy, so do other creditors, including NT.

10. Disclosure issues. NT is represented by different counsel in Hong Kong, Singapore,

and in this bankruptcy case, and DPL is represented by yet another law firm in Australia. NT’s

bankruptcy counsel, K&L Gates, was engaged the week of September 25, 2017 and had no reason to

discuss with NT the references to a yacht contained in pleadings filed in Zetta’s bankruptcy case.

Accordingly, NT had no reason to know of the Trustee’s alleged interest in the yacht until it was

arrested.2 Indeed, the location of the Yacht was not confirmed to NT until after its arrest. This

occurred several weeks after the September hearing.

11. The Trustee knew about the Personal Guaranties and NT’s attempts to collect from

Cassidy. NT disclosed the existence of the Personal Guaranties in the proof of claim it filed on

October 11, 2017. Further, I am informed and believe that, on October 12, 2017, NT’s counsel

transmitted to the Trustee’s counsel a copy of the Writ of Summons filed against Cassidy in Hong

Kong (which proceedings were discontinued after the commencement of the action in Singapore). At

about this time, NT’s counsel discussed with the Trustee’s counsel the potential of working together

to pursue Cassidy, expressing concern that the parties not get at cross-purposes. All of this occurred

before NT became aware that the Trustee asserted an interest in the Yacht.3

12. The Committee’s objections to the proposed financing. The Committee, along with

several other creditors, filed objections to the proposed financing. I am informed and believe that the

Bankruptcy Court denied the Trustee’s motion to approve the financing because the Trustee failed to

present adequate evidence to support the motion and the Bankruptcy Court did not rule on the

objections4

2.Cassidy never turned over possession of the Yacht to NT. The Yacht was in the possession ofCassidy until it was arrested by the Trustee. NT has never been in possession of the Yacht. 3 Indeed, it appears that the Trustee’s arrest of the Yacht may have been an attempt by the Trustee to jump in front of Cassidy’s other creditors, including NT. 4 The Trustee states “on information and belief” that NT was the “swing vote” causing the Committee to file its objections. While that is neither here nor there, NT notes that Committee communications are confidential and the only way the Trustee could make his allegation is if a member of the Committee breached its duties.


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13. NT did not violate the automatic stay. Cassidy transferred to NT his Shares in DPL,

2 but not possession of the Yacht. I am informed and believe that the Trustee asserts an ownership

3 interest in the Yacht, which has at all relevant times been owned by DPL. The action to establish the

4 Trustee's interest in the Yacht is pending in Australia and is the action in which the Trustee seeks

5 authority to post a bond (as security for costs) if ordered by the Australian court. The Yacht at all

6 relevant times was titled in the name of DPL and DPL's shares were owned by Cassidy prior to the

7 transfer to NT. There is no argument that the Yacht was ever titled in the name of Zetta or that the

8 Shares were ever registered to Zetta. Under these facts, it would be a stretch to say that the transfer

9 of the DPL Shares constituted a stay violation. 5

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14. The Trustee is risking more than the amount of the Bond. In paragraph 23 of his

11 Supplemental Declaration, the Trustee implies that the most he could lose is the amount of the bond.

12 I am advised that in the Australian legal system, as well as in other Commonwealth common law

13 legal systems, the losing party pays the winning party's recoverable legal fees and disbursements.

14 DLP's fees and disbursements here could well exceed the amount of the bond, resulting in a chapter 7

15 administrative priority claim over and above the amount posted for the bond.

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I declare under penalty of perjury under the laws of the United States that the foregoing is true

17 correct and that this Declaration was executed on January 3, 2018, at

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20 Guoyue (Grace) Huang

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28 5 DPL is a Samoa company. There are interesting legal questions regarding the effect of the US bankruptcy case on a Samoa company or its assets.

5



Case 2:17-bk-21386-SK Doc 855-2 Filed 11/06/18 Entered 11/06/18 12:15:22 Desc Declaration of Maurice G.R. Lynch Page 1 of 5

EXHIBIT A

Case 2:17-bk-21386-SK Doc 855-3 Filed 11/06/18 Entered 11/06/18 12:15:22 Desc Exhibit A to Declaration of Maurice G.R. Lynch Page 1 of 19

EXHIBIT B

Case 2:17-bk-21386-SK Doc 855-4 Filed 11/06/18 Entered 11/06/18 12:15:22 Desc Exhibit B to Declaration of Maurice G.R. Lynch Page 1 of 5

EXHIBIT C

Case 2:17-bk-21386-SK Doc 855-5 Filed 11/06/18 Entered 11/06/18 12:15:22 Desc Exhibit C to Declaration of Maurice G.R. Lynch Page 1 of 3

EXHIBIT D

Case 2:17-bk-21386-SK Doc 855-6 Filed 11/06/18 Entered 11/06/18 12:15:22 Desc Exhibit D to Declaration of Maurice G.R. Lynch Page 1 of 43

This form is mandatory. It has been approved for use by the United States Bankruptcy Court for the Central District of California.

June 2012 F 9013-3.1.PROOF.SERVICE

PROOF OF SERVICE OF DOCUMENT I am over the age of 18 and not a party to this bankruptcy case or adversary proceeding. My business address is K&L Gates LLP, 10100 Santa Monica Boulevard, 8th Floor, Los Angeles, California 90067. A true and correct copy of the foregoing document entitled NEW TARGET’S OPPOSITION TO TRUSTEE’S MOTION FOR ORDER APPROVING LETTER OF REQUEST; DECLARATIONS OF GUOYUE (GRACE) HUANG AND MAURICE G. R. LYNCH will be served or was served (a) on the judge in chambers in the form and manner required by LBR 5005-2(d); and (b) in the manner stated below: 1. TO BE SERVED BY THE COURT VIA NOTICE OF ELECTRONIC FILING (NEF): Pursuant to controlling General Orders and LBR, the foregoing document will be served by the court via NEF and hyperlink to the document. On November 6, 2017, I checked the CM/ECF docket for this bankruptcy case or adversary proceeding and determined that the following persons are on the Electronic Mail Notice List to receive NEF transmission at the email addresses stated below:

• Ron Bender [email protected] • Stephen F Biegenzahn [email protected] • Michael D Breslauer [email protected],

[email protected];[email protected];[email protected]

Service information continued on attached page 2. SERVED BY UNITED STATES MAIL: On November 6, 2017, I served the following persons and/or entities at the last known addresses in this bankruptcy case or adversary proceeding by placing a true and correct copy thereof in a sealed envelope in the United States mail, first class, postage prepaid, and addressed as follows. Listing the judge here constitutes a declaration that mailing to the judge will be completed no later than 24 hours after the document is filed. Stephen G Larson Larson O'Brien LLP 555 South Flower Street, Suite 4400 Los Angeles, CA 90071

Levene, Neale, Bender, Yoo & Brill LLP 10250 Constellation Blvd Ste 1700 Los Angeles, CA 90067

Service information continued on attached page 3. SERVED BY PERSONAL DELIVERY, OVERNIGHT MAIL, FACSIMILE TRANSMISSION OR EMAIL (state method for each person or entity served): Pursuant to F.R.Civ.P. 5 and/or controlling LBR, on _______________, I served the following persons and/or entities by personal delivery, overnight mail service, or (for those who consented in writing to such service method), by facsimile transmission and/or email as follows. Listing the judge here constitutes a declaration that personal delivery on, or overnight mail to, the judge will be completed no later than 24 hours after the document is filed. Honorable Sandra R. Klein United States Bankruptcy Court/Central District of California Edward R. Roybal Federal Building and Courthouse 255 East Temple Street, Suite 1582 / Courtroom 1575 Los Angeles, CA 90012 Service information continued on attached page I declare under penalty of perjury under the laws of the United States that the foregoing is true and correct. November 6, 2017 Jonathan Randolph /s/ Jonathan Randolph Date Printed Name Signature

Case 2:17-bk-21386-SK Doc 855-7 Filed 11/06/18 Entered 11/06/18 12:15:22 Desc Proof of Service Page 1 of 3



TO BE SERVED BY THE COURT VIA NOTICE OF ELECTRONIC FILING (NEF) (continued)

• Dawn M Coulson [email protected], [email protected] • Cecily A Dumas [email protected] • Scott Ewing [email protected], [email protected];[email protected];docketalarm-ecf-cacb-

[email protected] • Lisa Hill Fenning [email protected], [email protected] • Alan W Forsley [email protected], [email protected],[email protected],[email protected] • John-Patrick M Fritz [email protected], [email protected] • Jonathan L Gerber [email protected], [email protected] • Eric D Goldberg [email protected], [email protected] • Debra I Grassgreen [email protected] • Michael S Greger [email protected], [email protected] • David Guess [email protected], [email protected] • William W Huckins [email protected], [email protected] • Tiffany M Ikeda [email protected],

[email protected];[email protected];[email protected] • Robbin L. Itkin [email protected], [email protected];robbin-itkin-

[email protected] • Jeanne M Jorgensen [email protected], [email protected] • Michael D Kibler [email protected],

[email protected];[email protected];[email protected] • Jonathan D King (TR) [email protected] • Robert Labate • Paul J Laurin [email protected], [email protected];[email protected] • Dare Law [email protected] • Matthew A Lesnick [email protected], [email protected];[email protected] • Blake J Lindemann [email protected], [email protected] • Michael B Lubic [email protected], [email protected] • John W Lucas [email protected], [email protected] • Ron Maroko [email protected] • Daniel J McCarthy [email protected], [email protected];[email protected] • Michael McCollum [email protected] • Thor D McLaughlin [email protected], [email protected] • David W. Meadows [email protected] • Sabari Mukherjee [email protected] • Alan I Nahmias [email protected], [email protected] • Juliet Y Oh [email protected], [email protected] • R Gibson Pagter [email protected], [email protected];[email protected] • Douglas A Plazak [email protected] • Jeffrey N Pomerantz [email protected] • Paul A Rigali [email protected], [email protected] • David M Riley [email protected] • Mary H Rose [email protected], [email protected] • Daniel H Slate [email protected], [email protected];[email protected] • Robyn B Sokol [email protected], [email protected] • Randye B Soref [email protected], [email protected];[email protected] • Nolan Thomas [email protected], [email protected] • Andrew Troop [email protected] • United States Trustee (LA) [email protected] • Victor A Vilaplana [email protected], [email protected] • Matthew S Walker [email protected], [email protected]




• Philip S Warden [email protected], [email protected];[email protected];[email protected];[email protected]

• Alan J Watson [email protected], [email protected] • Corey R Weber [email protected], [email protected] • Kimberly S Winick [email protected], [email protected] • Rebecca J Winthrop [email protected], [email protected]

SERVED BY UNITED STATES MAIL (continued)

John K Lyons DLA PIPER LLP (US) 444 West Lake St, Ste 900 Chicago, IL 60606-0089

Pachulski Stang Ziehl & Jones LLP 10100 Santa Monica Blvd., 13th Floor Los Angeles, CA 90067

Seabury Corporate Finance LLC Seabury Corporate Finance LLC 1350 Avenue of Americas, 25th Floor New York, NY 10019


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