|
HCCW 368/2021
[2023] HKCFI 161
IN THE HIGH COURT OF THE
HONG KONG SPECIAL ADMINISTRATIVE REGION
COURT OF FIRST INSTANCE
COMPANIES (WINDING-UP) PROCEEDINGS NO. 368 OF 2021
____________________
| |
IN THE MATTER of s.177(1)(d) of the Companies (Winding Up and Miscellaneous Provision) Ordinance (Cap. 32) |
| |
and |
| |
IN THE MATTER of ZPMC-RED BOX ENERGY SERVICES LIMITED (振華海洋能源(香港)有限公司) |
____________________
Before: Hon Cheng J in Chambers (by paper disposal)
Date of Written Submissions of the Petitioner: 16 November 2022
Date of Written Submissions of the RBF: 30 November 2022
Date of Written Submissions of the Petitioner in Reply: 7 December 2022
Date of Decision on Costs: 18 January 2023
_____________________________
DECISION ON COSTS
_____________________________
1. The Petitioner has applied to vary the costs order nisi in my judgment of 21st October 2022 (“the Judgment”), such that RBF[1] pay the costs occasioned to it by RBF’s opposition to the Petition and by RBF’s application for adjournment of the Petition.
2. The parties agree that normally, the costs of a successful petition would be paid out of the assets of the company as an expense of the liquidation, so that an opposing contributory would not bear such costs, unless the opposition was unreasonable. See Re Datacom Wire & Cable Co Ltd [2000] 1 HKLRD 526 at 529D to 530D; Re Sky River International Trading (HK) Ltd [2019] HKCFI 2561 at [33].[2]
3. RBF submits that the Company was under the control of the Petitioner and not able to oppose the Petition. However, this does not shed light on the question of whether the opposition that was put forward was reasonable or unreasonable.
4. In relation to Ground 1, the Petitioner’s affirmations did not put forward indisputably clear-cut evidence that ZPMC HK made payment as agent for the Petitioner which could have been said to have put the matter beyond doubt, such as to make it unreasonable for RBF to pursue Ground 1. Furthermore, as RBF submits, the fact that ZPMC HK assigned its rights of subrogation to the Petitioner suggests that the Petitioner harboured doubts as to whether it did enjoy subrogated rights. The Petitioner submits that it is not uncommon for parties to execute a confirmatory document out of an abundance of caution, but the assignment indicates that there was reason for the parties to exercise caution in the first place.
5. I also accept RBF’s submission that it was not unreasonable to pursue Ground 3. Given the history of the parties’ disputes, it could not be said that it was unreasonable for RBF to pursue the argument that the Petition was presented for collateral purposes.
6. The position is different in relation to Ground 2. As I have found in the Judgment, RBF failed to show that the Company had a cross-claim which was genuine, serious and of substance.
6.1 In relation to the claim that the Petitioner dishonestly assisted the ZPMC-appointed directors’ unauthorised use of the Company’s BOC HK Account, in particular in making an unauthorised payment of RMB 19,687.15 to the Petitioner, quite irrespective of the doubts regarding the merits of the claim, the amount was in any event not one which exceeded the Debt of some US$28m.
6.2 In relation to the claim that the Petitioner dishonestly assisted the ZMPC-appointed directors in obscuring their general unauthorised use of the BOC HK Account, it was not clear from the pleadings what the alleged breaches of fiduciary duty by the ZPMC-appointed directors were, and what assistance was said to have been given as regards the directors’ use of the account. There was no adequate plea of dishonesty or quantum.
6.3 The pleas as to the Petitioner’s dishonest assistance were circular.
6.4 There was no serious or substantial basis for the plea of attribution of dishonesty to the Petitioner.
7. RBF submits that since leave was granted to it to file Adkins 2nd regarding Ground 2 at the interlocutory stage, on the basis that the allegations made could not at that stage be dismissed as entirely circular, Ground 2 was not wholly tenuous or unwarranted. However, as it acknowledges, no detailed examination of the merits of the cross-claim was carried out at that stage.
8. RBF further submits that the court rejected the Petitioner’s argument that attribution involved the piercing of corporate veils was rejected. That is true, but the more important point is that RBF’s argument of attribution was rejected as lacking any serious or substantial basis.
9. RBF also submits that there were no findings in the Judgment that the cross-claim was engineered by RBF and Mr Adkins to seek to prevent the winding-up of the Company. However, in my view, it is not necessary for there to be findings of bad faith against RBF and Mr Adkins before it can be said that it was unreasonable for RBF to pursue an argument based on a cross-claim which was of no real substance.
10. In relation to RBF’s alternative request for adjournment, as I have found in the Judgment, there simply was no concrete proposal to enable the Company to raise funds to pay the Debt, and the complaint about a lack of information did not justify the absence of a proper proposal. It does not seem to me that it was reasonable to pursue this alternative argument.
11. All in all, I agree that RBF’s unreasonable pursuit of Ground 2, which involved voluminous evidence and a significant part of the hearing, and its request for an adjournment, caused a significant unwarranted increase in costs. In the circumstances, I vary the costs order nisi in the Judgment to the extent that 40%[3] of the Petitioner’s costs of and occasioned by (a) RBF’s opposition to the Petition and (b) RBF’s application to adjourn the Petition are to be paid by RBF, with certificate for two counsel, to be taxed if not agreed. The remaining costs of and occasioned by the Petition are to be paid to the Petitioner and the Official Receiver out of the assets of the Company, to be taxed if not agreed.
12. I further make a costs order nisi that 40% of the Petitioner’s costs of and occasioned by the present application are to be paid by RBF, to be taxed if not agreed.
| |
(Yvonne Cheng)
Judge of the Court of First Instance
High Court
|
Mr José Maurellet SC (only in reply) leading Mr Tom Ng, instructed by Lau, Horton & Wise LLP, for the Petitioner
Mr Justin Ho and Mr John Leung, instructed by Shearman & Sterling, for RBF HK Limited
[1] Abbreviations are those used in the judgment of 21st October 2022.
[2] Neither party advocated for the approach, properly drawn to the court’s attention by counsel for RBF, in Re China Cultural City Ltd [2020] HKCFI 1947, that unsuccessful opposition by a contributory will generally result in an order that the opposing contributory pays the petitioner’s costs. I note however that Re China Cultural City Ltd did not suggest that Re Datacom Wire & Cable Co Ltd was wrongly decided, and acknowledged that passages in the judgment were to the effect that reasonable opposition, even if unsuccessful, would not attract an adverse costs order. Furthermore, Re China Cultural City Ltd at [5] indicated that costs would not be ordered against an opposing contributory if he simply brought to the court’s attention relevant matters to which the court should have regard and of which the court might not otherwise have been apprised, or if the opposition was being advanced because the company could not do so: in other words, where his conduct was reasonable. Ultimately, it appears that the difference between Re Datacom Wire & Cable Co Ltd and Re China Cultural City Ltd comes down to one of who bears the burden of demonstrating reasonableness or unreasonableness: see Re China Cultural City Ltd at [5]. This distinction would not make any difference to the outcome in the present case.
[3] As the opposition to the Petition and the application for adjournment were argued together and relied largely on the same evidence, both sets of costs are taken together in the consideration of the overall percentage to be paid by RBF.
|