LU JUN v. YU QI AND OTHERS

HCCW 377/2014

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES (WINDING‑UP) NO 377 OF 2014

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D E C I S I O N

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1.  I have before me an application in connection with the assessment of the costs of the joint and several provisional liquidators of Astrotec Company Limited (“the Company”), the 4^th respondent in these proceedings. The background to the application is a little complicated but for the most part is not relevant to the determination of the issue with which I am concerned.

2.  On 16 December 2014, the petition was issued for the winding up of the Company.  The application was made primarily, as I understand it, because the petitioner had been unable to enforce an order in his favour in previous unfair prejudice proceedings that the 1^st respondent buy out his shares in the Company. 

3.  On 27 January 2015, Mr Justice Godfrey Lam appointed the joint and several provisional liquidators.  The terms of that order are the standard terms that would normally be made when the Companies Court is appointing provisional liquidators over a company, subject to a winding up petition most commonly on the grounds of insolvency.

4.  The order provided for the payment of the joint and several provisional liquidators’ fees in paragraph 6 in conventional terms:

“6. Subject to the approval of the Court, the remuneration of the Provisional Liquidators and the fees, costs and expenses of all persons retained by the Provisional Liquidators be charged on a time-cost basis and, upon assessment by the Court, be paid out of the Assets of the Company.”

5.  Round about 12 November 2015, the parties to the petition settled their dispute.  On 16 November 2015, I made an order dismissing the petition and discharging the joint and several provisional liquidators.  Paragraph 5 of that order provided that:

“5. The Provisional Liquidators’ Fees and Costs be paid out of the assets of the Company, subject to approval of the Court or the agreement of the Company;”.

6.  The Company has issued the present summons seeking the taxation package provided to the Taxing Master on 9 November 2015 in respect of approximately the first 75% of the fees and disbursements claimed by the joint and several provisional liquidators, and the opportunity to comment on their bills.  I understand that the Taxing Master has probably already scrutinised the contents of the taxation package but has not made a formal determination of the amount he has decided to allow the joint and several provisional liquidators because of the intervention of the Company. 

7.  The position of the joint and several provisional liquidators is that the normal taxation process contained in the court’s Procedural Guide for taxation/determination of bills in liquidation process (issued by the court on 1 April 2004) should be followed and this does not provide for the involvement of the Company.

8.  It is correct that the Procedural Guide does not provide for the involvement of the Company or the shareholders of a company in the case of the assessment of the fees and disbursements of joint and several provisional liquidators of a solvent company.  I agree, however, with the decision of Kwan J (as she then was) in Re Boldwin Construction Co Ltd (HCCW 340/2002, unreported, 7 November 2006) that:

“...one instinctively recoils at the notion that any one may be financially encumbered without the opportunity to be heard, as natural justice demands it.”

9.  It seems to me that where one is dealing with a solvent company and there are shareholders who have a legitimate financial interest in the outcome of the taxation procedure that they should have the opportunity to comment on the amount sought by the joint and several provisional liquidators.

10.  It does, however, seem to me that as a consequence of that, the order appointing joint and several provisional liquidators over companies which are believed to be solvent should specifically provide for the shareholders of the company to be notified of the way in which the joint and several provisional liquidators plan to proceed, which I anticipate would normally be in accordance with the Procedural Guide, and to provide for them to have the opportunity to comment on and agree the proposed fees.

11.  It also seems to me as a general observation that the way in which an order appointing joint and several provisional liquidators over a solvent company in the case of a shareholders’ dispute is drafted and the extent of the powers given to the joint and several provisional liquidators should be determined having regard to the impact of their employment on the company’s affairs, and in the normal case probably provide greater restrictions on the freedom of the joint and several provisional liquidators to investigate the affairs of the company than would be the case with an insolvent company.  The obvious consideration to be taken into account is whether it is likely that one or other of the parties to the proceedings will be required to buy out the shares of the other and thus take control of the company, rendering investigations possibly serving no other purpose than to increase unnecessarily the level of fees to be paid.

12.  As I have already mentioned the taxation process has already commenced in the present case although the joint and several provisional liquidators has only been informed of the Taxing Master’s decision in respect of two disbursement items as I understand it.  I will therefore make an order in the following terms:

(1)  The joint and several provisional liquidators shall provide to the Company a copy of the taxation package provided to the Taxing Master on 9 November 2015.

(2)  The Company shall inform the joint and several provisional liquidators’ solicitors in writing within 26 clear calendar days of receipt of the taxation package, of those items that they do not agree, the reason they do not agree and the amount if any they suggest should be allowed.  The Company’s reply shall be in the same format as the taxation package.

(3)  The joint and several provisional liquidators shall inform the Company within 26 clear calendar days whether they accept the Company’s figure.

(4)  Those items that remain in dispute shall be submitted to the Taxing Master for assessment in accordance with the Procedural Guide.

(5)  The above procedures shall be adopted in respect of the remaining fees and disbursements of the joint and several provisional liquidators.

(6)   The amount of the disbursements assessed and determined by the Taxing Master prior to this Decision shall stand and not be reopened.

(7)  There be liberty to apply.

(8)  The joint and several provisional liquidators’ costs of today be assessed on the above procedure and be paid out of the assets of the Company.

(9)  The joint and several provisional liquidators’ costs of the taxation be assessed on the above procedure and be paid out of the assets of the Company.