WONG CHUNG CHI v. YUILLEY BUILDING MATERIALS COMPANY LTD AND OTHERS

HCCW 367/2016

[2019] HKCFI 3005

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES (WINDING-UP) PROCEEDINGS NO. 367 OF 2016

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BETWEEN

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D E C I S I O N

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1.  This is the Respondents’ application to vary the costs order nisi made in the Order of this court dated 21 February 2019 by which the Petition was dismissed with costs to be paid by the Petitioner. The Respondents seek an order for such costs to be taxed on indemnity basis.

2.  There are 3 bases advanced in support of this application, namely: (a) the Petitioner had no real intention of pursuing the remedy of a winding up order; (b) the conduct of the Petitioner was unconscionable in pursuing the Petition in light of the findings made by the court; and (c) the Petitioner had failed to accept any of offers made by the Respondents to settle these proceedings. 

3.  Costs are matters within the discretion of the court.  I propose to deal with the arguments advanced on behalf of the Respondents succinctly.  Firstly, the pursuit of a winding up remedy was not a main issue at the trial.  That is reflected in the Judgment dated 21 February 2019.  There was no application to strike out that relief.  There is no evidence that the normal costs order would result in unfairness to the Respondents by reason of this issue.

4.  On the alleged unconscionable conduct, it should be said that the court does not order indemnity costs against a losing party as a matter of course.  In most cases, adverse findings of fact would have been made by the court against the losing party.  In this case, it has not been demonstrated that the Petitioner had conducted himself in such a manner that the costs of these proceedings were inflated.

5.  Finally, on the settlement offers, the correspondence showed that both sides did endeavour to settle these proceedings on amicable terms.  By a letter dated 10 April 2018, the Petitioner offered to settle at an all inclusive payment of HK$2 million by the Respondents.  From 16 April to 22 October 2018, the Respondents made progressively higher counter offers to the Petitioner, with the last counter offer at HK$1.2 million.  That offer was declined, but in response the Petitioner reduced his demand to HK$1.6 million. 

6.  By a letter dated 16 November 2018, the Respondents made an offer to purchase the shares of the Petitioner in the Company at Net Asset Value based on the latest audited accounts of the Company (year ended 30 April 2017).  That letter triggered a debate whether it was mutually understood that the settlement offers were made on the basis of a purchase of the Petitioner’s shares. 

7.  Eventually, the Respondents withdrew their offer on 17 December 2018.  It was not disclosed to the Petitioner that counsel had to be briefed on behalf of the Respondents on that day.  The trial of the Petition was to begin on 15 January 2019. 

8.  The correspondence showed that the Petitioner did engage in meaningful negotiations with the Respondents.  Unfortunately, the last counter offer by the Respondents on 16 November 2018 triggered a debate which did not assist in reaching a settlement.  However, it was stated in that letter that the HK$1.2 million offer (dated 22 October 2018) was still open to acceptance as an alternative.  Both the 22 October and 16 November 2018 letters were marked “Without Prejudice Save as to Costs”.

9.  By another letter dated 29 November 2018, the Respondents clarified, inter alia, that all their settlement offers were made on the basis that Petitioner’s shares in the Company be transferred to them.  Hence, the full effect of the 16 November 2018 counter offer was only made clear to the Petitioner by this letter, ie, his shares would have to be handed over in return for the payment of HK$1.2 million.

10.  Although the Petitioner would have been much better off to have accepted either one of the counter offers instead of having the Petition tried, due to the lack of clarity in the terms, it would not be fair to expect the Petitioner to have accepted either of the counter offers until a reasonable time after having received the letter of the 29 November 2018.   

11.  In these circumstances, I do not believe that indemnity costs can be justified for a significant period before trial.  Hence, it would not in any event make a major impact on the costs to be recovered by the Respondents. 

12.  For these reasons, I am not inclined to exercise my discretion to make an indemnity costs order.  Accordingly, this application is dismissed with costs to the Petitioner.