RE IRISH SHIPPING LTD.

COMPANIES (WINDING-UP)

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RULING

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1. On the 25th April 1985 I made an order to wind up an unregistered company Irish Shipping Limited. The matter of costs was adjourned and argued before me on the 2nd May 1985.

2. The proceedings were unusual for the petition was presented by the official liquidator of the company, who was appointed by the High Court in Ireland, and not by a creditor. The opposing creditors with the exception of Adoria mounted strong opposition to the making of a winding up order. The litigation was substantial, and involved several issues of law.

3. Mr. Waung for the petitioner argued that in view of the conduct of the litigation by the opposing creditors costs should be awarded on a more generous scale than the normal basis. He submitted that costs should be taxed on the trustee basis and cited in support of his argument In re Nation Life Insurance Co. Ltd. (1978) 1 W.L.R. 45. This case is authority for the proposition that the normal basis of taxation of costs of a liquidator is on the common fund basis, but the court has a discretion to direct costs on a different basis. In that case Templemann J. awarded the costs of the liquidator to be paid out of the assets on the trustee basis as a result of exceptional circumstances. However, the trustee basis only applies to costs where a trustee is entitled to be paid out of a fund which he holds in that capacity. In the instant case the costs will not be paid out of a fund, but are to be paid by the opposing creditors as parties to the proceedings. Accordingly the trustee basis is not applicable.

4. Both Mr. Kaplan and Mr. McLanachan on behalf of their clients contended that costs should be taxed on the common fund basis. However, Mr. Ma who appeared for Nakamura submitted that no costs should be awarded against his clients as the submission by Mr. Sussex at the hearing lasted for only a few minutes. In fact Mr. Sussex adopted the submissions made by Mr. Litton and Mr. Kaplan, but emphasised that his client did not actively participate in the steps taken in Taiwan. Quite clearly Nakamura is liable to pay the petitioner's costs, but with an allowance for the time devoted to the argument relating to Taiwan. Mr. Ma did not accept that the common fund basis is the normal basis of taxation for the liquidator's costs, but produced no authority in support of his argument. In my view, the authority cited by Mr. Waung is correct, and in normal cases should be followed.

5. Mr. Kaplan submits that his clients should not be penalised by having to pay an excessive amount for costs for they were entitled to oppose the making of a winding up order. That is right, but in the normal case a petition is presented by a creditor not by the liquidator. Opposition to a creditor's petition is usually raised on the grounds that the company has a genuine prospect of payment of its debts or a winding up order would deprive creditors of a proposed compromise. In the instant case the opposition was launched so that the opposing creditors could obtain preference over the general body of creditors. To this end a number of technical arguments which had no merit were raised. Arguments were also put forward on matters which were the province of the Irish court.

6. Apart from these objections the opposing creditors' main contention is that they are secured creditors and that there was a contract between them and the official liquidator to preserve their position in Hong Kong. I found on the evidence that this argument was untenable. Any remedies that the opposing creditors have should be determined in other proceedings. It is therefore apparent that the opposing creditors had no justifiable reason for opposing the making of a winding up order.

7. By their opposition the opposing creditors have placed the official liquidator at risk and unnecessary expense to the detriment of the general body of creditors. I agree that the opposing creditors should not have to pay an excessive amount for costs, but I am quite satisfied that having regard to the conduct of the litigation by the opposing creditors that the petitioner and the Official Receiver are entitled to all their reasonable costs on a more generous scale than the common fund basis.

8. The reasonableness of any particular item such as instructing London counsel and the attendance of Mr. Moore, the official liquidator's London solicitor, at the hearing will be for the Taxing Master to determine.

9. My attention was drawn to American Express International Banking Corporation and Others v. Michael J. Johnson and Another (1984) H.K.L.R. 372 where some of the features were similar to the present case. In his ruling on costs Hunter J. had this to say:-

        "This was a heavy piece of litigation. The plaintiffs avoided the simple, and adopted a multiple course which I earlier said "placed maximum risk and maximum expense on the joint liquidators". The issues were not purely domestic: considerable investigation was necessary into U.S. law. I have no doubt that the joint liquidators and the official receiver are entitled to the costs of all the matters argued before me, including all costs reserved to me, upon the most generous appropriate scale."

 

Hunter J. made an order for costs to be taxed on a common fund basis with a direction to the Taxing Master to exercise his discretion under 0. 62 r. 32(2). 0. 62 r. 32(2) provides:-

        "(2)    On a taxation in relation to which rule 29 or rule 31(2) has effect and in other special cases costs may at the discretion of the taxing master be allowed -

 

10. In view of the special circumstances I consider that the order made by Hunter J. is appropriate in this case.

11. Accordingly in the exercise of my discretion there will be an order for the costs of the petitioner and the Official Receiver to be taxed on a common fund basis with a direction to the Taxing Master to exercise his discretion under 0.62 r. 32(2).

12. As Adoria adopted a neutral stance on the first day of the hearing their liability for costs will be limited up to and including the first day. Nakamura is not responsible for the costs incurred as a result of the argument devoted to the negotiations in Taiwan which took about three hours at the hearing.

13. The costs of the supporting creditor have been agreed to be paid by the opposing creditors on a party and party basis and there will be an order to this effect. Gallant (Panama) S.A. had in fact agreed to this course on the date that I delivered judgment on the petition.

14. Leave to appeal against the decision on costs is granted to the opposing creditors pursuant to Section 14(2)(e) of the Supreme Court Ordinance.