RE CHINA ZENITH CHEMICAL GROUP LTD (formerly known as XINYANG MAOJIAN GROUP LTD)

CACV 451/2024, [2025] HKCA 360

On appeal from [2024] HKCFI 2769

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 451 OF 2024

(ON APPEAL FROM HCCW NO 243 OF 2023)

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D E C I S I O N

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Hon Kwan Ag CJHC (giving the Decision of the Court):

1.  On 11 March 2025, we handed down our judgment dismissing the Company’s appeal. As a result, the winding-up petition against the Company was adjourned to the first Companies Court hearing for pronouncing a winding-up order. We ordered the Company to pay the costs of the appeal of Lyu (the petitioner), Gu and Chen (two supporting creditors). Orders for security for costs of the appeal had been made earlier in the sums of $350,000 each for Gu and Lyu and $380,000 for Chen.

2.  On 14 March 2025, I gave these directions for the summary assessment of costs:

(1)  The costs of the appeal (including the costs of the Company’s summons to adduce new evidence on appeal) be determined by summary assessment;

(2)  Each of Lyu, Gu and Chen do file and serve his/her respective statement of costs within seven days from the date of the order herein; and

(3)  The Company do file and serve its lists of objections within seven days thereafter.

3.  Pursuant to the directions, Gu, Lyu and Chen have each filed and served a statement of costs on 14, 21 and 25 March 2025 respectively.

4.  The winding-up petition came before Deputy High Court Judge Gary Lam on 17 March 2025. After hearing the Company, Lyu and the supporting creditors who appeared, he refused an adjournment and ordered the Company to be wound up[1].

5.  On 18 March 2025, Gu issued a summons pursuant to section 186(1) of the Companies (Winding Up and Miscellaneous Provisions) Ordinance, Cap 32 for an order that notwithstanding the winding-up order against the Company, there be leave to Gu to proceed with summary assessment of the costs of the appeal against the Company.

6.  On 20 March 2025, I made directions that the Company, Lyu and Chen do respond to Gu’s summons within seven days thereof, failing which the court would make such order as appropriate. The directions were copied to the Official Receiver.

7.  The response of Lyu and Chen was to issue summonses similar to Gu on 27 and 28 March 2025. They consent to the continuation of summary assessment of costs and also seek release of the amounts paid into court by the Company as security for costs in the appeal. They contend that they should be regarded as secured creditors to the extent of the payments into court for security for costs, and summary assessment of costs is necessary to obtain the payments made into court.

8.  The Official Receiver’s stance (by letters dated 26 March, 1 and 8 April 2025) is that if the court is minded to grant leave to proceed with summary assessment, this should be subject to the following terms (in addition to any other terms the court should consider fit and necessary):

(1)  No order obtained by the receiving party in the summary assessment of costs of this appeal shall be enforced against the Company without leave of the court; and

(2)  The receiving party shall not apply for any order for costs personally against the Official Receiver, the provisional liquidator of the Company, or the liquidators of the Company in relation to any application involving the summary assessment of the costs of this appeal.

9.  The Company’s solicitors wrote on 9 April 2025 stating that they are not in a position to respond as the Company has been wound up and they are unable to obtain instructions.

10.  We consider it appropriate to grant leave to Lyu, Gu and Chen to proceed with summary assessment of the costs of the appeal against the Company notwithstanding the winding-up order, subject to the terms proposed by the Official Receiver as mentioned above. The costs of the respective summonses issued by them are regarded as part of their costs in this appeal.

11.  We proceed to assess the costs claimed by Lyu, Gu and Chen summarily.

12.  Lyu’s statement of costs is in the total sum of $719,802. Gu’s statement of costs is for $592,345. Chen’s statement of costs is for $754,335. We make a gross sum assessment in respect of each of their costs in these amounts: $444,052 for Lyu, $440,445 for Gu and $461,135 for Chen.

13.  The award of costs for each exceeds the amount of security paid into court in respect of their costs of the appeal (including the application for security for costs and the new evidence application). We order the amounts paid into court for security for costs be paid out to Lyu, Gu and Chen in partial satisfaction of the costs awarded to them. Pursuant to the condition for granting leave to proceed with summary assessment of costs, they may not enforce the award for the balance of the costs against the Company without leave of the court.