NINOTRE INVESTMENT LTD AND ANOTHER v. STRONG LIGHT INVESTMENTS LTD AND ANOTHER

HCCW 72/2019

[2019] HKCFI 2440

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES WINDING‑UP PROCEEDINGS NO 72 OF 2019

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D E C I S I O N

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1.  On the 15 July 2019, the opposing contributory—Flying Mortgage Limited (“Flying Mortgage”) issued a summons which sought various things including in paragraph 3 that the Petitioners give security for Flying Mortgage’s costs up to the sum of HK$1,118,506.67 by paying that sum into court.

2.  As matters have transpired, it has proved possible for the parties to agree the amount of security, in fact the exact amount Flying Mortgage sought, and after cantankerous discussion between solicitors, the form of the security—a guarantee given by the Petitioners ultimate parent company Unity Investments Holdings Limited (“Unity”) which is listed on the Hong Kong Stock Exchange.

3.  The issue before me today is simply costs.  Flying Mortgage has proposed that it receives its costs up to the 2 August 2019 and thereafter the costs of paragraph 3 of the summons are costs in the cause. The Petitioner seeks an order that the costs after the 2 August 2019 are paid by Flying Mortgage on an indemnity basis.  The reason for the difference would seem to me to be as follows:

(1)  On the 2 August 2019, the Petitioners’ solicitors K&L Gates wrote to Flying Mortgage’s solicitors, proposing that security in the sum requested be provided by Unity in the form of a guarantee that was appended to the letter.

(2)  On the 15 August 2019, Flying Mortgage’s solicitors replied, rejecting the offer and stating that in due course detailed reasons would be provided.

(3)  On the 26 August 2019, the Petitioners filed evidence in opposition.

(4)  On the 29 August 2019, Flying Mortgage’s solicitors replied to the offer accepting it subject to certain amendments to the guarantee which the Petitioners agreed.

4.  Flying Mortgage says that the reason why the offer was not accepted until the 29 August 2019 was that it was only after considering the evidence contain in the 26 August 2019 affirmation, which gave it the opportunity to consider both the financial state of the Petitioners and also Unity, that it concluded the appropriate course was to accept security in the form of the proposed guarantee.

5.  The difference between the parties seems to arise because the Petitioner’s solicitors had proceeded on the basis that Flying Mortgage should, without more, have accepted the offer that was made on 2 August 2019.  In my view that is not correct.  Generally the court orders that security is provided by payment into court.  If a party wishes to provide security in the form of an alternative mechanism such as a guarantee from a third party, it is necessary for it to persuade the applicant and, if the matter comes to court, a Judge that in the circumstances it is appropriate to order security by way of third party guarantee.

6.  Although I accept that it would have been sensible for Flying Mortgage’s solicitors to reply to K&L Gates’ offer explaining this and identifying the further information which they thought was relevant to their client’s consideration of whether or not to accept the offer, it seems to me that in the round Flying Mortgage’s proposal for the way in which costs are dealt with is sensible and proportionate given the way the matter developed.

7.  I will, therefore, order that the costs up to and including the 2 August 2019 be paid by the Petitioners to Flying Mortgage with a certificate for counsel. The costs of the application after the 2 August 2019, be costs in the cause, save that the costs of today’s hearing should be paid by the Petitioners to Flying Mortgage.