NICE GAIN ENTERPRISES LTD. and Another v. CHINESE UNITED ESTABLISHMENTS LTD. and Another

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

COMPANIES (WINDING-UP) NO. 391 OF 1994

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DECISION AS TO COSTS

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1. This is a petition which was presented by two Petitioners; one a company, Nice Gain Enterprises Limited, and the other an individual, Cheung Siu Ki. They petition first of all that the company, Chinese United Establishments Limited, be wound up under the just and equitable ground, and alternatively, that the Respondents may be ordered to purchase the Petitioners' shares in Chinese United at a fair value to be assessed by the Court without discount for the fact that the Petitioners' shareholding is a minority one.

2. At the beginning of the second day of the hearing the Respondents, through their counsel, made an open offer to purchase the shares of the Petitioner at a fair value to be assessed without discount for the fact that the Petitioners' shareholding was a minority one. The matter was then adjourned for the Petitioner to consider this and behind the scenes, one might say, clarification of the exact terms of the offer was made.

3. This has resulted in a Consent Order which I have been asked to make. I will not recite the full terms of the order since that is unnecessary, save to say that the order provides for the purchase of the Petitioners' share at a fair value; the assessment of the fair value is to be made without prejudice to claims which the parties may have in High Court actions which are still pending; the assessment of the value of the shares shall be as at 15th August 1994, which is, of course, the date of the presentation of the petition; and the quantification of the amounts of the claims is to be made after receiving representations of the parties; such claims are to include claims for 62,500 Chinese United Establishments Ltd. shares and one share in Burlion and there is no admission to or determination of the validity of such claims which are to be set off against the value of the company arrived at in the first instance.

4. Then the balance so ascertained, if any, in favour of the Petitioners is to be paid to them within 21 days, or in the event of any appeal, within 14 days of the conclusion of the appeal. The payment of sums in excess of the interim payment is to await the outcome of said Actions and to be paid within 21 days thereafter or, in the event of any appeal, within 14 days.

5. There are three other matters in the order which I have been asked to make to which I should draw attention. Paragraph 3 of the order: "For the purposes of the assessment and the payment and adjustment for the outcome of the actions, both Petitioners are to be treated as one person"; secondly, the whole order is made on the basis that there is no admission that any of the allegations of the Petitioners are well-founded; and lastly, and most importantly as regards this application, is that under paragraph 5 it is stated: "Without admission that either party is entitled to costs, the above orders are made without prejudice to the Petitioners or the Respondents seeking any costs order against each other."

6. Immediately upon my being asked to make this order, the Petitioners applied for their costs and their point is simple: they came to court to get an order that was an order in the alternative, that either Chinese United be wound up or the Petitioners' shares be purchased. They say that was an alternative order and they got the order which they came to court to seek, if they did not get the exact order, they obtained substantially the relief that they came for.

7. The Respondents resist the order for costs sought by the Petitioner. First of all they point out that there was no admission of any allegation being well-founded and this was a Consent Order which provided expressly for that, nor have the merits been decided. They say in effect that there has been no determination upon which the Court could order costs. They say that although costs normally follow the event, the event would be a finding that the Petitioner would be entitled to his relief and that has not happened because what the Petitioner has done is to accept an offer which has been made.

8. In my view, I consider that the Petitioners are entitled to their costs on the very simple footing that they have, in effect, gained by these proceedings that which they had to come to court to get. If this open offer had been made earlier, perhaps when the petition were presented, or in lieu of evidence being filed by the Respondents, or at any other time, then of course the Petitioners would not have had to proceed with their petition, or if they had done so, would have done so at their own peril as to costs.

9. I am mindful in so saying that once the matter comes to court the Respondents are in a difficult position; they may well have reached a situation where, with a three to five week case looming as this one was, their irrecoverable costs, even were they to defeat the petition, would be so high that the chances of recovering them from the Petitioner would not be great, I know not.

10. The only suggestion I can make is that any offer which is to be made in such circumstances, whether for protection of costs or otherwise, would have to be made specifically with the order as to costs included, otherwise it seems to me that the normal course should follow and the Petitioners, having obtained their buy out order, should receive their costs.