RE SNG ALLAN, also known as SNG HOCK SENG

CACV 465/2018

[2021] HKCA 1847

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 465 OF 2018

(ON APPEAL FROM HCB NO 3651 OF 2018)

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REASONS FOR JUDGMENT

AND

DECISION ON COSTS

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Hon Kwan VP:

1.  I agree with the reasons for judgment and decision on costs of Barma JA.

Hon Cheung JA:

2.  I agree with the reasons for judgment and decision on costs of Barma JA.

Hon Barma JA:

Introduction

3.  This was an appeal by the Debtor against the judgment of G Lam J (as he then was)  (“the Judge”)  dated 27 August 2018 ([2018] HKCFI 2016)  by which the appellant Debtor was adjudged bankrupt on the petition of the respondent Petitioner.

4.  At the hearing before us, the Debtor was represented by Mr Paul Lam SC (leading Mr Foster Yim), and the Petitioner was represented by Mr Christopher Chain (leading Mr Nicholas Oh).  At the end of the hearing, we dismissed the appeal and indicated that our reasons for doing so would be handed down at a later date.  We also made certain orders and directions as to costs to enable the court to assess the costs of the appeal, and to deal with a possible claim by the Petitioner for the costs to be paid by a third party funder of the Debtor’s appeal, on paper without the need for a further hearing.  These, with apologies for the time it has taken to provide them, are my reasons for our judgment.  As our directions as to the costs of the appeal have been complied with, I deal at the end of this judgment with the questions of assessment of, and third party liability for, such costs.

Background

5.  The background matters can be briefly stated.  By a Statutory Demand dated 15 March 2018, the Petitioner demanded that the Debtor pay a debt owed to the Petitioner in the amount of HK$48,989,888.57.  This was the total of the outstanding principal under a margin loan granted by the Petitioner to the Debtor and accumulated interest thereon up to and including 13 March 2018.  The loan was advanced pursuant to certain securities account agreements between the Petitioner and the Debtor.

6.  The debt was secured by certain Hong Kong listed shares owned by the Debtor, namely: (1)  400,000 shares in Hanergy TFP (stock code 0566), the trading in which has been suspended since 20 May 2015; and (2)  51,000,000 shares in Tech Pro (stock code 03823), the trading in which has been suspended since 9 November 2017.  In the Statutory Demand, the value of these shares was stated to be nil.

7.  The statutory demand was served on the Debtor on 30 May 2018, but the Debtor neither complied with it nor did he make any application to set it aside.  In consequence, the Petitioner petitioned for the Debtor’s bankruptcy by a petition dated 26 June 2018.

8.  In the petition, the value of the shares was also stated to be HK$0, on the basis of “the ongoing suspension of trading in the [shares]”.  The petition went on to state that it was not made in respect of the secured part of the debt.

9.  On 27 August 2018, the petition was heard by the Judge.  At the hearing, the Debtor sought leave to adduce expert evidence as to the alleged common practice in the industry of realising security upon the client’s default in meeting margin calls, and also to deal with the value of the shares.  The Judge refused this request, and made the usual bankruptcy order against the Debtor.

The decision below

10.  The Judge’s reasons for his decision were as follows:

(1)  The Debtor could not point to any provision in the security account agreements that imposed an obligation on the Petitioner to sell the Shares at any particular time.  Nor could any such obligation be implied on the basis of any industry practice (see the judgment below at [3]).

(2)  The Petitioner had put a nil value on the shares in the Petition pursuant to s.6B(1)(b)  of the Bankruptcy Ordinance (Cap 6)  (“the BO”).  The Debtor did not contend that such estimates were a sham or that the statutory demand failed to comply with rule 44(5)  of the Bankruptcy Rules. Further, it is well established that a petitioner is bound by the estimated value of his security put in his petition and cannot take any benefit in the administration of the bankruptcy except on the basis of that estimate ([5] of the judgment below, although this must be read subject to what is said in [27] to [29] in this judgment).

(3)  In any event, the value of the shares, based on their last trading prices before suspension, was HK$5,032,000, which was far short of the debt (of just under HK$49,000,000)  owed to the Petitioner ([4] of the judgment below), and there was no evidence to support the Debtor’s assertion that if had the shares been realised earlier (at the time of the default), the proceeds would have been sufficient to meet the outstanding indebtedness.  In any event, this was immaterial as there was no arguable case that the Petitioner breached any duty owed to the Debtor by not selling the Shares at the time of default ([6] of the judgment below).

(4)  So far as the statutory demand was concerned, rule 44(5)  of the Bankruptcy Rules only required that it should state the value of the security as at the date of the demand, and at that date, the shares had long been suspended from trading ([6] of the judgment below).

The appeal

11.  The Debtor raised two grounds of appeal in his Notice of Appeal, namely:

(1)  The Petitioner was not entitled to rely on s.6B(1)(b)  of the BO to present the Petition, because upon its proper construction, a secured creditor who estimates the value of his security at nil cannot rely on s.6B(1)(b)  (“the Construction Ground”).

(2)  Further or alternatively, the petition should have been dismissed because the Petitioner’s estimated value of the security at nil was arbitrary and not genuine (“the Valuation Ground”).

12.  The Petitioner contended that neither ground had merit.  As to the Construction Ground, the Petitioner submitted that the proper construction of s.6B of the BO was that it does permit a petitioning secured creditor to value its security at nil value, without having to give up its security interest.  As for the Valuation Ground, the Petitioner submitted it was not open to the Debtor to raise this ground on appeal given the position he took in the court below, where he did not suggest that the estimate of the value of the security was a sham or otherwise not genuine.

The Construction Ground

13.  The Construction Ground was a new ground sought to be raised for the first time on appeal.  However, as it is a pure point of law, which does not depend on any evidence for its resolution, and was one which Mr Chain for the Petitioner did not object to and was prepared to meet, we allowed the Debtor to rely on this ground of appeal notwithstanding that it was not raised below.

The principles of statutory interpretation

14.  The proper approach to statutory interpretation is well settled, and there was no real dispute between the parties as to the applicable general principle, namely that the court will apply a contextual and purposive approach to give effect to the legislative intent whilst having due regard to the natural and ordinary meaning of the statutory language and words used and avoiding doing violence to the language of the provisions under consideration (see HKSAR v Furgo Geotechnical Services Ltd (2014)  17 HKCFAR 755, at [22] per Fok PJ).

15.  Mr Chain also referred to the following principles, which are also well-established and not controversial:

(1)  When considering the context of a statutory provision, the court must have a holistic regard to the entire legislative and sub-legislative framework which the provision forms part of, as well as its legislative history (see Li Yiu Kee v The Chinese University of Hong Kong (unreported, CACV 93/2009, 23 July 2010, at [73] per Stock VP (as he then was)).

(2)  In the course of ascertaining legislative intent, the court may have regard to a variety of background legislative materials, such as Law Reform Commission reports leading to the legislation, and the explanatory memoranda of legislative bills (see HKSAR v Cheung Kwun Yin (2009)  12 HKCFAR 568, at [14] per Li CJ).

(3)  Interpretation of a statutory provision should, as far as the wording allows, accord with common sense (see Cathay Pacific Airways Ltd v Kwan Siu Wa (2012)  15 HKCFAR 615, at [20(1)] per Ma CJ).

(4)  The court should lean against a construction that creates an absurdity, an anomaly, or otherwise produces an irrational or illogical result (see Jade City International Ltd v Director of Lands [2002] 3 HKLRD 33, at [50] per Mayo VP).

The relevant provisions of the BO

16.  The starting point is s.6(2)(b)  of the BO, the pertinent parts of which provide as follows:

“Subject to sections 6A to 6C, a creditor’s petition may be presented to the court in respect of a debt or debts if, but only if, at the time the petition is presented—

…

(b)  the debt, or each of the debts, is for a liquidated sum payable to the petitioning creditor, or one or more of the petitioning creditors, either immediately or at some certain, future time, and is unsecured;”

17.  Although s.6(2)(b)  requires the debt on which a petition is based to be unsecured, s.6B of the BO permits a secured creditor to petition for a debtor’s bankruptcy subject to certain conditions.  S.6B provides as follows:

“(1)  A debt which is the debt, or one of the debts, in respect of which a creditor’s petition is presented need not be unsecured if either—

(a)  the petition contains a statement by the person having the right to enforce the security that he is willing, in the event of a bankruptcy order being made, to give up his security for the benefit of all the bankrupt’s creditors; or

(b)  the petition is expressed not to be made in respect of the secured part of the debt and contains a statement by that person of the estimated value at the date of the petition of the security for the secured part of the debt.

(2)  In a case falling within subsection (1)(b) the secured and unsecured parts of the debt are to be treated for the purposes of sections 6 to 6C as separate debts.”

The Debtor’s submissions

18.  For the Debtor, Mr Lam contended that, on a proper construction of s.6B(1)(b), a secured petitioner who estimates the value of his security as nil cannot invoke that subsection in order to present a bankruptcy petition, and may only rely on s.6B(1)(a)  by giving up the security that he holds.

19.  Mr Lam very fairly accepted that there are several cases in which the Hong Kong courts have made bankruptcy orders even though the petitioner had estimated the value of his security.  However, he pointed out that in those cases, the point was not argued, and that there appears to be no Hong Kong or English authority in which the construction of s.6B or its English equivalent (s.269(1)  of the Insolvency Act 1986, which is in identical terms to s.6B(1)).  He also very properly drew our attention to the Australian authority of Re O’Leary, ex parte Bayne (1985)  61 ALR 674, where Sheppard J held (at 683):

“At first sight, it may seem odd that a secured petitioning creditor may claim that his security is valueless and yet not be obliged to surrender it. But I am satisfied that, upon its true construction, the Act was intended to enable this course to be taken in an appropriate case. Counsel for the debtors made no submission to the contrary.”

20.  However, he went on to submit that we should not follow Re O’Leary, as it is not binding on us, the point did not appear to have been fully argued, no detailed reasons were given, and the relevant Australian statutory provisions (s.44 of the Bankruptcy Act 1966 are differently worded), and Sheppard J’s view may have been influenced by the fact that, under Australian law (unlike Hong Kong and common law), the petitioning creditor is not bound by the estimate in his petition.

21.  Mr Lam submitted that the Debtor’s construction should be adopted because:

(1)  The purpose of s.6B(1)  was to create an exception to the general rule under s.6(2)(b).  That exception gave the secured creditor two alternative options: to give up the security (pursuant to s.6B(1)(a)); or to declare that the petition was not made in respect of the secured part of the debt (s.6B(1)(b)).  By s.6B(2), where the petitioning creditor chose the second option, the secured and unsecured parts of the debt would be deemed to be two separate debts, and the petition could (having regard to section 6(2)(b)  only be presented in respect of the unsecured part of the debt.

(2)  The language of s.6B(2)  did not allow for the value of the security to be estimated at nil because in that event there would not be two separate debts, as it would be nonsensical to say that the secured part of the debt was HK$0, as this would render meaningless the statement in the petition that the petition was not made in respect of the secured part of the debt.  In other words, it was implicit in the division of the debt into two parts that each part had some (non-zero)  value, as a part that had a zero value would not really exist.

(3)  Mr Lam also argued that there was no conceivable reason why a secured creditor who estimated the value of his security at nil should be allowed to retain the security, given that he would be bound by the estimate in the petition (this being the position under common law).  The effect of this rule was in substance the same as requiring the petitioner to surrender the security.

The Petitioner’s submissions

22.  For the Petitioner, Mr Chain referred us to the legislative history of s.6B submitting that it was a useful cross-check when considering its construction:

(1)  The current s.6B of the BO was enacted by the Bankruptcy (Amendment)  Bill 1996 passed on 18 December 1996.

(2)  The Bankruptcy (Amendment)  Bill 1996 was based on the Law Reform Commission’s Report on Bankruptcy 1995 (“the LRC Report”).

(3)  S.6B replaced the former s.6(2), which read as follows:

“If the petitioning creditor is a secured creditor, he must in his petition either state that he is willing to give up his security for the benefit of the creditors in the event of the debtor being adjudged bankrupt, or give an estimate of the value of his security. In the latter case he may be admitted as a petitioning creditor to the extent of the balance of the debt due to him after deducting the value so estimated in the same manner as if he were an unsecured creditor.”

(4)  Although there was a change of wording from the old s.6(2)  to the current s.6B, the legislative intent was that there was to be no change made to the rights of secured creditors (see the LRC Report, Chapter 5, Recommendations).

23.  Bearing this in mind, Mr Chain argued that the proper construction of s.6B is that it does permit a petitioning secured creditor to value his security at nil, without having to give up the security.  He put forward three main propositions in support of this construction.  They can be summarised as follows:

(1)  The natural and ordinary meaning of s.6B(1)(b)  supports this construction, for a number of reasons:

(a)  It requires the petitioning creditor to state in the petition “the estimated value at the date of the petition of the security for the secured part of the debt”.  There is nothing in s.6B(1)(b)  to qualify or fetter the estimated value, and there is no suggestion (expressly or otherwise)  to suggest that s.6B(1)(b)  does not apply to cases in which the estimated value is nil. 

(b)  Common sense suggests that there will be many scenarios in which the value of a security interest may sensibly and properly be regarded as nil.  Examples include situations where the value of the security has decreased since it was given – thus, property might decline in value with a fall in the market, shares might do the same, or be rendered valueless if the company whose shares are held as security goes into insolvent liquidation, and where a security is a second or subsequent mortgage or charge, it will have no value if the value of the property subject to the security is less than the amount owed to secured creditor(s)  having first (or higher)  priority.

(c)  The Debtor’s reliance on s.6B(2)  and the reference therein to secured and unsecured parts of the debt being treated as (two)  separate debts was flawed, because:

(i)  The suggested reading of the word “debts” as necessarily importing the notion that it must have some value above nil impermissibly stretches the wording of s.6B(2)  too far and is inconsistent with the natural and ordinary meaning of s.6B(1)(b).

(ii)  Such a reading is inconsistent with the legislative intention referred to above, that there should be no change to the rights of secured creditors.

(2)  The weight of authority law across several common law jurisdictions supports the construction contended for by the Petitioner, as courts in Hong Kong, Australia, England and Canada have all found petitions to be valid under s.6B(1)(b)  or similar provisions, even where the security in question was valued at nil (see e.g., 黃志偉(Wong Chi Wai Jeffry)  v Sheung Shui Town Centre Management Ltd (Unreported, CACV 257/2011, 6^th June 2013), at [11], [18] and [19]; Gate Gourmet Luxembourg IV Sarl v Morby [2015] EWHC 1203 (Ch)  (7 May 2015), at [68]; Danso Enterprises Ltd (2004)  4 CBR (5^th)  316, at [11] and [18] to [22].  These authorities all demonstrate that the courts have accepted that a secured creditor can value his security at nil without giving up the security, and while the precise argument now run by the Debtor may not have been raised in these authorities, this does not detract from the fact that in each of those cases, the courts accepted without difficulty the notion of a nil estimated value for security by a petitioning secured creditor.

(3)  The Petitioner’s construction accords with common sense and is entirely consistent with the legislative and sub-legislative framework, whilst the Debtor’s construction is absurd:

(a)  Despite the general common law rule that a petitioner is bound by the estimated value in the petition, Rules 11 to 13 of the Proof of Debt Rules (Cap 6E)  allow a creditor (including the petitioner)  to seek leave to amend the estimated value of the security on the basis of either bona fide mistake or a change in value of the security.

(b)  Thus, in the event of a subsequent increase in the value of the security, the Petitioner’s construction would permit the petitioner to apply to amend his proof of debt as envisaged by the Proof of Debt Rules, whereas on the Debtor’s construction, the petitioner would be obliged to give up the security in order to present his petition and thus would have lost his security and could no longer amend its estimated value to take advantage of the rise in value of the security.  This point provided a complete answer to Mr Lam’s suggestion that there could be no conceivable reason why a secured creditor who estimates the value of his security at nil should be allowed to retain the security.  It also demonstrated that the Debtor’s construction is inconsistent with the framework of the BO and the Proof of Debt Rules and could cause real prejudice to the petitioning creditor.

Discussion

24.  In my view, the Petitioner’s construction of s.6B is clearly correct.  This is for a number of reasons.

25.  First, the wording of s.6B(1)(b)  does not, on its face, impose any restriction or qualification as to the estimated value to be placed on the security.  On the natural reading of the statutory wording, there appears to be no reason why the estimated value cannot be nil.  As is made clear by the examples referred to in [23(1)(b)] above, there are multiple ordinary practical scenarios where a security interest may quite properly and appropriately be valued at nil. 

26.  Second, I cannot agree with Mr Lam that the introduction of the notion of separate debts in respect of the secured and unsecured parts of the debt (or the use of the word “parts” in respect of the two notional elements of the secured debt)  in s.6B mandates that the amount of the secured part of the debt or the estimated value of the security under s.6B(1)(b)  must exceed zero.  Quite apart from the fact that I can see no conceptual difficulty with a statement that the value of the secured part of the debt is zero, it must be borne in mind that the provision merely deems the debt to have two parts, one secured and the other unsecured.  In reality there is only one debt, which is secured, and the security may or may not have any value, depending on the circumstances.  Given that one is considering a statutory deemed construct, which is simply intended to enable a secured creditor to petition for a debtor’s bankruptcy where he is for all practical purposes unsecured in respect of the shortfall between the amount of the debt and the value of the security held, there is in my view even less reason to think that one (the secured)  part, should have a non-zero value.

27.  It is clear that the purpose of s.6B is to enable a secured creditor, whose security is worth less than the amount of the debt he is owed, to present a petition for the bankruptcy of the debtor concerned.  It follows from this that it cannot have been the legislative intention that the secured creditor should necessarily give up his security in order to be able to present a petition. That being so, I am unable to see any rational reason why a secured creditor whose security is genuinely thought to be worthless at the time of the petition should be required to give it up in order to present his petition, whereas a secured creditor whose security is genuinely thought to have some value, however small (perhaps as little as HK$1)  should be able to retain it.  Such an outcome would, to my mind, well deserve the epithet “absurd”.

28.  This is particularly so when one considers Mr Lam’s question why a secured creditor who estimates the value of his security at nil should be allowed to retain it.  This question is readily answered by reference to rule 13 of the Proof of Debt Rules, and by the example of a post-petition increase in the value of the security referred to by Mr Chain.  There can be no justifiable reason why a petitioner who genuinely and reasonably estimates the value of his security at the time of the petition to be HK$1 can apply under the Proof of Debt Rules to amend the estimated value in the event of a subsequent increase in the value of the security, but a petitioner who genuinely and reasonably estimates the value of his security to be nil cannot rely on the same procedure.  Rule 13 of the Proof of Debt Rules makes no distinction between the petitioner and other creditors.  Each of them has to put in a proof of debt in order to participate in any dividend that might be declared.

29.  Mr Lam submitted in oral argument (relying on Re Lacey (1884) 13 QBD 128 and Re Button [1905] 1 KB 602)  that the common law rule preventing a petitioner from revising his estimate of value in respect of his security should still be followed, at least to the extent that rule 13 of the Proof of Debt Rules should only be understood as permitting a petitioner to avail himself of the rule 13 procedure in the case of a bona fide mistake as to the estimate, but not in the event of a change in value of the security. Although it is correct that the cases relied on do suggest that the petitioner cannot change his estimate save in the case of a bona fide mistake, I can see no justification for such a reading of the rule.  Nothing in the rule suggests that it should be so limited in the case of a petitioner – it refers only to creditors, which would naturally include the petitioner, and contains no indication of different treatment for a petitioning creditor.  Further, Mr Lam accepted, when it was put to him in argument, that rule 13 reflected the recommendation at paragraphs 1521 and 1522 of the Cork Report (1982, Cmnd 8558)  which came many decades after those cases were decided.  Those paragraphs related to valuation of securities and were in the following terms:

“1521. A secured creditor has the right to value his security and, if his debt is greater than the assessed value, to prove for the unsecured balance. With one important exception, any creditor who takes this course has the right to correct the value put on his security in the light of actual events. The sole exception is the petitioning creditor himself. He is required to state the value of his security in the petition, and may not be allowed subsequently to reduce that value and adjust the unsecured element of his claim.

1522.  There is no justification for this discrimination against the petitioning creditor, and we recommend that it be removed.  In future, the applicant creditor should be required to state in his application the value of any security held by him, but he should subsequently be at liberty to correct that value in the light of actual events like any other proving creditor.”

30.  This also suggests, to my mind, that the position now is that the petitioning creditor is in the same position as any other creditor, and thus can amend the value he places on his security in the light of actual events.  That being so, it is impossible to see why a petitioning secured creditor who values his security at zero should be in any different position from other petitioning creditors who regard their securities as having some value, or why the petitioning creditor who values his security at zero should be treated differently from other proving creditors who have done the same.

31.  Further, as Mr Chain correctly pointed out, even this limited acceptance by Mr Lam of the applicability of rule 13 to a petitioner necessarily undermined Mr Lam’s suggestion that there was no reason why a petitioner who estimated his security to be of nil value should not be required to give it up.

32.  For all of the foregoing reasons, it seems to me that the terms of s.6B, the context (of the BO and the Bankruptcy Rules), the statutory purpose as revealed in the legislative materials and the unreasonable and unjust consequences of the interpretation of s.6B advanced by Mr Lam all point firmly in favour of the Petitioner’s interpretation of s.6B as entitling the petitioner to place a nil value on security held by him.  This conclusion is also consonant with all the authorities from various jurisdictions to which we were referred.  Although there was little discussion or debate as to the construction issue in those authorities, this might be because it was regarded as being a straightforward matter which admitted of no real argument.  It follows that the Construction Ground put forward by the Debtor must be rejected.

The Valuation Ground

33.  The Debtor also sought to contend that the Petitioner’s estimate of a nil value for the shares was not genuine and was arbitrary, because the reason given for such valuation was misconceived, as it did not follow from the suspension of trading of the shares that they had become valueless.

34.  Mr Chain for the Petitioner objected to this ground, and submitted that it was not open to the Debtor to advance this argument on appeal when it was not taken in the court below. 

35.  Mr Lam fairly accepted that the Valuation Ground had not been taken in the court below, and as noted in [10(2)] above, the Judge recorded that there was no suggestion before him that the estimate was a sham, or other than genuine.

36.  In these circumstances, it is not open to the Debtor to raise the Valuation Ground on appeal.  This is clearly a point which, if raised below, would have been likely to have been the subject of evidence from the Petitioner to refute it.  It is well-established that where a point is taken for the first time on appeal, in respect of which evidence might have been filed that might have defeated it in the court below, it will not be allowed to be raised on appeal.  As Blair Kerr J observed in Tang Koon Wai v Tang Ting Chun (Unreported, CACV 25/1970, 25 November 1970), at [22]:

“… if a point was not taken before the tribunal which hears the evidence, and evidence could have been adduced which by any possibility would prevent the point from succeeding, it cannot be taken afterwards.”

37.  In the circumstances, it is not necessary to consider the Valuation Ground further, and it must be rejected.

Disposition and questions of costs

38.  For the reasons explained above, the Debtor’s appeal was dismissed.  It was accepted by Mr Lam that costs should follow the event.  Mr Chain sought disclosure from the Debtor of the identity of the funder of the Debtor’s appeal, with a view to seeking recovery of the costs of the appeal from the funder, in the event that the Petitioner’s costs could not be recovered from the Debtor.  Accordingly, we dismissed the appeal with costs to the Petitioner with certificate for two counsel, and made the following further orders (set out in paragraphs 3 to 6 of our Order dated 6 June 2019)  in relation to costs at the end of the hearing, with a view to enabling the costs to be assessed and any question of third party liability for costs to be addressed:

(1)  The Debtor and his solicitors shall provide the name and address of the party who funded the appeal for the Debtor (“the Funder”)  within 7 days hereof.

(2)  Upon such information being provided, the Funder will be joined, without further order, as a party to the appeal for the purposes of costs only.  The Petitioner’s solicitors shall forthwith serve a statement of costs for summary assessment on the Debtor and the Funder.

(3)  Within 14 days of being served with the Petitioner’s Statement of Costs, the Debtor and the Funder shall be at liberty to lodge written submission on costs of not more than 5 pages.

(4)  The court shall determine the questions of costs (inter alia whether costs should be ordered against the Funder and the amount on gross sum assessment)  on paper.

39.  Pursuant to the Order dated 6 June 2019, the Debtor’s solicitors wrote to the court (with a copy to the Petitioner’s solicitors)  on 10 June 2019 disclosing the name and last known address of the Funder.  Thereafter, on 18 July 2019, the Petitioner’s solicitors lodged a statement of costs providing a breakdown of the Petitioner’s costs of the appeal, which amounted to HK$338,390.  However, there was no indication as to whether the statement of costs had been served on the Funder, and if so, whether the Funder had been informed of our Order, her potential liability for the costs of the appeal, or the need to lodge submissions concerning her liability for and the amount of the costs claimed. On 29 July 2019, the Debtor’s solicitors lodged a list of objections to the Petitioner’s costs statement on behalf of the Debtor.  No submissions or objections have been received from the Funder.  Further, the Petitioner has not thereafter indicated whether or not it seeks payment of its costs by the Funder (in this regard it may be noted that this may not prove necessary, as the Official Receiver had on 7 June 2021 written to the Petitioner’s solicitors to inform them that there might be sufficient assets in the Debtor’s estate to pay the Petitioner’s costs).

40.  In these circumstances, it seems to me that the appropriate course to take at this stage would be to assess the Petitioner’s costs on a gross sum basis, but only as between the Petitioner and the Debtor.  Such assessment will not bind the Funder.  So far as the Funder is concerned, if it is sought to pursue the Funder for any part of the Petitioner’s, the Petitioner should write to the court to seek further directions to enable this to be achieved.

41.  As between the Petitioner and the Debtor, the Debtor’s principal objection in relation to the statement of costs filed related to the number of solicitors engaged.  The Debtor submitted that there was no need for three solicitors to have been employed, and accordingly sought to exclude the costs attributable to the second associate solicitor mentioned in the statement of costs.  Beyond this, objection was taken to various items charged by the partner and first associate solicitor, on the basis of excessive time spent.

42.  The objection that three solicitors should not have been engaged appears to be based on a misconception.  It is clear from the statement of costs that only two solicitors were engaged by the Petitioner at any time during the conduct of the appeal.  The partner was engaged throughout, the first associate solicitor was engaged from the beginning of the appeal until 15 October 2018, and the second associate was engaged only after 29 October 2018.  The Debtor’s major objection is thus unfounded.  It remains to consider whether the time spent by the solicitors in dealing with the appeal was reasonable (no objection is taken as to counsel’s fees).  Taking a broad brush approach, I would accept that a small reduction might be made in respect of the Petitioner’s solicitors charges and would reduce the time spent by the partner under section C of the statement of costs by 2 hours, and that spent by the second associate by 3 hours, in total.  This leads to a reduction of HK$21,200.  I would therefore assess the Petitioner’s costs of the appeal in the total amount of HK$317,190, as between the Petitioner and the Debtor.