Re Yun Yip Auto Services Ltd.

HCCW 84/1990

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES WINDING-UP PROCEEDINGS
NO. 84 OF 1990

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JUDGMENT

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1. This is an application to vary an order made by Cheung J, as he then was, on 12 May 1998. In that order, his Lordship ordered that the expenses of the Special Managers, including legal fees, general administration and related expenses, shall have priority to be paid out of the assets of the company, pursuant to rule 179 of the Companies Winding-up Rules and share equal priority with the fees, percentages and charges payable to, or costs, charges and expenses incurred by or authorised by the Official Receiver, provided that such expenses shall not exceed HK$50,000.

2. Today's hearing relates to the Special Managers' application to increase the total amount inclusive of the previous sum of $50,000 to $HK350,000. I am persuaded by the arguments put forward by Mr Bartlett, counsel for the Special Managers, relating to the necessity to make the present application which is not opposed by Miss Mckenna appearing for the Official Receiver. The supporting affidavit disclosed sufficient material to justify the requested increase.

3. Mr Bartlett very fairly pointed out to me during submission, that at the time when Cheung J made his order, rule 179 only referred to the remuneration of a special manager, but not the fees, disbursements or expenses of a special manager as they are now referred to in the rule as amended by an amendment made in 2000. On the other hand, at all material times, there was and is a power on the part of the court under section 220 of the Companies Ordinance to make an order as to the payment of costs, charges and expenses incurred in the winding-up out of the assets of the company, in such order of priority as the court thinks just.

4. My reading of Cheung J's order is that the learned judge, based on the material then presented before him, exercised his discretion under section 220 to provide for specifically the expenses and charges incurred by the Special Managers in the present case. In the exercise of his discretion, he ordered that the same should be accorded equal priority with the fees, percentages and charges payable to, or, costs, charges and expenses incurred by or authorised by the Official Receiver, something which was and is expressly provided for under rule 179.

5. Given my way of reading of the learned judge's order, and given the fact that there has been, since the order, no material change in circumstances except the circumstances relating to the need for the present application to increase the ceiling, I am happy to accede to the present request which, as analysed by me above, merely involves the variation of the ceiling, but not any re-exercise of discretion on the court's part.

6. I mention this because under the new rule or the rule as amended, the fees, disbursements and expenses of a special manager do not enjoy the same priority as that incurred by the Official Receiver, and any request to disturb the statutory priority would, of course, have to be supported by material and involve the court's exercise of its discretion under section 220. But as analysed by me above, the discretion had already been exercised before by the learned judge and there has been, as I say, no change in the circumstances. The present application only relates to the variation in the amount.

7. So, for all these reasons, I make an order in terms of paragraph 1(2) of the summons dated 4 June 2002 with the following amendments:

(1) The phrase, "pursuant to Rule 179 of the Companies Winding-Up Rules" appearing in the original order, be taken out from the order and be re-inserted after the words "the Official Receiver" in the original order, so as to accord with my above analysis of the jurisdiction exercised by the court in making the order in the first place.

(2) The figure, "HK$250,000" be changed to "HK$350,000", something which was dealt with by counsel during submission, with which I agree.

8. Apart from the above variation, there is also a second application to vary or to clarify a matter arising out of another order made by Le Pichon J, as she then was, on 4 February 1998, in which her Ladyship acceded to an application by the Special Managers for the appointment of solicitors to the Special Managers. The variation relates to the Special Managers' retaining of counsel in addition to solicitors, to assist them in their task in this matter, and the application in fact relates to a ratification of the Special Managers' retaining of counsel prior to this application to vary.

9. It is true that the order of the learned judge did not refer specifically to the Special Managers' retaining of counsel, but on the material before me I see no reason why the Special Managers should not have properly instructed counsel, in addition to solicitors, to assist them in this rather unusual and difficult case. So, I am also minded to accede to this application to vary, which, when granted, will confirm and if necessary ratify the Special Managers' retaining of counsel to assist them. So, in other words, I make an order in terms of paragraph 1(1) of the summons, save that in relation to this variation, the subject of variation is not the order of Cheung J dated 12 May 1998, but as I mention above, the order of Le Pichon J dated 4 February 1998.

10. Turning to the costs of this application, I make an order in terms of paragraph 2 of the summons; and as prayed for in paragraph 3 of the summons, I give liberty to apply.