ASIAN OCEANIC BANK LTD (IN LIQUIDATION) AND OTHERS v. LAMBANG MAJU SDN BHD AND OTHERS

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JUDGMENT

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Liu JA:

1. By an Originating Summons dated.3 December 1993, the plaintiffs interpleaded on the ownership of some 6.5m shares and 1.3m warrants registered in the name of the 2nd plaintiff company (in liquidation). The Originating Summons was heard on 4 October 1994 by Yeung J., sitting then as a Deputy Judge of the High Court. The issue of ownership of these shares and warrants were ordered to be tried between the 1st, 2nd and 3rd defendants. The shares and warrants were ordered to be deposited in court. The plaintiffs' were given "costs in the cause of the action". The Deputy Judge granted liberty to apply. As the 1st defendant was absent, directions for the trial were given between the 2nd and the 3rd defendants. Liberty to apply was again granted.

2. There was no available fund to satisfy the costs order. The question of costs was a matter of concern to the parties. Solicitor for the plaintiffs submitted "that the 1st, 2nd and 3rd defendants should be jointly and severally liable to the costs of the plaintiffs' interpleader action". Counsel for the 2nd defendant invited the court to order costs to "be borne by the unsuccessful party after the issue had been tried", and he took exception to costs being "shared between all the defendants". That submission was supported by counsel for the 3rd defendant. He reasoned that "costs could not be deducted from the subject matter which were to be deposited in court because the 6.5m shares were not marketable" and suggested that costs be reserved to be trial judge. The judge made the order for costs in the way he did.

3. Slightly more than a year and a half later, three summons were filed, two of which were placed before Jerome Chan, J on 9 May 1996. The plaintiffs were not restoring the Originating Summons for hearing. Between the two hearings, that of the Originating Summons in 1994 by Deputy Judge Yeung and that of the interlocutory summonses in 1996 by Jerome Chan, J., 16.25m shares and 3.25m warrants (worth $6.5m) were delivered in exchange. On 11 January 1996, dividend was declared on the 6.5m shares in the sum of $325,000. After the hearing of the summonses by Jerome Chan, J., on 3 October 1996, further dividend in the sum of $243,750 was declared.

4. In the interlocutory summonses, the plaintiffs also sought permission to collect 1.625m bonus shares which had been issued. But in essence, the plaintiffs asked for the costs awarded in the Originating Summons to interplead and costs of the interlocutory summonses, including all proper expenses and outlay of the liquidators of the plaintiffs to be duly paid out of the dividend of $325,000. In this appeal, the later dividend of $243,750 was included. The plaintiffs renewed their request for an order that no action be brought against them by the defendants for the recovery of the shares, warrants, bonus shares and dividend. The court was also invited to allow them to have a first charge upon the exchanged 16.25m shares and 3.25m warrants ($6.5m). The plaintiff further desired to be excused from all further proceedings in the interpleader action.

5. On 9 May 1996, Jerome Chan, J dismissed both these interlocutory summons, with leave granted to the plaintiffs "to apply for an order for costs incurred after 4 October 1994 by subsequent application". Costs of the summonses were given to the defendants. From this decision of Jerome Chan, J. the plaintiffs appealed.

6. The judge reduced his brief reasons into writing as follows:

          "Summonses were wholly misconceived and that the terms of the order of 4.10.94 was intentional. It was not a slip that the plaintiffs were not released from these proceedings and that costs were awarded to them 'in the course', and not to be taxed and paid forthwith. If the plaintiffs are unhappy about their order, they should appeal against it; or ask the judge to vary it if there is proper ground for doing so. In the premises, the summonses ought to have been dismissed."

7. On 4 October 1994, Deputy Judge Yeung ordered the plaintiffs' costs in the Originating Summons for interpleader relief to be costs in the cause of the interpleader action. The shares (apparently the warrants as well) were unmarketable and no available fund was then at hand to meet the plaintiffs' costs. It was not suggested that the plaintiffs should be deprived of their costs as interpleaders. What was at issue was the mode of reimbursement. It was a departure from the usual costs order in an interpleader application, designed to recoup the plaintiffs soonest possible in an exceptional case. If the subject-matter had been marketable or resources otherwise accessible, costs and expenses of the stake-holders would have been instantly satisfied, leaving accountability to be settled among the claimants in the framed issue. Liberty to apply was granted in relation to the part of the Deputy Judge's Order giving directions for trial. No supervision over the deposit into court of the shares and warrants was envisaged. The plaintiffs' costs order would also require no further assistance for implementation, but liberty to apply was given. It was perhaps indicative of the flexibility in an unusual costs order which could hardly be claimed to be rigid. In essence, the plaintiffs were inviting Jerome Chan, J. to allow costs which were, as awarded to them, to be paid in the cause of the interpleader action to be paid in advance out of the dividend collected in 1996. It was not a rehashing of the plaintiffs' costs application before Deputy Judge Yeung on 4 October 1994. The application heard by Jerome Chan, J. was a new application for the costs awarded to be met earlier out of the available $235,000 dividend. In any case, there was a substantial change of material circumstances to warrant a fresh application to be made to Jerome Chan J as regards costs and other relief. Cash became then available after a protracted period, the defendants apparently were dilatory in prosecuting the interpleader action, the 1st defendant remained recalcitrant in declining to enter an appearance to the Originating Summons and the plaintiffs' liquidators were understandably impatient to complete liquidation. As a first step, costs, expenses, fees and operational outlay would have to be settled. The circumstances clearly warranted a restoration of the Originating Summons for hearing, but no technical objection to the summonses was successfully taken before Jerome Chan J. The judge was simply of the opinion that he had no jurisdiction to entertain the applications for the reasons he gave. The court can therefore interfere.

8. In this appeal, the plaintiffs invited this court to allow, inter alia, their costs and expenses (including those of their liquidators) incurred in the past and hence to be paid out of the dividends of $325,000 and $243,750. This court was also asked to hold the balance of the dividends pending the resolution of the interpleader action. In consequence, the plaintiffs sought a first charge upon the shares, warrants and dividends. They wished to be excused from all further proceedings in the Originating Summons and to be spared from whatever claims the 1st defendant cared to make with respect to these shares, warrants and dividends. The 1st defendant has been indifferent to these proceedings.

9. As I have said, funds are now available out of which the costs and expenditure of the plaintiffs, including those of the liquidators may be paid and secured. The liquidators should be assisted to complete liquidation. It was disclosed by counsel for the plaintiffs that professional trustees would be sought for appointment to hold the shares, warrants and dividends. The debit against the dividends can be made good by the losing party in the inter-party action and the inconvenience, if any, caused to the 2nd and 3rd defendants would be more than justified by the circumstances now known to this court. Even the legal costs incurred in the staunch resistance to the plaintiffs' claim might have been sufficient for keeping the interpleaders indemnified.

10. For the reasons we have given, the plaintiffs need not appeal against the Order of Yeung, J made on 4 October 1994 nor strictly apply for a variation thereof. The issuance of the summonses for the hearing before Jerome Chan, J gave rise to no vital flaw in procedure or jurisdiction. This court was faced with a material change of circumstances, the slow progress in the interpleader proceedings and the need to bring the liquidation of the plaintiffs to conclusion.

11. Mr Swaine for the 2nd defendant raised a technical procedural point as to the form in which matters were brought before Jerome Chan, J. The summonses were entertained by Jerome Chan, J and they had not been shown to be flawed. It was open to this court to entertain the submissions of Mr Reyes, counsel for the plaintiffs in the scenario presented to this court. Mr Swaine further submitted that the 3rd defendant enjoyed an interest in trust via Crownhall Investments Ltd. and Asian Master Enterprise Ltd. as long ago as 1985. Counsel complained that the 2nd defendant was unnecessarily encouraged by the liquidators in 1992 to take over the shares in question. It was argued before us that the liquidators had, by their conduct, brought about the need to interplead and that this court, if invited to exercise its discretion afresh, should refuse costs to the liquidators. Elder Dempster Lines v. Zaki Ishag, The Lycaon [1983] 2 Lloyd's Rep. 538 was cited in support.

12. Mr Reyes, counsel for the plaintiffs provided the court with a succinct analysis: A dispute arose between the 2nd plaintiff and Crownhall & Asian Master. A settlement was reached involving payment by the 2nd defendant of US$1m for the release of the security interest of the 1st plaintiff. It was, then in 1992, understood by the liquidators that after the settlement, the beneficial interest in the shares in question ultimately vested in the 2nd defendant, having passed through the 1st defendant and Top-text. These shares were accordingly transferred to the 2nd defendant in 1992. In 1993, the 1st defendant raised its claim, soon followed by one of the 1st defendant's. Whilst Mr Swaine was not able to readily identify the grounds of the 3rd defendant's claim, Mr Reyes clarified the position with little effort. Mr Swaine informed the court that the matter was involved and complex. But Deputy Jufge Yeung made no reference to any mmisvonduct and granted costs to the plaintiffs. The 3rd defendant was unable to clearly demonstrate anything questionable on the part of conduct. If this court is to exercise the discretion afresh, it should, in our view, exercise it in favour of the plaintiffs and their liquidators. We grant the proposed order sought in the Supplemented Notice of Appeal.

13. For all these reasons, we allow the appeal and grant the relief sought by Mr Reyes, counsel for plaintiffs. The appeal and grant the relief sought by Mr Reyes, councel for plaintiffs. The appeal is, therefore, allowed, the order of the judge set aside, the relief prayed for granted and an order nisi  made that cost here and below be costs for the plaintiffs against the 2nd and the 3rd defendants.