RE CHINA CULTURAL CITY LTD

HCCW 313/2019

[2020] HKCFI 1947

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES WINDING-UP PROCEEDINGS NO 313 OF 2019

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D E C I S I O N

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1.  On 22 June 2020 I gave judgment ordering the winding up of the Company. I made a costs order nisi that Chinluck (the opposing contributory) should pay the Petitioner’s costs of the Petition save the Petitioner’s costs of presenting and advertising the Petition. The later costs would have been incurred irrespective of opposition to the Petition.

2.  Chinluck has applied for the order to be varied and that as between the Petitioner and Chinluck there be no orders as to costs. Chinluck argues that this is the correct order for the following reasons. Le Pichon J explains the conventional costs orders that are made on a winding up petition in her judgment in Re Datacom Wire & Cable Co Ltd [1]:

“Although the question of costs is always in the discretion of the court, where the petition is successful, the practice as to costs is conveniently set out in French, Applications to Wind-up Companies at paras.4.5.1, 4.5.2.1, 4.5.4.1 and may be summarised as follows:

(1) One set of costs is generally given to the petitioner, another among all the creditors supporting him and a third among the contributories supporting him;

(2) Where the petitioner has been substituted, the original petitioner’s costs of presenting and advertising the petition will be ordered to be paid as an expense of the liquidation: see Re Bostels Ltd [1968] Ch 346;

(3) Costs under (1) and (2) are normally ordered to be paid out of the assets of the company as an expense of the liquidation;

(4) Creditors or contributories appearing to oppose a successful petition are not entitled to costs.  See Re Bathampton Properties Ltd [1976] 1 WLR 168 at p.171H and French, Applications to Wind-up Companies at para.4.5.5.1.”

3.  Le Pichon J goes onto say this at 530C-E:

“Costs orders have sometimes been made against opposing contributories. See Boyle and Marshall on Practice and Procedure of the Companies Court at para.9.120 and Buckley on the Companies Acts (14th ed.) at p.551. Such an order was made in Re A & BC Chewing Gum Ltd [1975] 1 WLR 579 where a contributory petitioned to wind-up the company on the just and equitable ground. Admittedly that was a shareholder dispute case where costs would not normally be borne by the company since its role as party is purely nominal. Nevertheless, the underlying rationale remains that a party who unreasonably opposes a successful winding-up petition should be ordered to bear the costs.”

4.  Chinluck reasons that it follows from these statements of principle that if an opposing contributory’s opposition is reasonable an opposing contributory should not be ordered to pay the costs.  It goes on to contend that its opposition was not unreasonable and thus the Petitioner’s costs should be paid out of the assets of the Company.

5.  I think it clear on a close reading of Datacom that it does not establish that unsuccessful opposition by an opposing contributory should not result in the opposing contributory being ordered to pay the costs; although I accept that the language of the passages at 529G and 530D tends to imply that reasonable opposition even if unsuccessful will not attract an adverse costs order.  It would seem to me that the position is this, (and I agree that the principles at 529D to G, i.e., sub-paragraphs (1) to (4) are correct as far as they go) that generally unsuccessful opposition by a contributory will result in an order that the opposing contributory pays the Petitioner’s costs.  This will not apply if an opposing contributory is simply bringing to the court’s attention relevant matters to which the court should have regard and of which the court might not otherwise have been apprised or if the opposition is being advanced because the company cannot, for example, because of a deadlock at board level, oppose the petition.  The difference between this approach and that advanced by Chinluck based on its reading of Datacom is that generally active opposition by an opposing contributory will attract an adverse costs order rather than the presumption being that the costs are paid out of the assets of the company unless it is demonstrated by a petitioner that the opposition was unreasonable.

6.  In the present case Chinluck identified an issue that arose from the evidence which emerged later in the case, namely, whether a beneficiary could properly issue a petition or whether it was necessary for a trustee to do so.  I accept that as a result of the Court of Appeal’s decision in Re Chung Kong Materials (JV) Limited [2] the position in Hong Kong was unclear.  To that extent the opposition was helpful as it ensured an issue that needed to be addressed was adduced with the assistance of Mr Hui who appeared on behalf of Chinluck.  In these circumstances, I will change my costs order to provide that Chinluck should pay 70% the Petitioner’s costs of the Petition save the Petitioner’s costs of presenting and advertising the Petition.  This reflects what I consider to be an appropriate division. Chinluck did oppose on other grounds other than locus.  I shall make no order in respect of this application to change the costs order.