SPRINGTIME GLOBAL LTD v. GLOBAL PROFIT DEVELOPMENT LTD

HCCW 121/2019

[2020] HKCFI 914

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES WINDING-UP PROCEEDINGS NO 121 OF 2019

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DECISION ON COSTS

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1.  On 25 April 2019, the Petitioner presented a petition to wind up the Company on the grounds of insolvency. The Petition was opposed by an Opposing Contributory, Raymond Cheng, not by the Company itself. On 4 December 2019 the Petitioner amended the Petition to add as an alternative ground that the substratum of the company had been lost as a result of it ceasing to carry on its sole business, namely, that of operating a restaurant in Causeway Bay, as a result of the landlord terminating the lease. When the Amended Petition came on for hearing before me on 11 May 2020, the Opposing Contributory withdrew his opposition to the Amended Petition, accepting that as a consequence of the cessation of business the Petitioner’s new contention, namely, that the Company’s substratum was lost was correct. I made a winding-up order. As the parties could not agree the costs order I adjourned the question of costs until 22 May 2020 for argument.

2.  The Petitioner and the Opposing Contributory have agreed that both their costs of the Amended Petition (both prior to and after the amendment) should be paid out of the assets of the Company.  However, they are unable to agree the costs of the Opposing Contributory’s application to strike-out the petition, which was issued on 6 May 2019.  The Opposing Contributory has proposed that both parties’ costs are paid out of the assets of the Company.  The Petitioner has proposed that the Opposing Contributory pays the costs of the strike out application.

3.  On 7 May 2019 Mr Cheng’s affirmation was filed in (and I quote from [1]) “…. opposition to the Petition …. as an Opposing Contributory and in support of my application by way of Summons dated 6 May 2019….”.  No further evidence was filed by either party prior to 11 May 2020.

4.  Ms Kung on behalf of the Petitioner submits that:

(1)  Costs should follow the event;

(2)  the conduct of the Opposing Contributory justifies costs being ordered against him; and

(3)  there was no bona fide defence to the debt

5.  It is correct that normally costs follow the event.  In Re Lucky Ford Industrial Ltd [1] I explain in [11], [12] and [14] of the judgment:

“11.  The court has a discretion how to deal with costs of any matter. In my view the following principles emerge from a consideration of the cases in the light of the underlying objectives of the Rules of the High Court stated in O 1A r 1, which pursuant to O 1A r 2 the court shall seek to give effect to when exercising its powers since April 2009. Decisions handed down before April 2009 have to be read in the light of the changes introduced by the Civil Justice Reforms, which require the court to give more weight to considerations of economy and expedition than had hitherto been the case.

12.  If judgment is entered for relief sought by a petitioner pursuant to a consent order, as was the case in Re Chinese United Establishments Ltd, or the respondent has withdrawn his objection to the relief sought by a petitioner resulting in judgment in his favour, costs will follow the event.

…

14.  In my view having regard to O 1A r 1 the correct approach to determining costs in cases which do not involve the court granting substantive relief is for the court first to consider the terms of settlement and assess whether the petitioner has obtained substantially what he sought in his petition.  If he did it will not be necessary or appropriate for the court to consider evidence and arguments directed to the merits of the case and whether or not the petitioner would have been successful if the petition had gone to trial.  The petitioner will be treated as having been successful and entitled to his costs.”

6.  Ms Kung argues that as the strike-out summons was withdrawn, it follows that the Opposing Contributory has been unsuccessful and that he should pay the Petitioner’s costs.  However, the strike-out application was simply opposition to the Petition.  It made no difference to the evidence that was filed, or, if the matter had not been resolved, would have been filed.  The only consequence of the Opposing Contributory issuing a strike-out summons, rather than simply opposing the Petition, was that it gave him a basis for arguing he should go first at any hearing and have the last word when it comes to the filing of evidence.  As can be seen from Mr Cheng’s affirmation, the first paragraph of which I have quoted, it was filed in opposition to the Petition.  It explained his grounds of opposition; that is all.  As the only material costs of the strike-out application are the preparation of Mr Cheng’s affirmation, it is not clear to me what difference there is in dollar terms between the alternative orders that the parties seek [2].

7.  Whatever the logic behind the agreement by the Petitioner that both parties’ costs of the Amended Petition should be paid out of the assets of the Company, the consonant costs order in respect of the strike-out application is also that both parties’ costs are paid out of the assets of the Company.  The dissonance between agreeing that the costs of the Amended Petition should be paid out of the assets of the Company and arguing that the costs of the strike-out application should be paid by the Opposing Contributory are demonstrated by the 3^rd component of Ms Kung’s argument, namely, that the Company did not have a bona fide defence to the debt relied on to prove insolvency.  If that were the case the Opposing Contributory should have paid the costs of the Amended Petition.

8.  In these muddled circumstances, it seems to me that the right course is both parties’ costs be paid out of the Company’s assets. The Petitioner pays the costs of this hearing.