KELSO ENTERPRISES LTD v. LIU YIU KEUNG STEPHEN AND ANOTHER

HCMP 3302/2004

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 3302 OF 2004

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D E C I S I O N

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1. Today’s hearing concerns the question of what is the appropriate order as to costs to be made in respect of the application by Kelso for the deferment of the dissolution of the liquidation of Universal Products Limited and the removal of its liquidators. 

2. I heard those applications on 11 and 12 May 2006.  On 21 July 2006 I delivered my judgment, by which I dismissed both applications.  When delivering judgment, I did not make an order for costs, as counsel at the hearing had asked that the question of costs should be stood over pending the delivery of my judgment as the reasons for which I came to my decision (whatever it might have been) might well have some bearing on the question of costs.

3. In the event, it has not been possible for the parties to agree on the appropriate order for costs and it has been necessary for the matter to be restored before me to determine that question.  Mr Bleach S.C., who appears for the liquidators, submits that the appropriate order for costs is that, as between his clients and the applicants, his clients should have their costs of the applications – in particular, the costs of the hearing before me on 11 and 12 May 2006, the costs of preparation for that hearing including the costs for the preparation of evidence for that hearing, and also the reserved costs of two applications before Deputy Judge Mayo on 2 and 16 December 2005. 

4. Mr Harris, for Kelso, accepts that the liquidators should have the costs of the application for deferral of dissolution but so far as the question of costs of the application for removal of the liquidators is concerned, Mr Harris suggests that, effectively,there should be no order as to the costs of that application, and that the appropriate course to adopt would be for the liquidators to be awarded an overall proportion, in percentage terms, of their costs of dealing with both applications, which he suggested should be about 15 per cent. 

5. Having considered the submissions that have been made to me by Mr Bleach and Mr Harris, I have come to the view that the appropriate order to make would be for the costs of both applications to be granted to the liquidators. 

6. It seems to me that the only basis on which it would be appropriate to deprive the liquidators of part of their costs of their opposition to the applications and of their preparation of the evidence which was necessary for the court to come to a view as to the correct order to make would be if the liquidators had acted in some way unreasonably so as to disentitle themselves from obtaining an order for costs in respect of some part of the costs that they had incurred in opposing the summonses.  I do not think that it can be said that the liquidators in any way acted unreasonably in the way in which they approached the summonses. 

7. When, initially, an application was made for the deferral of the dissolution of the company, the liquidators adopted a neutral approach.  However, despite some time having passed and a further application for deferral having been made and granted on an unopposed basis, when an application for a yet further deferral was made, the liquidators were left in a position where they were unable to see any apparent basis for the further deferral of the dissolution of the company on the strength of an expressed wish by Kelso to further investigate matters which, as far as the liquidators were concerned, had already been investigated and which had failed to lead anywhere – principally because of the failure of Kelso to provide funding which Kelso had indicated, at an earlier stage, that it was inclined to provide. 

8. It was only when the liquidators pointed out that it was for Kelso to justify any further deferral of the dissolution of the company that Kelso put in evidence to suggest that the liquidators had acted improperly and in a less than professional manner in relation to the way in which the liquidation had been carried out, and in relation to the alleged failure to disclose prior relationships between themselves or their firm and the management of the company in liquidation prior to its liquidation.

9. Having regard to the trenchant terms in which the criticisms  of the liquidators conduct were made, it is scarcely surprising that the liquidators should have thought it necessary to put forward their own position and to defend their actions by reference, as fully as possible, to the evidence that they put forward as representing the true position.

10. That evidence led me to the view (expressed in my judgment of 21 July 2006) that there was no proper basis on which the dissolution of the company should be further deferred. 

11. In all of the circumstances, therefore, I can see no basis for depriving the liquidators of any part of their costs that they incurred in relation to these applications and I therefore order that the liquidator's costs of the applications are to be paid by the applicant, such costs to be taxed on a party and party basis if not agreed.

12. So far as the position of the opposing creditors is concerned, the opposing creditors do not seek any order for costs in their favour, however, Mr Harris for Kelso has suggested that the opposing creditors should be ordered to pay a part of Kelso’s costs to reflect the fact that Kelso had to deal with the additional material that was put in by the opposing creditors and that this would have involved them in some costs.  The percentage that Mr Harris put forward for consideration was 15 per cent.  Mr Harris also suggested that a similar order should be made in favour of the liquidators.  However, Mr Bleach disavowed any desire to obtain an order for costs as against the opposing creditors, saying that the liquidators had not in fact incurred any costs in dealing with the position advanced by the opposing creditors. 

13. So far as the position between the applicants and the opposing creditors is concerned, it is fair to say that the opposing creditors did put in evidence and did make submissions before me which, at the end of the day, I found to be of no great assistance in coming to the views that I did on the matter.  I took no account, at the end of the day, of the evidence filed by the opposing creditors and did not give any weight to any submissions made on their behalf. 

14. However, having regard in particular to the extent of the work that would appear to have been necessary to respond to those matters, which, on the part of Kelso, appears to have consisted of no more than slightly over one page in the second affirmation of Mr Roberto Servigon Shu, and a total of three fairly short paragraphs in the skeleton submissions filed on behalf of the applicants in which, essentially, the position taken was that no weight should be given to the views expressed by the closing creditors, it seems to me that there would be little to be gained in ordering a taxation of those costs.  As far as the costs themselves are concerned, it would appear to me that they would be substantially less than 15 per cent of the applicant's total costs which have been put forward for consideration.

15. In all of the circumstances, having regard to the very limited extent of the work that would have seem to have been done in relation to the additional material introduced by the opposing creditors, I think that the fairest and simplest course is simply to make no order as to costs as between the opposing creditors and the applicants.