IMAGE TECHNOLOGY (HONG KONG) LTD AND OTHERS v. HO YING CHEONG AND OTHERS

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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JUDGMENT

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1. The 1st Defendant seeks costs reserved by Deputy Judge Peard to be borne by the Official Receiver. There was some evidence from the solicitors' correspondence that such costs would come out from the assets of the Company, although this has never been confirmed by the Official Receiver. Mr Lewis submitted that the Official Receiver is not saying that the 1st Defendant should not have the costs but, as a matter of principle, cannot consent to the order being made against the Official Receiver if the order has the effect of making the Official Receiver personally liable for costs in case of insufficient assets of the Company.

2. In my view the case falls within the principles set out in the Court of Appeal decision of De-Etco International Ltd. v. Desirable Enterprises Ltd. [1993]1 HKC 251. As a matter of substance, the Official Receiver's application to vest the money lodged in court with the Official Receiver was doomed to fail. Even if the money was lent by the Company to the other Plaintiffs, this could not result in the Company retaining any proprietary interest in the money. Under s.198 of the Company Ordinance, the properties which shall be vested in the Official Receiver are only those belonging to the Company or held by trustees on its behalf. The Officer Receiver has never explained the legal basis for making the application, namely, how the Company could retain a proprietary interest in the money and the application had since been abandoned. With respect to Mr Lewis, the point is not answered by saying that these are matters of submission at a full hearing which had not taken place.

3. Procedurally, the steps taken were also misconceived. I have already dealt with the procedural irregularity in my last decision. Miss Wong further referred to the ex parte application and the latter summonses to join as a Plaintiff.

4. It is clear that the Official Receiver is liable for the costs which were reserved by Deputy Judge Peard. As to the scale of costs, Miss Wong asks for indemnity costs. In my view a party just cannot institute proceedings and abandon them at midway without being ordered to pay for a higher scale of costs. There was no justifiable reason being advanced. While I appreciate the pressure on a solicitor in litigation, there must be a proper basis in lodging an application.

5. However, instead of ordering costs on an indemnity basis which may be appropriate in contempt proceedings or where the steps taken constitute an affront to the court, the appropriate order for costs in this case would be on a common fund basis which I understand in practical terms is very little different from taxation on indemnity basis.

6. The order I am going to make is that the costs of the three sets of proceedings reserved by Deputy Judge Peard and of today be borne by the Official Receiver and paid to the 1st Defendant.