THE JOINT & SEVERAL LIQUIDATORS OF PLANET TOYS (HK) LTD (IN LIQUIDATION) v. DESMOND CHUNG SENG CHIONG AND ANOTHER

HCCW 248/2009

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES (WINDING-UP) PROCEEDINGS NO. 248 OF 2009

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HCCW 249/2009

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES (WINDING-UP) PROCEEDINGS NO. 249 OF 2009

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D E C I S I O N

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1.  This is a hearing to determine the costs of 3 applications, namely, (i) an application by the Liquidators of Planet Toys (HK) Ltd and Planet Pets (HK) Ltd (respectively “Applicants” and “Companies”) for the return of a total sum of HK$1,092,996 (“Funds”) by the Companies’ former Liquidators (“Respondents”) to the estates of the Companies and (ii) 2 applications (1 Summons in respect of each of the Companies) by the Respondents to have the bills for their remunerations and expenses in respect of the liquidation of the Companies taxed together with related relief.

2.  These applications were disposed of by consent via an order dated 18 May 2016.  The consent order essentially encompassed the relief sought in the applications of the Respondents. 

3.  The material facts have been set out in paras 9.1 to 9.23 of the Respondents’ skeleton argument.  Very briefly, the Respondents were appointed as the Provisional Liquidators of the Companies pursuant to a voluntary wind-up under s.228A of the then Companies Ordinance, Cap 32 (“Ordinance”) on 24 December 2008.  They became Liquidators of the Companies about 1 month later.  One of the creditors later petitioned for the winding-up of the Companies.  On 22 July 2009, the Companies were wound-up by the court and the Official Receiver (“OR”) became the Provisional Liquidator of the Companies.  On 3 September 2010, the Applicants were appointed as Liquidators of the Companies.  A Committee of Inspection (“COI”) was appointed on 24 May 2011.

4.  The Funds were held by the Respondents with the aim to settle their remunerations and expenses incurred prior to the compulsory winding-up.  At the end of 2009, the Respondents lodged their bills with the court for taxation.  However, in April 2010 the Master seized of the matter took the view that he had no jurisdiction to tax the bills, and suggested that the Respondents should seek the view of the COI or the creditors on their remuneration pursuant to s.244 of the Ordinance.  It is important to note that there is no issue on the applicability of s.244.  Under those provisions, the COI, or if there was no such committee, the creditors might fix the remuneration to be paid to the Respondents.

5.  Unable to have their bills taxed, on 30 April 2010 the Respondents (via their solicitors) asked the OR if there was any objection to the application of the Funds to settle their existing bills.  The OR replied on 2 July 2010 (“Reply”) that she had “no objection to your client proceedings (sic) as proposed in your letter”.

6.  Soon after their appointment as Liquidators and having received further bills (“Further Bills”) from the Respondents for remuneration and expenses incurred after the compulsory winding-up of the Companies, the Applicants raised issue with the Respondents concerning the retention of the Funds without the taxation of their bills. 

7.  In July 2011, in response to the Applicants’ request that the Further Bills be taxed, those Bill were lodged by the Respondents with the court for taxation.  The Master again declined to tax the Bills on the ground of lack of jurisdiction. 

8.  Meanwhile, the Applicants had written to the OR seeking information of the dealings between her and the Respondents.  In respect of the Reply, the OR’s letter to the Applicants dated 28 January 2013 stated that “the [OR] has merely indication no objection to the proposed treatment of their remuneration which appears to have followed the provision set out in section 244 of [the Ordinance]”. 

9.  Unable to reach a consensus on the Funds, the Applicants took out their application (see para 1 above) on 15 January 2015, which was followed by the Respondents’ applications on 10 June 2015.

10.  The arguments here are quite simple.  As noted above, there is no dispute as to the application of s.244 of the Ordinance.  It is a fact that none of the Respondents’ bills have been agreed by the creditors of the Companies (or any COI).  However, the Respondents say that they were at all material times acting under the belief that such agreement had been sought by the OR before the Reply was given.  It is accepted, in light of the correspondence between the OR and the Applicants, that no such agreement was in fact sought. 

11.  Let me say at the outset that I do not believe that the Respondents deserve any serious criticism for their actions in these matters.  I accept that they had acted with transparency and good faith. However, sympathetic as one may be of the predicaments which the Respondents had faced in trying to have their bills settled, I do not believe that there was sufficient ground for them to believe that the Reply confirmed that the creditors had approved their bills.  By reason of its importance, that fact should, and could, have been clearly established with a simple question. 

12.  I have to say that the Reply could have been written in clearer terms to avoid any misunderstanding.  On one view, the writer might have overlooked the requirements under s.244 when he wrote the Reply.

13.  However, the state of affairs at the time when the Applicants took out their application was that the Respondents had declined to return the Funds to them (the Funds had been applied by the Respondents to pay their bills), and the Respondents had no entitlement to have their bills paid without satisfying s.244 of the Ordinance or taxation. 

14.  I do not accept the Respondents’ contention that they had succeed in their applications.  In truth, those applications were necessary in order to answer that of the Applicants, and the agreement later reached to have the Respondents’ bills taxed served to resolve the impasse between the parties on the Funds.  Such taxation was necessary to legitimise the use of the Funds by the Respondents. 

15.  Whilst the Applicants may be criticised for not acting more promptly in these matters, I accept that they have acted with due regard to the interest of the estates of the Companies. 

16.  I do not believe it is just to burden the estates of the Companies with more than 1 set of costs in these matters.  On balance, the just course is to order that the costs of the Applicants in respect of the 3 applications be paid out of the estates of the Companies.  I make no order in respect of the Respondents’ costs of these applications, save that the Respondents will have to pay the costs of this hearing because they had declined to accept the proposal of the Applicants made in November 2015 to dispose of the applications by consent (essentially in the terms of the consent order dated 18 May 2016) with no order as to costs as between the parties.  Thus, this hearing could, and should, have been avoided.