RE UP ENERGY DEVELOPMENT GROUP LTD

HCCW 91/2016

[2022] HKCFI 3818

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES (WINDING-UP) PROCEEDINGS NO 91 OF 2016

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D E C I S I O N[1]

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1.  By Summons dated 6 July 2022, the PLs apply for leave to appeal against the Costs Order whereby the PLs (and ICA) were ordered to pay the costs of the hearings on 14 February 2022 and 1 April 2022, and not allowed to recover their costs from the assets of the Company. Prior to that, the PLs’ application to vary the Costs Order was dismissed by this Court for the reasons stated in [2022] HKCFI 1917 (“Reasons”).

2.  The PLs did not appeal against the winding-up order made on 6 May 2022 or the reasons set forth in the Judgment [2022] HKCFI 1329 (“Judgment”). Although ICA lodged an appeal against the Judgment, no step has been taken to set down the appeal for hearing.

Whether leave to appeal is required

3.  At the hearing of the Summons, this Court asked counsel to address the question whether the PLs require leave to appeal against the Costs Order when there is an extant appeal against the Judgment (which embodies the winding-up order and the Costs Order) and the PLs are parties to that appeal (having been served with the notice of appeal).

4.  In her supplemental submissions, Ms Rachel Lam SC (leading Ms Tinny Chan), counsel for the PLs, submits that leave to appeal is required for the following reasons:

(1)  S.14(3)(e) of the High Court Ordinance (Cap. 4) provides that leave to appeal is required for an appeal on costs only (Hong Kong Civil Procedure 2023, §59/0/41).

(2)  A respondent’s notice to vary or a respondent’s notice by way of cross-appeal relating to costs only cannot be pursued unless he has been granted leave to appeal (Hong Kong Civil Procedure 2023, §59/0/42).

(3)  As pointed out by the Court of Appeal in Ng Hong Ki v Leung Fong Kiu [2012] 1 HKLRD 435, §24 – “Where leave is required for an appeal to be brought, the respondent seeking to bring a cross-appeal may not rely on the appeal as affording him a right to come before the appellate court without first obtaining leave, as a cross-appeal given by a respondent’s notice is still a separate appeal, and a respondent’s notice is ‘mere machinery’… He cannot ride on the back of the appeal to embark on his own separate appeal without leave.”

(4)  The matter may also be tested this way – had ICA not appealed against the winding-up order, the PLs would clearly have been expected to seek leave to appeal against the Costs Order.

(5)  Accordingly, it would not have been proper for the PLs to simply “tag on” ICA’s substantive appeal by filing a supplementary notice of appeal.

5.  Mr Toby Brown (appearing with Ms Jacquelyn Ng), counsel for the Petitioner, submits that leave is required:

(1)  Where an appeal against costs is raised as part of a notice of appeal that covers substantive issues, leave to appeal is not required (Wheeler v Somerfield & Ors [1966] 2 QB 94, 96B-C; Re Wing Fai Construction Co Ltd, CVCA 244/2004, 6 October 2005, §§18-19, 24). However, if the appeal against costs is made separately (even though a substantive appeal in the same matter is pending), it is regarded as independent of the substantive appeal and leave to appeal is required (Lo Kai Shui v HSBC [2022] HKCA 1363, §12).

(2)  The present case is analogous to Lo Kai Shui in that although ICA appealed as of right against the Judgment, the PLs decided not to appeal against the Judgment but to proceed separately with a costs-only appeal. Leave to appeal is required for such separate appeal.

(3)  The PL’s proposed appeal is not co-extensive with ICA’s appeal in that if ICA loses the appeal, the issue whether the PLs should face a personal costs order does not arise, as this is an issue particular to the PLs. Not all the relevant costs issue are “wrapped up” in ICA appeal, such that the PLs should be able to “tag along” with ICA appeal.

6.  I agree with the submissions of counsel. The Summons should be considered on its merits, regardless of whether ICA will proceed with the appeal against the Judgment.

Whether leave to appeal should be granted

7.  The PLs have to satisfy the court that the proposed appeal has a reasonable prospect of success. This, in turn, requires the PLs to show that in making the Costs Order, this Court failed to exercise the discretion, or made some error of law or facts or that the Costs Order was plainly wrong or outside the generous ambit within which a reasonable disagreement is possible (Hong Kong Civil Procedure 2023, §59/0/54; Waddington Ltd v Chan Chun Hoo Thomas & ors, HCMP 1326/2017, 18 October 2017, §§3-4).

8.  In the draft Notice of Appeal (“NOA”), the PLs seek to reverse the Costs Order in 3 aspects:

(1)  the PLs and ICA should not be ordered to pay the costs of the hearing on 14 February 2022 to the Petitioner and the OR;

(2)  the costs of the Petitioner, the OR, the PLs and ICA for the hearing on 1 April 2022 should be paid out of the assets of the Company; and

(3)  the PLs should be allowed to recover all their costs from the assets of the Company.

9.  Ms Lam submits that essence of the proposed appeal rests in the PLs’ position that “throughout the proceedings they had adopted a posture of endeavouring to assist the Court in carrying out their duties, whether in respect of the factual developments or laying before the Court issues of jurisprudential concern.” It is said that “such bona fide stance, adopted with the most genuine of intentions, was not intended to be any kind of affront to the Court”. I am unable to see the relevance of the bona fides (or the lack of it) of the PLs. Nowhere in the Judgment or the Reasons did the Court make any findings to the effect that the PLs’ stance constituted an affront to the Court. Nor was it the basis for making the Costs Order.

10.  Ground 1 concerns the costs of the hearing on 14 February 2022. The PLs contend that this Court failed to take into account (1) the subsequent evidence filed by the Petitioner which, it is said, supported the PLs’ stance; and (2) the PLs had updated the court with the views of the creditors. The same arguments have already been considered in §§5(3)-(5), 6-8 of the Reasons.

11.  Ground 2 deals with the order disallowing the PLs from recovering their costs from the assets of the Company. It is said that the exercise of discretion is erroneous because the PLs’ opposition to the Petition on jurisdictional grounds was “not unreasonable” for the reasons articulated. The same arguments have been considered and rejected for the reasons stated in §§9-14 of the Reasons.

12.  No matter how Ms Lam puts it, it is clear that the PLs have not identified, let alone demonstrated why the assets of the Company (and hence the creditors of the Company) should bear the costs incurred by the PLs in opposing the Petition and failed in that opposition.

13.  The Summons is dismissed.

14.  As for costs, I make a costs order nisi that (1) the costs of and occasioned by the Summons be paid the PLs to the Petitioner, to be taxed if not agreed with certificate for 2 counsel; and (2) the PLs are not entitled to recover their costs from the assets of the Company.