BALRAM CHAINRAI v. LAKSHMI PREMISES PRIVATE LTD

HCSD 16/2022

[2023] HKCFI 168

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

APPLICATION TO SET ASIDE A STATUTORY DEMAND

NO.16 OF 2022

_______________________

BETWEEN

______________________

_________________

DECISION

_________________

1.  This is an application by Balram Chainrai (“the Applicant”) by summons dated 2 December 2022 (1) to vary the costs order nisi made in favour of the Applicant in §78 of my Decision dated 25 November 2022 (“the Decision”) that those costs be costs on an indemnity basis; (2) for the Decision to be published; and (3) for the application to be dealt with on paper.

2.  Lakshmi Premises Private Limited (“the Respondent”) opposes the application and sought an oral hearing. Having considered the written submissions of the parties, directions were given on 11 January 2023 that the application be disposed of on paper.

(1) The application

(a) Whether indemnity costs are appropriate

3.  The relevant legal principles based on the Court of Appeal’s Judgments in Re Leung Cherng Jiunn [2016] 1 HKLRD 850 at § 27 (5) and Ling Wai Hoi v Jetland Global Investments Limited [2022] HKCA 1457 at §57 are summarised in §23 of the Decision.

4.  In the present case, the reason for setting aside the statutory demand appears in §77 of the Decision:

“… the statutory demand ought never to have been served. The Respondent’s case is the antithesis of a clear and obvious case that would warrant a bankruptcy order.”

5.  Applying the relevant principles, I have no hesitation in varying the costs order nisi and ordering that the costs be assessed on an indemnity basis.

(b) Indemnity basis

6.  As stated in Hong Kong Civil Procedure 2023 at 62/App/11, all costs are to be allowed except those unreasonably incurred or of unreasonable amount to, the receiving party being given the benefit of any doubt: EMI Records Limited v Ian Cameron Wallace [1983] Ch 59. On an indemnity basis, in the absence of rigid rules to determine the proper hourly rate of solicitor, experience, expertise and the complexity of the issue were all relevant factors to be considered: Iskander v Bonardy CACV 117/1987.

(c) Summary assessment

7.  The hearing itself took half a day. The amount of costs shown on the Applicant’s statement of costs is a little over $2 million (inclusive of Counsel’s fees). Apart from senior and junior counsel, 3 fee earners (2 partners[1] and an associate) at the Applicant’s solicitors were assigned in the conduct of the application.

8.  While the case merited 2 counsel, in my view, it was unreasonable also to have 3 fee earners of the Applicant’s solicitors (of whom 2 were senior fee earners[2]) involved. Moreover, duplication of work is obvious.

9.  Further, in view of the fact that fees are charged by Counsel for “perusal of papers, settling the setting aside application and reply affirmation and conferences”, the additional separate brief fees of Counsel are excessive and unjustifiable.

10.  Having regard to the nature of the case and the evidence adduced by the parties, Counsel’s fees are reduced in accordance with summary assessment made in the Court’s letter of even date sent to the parties.

(2) Publication of the Decision

11.  The Applicant seeks publication of the Decision.

12.  I accept that PD 25.1/3 does not render it mandatory that the application/Decision remain confidential. The rationale for such applications to be in camera is undoubtedly for the protection of the privacy/reputation of the applicant. The consequence of a demand being issued and becoming public knowledge can be far-reaching when the party served is actively engaged in business transactions.

13.  In the present case, the statutory demand was served very publicly when the Applicant at a lunch event with prominent members in the community. Correspondence from the Respondent’s solicitors were copied to a number of prominent persons in the Indian community well known to the Applicant. In the circumstances, it cannot be gainsaid that the claims made in the statutory demand are not somehow already in the “public domain”.

14.  Implicit in the service of a statutory demand is a suggestion/notion that the Applicant has not paid his debts. In the present case, the Applicant is a businessman and such an allegation can be highly damaging to his reputation. There is a world of difference between the failure to discharge a debt that cannot be disputed and one where (as in the present case,) there are genuine disputes as to the debt.

15.  Accordingly, publication of the Decision is allowed.

(3) The Applicant’s costs of the variation

16.  The Applicant being the successful party in the variation application is entitled to costs in making that application also on an indemnity basis.

17.  Having perused the statement of costs submitted, I consider the amount excessive and disproportionate in relation to the matters involved. It is reduced to the amount summarily assessed and stated in the Court’s letter mentioned in §10 above.