JEFFREY THOMAS ROBBINS AND ANOTHER v. PEAKTOP TECHNOLOGIES (USA) HONG KONG LTD

HCMP2456/2006

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 2456 OF 2006

____________________

_____________________

______________________

______________________

D E C I S I O N

______________________

1.  This is an application for leave to appeal against my ruling on costs, which I made at the end of the hearing of an application in this matter on 16 May this year.  The application then before me was an application for inspection of the documents a company controlled  by Peaktop Technologies (USA) Hong Kong Limited (“the Company”) by two persons who were, at the time that they made the application, directors of the Company.

2.  The application was in fact taken out in November 2006, having been preceded by correspondence over a period of some six weeks prior to that date.  The relationship between the Applicants and the Respondent appeared to have broken down some time earlier than that, in about August 2006 or thereabouts.  Notwithstanding that it would have been open to the Respondent to have taken steps to remove the Applicants as directors of the Company at any time after the breakdown of their relationship, the Respondent did not in fact take steps to do so until February 2007, when it sought to convene a meeting to consider the removal of the Applicants as directors of the Company.  Despite the Applicants’ protest, a meeting was held on 10 April 2006, at which the Applicants were removed as directors of the Company by the Respondent, who controlled a majority shareholding in the Company.

3.  At that point, the Applicants’ application became doomed to fail as they would no longer have locus standi to bring the application under the relevant provisions of the Companies Ordinance, or at common law, being no longer directors of the Company.  At that stage, the Applicants considered their position and proposed to the Respondent that they should withdraw their application, but on terms that the Respondent should pay the costs of it on the basis that, had the Applicants not been removed as directors of the Company, the Respondent would ultimately have failed in its opposition to the application and the Applicants would have obtained the orders that they were seeking.  This was not something that the Respondent was not prepared to agree to, and so the matter came on for hearing before me.

4.  At the hearing, the Applicants sought leave to discontinue or withdraw the application, recognising, as they had to, that the consequence of their removal as directors was that they could not possibly succeed in obtaining the relief that was sought.  They did, however, ask for an order of costs in their favour to reflect the fact that their application was properly brought when it was initiated and would have succeeded had it not been for their removal as directors by the Respondent.

5.  In the event, having considered the circumstances of the case, I came to the conclusion that this was a case in which it would be, exceptionally, right for me to make such a costs order in favour of the Applicants, notwithstanding that they were seeking leave to withdraw their application and that the application would, had it been fought out, ultimately have failed.

6.  Mr Wong today has sought to persuade me that that decision was an incorrect one and that the Respondent should be granted leave to appeal against my decision on costs.  With respect to Mr Wong, I disagree.  It seems to me that the question of costs is a matter that is within the discretion of the Court and, as Order 21 rule 3 makes clear, even in the case of a discontinuance or withdrawal, it is open to the court to exercise its discretion as to costs as it thinks appropriate in the circumstances of the case. 

7.  I think it is clear from the judgment that I delivered at the hearing of the matter on 16 May this year, that the basis on which I concluded that it would be right to award the Applicants their costs, notwithstanding their decision to withdraw their application, was that I was satisfied that, at the time the application was brought, it was well-founded and that it had not just good prospects of succeeding but would have succeeded had the Applicants still been directors of the Company at the date that the application actually came to be heard. 

8.  I took into account also the fact that the removal of the Applicants as directors was a step that was always open to the Respondent to take and that there was no good explanation for the failure to have taken the step at an earlier stage, either shortly after the breakdown of the relationship between the parties in August 2006, or at any time before the application was instituted, notwithstanding that there had been correspondence for several weeks leading up to the bringing of the application.  Moreover, there was no explanation for the failure to take steps to remove the Applicants until as late as February 2007, with a meeting not being held until 10 April 2007, barely a month before the application was due to be heard. 

9.  In those circumstances, it seemed to me that it would be right to reflect the fact that the Applicants would have succeeded in their application but for the Respondent’s failure to take a step which was open to it at a time when it would have resulted in the Applicants not expending any costs unnecessarily on their application.  In those circumstances, it seemed to me that it was an appropriate exercise of my discretion to order that the costs of the application be paid by the Respondent to the Applicants.

10.  As far as Mr Wong’s proposed grounds of appeal are concerned, it seems to me that, in relation to the first ground, that there was in fact an acknowledgement of defeat by the Applicants, this is, with respect, to mischaracterise the position.  It may be possible to say that the Applicants acknowledged that their application, at the end of the day, was bound to fail, but I think that, having regard to the circumstances in which that position came about, it cannot be said that they were in any way acknowledging that their application was not one which was well-founded when it was brought.  Indeed, in my judgment, I came to the view that, at the time that it was brought, the application was indeed one that was well-founded, with strong prospects of success.

11.  As for the second proposed ground of appeal, which is that it was necessary to demonstrate special circumstances or misconduct of the Respondent in the sense of some act, omission or course of conduct which was unreasonable or improper, it seems to me that there were, in this case, special circumstances which justified the making of the unusual costs order which I did make.  I do not think it is strictly necessary to characterise the course taken by the Respondent as misconduct, but it certainly seems to me that there was a failure by the Respondent to take a step which was reasonably open to it, which would have obviated the possibility of the application being made at a time when there would have been no real costs incurred by the Applicant.

12.  As far as the suggestion is made in the third ground of appeal that certain matters were taken into account which were not matters proper to be taken into account, I say no more than that it is, and remains, my view that they were proper matters to be taken into account and I do not consider that there is any very good prospect of arguing otherwise on appeal.

13.  Finally, in relation to the delay in filing evidence and the question of whether or not the Applicants should have been allowed to file further evidence shortly before the hearing, when it was, by then, clear that they were doomed to fail, it seems to me that it was clearly open to the Applicants to file that further evidence, first, in response to the evidence which had been filed by the Respondent well out of time and, secondly, in order to explain to the court the circumstances and reasons for their decision not to proceed with the application.

14.  In all the circumstances, therefore, I do not think that I should grant leave to appeal against my ruling.  If the Respondent wishes to pursue this matter further, it will have to seek leave from the Court of Appeal.  As far as the costs of this application are concerned, I order that the costs of the application be to the Applicants in the original application, to be paid by the Respondent, to be taxed on a party and party basis if not agreed.