THE MOTOR TRANSPORT CO OF GUANGDONG AND HONG KONG LTD v. HIGHWELL DEVELOPMENT LTD

HCCW227/2006

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES WINDING-UP PROCEEDINGS

NO. 227 OF 2006

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D E C I S I O N

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1.  This is an application for the rescission of a winding-up order that was made on 8 January 2007 and for the consequent dismissal of the petition. 

2.  The situation is that on 8 January 2007, when the petition came before the court, the Company was not represented.  At that time, it owed the Petitioner a relatively small amount of money which was, however, in excess of the minimum required for the presentation of a winding-up petition.  The petition had been before the court on several previous occasions, on each of which an adjournment was granted to enable the Company to make arrangements to pay the debt which was the subject of the petition, which it did by instalments on a number of separate occasions.

3.  It now appears that the reason why the Company was not represented on the last occasion was that the director of the Company who had been appearing on its behalf was under a misapprehension as to the nature of that hearing.  Be that as it may, in the absence of the Company and in the absence of any explanation for its non-attendance, a winding-up order was made.

4.  Subsequent to the making of the winding-up order, it appears that the Company and the petitioner entered into discussions and were able to agree, in principle, on the settlement of the outstanding debt and the costs involved in this petition, but they did so on the basis of a belief that the Official Receiver’s costs would not exceed the amount of the deposit that had been paid by the petitioner to the Official Receiver when the petition was presented.  On that basis, a payment of, I am told, some HK$58,000-odd was made by the Company to the petitioner to cover the balance of the debt and the costs of this petition.

5.  The petitioner then took out this application by summons dated 15 February 2007.  As the winding-up order has not been sealed or otherwise perfected, the court does have discretion to rescind it.  In considering whether or not to exercise such discretion, the court will take into account three principal factors.  The first is whether the debts to the petitioner and any other supporting creditors have been paid in full.  That appears to be the case here, the petitioner having confirmed that the debt owed to it has been settled and there being no supporting creditors who have appeared on this petition.  The second matter for consideration is whether or not the affairs of the Company require investigation and, as to this, the Official Receiver has indicated, in a letter to the court, that the Official Receiver does not consider that there are any matters that require investigation.  The final matter is that the court should be satisfied of the solvency of the Company and, on the basis of what I have been told by the director of the Company, who has appeared today, I am prepared to accept that the Company is solvent.

6.  I therefore accept that this is an appropriate case in which to exercise my discretion to rescind the winding-up order and dismiss the petition.

7.  However, there has been one slight complication as to costs.  Although the summons asked that the petition should be dismissed with no order as to costs, Mr Hui, who appears for the petitioner, has indicated that owing to an unexpected development, that is no longer the Petitioner’s position. 

8.  That development is this.  The Official Receiver, in writing in to indicate his views as to whether or not the order sought should be granted, also indicated that his costs had in fact exceeded the amount of the deposit.  The Official Receiver’s costs, which the Official Receiver seeks to have assessed by way of a gross sum order, are $20,000.  The Official Receiver has provided a breakdown of such costs and these relate to his attendance on the first hearing of the petition and several subsequent hearings of it, and also some costs in relation to engaging in correspondence and preparation for the hearing and looking into this matter. 

9.  Having considered the work that has been done by the Official Receiver, the amount of $20,000 does not appear to be unreasonable and I would be prepared to make a gross sum order in this amount in favour of the Official Receiver, so that he will be entitled to recover his costs in this matter in the gross sum of HK$20,000.

10.  The complication that this causes is that this amount exceeds the amount of the petitioner’s deposit (which was $12,150) by $7,850.  This additional sum was not taken into account by the petitioner when discussing with the Company the amount of costs payable by the Company to it.  In those circumstances, Mr Hui, for the petitioner, says that while he has no objection to the petitioner paying the Official Receiver’s costs in the first instance, the additional amount of $7,850 that is not already covered by the deposit should also, ultimately, be recoverable by the petitioner from the Company.

11.  Mr Chik, the director of the Company who has appeared before me today, has opposed having to pay any further costs on the Company’s part on the grounds that the payment of $58,000-odd was a full settlement of all costs in relation to these proceedings. 

12.  It seems to me, on the material before me, that it is quite clear that that sum was arrived at on the basis of a mutual assumption – or at least an assumption on the part of the Petitioner and probably also on the part of Mr Chik – that the Official Receiver’s costs were in fact likely to be in an amount that was approximately the same as the deposit.  As far as the parties were aware at that stage, and certainly as far as the petitioner was aware, the amount of the Official Receiver’s costs up to that point were about $12,000.  It was only after the summons was taken out - and in fact, I think, only in the last few days, on receipt of a copy of the letter of the Official Receiver to the court - that the petitioner would have appreciated that the Official Receiver’s costs were in fact in excess of the amount of the deposit.

13.  Given that, in a case such as this where there was an undisputed debt owing to the Petitioner as the foundation of the petition, dismissal of the petition would generally only be granted on terms that the costs of the petition be paid by the Company, subject to any other agreement that might be reached, it seems to me appropriate that the Company should ultimately bear the costs involved in this petition, and to the extent that there are any further costs to be paid as a result of the fact that the Official Receiver’s costs exceed the amount of the deposit paid by the petitioner, it follows, to my mind, that those are costs which should be paid by the Company to the petitioner as well.

14.  It therefore seems to me that any agreement that was reached as to costs was have been reached on the basis of an assumption, which subsequently proved to be incorrect, as to the level of the Official Receiver’s costs, that the petitioner is in no way to blame for that situation having arisen and, in the circumstances, the usual order as to costs that would have been made in a case such as this should be made.

15.  I will therefore rescind the winding-up order made on 8 January 2007 and dismiss the petition.  I will make an order that the Official Receiver’s costs in this proceeding, inclusive of the costs of this application which are assessed in the amount of HK$20,000, are to be deducted, so far as possible, from the deposit paid by the petitioner, and that the balance thereof is to be paid by the petitioner to the Official Receiver, but that such balance is to be recoverable by the petitioner from the Company, so that the ultimate effect is that the Company will bear the shortfall of HK$7,850 in respect of the Official Receiver’s costs.