Re Nimble Holdings Co Ltd Formerly Known As the Grande Holdings Ltd

HCCW 177/2011

[2021] HKCFI 1668

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES WINDING-UP PROCEEDINGS NO 177 OF 2011

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D E C I S I O N

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1.I have before me an application by the Company which was formerly known as The Grande Holdings Limited for an order for the payment out of HK$1 million from HK$34 million currently in court to repay the Company for an equivalent sum which it paid to Deloitte Touche Tohmatsu (“Deloitte”) in the following circumstances.

2.The Company was restructured by a scheme of arrangement that was sanctioned on 15 April 2016.  Prior to the Scheme being successfully introduced, attempts had been made by the provisional liquidators of the Company to formulate a restructuring proposal and progress the resumption of trading of the Company’s shares.  The process involved acrimonious exchanges with the owners of the Company and companies associated with the owners.

3.Negotiations led to an arrangement being entered into for the financing of a restructuring which culminated in the signing of an Amended Restructuring Agreement (“Restructuring Agreement”) on 14 December 2015.  The relevant section of that agreement is Clause 3 which dealt with the costs of the restructuring.  In summary, it provided that costs up to a total of HK$45 million would be paid by a combination of the Company and an associated company—Sino Bright Enterprises Co Ltd (“Sino Bright”).

4.The particular provision which is relevant to the present application is clause 3.2 which reads as follows:

“The Provisional Liquidators agree that the costs and expenses of the Company and fees of the Provisional Liquidators incurred after 16 December 2013 in and about the finalization and/or implementation of the Restructuring Proposal, including the reasonable fees and expenses of the legal advisers, auditors, valuers, financial adviser, independent financial adviser, internal control consultant, share registrar, share transfer agent and other professionals and agents necessarily engaged by the Company in connection therewith and all filling and recordal fees and charges necessitated thereby, whether in relation to satisfying the requirements of the Stock Exchange or any other regulator, or the Takeovers Code shall be capped at HK$45 million (the ‘Costs and Expenses’).”

5.As can be seen clause 3.2 purports to identify the costs which it was anticipated would be incurred and were to be capped at HK$45 million.  The questions that have to be answered in order to determine the application is first, whether the costs of the Scheme Administrators, Deloitte, were included in clause 3.2 and secondly, whether, if not, they were covered by the scheme.  I deal with the terms of the scheme of arrangement in more detail later.

6.The Company argues that it is clear from the term sheet appended to the operative terms of the Restructuring Agreement that the restructuring costs covered by clause 3.2 extended to the costs of introducing and implementing a scheme.  It is clear that clause 3.2 did not itself expressly refer to Scheme Administrators or their costs, but the Company contends that it is clear from the scope of the Restructuring Agreement, and in particular the detailed reference to the scheme in the term sheets and the wide language used in clause 3.2, that it must have been intended that the costs to be paid by the Company and Sino Bright, extended to the Scheme Administrators’ costs which were capped at HK$45 million.

7.Subsequently, as I have mentioned, Deloitte were engaged by the Company.  The Company has paid Deloitte’s fees.  It has previously been agreed that a proportion of those costs should be paid and settled out of the money that is in court.  However, in respect of this remaining amount of HK$1 million, the provisional liquidators have not been prepared to agree to the Company being reimbursed and argue that it is clear that either the Restructuring Agreement or the terms of the scheme, require those costs to be borne by the Company in addition to the sum of HK$45 million.

8.I do not understand there to be any dispute about the principles by reference to which the court determines issues of construction.

(1) The overriding objective in construction is to give effect to what a reasonable person would have understood the parties to mean having regard, not merely to the individual words they have used, but to the agreement as a whole, the factual and legal background against which it was concluded and the practical objects which it was intended to achieve.[1]

(2) In serious utterances such as legal documents, people may be supposed to have chosen their words with care.  If the ordinary meaning of the words makes sense in relation to the rest of the document and the factual background, then the Court will give effect to that language, even though the consequences may appear hard for one side or the other.[2]

(3) The law excludes from the admissible background the previous negotiations of the parties and their declarations of subjective intent.  They are admissible only in an action for rectification.[3]

(4) Likewise, it is not permissible to take into account subsequent conduct of the parties as an aid in construing the contract or in determining whether an inference can be drawn as to their intention when they entered into the contract.[4]

9.The relevant background information to which the court in my view can properly have regard is fairly limited.  It is as follows. First that the parties involved are sophisticated and they had all instructed sophisticated commercial lawyers to advise them.  Secondly, one can see that the figure of HK$45 million was built up over time to cover particular items that are described in schedules that were exchanged between the parties.  The schedules did not make express reference to the costs of a Scheme Administrator.

10.It seems to me that the better construction is that clause 3.2 did not include the Scheme Administrators’ costs.  I reach this conclusion principally because the inclusion of Scheme Administrators is something sufficiently obvious that its omission is more consistent with it being consciously admitted, at least by the provisional liquidators, rather than because the parties were aware that such costs would be incurred, but thought they were covered by the general wording of clause 3.2.

11.That being the case it follows that I decline to grant the application that has been made.  There is, however, an alternative route by which I conclude that the Scheme Administrators’ costs cannot be recovered by the Company out of the money paid in the court.  The terms of the scheme, in my view, clearly distinguish between the restructuring costs and the scheme administration costs and do not treat the latter as forming part of the former.

12.The definition section of the scheme contains a definition of restructuring costs which mirrors the definition in the Restructuring Agreement.  However, it also includes a definition of scheme administration costs.  The two categories of costs are treated as separate in the operative clauses of the scheme, namely, clauses 13, 24 and 58.  It seems to me clear that under the scheme the restructuring costs do not include the scheme administration costs.  Mr Lee very fairly accepted that even if I agreed with his construction of clause 3.2, but concluded that the scheme was to be construed as I have found it should be construed, the terms of the scheme, being subsequent to the Restructuring Agreement, were determinative of the application.

13.I, therefore, will dismiss the summons and unless somebody wants to argue otherwise order that the costs are paid by the Company to the provisional liquidators forthwith, such costs to be taxed if not agreed with a certificate for one counsel.

Mr Jason Lee, instructed by Johnnie Yam, Jacky Lee & Co, for the company

Attendance of Johnnie Yam, Jacky Lee & Co, for Sino Bright Enterprises Co Ltd, was excused

Mr William Wong SC and Mr Look Chan Ho, instructed by Michael Li & Co, for the former provisional liquidators