Re Primlaks (H.K.) Ltd (in Liquidation)

HCCW 258/2018

[2024] HKCFI 2156

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES WINDING-UP PROCEEDINGS NO. 258 of 2018

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DECISION ON COSTS

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A.  PROCEDURAL HISTORY

1.By Decision dated 12 March 2024 (“Decision”), I dismissed the summons dated 23 June 2023 (“Reversal Summons”) taken out by the Petitioner to reverse the decision of the Joint and Several Liquidators (“Liquidators”) in their Notice of Adjudication of Proof of Debt dated 2 June 2023 to reject a claim of HK$15,812.21 and a claim of US$8,325,712.75. At the same time, the Petitioner’s Further Evidence Summons dated 6 December 2023 (as defined in paragraph 10 of the Decision) was also dismissed.

2.In the Decision, I made a costs order nisi that the Petitioner shall pay the costs of and occasioned by the Reversal Summons and also the Further Evidence Summons (including all costs reserved) to the Liquidators, to be taxed if not agreed (“Costs Order Nisi”).

3.By summons dated 25 March 2024, the Liquidators applied to vary the Costs Order Nisi such that the costs of the Reversal Summons and Further Evidence Summons be summarily assessed and payable forthwith (“Variation Summons”).

4.By letters dated 12 and 16 April 2024 from the Court, parties were directed to lodge written submissions and file statements of costs (“Directions”). As indicated in the letter dated 12 April 2024, while the Liquidators’ summons dated 25 March 2024 only referred to the application for summary assessment, it appeared from the Liquidators’ solicitors’ letter dated 25 March 2024 that they also sought to vary the Costs Order Nisi with a view to including costs of the following summonses, which had previously been reserved (“Reserved Costs Application”):

(1)  The Petitioner’s summons dated 12 May 2023 to apply for an order for the Liquidators to provide adjudication on the Proof of Debt (as defined in Decision §6) (“Adjudication Summons”); and

(2)  The Liquidators’ summons dated 28 November 2023 to apply for Ashok to attend the hearing of the Reversal Summons for cross-examination (“Cross-Examination Summons”).

5.By letter dated 12 April 2024, the Petitioner’s solicitors informed the Court that their client “wishes to claim costs in respect of the Reserved Costs Application”. Directions were given for the parties to make submissions and also provide the relevant statements of costs in respect of the above applications. In the circumstances, although no summons has been filed by the Petitioner for any application to vary the Costs Order Nisi, the Petitioner is taken to have made such an application, in view of its solicitors’ letter dated 12 April 2024 (as mentioned above) and also the fact that the Liquidators’ submissions have already addressed the Petitioner’s arguments on costs in this regard.

6.By summons dated 26 April 2024, the Liquidators applied for leave to amend their summons dated 25 March 2024 as they sought an additional order for costs to be assessed on an indemnity basis (“Amendment Summons”).

B.  ISSUES FOR DETERMINATION

7.In these circumstances, the following issues arise for my determination:

(1)  Whether summary assessment is appropriate.

(2)  How the Reserved Costs Application should be resolved.

(3)  Whether the Costs Order Nisi should be varied for costs to be awarded on an indemnity basis.

C.  ANALYSIS

C1.  Whether summary assessment is appropriate

8.It is common ground that the court has jurisdiction under Order 62 rule 9(4)(b) of the Rules of High Court (Cap. 4A) (“RHC”) to order summary assessment in lieu of taxation for non-interlocutory applications.

9.Order 62 rule 9C(1)(a) provides that no direction or order may be made for summary assessment if “the paying party shows substantial grounds for disputing the sum claimed for costs that cannot be dealt with summarily”.

10.Under the Civil Justice Reform, the court is encouraged to order immediate payment of costs of interlocutory proceedings, and if possible, by way of summary assessment of costs: Midland Business Management Ltd v Lo Man Kui (No 2) [2011] 2 HKLRD 667 §9 (Johnson Lam J, as he then was).

11.In Beyonics Technology Ltd v Goh Chan Peng (unreported, CACV 244/2014, 13 October 2015), Chu JA (as she then was) took into account the following factors in ordering summary assessment (§§7, 10):

(1)  The short duration of the proceedings, which lasted only for three months with three hearings.

(2)  No complex procedures were involved and the papers were not voluminous.

(3)  Summary assessment of the costs will promote procedural economy and save time and costs, and accord with the underlying objectives in Order 1A.

(4)  The estimated amount of costs was not very substantial.

12.The Liquidators submitted that these factors were equally applicable to the present case. The case lasted for 7 months from the Adjudication Summons to the Reversal Summons. No complex procedures were involved as the matters were determined based on affirmation evidence alone. The papers were not voluminous for a substantive two-day hearing.

13.The Liquidators also pointed out that since I had already determined the Reversal Summons, I should be in as good a position as a Taxing Master to assess the Liquidators’ costs based on the presently available materials, and the parties could avoid spending more time and costs on taxation.

14.In reply, the Petitioner submitted that there appeared to be duplications of costs as between work done by solicitors and work done by counsel and such items should be properly examined by way of taxation.

15.In view of the relatively short duration of these proceedings, the nature of the issues involved and also my previous involvement in hearing and determining this matter, I agree with the Liquidators that summary assessment is appropriate.

C2.  Reserved Costs Application

16.As mentioned above, both parties have claimed costs of and occasioned by the Adjudication Summons and also the Cross-Examination Summons, which are the subject matters of the Reserved Costs Application.

17.The Petitioner submitted that the Adjudication Summons was necessary given the Liquidators’ delay in issuing the adjudication for the proof of debt sought by the Petitioner. It appears that the time taken for the adjudication was partly due to the fact that various requests for documents had been made by the Liquidators. Further, by letter dated 26 April 2023, the Liquidators had indicated to the Petitioner that they expect to issue the final adjudication “within one month” after the Liquidators have received the Petitioner’s response. In the circumstances, it was quite unnecessary for the Petitioner to issue the Adjudication Summons. In any event, the Liquidators’ Notice of Adjudication of Proof of Debt was eventually issued on 2 June 2023 (i.e. shortly after expiry of the one-month period they indicated). In addition, whilst the Petitioner might have considered the issuance of the Adjudication Summons an attempt to press for an early adjudication from the Liquidators, it would hardly serve any meaningful purpose in reality.

18.On the other hand, since the Adjudication Summons could have little utility, the time and efforts that the Liquidators were required to spend on addressing the summons should not be substantial. In this regard, insofar as the Liquidators seek to include costs of preparing the 1^st Affirmation of Kenneth Fung in the costs of the Adjudication Summons, I have some reservations as to the necessity of preparing a detailed affirmation which traverses the minute details of the procedural history. It should be borne in mind that the Liquidators should only be allowed to claim costs reasonably and proportionately incurred for that purpose only.

19.As regards the Cross-Examination Summons, since I have made an order in favour of the Liquidators, there is no reason why costs should not follow the event, regardless of Ashok’s decision not to attend the substantive hearing of the Reversal Summons.

C3.  Whether costs should be awarded on an indemnity basis

20.The mere fact that the Petitioner’s case has been rejected does not per se justify that costs should be awarded on an indemnity basis. It is incumbent upon the Liquidators to demonstrate some exceptional circumstances which could provide good reasons for indemnity costs. The Liquidators have complained about the lack of evidence in the Petitioner’s case and this does not in my opinion render the case an unusual one. In the present case, as shown in the Decision, the Court was required to closely examine all relevant materials before coming to a conclusion. Further, the fact that Ashok chose not to give oral testimony may reflect the Petitioner’s concerns over its own case but it could also have been caused by some other reasons. However, as a result of Ashok’s absence, the substantive hearing was conducted on affidavit evidence without the need to hear and consider oral evidence and no additional costs were unnecessarily incurred accordingly. Moreover, the Court’s decision on the Further Evidence Summons was a case management decision made upon exercising its discretion and it, in my view, cannot be used as a ground in support of an order for indemnity costs.

21.Insofar as the Liquidators also complained that the Petitioner acted in an unreasonable manner by putting undue pressure on the Liquidators to accept its proof through false allegations and repeated threats to seek court orders, I do not consider this alone to constitute a basis for indemnity costs, as this has already been taken into account in my costs order in respect of the Adjudication Summons, as discussed above.

22.In the circumstances, I order that all relevant costs should be awarded on a party and party basis (as opposed to an indemnity basis). Consequently, the Liquidators should not be allowed to claim the costs of the Amendment Summons. Further, insofar as the costs of the Liquidators’ Variation Summons are concerned, although the Liquidators have succeeded in some parts of the application, I am required, in conducting a summary assessment, to take into account the fact that their arguments on indemnity costs (which constituted about 30% of the overall submissions), as explained above, have failed.

23.In passing, I note that the Liquidators have submitted two statements of costs in respect of the Reversal Summons and the Further Evidence Summons (i.e. one for assessment on a party and party basis and one for assessment on an indemnity basis). Apparently, the Liquidators’ statement for assessment of indemnity costs referred to higher hourly rates than those used in the other statement. Nonetheless, I do not think there is any legitimate basis for any party to think that it is entitled to submit larger sums of costs for assessment simply because it seeks to claim costs on a higher basis.

D.  SUMMARY ASSESSMENT AND ORDER

24.Adopting a broad-brushed approach and having considered the parties’ statements of costs (and also their comments on each other’s statements), I summarily assess the costs of and occasioned by the various summonses as follows, (in light of the observations I have made above):

(1)  Reversal Summons and Further Evidence Summons (claimed in the sum of HK$836,483): HK$680,000.

(2)  Adjudication Summons (claimed in the sum of HK$73,995): HK$20,000.

(3)  Cross-Examination Summons (claimed in the sum of HK$159,619): HK$100,000.

(4)  Variation Summons and Amendment Summons (claimed in the sum of HK$132,984): HK$60,000.

25.By reason of the matters stated above, I make an order that the Petitioner shall pay costs summarily assessed in the sum of HK$860,000 to the Liquidators forthwith.

Mr Andrew Nicholas Hart, Solicitor Advocate of Hart Giles, for the Petitioner

Mr Justin Lam and Mr Billy Liu, instructed by J. Chan, Yip, So & Partners, for the Joint and Several Liquidators