Summit Prestige Enterprises Ltd v. Peak No. 1 Holdings Ltd

HCCW 106, 107, 108, 109/2024

[2024] HKCFI 3392

HCCW 106/2024

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES (WINDING-UP) PROCEEDINGS NO 106 OF 2024

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AND

HCCW 107/2024

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES (WINDING-UP) PROCEEDINGS NO 107 OF 2024

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AND

HCCW 108/2024

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES (WINDING-UP) PROCEEDINGS NO 108 OF 2024

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AND

HCCW 109/2024

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES (WINDING-UP) PROCEEDINGS NO 109 OF 2024

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DECISION ON COSTS[1]

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1.In the PLs Decision, this Court made a costs order nisi in respect of the Continuation Summonses and the Discharge Summonses that (1) the Purported Directors are not entitled to recover their costs from the estate of the Companies; (2) the Petitioners’ and the Companies’ costs be costs in the Petitions; and (3) the Official Receiver’s costs be costs in the Petitions.

2.By summonses dated 23 April 2024 (as amended by summonses dated 31 May 2024) (“Variation Summonses”), the Petitioners apply for (1) leave to join Mr Wong and KBCC as parties for the purpose of costs only, and (2) variation of the costs order nisi so that (a) the costs of the Continuation Summonses and Discharge Summonses be paid by Mr Wong on an indemnity basis; and (b) the costs of the Discharge Summonses be paid by KBCC on an indemnity basis, the latter as a wasted costs order under Order 62 rule 8.

3.In the Variation Summonses, the Petitioners also ask for costs against the Purported Directors. The application is abandoned by the Petitioners, having regard to the time and costs involved in effecting service of the Variation Summonses out of the jurisdiction and the lack of information regarding the whereabouts of the Purported Directors and their financial means.

Overview

4.There is no issue as regards the joinder of Mr Wong and KBCC for the purpose of costs, and the parties have agreed on directions for filing of evidence. The only issue dividing the parties is whether there is any proper basis for the court to order Mr Wong and/or KBCC to pay the costs of the Continuation Summonses and the Discharge Summonses.

5.Mr Nigel Francis, solicitor for the Petitioners, submits that there are 2 main reasons why costs should be awarded against Mr Wong:

(1)  Mr Wong is a “real party” in these proceedings. He is a shadow director who instructed the Purported Directors to oppose the Continuation Summonses and issue the Discharge Summonses. This is consistent with (a) the Decision dated 29 February 2024 in HCMP 1015/2023 where the Recorder recognized Mr Wong as the mastermind behind the obstructions to CPG’s liquidation; and (b) Mr Wong’s contumelious conduct in respect of CPG, the Petitioners and the Companies including using the Purported Directors to achieve that purpose as the court found in §70(3) of PLs Decision.

(2)  Mr Wong was awarded costs in HCCW 67/2022 against the Liquidators. If costs are awarded against Mr Wong in these proceedings, such costs can be set-off against the costs payable by the Liquidators (and hence CPG) to Mr Wong.

6.Mr Chris Dobby, solicitor advocate for Mr Wong, submits that there is no basis to order costs against Mr Wong for the following reasons:

(1)  The assertions that Mr Wong is a shadow director and that the Purported Directors acted pursuant to his instructions are bare assertions and not supported by any admissible evidence.

(2)  The fact that Mr Wong is present in Hong Kong, may have assets of value and that he was awarded costs in HCCW 67/2022 are irrelevant to the question as to whether Mr Wong should be ordered to pay costs.

7.As for KBCC, Mr Francis submits that a wasted costs order should be made against KBCC given that:

(1)  The Purported Directors did not have authority to act for the Companies. Upon appointment of the Liquidators, there was no basis for KBCC to assume that Wang/Hsieh (or, indeed, any of the Purported Directors) had authority to act for the Companies, whether on the basis of the purported resolutions said to have been provided to KBCC or the articles of association of the Companies.

(2)  KBCC cannot hide behind counsel’s advice when no such advice has been produced as evidence. This is particularly so when the Petitioners’ solicitors, Messrs. YTL LLP (“YTL”), had since December 2023 issued multiple letters to warn KBCC on their lack of authority to act on behalf of the Companies, all of which were ignored by KBCC.

8.Mr Kin Choi, solicitor for KBCC, submits that a wasted costs order should not be made against KBCC for the following reasons:

(1)  KBCC had received documents showing the authority of the Purported Directors viz., (a) signed board resolutions appointing the directors, (b) consent to act as Director signed by each of the directors, and (c) articles of association of each of the Companies, all of which were on their face regular.

(2)  All documents in KBCC’s possession had been provided to Mr Victor Joffe SC and Mr Martin Kok, who were counsel for the Companies, and counsel did not advise that the Purported Directors might not have proper authority to act for the Companies.

(3)  The Petitioners never issued any summons to set aside the Discharge Summonses for want of authority.

(4)  It does not appear that the Petitioners have incurred much costs in dealing with the Discharge Summonses and, as such, it cannot be said that KBCC’s conduct has caused the Petitioners to incur any wasted costs.

Applicable Principles

9.The court has jurisdiction to order costs against a non-party under s.52A(2) of the High Court Ordinance (Cap. 4) (“HCO”):

“Without prejudice to the generality of subsection (1), the Court of Appeal or the Court of First Instance may, in accordance with rules of court, make an order awarding costs against a person who is not a party to the relevant proceedings, if the Court of Appeal or the Court of First Instance, as the case may be, is satisfied that it is in the interests of justice to do so.”

10.Before the court exercises the power under s.52A of the HCO, the non-party needs to be joined for the purpose of costs only. Order 62 rule 6A of the Rules of the High Court provides that:

“(1) Where the Court is considering whether to exercise its power under section 52A or 52B of the [HCO] to make a costs order in favour of or against a person who is not a party to the relevant proceedings—

(a) that person must be joined as a party to the proceedings for the purposes of costs only; and

(b) that person must be given a reasonable opportunity to attend a hearing at which the Court shall consider the matter further.”

11.In other words, an application under s.52A of the HCO involves 2 stages:

(1)  In the 1^st stage, the court considers whether the non-party should be joined for the purpose of costs. The applicant does not need to show an arguable case. Nor is it open to the non-party to challenge the application on the ground that he has “no real prospect of success”. The court will only refuse joinder if it is plain and obvious that the application amounts to an abuse of process.

(2)  In the 2^nd stage, the non-party joined as defendant for the purpose of costs will show cause as to why no costs order should be made against him. The overall consideration is whether it is in the interest of justice to make such an order.

12.The relevant principles governing the exercise of the discretion to order costs against non-party have been sufficiently stated in Dymocks Franchise Systems (NSW) Pty Ltd v Todd & Ors [2004] 1 WLR 2807, §25 (as applied in Leung Chung Ching Edwin v Estate of Leung On Mei Amy [2016] 2 HKLRD 365, §47):

“(1) Although costs orders against non-parties are to be regarded as ‘exceptional’, exceptional in this context means no more than outside the ordinary run of cases where parties pursue or defend claims for their own benefit and at their own expense. The ultimate question in any such ‘exceptional’ case is whether in all the circumstances it is just to make the order. It must be recognised that this is inevitably to some extent a fact-specific jurisdiction and that there will often be a number of different considerations in play, some militating in favour of an order, some against.

(2) Generally speaking the discretion will not be exercised against ‘pure funders’, described … as ‘those with no personal interest in the litigation, who do not stand to benefit from it, are not funding it as a matter of business, and in no way seek to control its course.’ …

(3) Where, however, the non-party not merely funds the proceedings but substantially also controls or at any rate is to benefit from them, justice will ordinarily require that, if the proceedings fail, he will pay the successful party’s costs. The non-party in these cases is not so much facilitating access to justice by the party funded as himself gaining access to justice for his own purposes. He himself is ‘the real party’ to the litigation, a concept repeatedly invoked throughout the jurisprudence … Nor, indeed, is it necessary that the non-party be ‘the only real party’ to the litigation … provided that he is ‘a real party ... in very important and critical respects’.

(4) Perhaps the most difficult cases are those in which non-parties fund receivers or liquidators (or, indeed, financially insecure companies generally) in litigation designed to advance the funder's own financial interests … their Lordships would hold that, generally speaking, where a non-party promotes and funds proceedings by an insolvent company solely or substantially for his own financial benefit, he should be liable for the costs if his claim or defence or appeal fails. As explained in the cases, however, that is not to say that orders will invariably be made in such cases, particularly, say, where the non-party is himself a director or liquidator who can realistically be regarded as acting rather in the interests of the company (and more especially its shareholders and creditors) than in his own interests.” (underlined added)

13.An important aspect which the court would take into account is due administration of justice. This has been explained by the Court of Final Appeal in The Liberty Container (2007) 10 HKCFAR 256, §§30-33 in this way:

“30. … Funding a litigant who could not otherwise afford to litigate facilitates access to justice. But access to justice is not the only objective to be considered. The due administration of justice involves many other objectives. These include: discouraging ill-founded claims and defences; compensating in costs litigants put to expense in the successful pursuit or defence of a claim; and leaving the control of a claim or defence in the hands of the person whose claim or defence it is. Just as it would be inimical to access to justice if all funders were seriously exposed to costs orders, so would it be inimical to these other objectives if no funder could be ordered to pay costs. No perfect solution has been found. But the balance which has emerged from cases like Knight, Hamilton and Dymocks provides, in our view, a good general guide when deciding whether or not to order costs against a funder who comes within the scope of s.52A.

31. This balance involves drawing a distinction between, on the one hand, a pure funder who funds litigation to facilitate access to justice by the funded litigant and, on the other hand, a self-interested funder who funds litigation not so much to do that as to gain access to justice for his own purposes. We hesitate to adopt or devise anything as a hard and fast test for deciding who is or is not a pure funder. But we think that the courts can usefully guide themselves by normally treating as pure funders those and only those who have no personal interest in the litigation, do not seek to benefit from it, are not funding as a matter of business and do not seek in any way to control its course. On this basis, a creditor who funded litigation for the benefit of the general body of creditors including himself is not a pure funder …

33. At least normally, costs should not be ordered against a pure funder even though that regrettably leaves the funded litigant’s successful opponent uncompensated in costs. But justice will normally require that a self-interested funder whom the law can reach be ordered to pay the costs of the funded litigant’s successful opponent.” (underlined added)

14.The court would look at the circumstances of the case to ascertain whether the non-party was the driving force behind the litigation and involved in it in such a way and to such an extent that he should be made liable for costs (Leung Chung Ching Edwin, §49).

15.As regards wasted costs order, Order 62 rule 8 provides that:

“(1) The Court may make a wasted costs order against a legal representative, only if–

(a) the legal representative, whether personally or through his employee or agent, has caused a party to incur wasted costs as defined in section 52A(6) of the [HCO]; and

(b) it is just in all the circumstances to order the legal representative to compensate the party for the whole or part of those costs.

(2) A wasted costs order may–

(a) disallow the costs as between the legal representative and his client; and

(b) direct the legal representative to–

(i) repay to his client costs which the client has been ordered to pay to other parties to the proceedings; or

(ii) indemnify other parties against costs incurred by them.”

16.“Wasted costs” is defined in s.52A(6) the HCO as:

“… any costs incurred by a party as a result of–

(a) an improper or unreasonable act or omission; or

(b) any undue delay or other misconduct or default,

on the part of any legal representative, whether personally or through an employee or agent of the legal representative.”

17.In considering whether to make a wasted costs order, the court has to consider 3 questions:

(1)  Whether the solicitor was responsible for (a) acting improperly or without reasonable cause; or (b) undue delay or other misconduct or default in any proceedings;

(2)  Whether the conduct of the solicitor caused costs to be incurred or wasted so that there was a causal link between the conduct and the costs incurred; and

(3)  Whether the court should exercise its discretion to make a wasted costs order against the solicitor (Ma So So v Chin Yuk Lun & Anor (2004) 7 HKCFAR 300, §6).

18.The wasted costs jurisdiction is compensatory but also punitive in nature to the extent that it shifts the burden of costs from a party that would otherwise be liable onto the solicitor. The jurisdiction is summary in nature and should be exercised in “clear cases” where the need for a wasted costs order is “reasonably obvious” (Ma So So, §§7-9).

19.Where a solicitor institutes or continues proceedings without authority, he acts “improperly or without reasonable cause” (Ma Hing Yin Caroline v Crowncity Engineering Ltd & Ors HCPI 83/2005, 16 May 2006, §17). A solicitor purported to act for a client in an action when he did not have such authority acted in breach of the implied warranty. The court would normally order him to personally to pay the costs needlessly incurred by the opposing party. It matters not whether the solicitor acted bona fide and in reasonable reliance of the instructions; or that he had been deceived into believing that he had the authority to act for the client; or that he quite innocently did not know that there was no authority or the authority once existed had ceased to exist (Grand Field Group Holdings Ltd v Tsang Wai Lun & Ors [2010] 4 HKLRD 487, §12, per Poon J (as he then was)).

Non-party costs order against Mr Wong

20.I do not think that there is a proper basis for this Court to hold that Mr Wong was a shadow director of the Companies for the purpose of the Variation Summonses. No such allegation was made by the Liquidators in the affirmations filed in respect of the Continuation Summonses. Nor did the court make any such finding in the PLs Decision. I would however emphasize that this view is only based on the evidence before the court at the time the Continuation Summonses and the Discharge Summonses were heard and determined. It would not preclude the Liquidators or the court from coming to a different view having regard to the evidence available to them.

21.For the reasons set out in §§22-24 below, I consider that this is an exceptional case which warrants the court exercising the discretion to order Mr Wong, a non-party, to pay the costs of and occasioned by the Petitioners in the Continuation Summonses and the Discharge Summonses.

22.First, I agree with the Petitioners’ contention that Mr Wong had substantial involvement in, and was a real party to, the Continuation Summonses and the Discharge Summonses, having regard to the following findings in the PLs Decision:

(1)  Despite the appointment of the Liquidators, the Companies and the subsidiaries holding the Chongqing Projects remained under the control of, inter alios, Mr Wong (one of the Former Directors of CPG) in the past 10 months, which necessitated the court making the Appointment Orders on an ex parte basis (PLs Decision §§17, 35-46, 59, 69).

(2)  The extensive actions taken by Mr Wong and his associates to prevent the Liquidators from taking control over the Petitioners and the Companies, both before and after the 15 Sept Order, left the court with much unease that if the Purported Directors were allowed to remain in their position, they would do anything to fit their own or Mr Wong’s purposes and without any regard to the interests of CPG or the Companies; and they would take steps to nullify any order which would be made by the court after hearing the parties’ arguments (PLs Decision §70).

(3)  The Purported Directors were appointed as a result of the actions taken by the Former Directors including Mr Wong, and they have been taking steps to prevent the Liquidators from gaining control over the Companies at the behest of Mr Wong (PLs Decision §§53-58, 65, 72).

(4)  The purpose of the Discharge Summonses was to set aside the Appointment Orders so that the Purported Directors could continue to control the Companies to the exclusion of the Liquidators. The only inference which can be drawn is that it was Mr Wong who caused the Discharge Summonses to be issued given that (a) this was what Mr Wong had been doing since the appointment of the Liquidators through the various acts described in the PLs Decision; (b) apart from having their names be listed as additional directors, it does not appear that the 4 Appointees had any substantive involvement qua directors of the Companies; and (c) similarly, apart from being purportedly appointed as directors of the Companies on 10 August 2023 and 11 September 2023 (PLs Decision §59), there is no evidence to suggest that either Wang or Hsieh has any interest or substantive role in the Companies.

23.Second, although there is no evidence to suggest that Mr Wong was the funder of the opposition to the Continuation Summonses and the pursuit of the Discharge Summonses[2], it was Mr Wong who would stand to benefit if the Appointment Orders were set aside so that the Companies would remain under the control of the Purported Directors who were his close associates (as I so find). Justice would require that when the opposition fails, Mr Wong should be ordered to pay the costs of the Petitioners who were the successful parties.

24.Third and just as importantly, the costs order against Mr Wong is necessary for due administration of justice as it would discourage the former directors of a company in liquidation from taking steps to obstruct the liquidators’ effort in taking control over the company and its direct and indirect subsidiaries, even if the steps were carried out through their close associates who were put up as directors of the subsidiaries concerned.

25.For completeness, I do not think that the existence of the costs order in favour of Mr Wong to be relevant to the issue I have to decide. The costs order in HCCW 67/2022 was made by the Recorder after considering the merit of the applications before him. The Liquidators did not challenge the costs order.

Wasted costs against KBCC

26.In my view, the Petitioners should be compensated for the wasted costs occasioned by the Companies’ opposition to the Appointment Orders on an indemnity basis.

27.As regards acting improperly or unreasonably, KBCC clearly did not have proper authority to act on behalf of the Companies:

(1)  Upon the Liquidators’ appointment, they are the only persons entitled to take control over the Companies. The Purported Directors (including Wang/Hsieh) have not established that they had been properly appointed as directors of the Companies (PLs Decision §§2, 9-12, 63).

(2)  Since 31 May 2023 (date of the WU Order), the Former Directors of CPG ceased to have any power to pass any resolutions in respect of CPG other than for the limited purpose of the WU Appeal. Consequently, Tiffany Wong remains the sole director of the Petitioners (pursuant to the resolutions passed by the Liquidators appointing her as such director), and neither Wang nor Hsieh (or for that matter, Yu/Ho) were properly appointed as directors of the Petitioners. (PLs Decision §46).

(3)  Consistent with this, at the hearing on 20 November 2023, Wallbank J of the BVI court observed that the Liquidators were entitled to, inter alia, procure CPG to exercise its right qua shareholder of the Petitioners without first seeking an order for recognition or assistance from the BVI court (PLs Decision §48).

(4)  At the hearing of the s.570 Application on 6 December 2023 before the Recorder, the position was made even more clear given that (a) Mr Wong, George Wang and Mr Xu were subject to undertaking or injunction not or hold themselves out as directors of CPG or to vote on CPG’s shares in the Petitioners; and (b) the Recorder observed that as a matter of Hong Kong law, since 24 July 2023, Tiffany Wong had been the sole director of each of the Petitioners (PLs Decision §54(1)-(2), (5)).

28.Even if there were any basis for KBCC to assert that they did not understand or know the legal position described in the preceding paragraph, it was incumbent upon KBCC to take legal advice but they chose not to do so. To the contrary, KBCC continued to act on the instructions of Wang/Hsieh as if the Former Directors had the power to appoint Yu/Ho as directors of the Petitioners who, in turn, had the power to appoint Wang/Hsieh as directors of the Companies. KBCC even went so far as to give notices on 15 December 2023 to convene EGMs of the Companies for the purpose of appointing the 4 Appointees as directors.

29.The Liquidators through the letter of YTL dated 21 December 2023 specifically drew to the attention of KBCC that Wang/Hsieh had not been properly appointed as directors of the Companies, with reasons and supporting documents, and stated inter alia that:

(1)  Tiffany Wong’s capacity as the sole director of the Petitioners had been “confirmed unconditionally by the Hong Kong Court and, in effect, also the BVI Court following the absolute dismissal of the interlocutory injunction application for which no appeal has been lodged”. Copy of the transcripts of the hearing on 20 November 2023 in the BVI court was enclosed (§3);

(2)  Tiffany Wong as sole director of the Petitioners “did not appoint, approve retrospectively or otherwise acquiesce to the purported appointment of [Wang] and [Hsieh] to any of the [Petitioners] or, indeed, any [Companies]” (§8);

(3)  As KBCC claimed that they had been satisfied with their “warranty of authority”, they should provide complete copies of all documentation relating to (a) the appointment of Wang/Hsieh as duly appointed officers of the Petitioners; (b) the request allegedly made by Wang/Hsieh to each of Yu and Ho asking them to resign as directors of the Companies; and (c) the appointment of Wang/Hsieh as directors of each of the Companies including the Form ND2As filed at the Companies Registry on 6 October 2023 (§9); and

(4)  KBCC should also provide (a) a written explanation (with supporting documents) of the circumstances by which Wang/Hsieh had been allegedly appointed as directors of the Companies; and (b) written confirmation whether KBCC were solely taking instructions from Wang/Hsieh (§18).

30.KBCC did not provide any of the documents requested by the Liquidators. Instead, in their letter dated 3 January 2024, KBCC provided their response to the “various requisitions” raised in YTL’s letter of 21 December 2023 in this way:

(1)  Wang/Hsieh had been appointed by Yu/Ho pursuant to article 20(1)(b) of the articles of association of the Companies. KBCC had sight of the board resolution executed by Yu/Ho regarding the appointment but would not provide them to the Liquidators (§3); and

(2)  There was “no lack of clarity in relation to the composition of [the Companies’] board of directors” as alleged by the Liquidators, and they denied that the Companies did not have “validly appointed directors” (§5).

31.It is clear from KBCC’s letter of 3 January 2024 that they had all the time and opportunity to consider the issue of authority including the views expressed by the courts in the BVI and Hong Kong, but decided that the Wang/Hsieh had been properly appointed as directors of the Companies.

32.At the hearing, Mr Choi does not dispute that the burden is on KBCC to demonstrate that they had proper authority to act for the Companies in these proceedings. He submits that although this Court found that the Purported Directors had not been properly appointed, “on paper”, they had been “legally appointed”. The papers which KBCC relied on are:

(1)  the written resolutions passed by all the directors of the Companies on 23 September 2023 resolving to appoint Wang/Hsieh as directors in place of Yu/Ho, which was signed by Yu/Ho qua directors; and

(2)  article 20(1)(a) of the articles of association of the Companies which provides that the director may appoint a director by an ordinary resolution or a decision.

33.Mr Choi submits that having been provided with these papers, there was no reason for KBCC to question the authority of Wang/Hsieh. I have no hesitation in rejecting the submission.

(1)  The burden is on KBCC to satisfy themselves that Wang/Hsieh had proper authority to act on behalf of the Companies. Mr Choi has not been able to articulate any point in answer to the want of authority for the reasons stated in §27 above.

(2)  Where, as here, the solicitors instituted or continued proceedings without authority, they acted “improperly or without reasonable cause” for the purpose of Order 62 rule 8 (Ma Hing Yin Caroline, see §19 above). It does not matter whether the solicitors acted bona fide and in reasonable reliance of the instructions (Grand Field).

(3)  In any event, the contention that KBCC were entitled to rely on the papers as evidence of proper authority cannot be accepted. As can be seen from the correspondence summarized in §§29-30 above, KBCC had been told by the Liquidators, with detailed reasons and supporting documents, as to why (a) the Former Directors had no power to appoint anyone as directors of the Petitioners; (b) only Tiffany Wong qua sole director of the Petitioners could appoint any director of the Companies; and (c) she never appointed Yu/Ho or any of the Purported Directors as directors of the Companies. The correspondence show that KBCC had considered the Liquidators’ reasons but decided to continue to act as if Wang/Hsieh had been properly appointed as directors, rather than just relying on the papers as suggested by Mr Choi.

34.Mr Choi also contends that KBCC relied on leading counsel/counsel’s advice in deciding to oppose the Appointment Orders. No such advice has been produced in the affirmation filed by KBCC for the purpose of showing cause. Upon questioned by this Court, it transpires that KBCC never sought any advice from leading counsel/counsel as to whether KBCC had proper authority to act on behalf of the Companies. Rather, Mr Choi surmises that since KBCC provided “all the documents” (which had not been identified) to counsel in relation to these proceedings, if there was a problem on authority, counsel would have raised it but they never did. I am unable to see how Mr Choi can contend that KBCC relied on counsel’s advice when no advice has ever been sought on the question of KBCC’s authority to act for the Companies.

35.As for “causation”, Mr Choi submits that KBCC did not cause the Petitioners to incur any or any significant costs given that (1) the Continuation Summonses had to be issued and the Petitioners had to instruct counsel to appear at the hearing; (2) the Discharge Summonses were only issued on 5 March 2024, 2 days before the hearing on 7 March 2024; and (3) no further affirmation and further submissions were filed by the Petitioners in response to the Discharge Summonses.

36.Mr Francis readily accepts that the Continuation Summonses had to be issued and the Petitioners did not file any further affirmation or submissions in response to the Discharge Summonses. However, immediately after the documents used at the ex parte hearing had been served on KBCC on 26 February 2024, KBCC in their letter dated 27 February 2024 stated that they acted for the Companies and the Companies would seek to set aside the Appointment Orders. As a result of KBCC deciding to continue to act for the Companies and taking the aggressive stance of seeking to set aside the Appointment Orders, the Petitioners and their legal team had to spend much time and costs in dealing with the intended discharge summonses, which were filed and served on 5 March 2024.

37.KBCC’s letter of 27 February 2024 was couched in very strong terms:

“Our clients consider that the [Appointment Orders] to be irregular and highly problematic, and are liable to be set aside. In particular, we are instructed that the petitions were filed without proper authority of the [Petitioners] and full and frank disclosures.

Our clients are actively considering an application to discharge and/or appeal against the [Appointment Orders], and expressly reserve their right to seek personal costs order against non-parties who purportedly acted with [sic] the authority of the petitioners. In the interim, we ask your clients not to take steps in furtherance of the [Appointment Orders] pending our clients’ intended application.” (underlined added)

38.The letter shows that KBCC were alive to the issue of authority and the costs consequence for acting without authority. It also confirms that KBCC were prepared to ignore the warnings given by the Liquidators and continued to act in accordance with the instructions given to them regardless of whether their clients had the proper authority to give such instructions. As a result of the conduct of KBCC, the Petitioners had to incur additional costs in dealing with the opposition to the continuation of the Appointment Orders and the Discharge Summonses. Having conducted the proceedings in this manner, I do not see how KBCC can contend that their conduct did not cause any wasted costs to have been incurred.

39.This is a paradigm case where the court should exercise its discretion to make a wasted costs order on an indemnity basis against KBCC to reflect the disapproval of the court over their conduct in these proceedings.

Conclusion

40.For the reasons set out above, I order that Mr Wong and KBCC be joined as parties for the purpose of costs only, and the costs order nisi be varied to the following extent:

(1)  Mr Wong do pay the costs of and occasioned by (a) the Companies’ opposition to the Continuation Summonses from 27 February 2024, and (b) the Discharge Summonses, on an indemnity basis, to be assessed by way of gross sum assessment.

(2)  KBCC do pay the costs of and occasioned by the Discharge Summonses from 27 February 2024 on an indemnity basis, to be assessed by way of gross sum assessment.

41.As for costs of the Variation Summonses, I order Mr Wong and KBCC to pay the costs of and occasioned by the Variation Summonses on a party and party basis, to be assessed by way of gross sum assessment.

42.For the purpose of summary assessment of costs, the Petitioners do provide their statement of costs within 7 days from the date of this Decision. Mr Wong and KBCC do provide their comments, if any, within 7 days thereafter. The costs will be assessed on paper.

Mr Nigel Francis, of YTL LLP, for the Petitioners in all proceedings

Mr Chris Dobby (Solicitor Advocate), of Hogan Lovells, for Mr Wong Sai Chung in all proceedings

Mr Kin Choi, of K.B. Chau & Co., for K.B. Chau & Co. in all proceedings