Joint Liquidators of Hsin Chong Group Holdings Ltd (in Liquidation) and Others v. Pricewaterhousecoopers (A Firm)

HCMP 260/2021

[2024] HKCFI 336

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 260 OF 2021

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DECISION ON COSTS

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1.At para. 80 of my Decision dated 15 December 2023, I made a costs order nisi. I have received written submissions on behalf of PwC dated 5 January 2024 requesting a variation of the order nisi,and written submissions on behalf of the JLs dated 12 January 2024 opposing any variation. The parties have requested that I decide the issue on paper.

2.The starting-point is that a successful litigant should be awarded their costs of going to court, unless there is good reason otherwise.

3.If litigation is commenced unnecessarily, when a request by correspondence would suffice, then the applicant ought not to be able to recover the costs of such unnecessary litigation. On the basis that PwC provided the AWP in respect of the First Three Problematic Transactions once they had seen Lai 1 which explained the JLs’ reasonable requirements for the same, and that the JLs had failed to provide such explanation to PwC prior to taking out the OS (notwithstanding PwC’s repeated requests), it seems to me that the JLs should not be entitled to the costs of the OS insofar as they relate to the First Three Problematic Transactions. I had this in mind when ordering on a nisi basis that 50% of the costs of Lai 1 should not be recoverable by the JLs from PwC. I remain of that view in respect of the First Three Problematic Transactions and Lai 1.

4.As stated in my Decision, I consider that the JLs did not properly explain their reasonable requirements for the AWP for the PPP until the JLs’ written submissions by counsel dated 22 November 2023 for the purpose of the substantive hearing of the OS commencing on 6 December 2023. I have in my Decision paras. 46-55 recorded the unfolding of the JLs’ reasonable requirements from Lai 1 to Lai 3, and then counsels’ written submissions.  The JLs’ view of their reasonable requirements is a matter to be advanced clearly in order that the respondent may understand the request and/or the court may assess whether or not an order is appropriate under s.286B. That in my view did not happen in this case until the JLs’ counsels’ written submissions were lodged. I am persuaded by PwC that this is a matter to be taken into account when deciding costs.

5.If the JLs had engaged with PwC and, prior to issuing the OS, stated their reasonable requirements for the AWP for the PPP in a manner similar or close to that explained by the JLs’ counsels’ written submissions, then PwC ought to have agreed to provide the documents and, if they had, then there would be no court application and no request for costs. If not, then PwC would bear the JLs’ costs of seeking an order. I am persuaded that PwC should not bear all of the costs of the various formulations of the JLs’ requests until their reasonable requirements were properly stated. However, I note that the OS was still disputed by PwC after the reasonable requirements were articulated, and much of the JLs’ evidence filed was necessary for the determination of the OS. It seems to me that if the JLs’ reasonable requirements had been established more directly, the JLs’ quantity of evidence, and therefore costs of preparation of evidence, ought to have been significantly reduced. I see the argument that PwC has been put to legal expense in responding to the JLs’ evidence which fell short of the mark until late in the day. However, in light of PwC’s continued opposition, PwC’s evidence was in fact still necessary for the hearing of the application. I do not order the JLs to pay any of PwC’s costs. I take a broad-brush approach and will allow the JLs to recover in respect of the preparation of only 2 and not 3 affirmations. The reasoning is not due to the content of the 3rd affirmation but because the JLs ought to have articulated their reasonable requirements within the normal course of evidence in support and evidence in reply i.e. 2 affirmations.

6.Accordingly, the costs order nisi made on 15 December 2023 is varied as follows: “PwC to pay the JLs the costs of and incidental to the OS save that (i) it only pays 50% of the costs of and incidental to the preparation of Lai 1, and (ii) that there be no order as to costs in respect of the preparation of Lai 3.”

7.No order as to costs is made in respect of this paper application, as neither party was wholly successful. 

Submissions by Ms Audrey Eu SC leading Mr Adrian Lai, instructed by DeHeng Law Offices (Hong Kong) LLP, for the Applicants

Submissions by Mr Paul Shieh SC leading Mr Danny Tang, instructed by Reynolds Porter Chamberlain, for the Respondent