Bank of China (Hong Kong) Ltd v. New Nongkai Global Investments Ltd

HCA002062A/2003

HCA2062/2003

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO.2062 OF 2003

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Coram: Deputy High Court Judge Poon in Chambers

Date of Hearing: 21 October 2003

Date of Decision: 30 October 2003

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D E C I S I O N

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Introduction

1.In this Decision, I will adopt the same abbreviations used in the Decision that I handed down on 31 July 2003 ("the First Decision").

2.By virtue of the First Decision, I dismissed the NNG Receivers' application ("the Application") for a direction that the SHL Receivers do provide to the NNG Receivers cooperation and assistance by complying with all reasonable requests made pursuant to an earlier order that I made on 13 June 2003 whereby the NNG Receivers do take such steps as are necessary to obtain from SHL, whether acting by the SHL Receivers or otherwise, access to such books, records and information relating to the assets, liabilities and affairs of SHL and its subsidiaries and access to such premises of SHL and its subsidiaries as the NNG Receivers may request for the purpose of enabling them to carry out their duties. I also made an order nisi that the NNG Receivers do pay the SHL Receivers costs, to be taxed if not agreed.

3.The facts leading to the Application and the reasons of my decision have already been set out in the First Decision. I will not repeat them here.

Costs applications

4.Both the NNG and SHL Receivers now apply to me to vary the costs order nisi. On the one hand, the NNG Receivers' wish to have a costs order in these terms :

(1)	Costs of and incidental to the Application be paid by the NNG Receivers to the SHL Receivers on an indemnity basis with certificate for two counsel;
(2)	Costs of an incidental to the application of the SHL Receivers to, and the hearing before, Deputy Judge Lam (as he then was) under HCMP2414/2003 on 17 June 2003 be paid by the NNG Receivers to the SHL Receivers on an indemnity basis with certificate for two counsel;
(3)	The SLH Receivers' own costs incurred in the above two applications be paid by the NNG Receivers, to be taxed if not agreed.

5.In the course of his submissions, Mr Fung, SC, counsel for the SHL Receivers, contended that SHL Receivers' costs be paid by the NNG Receivers personally and not to be paid out of NNG assets.

6.On the other hand, the SHL Receivers, for the avoidance of doubt, seeks an order that the costs payable to the SHL Receivers and the NNG Receivers' own costs in relation to the application be paid out of the assets of NNG.

7.Two principal issues arise out of the above costs applications. First, whether the costs of the Application should be taxed on an indemnity basis. Second, whether the NNG Receivers are personally liable for such costs.

The law

8.I will first set out the law which, I believe, is well settled. I have been taken through a number of authorities including Choy Yee Chun v. Bond Star Development Ltd [1997] HKLRD 1327; Sung Foo Kee Ltd v. Pak Lik Co. (a firm) [1996] 3 HKC 570; Re Hyundai Engineering &Construction Co. Ltd [2002] 2 HKLRD 71 and Nintendo Co. Ltd v. The World Camera and Radio Co. Ltd & Others [1999] 2 HKLRD 199. For present purposes, it is sufficient to simply state the following.

9.Costs may be ordered to be taxed on an indemnity basis where proceedings are scandalous, vexatious or an abuse of process, or have been initiated or prosecuted maliciously, or for an ulterior motive, or in an oppressive manner. The circumstances in which indemnity costs might be awarded are not restricted to circumstances just described. The discretion was not to be fettered or circumscribed beyond the requirement that taxation on an indemnity basis must be appropriate.

10.As a matter of general principle, a court-appointed receiver is entitled to all costs, charges and expenses and to be indemnified against all liabilities properly or necessarily incurred in the protection and preservation of the property committed to his charge, or otherwise in the course of his duties, even though they result in loss. However, a receiver who causes unnecessary proceedings or litigious expenses or is liable personally for costs. Similarly, a receiver may be ordered to pay costs occasionally by his misconduct or neglect : Halsbury's Laws of England (4th edn), Vol.39, paras.431, 448; Picarda on The Law Relating to Receivers, Managers and Administrators, (3rd edn, 2000) at pp.451-2.

11.With the above principles, I now turn to examine if two main issues that I have identified at paragraph 7 above. They both relate to the NNG Receivers' conduct in bringing and continuing to pursue the Application.

The need to bring the Application

12.Mr Fung submitted that the Application was entirely misconceived, wrong in law and unarguable. And the NNG Receivers had been so warned from the very beginning, right before the start of the hearing on 13 June 2003 and thereafter. But they chose to bring and pursue the Application, which in the end failed. In the circumstances, they should personally bear the costs of the Application on an indemnity basis.

13.Mr Kidd, for the NNG Receivers, submitted that the Application was rendered necessary by the circumstances so as to resolve the question whether the SHL Receivers were under a duty to assist the NNG Receivers in providing access to the information of SHL as requested. It was novel and unprecedented. And it was taken pursuant to advice by leading counsel.

14.As I have ruled in the First Decision, the Application was procedurally deficient. (I have deliberately refrained from ruling on the merits of the Application.) I could see the necessity and urgency behind the Application. It would appear that the difference in opinions of the two sets of receivers, failing agreement, could only be resolved in court. That was no doubt a novel and unprecedented application. And the NNG Receivers took the precaution of obtaining legal advice from senior counsel before embarking on it. When all the circumstances at the time were considered, the NNG Receivers were not guilty of any misconduct that attracted indemnity costs, let alone personal liability of costs.

15.This disposes of the two main issues. I now turn to consider the other three subsidiary points.

SHL Receivers' costs for the hearing in HCMP2414/2003

16.Mr Fung argued that it was purely because of the Application that the SHL Receivers had to go before Deputy Judge Lam (as he then was) in HCMP2414/2003 on 17 June 2003 in order to obtain an order to enable them to defend the Application. The costs incurred by the SHL Receivers should therefore be borne by the NNG Receivers.

17.I doubt if I have jurisdiction to order the NNG Receivers, who are not a party to HCMP2414/2003 and who did not take part in that application, to bear such costs. In any event, it would appear that the application was necessitated by the fact that the original order appointing the SHL Receivers was not sufficiently wide to enable them to take part in the Application. I do not consider it right that the NNG Receivers should be held liable for the costs of such application.

SHL Receivers' own costs

18.Mr Fung next asked that the SHL Receivers' own costs incurred in the Application and the application in HCMP2414/2003 on 17 June 2003 be paid by the NNG Receivers. In my view, where the receiving party retains legal advisers, it is wrong in principle to order the paying party to pay the receiving party's own costs. The paying party is only liable for the legal costs incurred by the receiving party.

Certificate for two counsel

19.The final point is whether certificate for two counsel should be awarded. I have endeavoured to summarize the principles governing the certification of two counsel in Xin Juan Trading Co. Ltd v. NPH Petrochemical Limited, HCA18159/1998 and CACV276/1998, unreported. The relevant parts of my judgment have been reproduced in the Hong Kong Civil Procedure 2002, Vol.1 para.62/App/48 at pp.902-3. I shall not repeat them here.

20.As I understand Mr Kidd, he did not seriously contend that certificate for two counsel should not be awarded. Indeed, I am satisfied that having regard to the nature of the Application, the urgency of the matter, the magnitude and size of the case, the stake involved, and the complexity arising from the nature of the Application, attendance of two counsel was clearly justified.

Conclusion

21.For these reasons, I will vary the costs order nisi as follows :

(1)	The costs of the Application shall be paid by the NNG Receivers to the SHL Receivers, to be taxed if not agreed with a certificate for two counsel, such costs to be paid out of the assets of NNG.
(2)	The NNG Receivers' costs incurred in connection with the Application be paid out of the assets of NNG.

Costs of the present applications

22.The debate that took place before me was substantially, if not wholly, on the NNG Receivers' personal liability of costs and whether costs of the application should be awarded on an indemnity basis. As I have ruled against the SHL Receivers on these points, they have failed in their application substantially. In the circumstances, I will make an order nisi that they should pay the NNG Receivers the costs of the present applications, to be taxed if not agreed and such costs to be paid out of the assets of SHL.

Representation:

Mr David Kidd of Messrs Allen & Overy, for the Receivers and Mangers (Solicitors for Ruby M.Y. Leung and Kennic, L.H. Liu of Messrs Kennic L.H. Lui & Co., the Joint and Several Receivers and Managers, for the Defendant)

Mr Patrick Fung, SC and Mr Michael Liu, instructed by Messrs Wilkinson & Grist, for the Receivers and Managers (Solicitors for Y.K. Stephen Liu and Kenneth Yeo Boon Ann of Ernst & Young Transactions Limited, the Joint and Several Receivers of Shanghai Land Holdings Limited)