Re Cresvale Far East Nominees Ltd (in Creditors Voluntary Liquidation)

HCMP 3019/2004

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 3019 OF 2004

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Before: Hon Kwan J in Chambers

Date of Hearing: 30 November 2004

Date of Decision: 30 November 2004

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D E C I S I O N

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1.This is an application made ex parte on notice by the liquidators of Cresvale Far East Nominees Limited (“the Company”), seeking an order that their remuneration and costs in relation to proposed investigations as to the beneficial ownership of certain asserts of the Company (“the Doubtful Assets”) which may be held on trust be paid out of those assets, insofar as the same cannot be paid out of the Company’s free assets.

2.I do not propose to set out the background to this application, which has been covered in detail in the supporting affidavits of the liquidators.

3.The order sought is a form of order sanctioned in Re Berkeley Applegate (Investment Consultants) Limited (in Liquidation) [1989] Ch 32, in which the court in the exercise of its inherent jurisdiction allowed the remuneration of liquidators to be paid out of trust assets to the extent not covered by the company’s free assets, by invoking the principle that where a person seeks to enforce a claim to an equitable interest in property, the court has discretion to require as a condition of giving effect to that equitable interest that an allowance be made for costs incurred and for skill and labour expended in connection with the administration of the property.  This form of order has since been made in various cases in Hong Kong.

4.Here the liquidators’ proposed investigation is intended to determine the ownership of the Doubtful Assets, whose ownership is at present uncertain.  This is akin to the situation in Re Telesure Limited [1997] BCC 580.  The task cannot be undertaken by any one other than the liquidators and is likely to involve costs exceeding the value of the free assets.

5.If the Doubtful Assets are found not to belong to the Company, the free assets may not be used to meet the costs expended in connection with the administration of the Doubtful Assets (Re Berkeley Applegate (Investment Consultants) Limited (No.3) (1989) 5 BCC 803 at 805D to G).

6.The circumstances here justify a provision to be made for the liquidators’ costs out of the Doubtful Assets, subject to two matters.

7.Firstly, as I have mentioned the application is made ex parte on notice.  The liquidators have given notice of the application and served the papers on all the third parties who appear to be interested in the Doubtful Assets on 24 and 25 November 2004.  These parties are in Tokyo, the Isle of Man and New York, and only one has appointed legal representatives in Hong Kong, so they would have less than a week to respond.  At the hearing today, apart from the party which has responded by their solicitors in Hong Kong, there was no response from the others.  It seems to me appropriate in the circumstances to make further provisions in case any of the interested parties should wish to raise objections.  I therefore make these additional directions:

(1.)    the liquidators shall within 7 days hereof sent by courier to the last known address of each of the third parties who have asserted claims over the Doubtful Assets a copy of this order;

(2.)    the order today may be varied or discharged upon application of any third party, such application to be made within 14 days of the service of this order on the party concerned, and to be made by summons supported by affidavit; and;

(3.)    there be liberty to apply.

8.The other matter relates to the width of the order sought.  The order should be restricted to costs and expenses incurred in investigating and ascertaining the entitlement to the Doubtful Assets, including necessary applications to the court in connection therewith, but should not include costs in dealing with any hostile response to the claim (Re Telesure Limited, supra. at 581H to 582B and 583D).

9.I therefore amend the draft order to provide as follows:

“It is ordered that the liquidators’ remuneration, fees, expenses, costs, disbursements and/or liabilities in investigating and ascertaining the entitlement to the assets referred to in paragraph 4 of the 2^nd affidavit of Joanne Oswin filed on 26 November 2004 (“Trust Assets”) and this and any necessary application to the court as may be required for the said purposes, save for costs that may be incurred in hostile litigation, be paid, in such sum or sums as the court shall deemed just, from such Trust Assets to the extent that the same cannot be paid out of the Company’s assets.”

Mr. Paul Carolan, instructed by Messrs Allen & Overy, for the joint & several Liquidators