Best Consultants Ltd v. Aurasound Speakers Ltd
Read the full judgment text of HCCW 1021/2003 on BabelCite. This High Court CFI judgment was delivered on 14 November 2005.
1. On 11 September 2003, the petitioner presented a petition to wind-up Aurasound Speakers Limited (“the Company”) on the ground that it had failed to repay of a debt of HK$900,000. The Company opposed the petition. Mr David Liu Den Chun, a director of the Company, filed three affirmations on behalf of the Company in opposition.
Cited by 4 cases · Cites 2 cases
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HCCW1021/2003 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE COMPANIES WINDING-UP PROCEEDINGS NO.1021 OF 2003 ------------------------------
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------------------- Before : Deputy High Court Judge Poon in Chambers Date of Hearing : 7 October 2005 Date of Decision : 14 November 2005 -------------------------- D E C I S I O N -------------------------- Application 1.On 11 September 2003, the petitioner presented a petition to wind-up Aurasound Speakers Limited (“the Company”) on the ground that it had failed to repay of a debt of HK$900,000. The Company opposed the petition. Mr David Liu Den Chun, a director of the Company, filed three affirmations on behalf of the Company in opposition. 2.The petition came before Tang J (as he then was) on 30 July 2004. After hearing the parties, Tang J found that none of the three affirmations of Mr David Liu disclosed a bona fide dispute on substantial grounds regarding the debt. He therefore ordered the winding-up of the Company. 3.By letter dated 18 August 2004, Tang J invited the parties to make submissions as to whether costs should be ordered against Mr David Liu as an opposing contributory on the authority of In re Datacom Wire & Cable Co. Ltd [2000] HKLRD 526. 4.It would appear that the Datacom case is not applicable here as Mr David Liu was not an opposing contributory. Be that as it may, after some exchange of correspondence, the petitioner took out a summons dated 17 December 2004 (“the Summons”) seeking for, inter alia, costs of the petition (after the first hearing on 5 November 2003) be paid by Mr David Liu personally on an indemnity basis. Jurisdiction 5.The court’s jurisdiction on costs is derived from section 52A of the High Court Ordinance, Cap.4. Section 52A reads :
6.Section 52A is modeled on section 51 of the English Supreme Court Act 1981. In particular, section 52A(1) is virtual identical to section 51(1) of the English Act. But there is a very important distinction. Section 52A(2) goes on to provide that unless there is specific provision made in any Ordinance, no order of costs may be made against a non-party. There is no similar provision in the section 51 of the English Act. 7.The significance of the distinction is this. In England, ever since the House of Lords’ decision in Aiden Shipping Co. Ltd v. Interbulk Ltd [1986] AC 965, the courts do have jurisdiction under section 51(1) of the Supreme Court Act 1981 to award costs against a non-party. However, in Hong Kong, because of section 52A(2) of the High Court Ordinance, such power is not readily available to the courts here : see The Hong Kong Housing Authority v. Hsin Yieh Architects & Associates Limited & Others, CACV85/2005, unreported, 5 October 2005, per Tang J at paragraphs 10 and 32. 8.A further provision is relevant, which is the definition of “party” in section 2 of the High Court Ordinance. There, “party” is defined to include “every person served with notice of or attending any proceeding, although not named on the record.” 9.The combined effect of sections 2 and 52A is this. In the absence of any specific statutory provision, a party who intends to seek costs against a non-party (in the sense that he is not named on record), has to either :
10.Thus, in Hong Kong Housing Authority v. Hsin Yieh Architects & Associates Limited & Others [2005] 1 HKLRD 801, the Authority first applied ex-parte for a declaration that AXA (the leading insurer under the relevant policy) was a party within the meaning of section 2 of the High Court Ordinance and when that application failed, successfully obtained from Reyes J for an order joining AXA as a defendant to the proceedings : see paragraphs 8 to 11 of the judgment. Reyes J then dismissed AXA’s application for setting aside the joinder and service outside the jurisdiction. His decision was approved on appeal in CACV85/2005. Among other things, Tang JA was satisfied that there is a serious question to be tried as to whether it is permissible for a person to be joined as a party so that he might be made liable for the costs of the proceedings. 11.Mr Wong, appearing for the petitioner, submitted that the court has a general jurisdiction to award costs against a non-party under section 52A(1) of the High Court Ordinance. This Mr Vaughan conceded. However, as I have demonstrated above, the court does not have any general power to award costs against a non-party under section 52A. With respect, both counsel are wrong on this point of jurisdiction. Was Mr David Liu a party to the winding-up proceedings? 12.In the present case, Mr David Liu had not been joined as a party to the winding-up proceedings. However, Mr Wong argued that he was a party thereto. He took essentially two points. 13.First, Mr Wong argued that Mr David Liu was a party to the winding-up proceedings by virtue of the service of the Summons on him. In support, he relied on World Fuel Services (Singapore) Pte Ltd v. The Owners of the Ship or Vessel “M.V. Liberty Container”, HCAJ135/2003, unreported, 13 September 2005, Waung J. 14.I am unable to accept Mr Wong’s submission. The Summons made Mr David Liu a party to the application for costs against him. It does not have the effect of making him a party to the winding-up proceedings. If Mr Wong’ submission were correct, a party could make any person a party to the proceedings by serving on him a summons at any time. This would render the rules and the case law on joinder obsolete. This simply cannot be right. 15.Further, the Liberty Container case, properly understood, does not support Mr Wong’s submission at all. There costs were sought against the intervener (who was already a party to the proceedings by virtue of his intervention) in respect of an application that the intervener did not take part. One of the arguments advanced by the intervener was that it was not liable for such costs as it was a “non-party” to that particular application. Applying a liberal construction to section 52A, Waung J held that the court had jurisdiction to order costs against the intervener for that particular application. The Liberty Container case is wholly distinguishable from the present one where Mr David Liu was never a party throughout the winding-up proceedings. 16.Second, Mr Wong argued that when the court looks at the substance, rather than the form, of the matter, David Liu is a “real party” to the winding-up proceedings. He is therefore amenable to an order on costs of those proceedings. In this regard, Mr Wong cited a number of cases from other common law jurisdictions, including R. v. Greene (1842) 114 ER 1042 (England), Knight v. KP Special Assets Ltd (1992) 107 ALR 585 (Australia) and Dymocks Franchise Systems (NSW) Pty Ltd v. Todd [2004] 1 WLR 2807, PC (New Zealand). 17.It is beyond doubt that the jurisdiction to order costs against a non-party is well-established in the above common law jurisdictions. The concept of “real party” is invoked when the courts decide to exercise the jurisdiction : see the Dymocks case, per Lord Brown of Eaton-Under-Heywood, at paragraphs 23 to 29. In other words, the concept of “real party” does not found the jurisdiction to order costs against a non-party. It provides guidance as to how to exercise the jurisdiction. 18.When the effect of the concept of “real party” is properly understood, it can be readily seen that it has no application here. For as I have demonstrated above, the court does not have a general jurisdiction to order costs against a non-party. 19.Accordingly, I reject Mr Wong’s submission that Mr David Liu is a party to the winding-up proceedings. It follows that the court does not have jurisdiction under section 52A to order him to bear the costs of the winding-up proceedings. Conclusion 20.The petitioner’s application must fail. I dismiss it accordingly. 21.I will make an order that the costs of the petition be paid out of the assets of the Company. I will further make an order nisi that the petitioner to pay Mr David Liu costs of the Summons, to be taxed if not agreed.
Mr Anson M.K. Wong, instructed by Messrs Daniel Lam & Co., for the Petitioner Mr Joseph Vaughan, instructed by Messrs Ko & Chow, for Contributory of the Company (LIU Den-chun David) Appeal dismissed: see CACV41/2006 dated 17 October 2006 |
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