Re Cirtex Co Ltd
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IN THE COURT OF APPEAL No. 133 of 1987 BETWEEN
Coram: Hon. Hunter, J.A. Date of Hearing: 27th October 1987 Date of Judgment: 27th October 1987 ______________ JUDGMENT ______________ Hunter, J.A.: 1. This is an unfortunate dispute. Cirtex Co. Ltd. was incorporated in 1984 by two groups of people now represented by the appellants and the respondents. The issued capital was $6 million divided equally between the two groups. Things did not go well between them. Litigation followed, as did an application to wind up the company on the grounds of deadlock and it being just and equitable so to do. That petition came before Jones J. on 21st September last. He made a winding-up order. 2. The appellants, China Profit Ltd., the owners of one moiety of the shares have appealed that order. The respondents have retaliated by making an application for security for costs under O.59 r.10(5). This reads:
The note to the White Book 59/10/18 starts off with these words:
3. We have inherited in this Court, the 19th century practice of Court of Appeal in England, to give security for costs where the appellant is impecunious. 4. The first question which arises here is whether China Profit is in fact impecunious within the meaning of that principle. What is said against it is this. It was incorporated at about the same time as Cirtex Ltd. with a capital of $.5 million. It then borrowed $2.5 million. Those two sums combined enabled it to acquire its $3 million worth of shares in Cirtex Ltd. Therefore all its assets have been invested in Cirtex. It has no other free assets which have been revealed to this Court. The only prospect of getting any money back is if the winding up order is confirmed and that produces a surplus. There has been a good deal of dispute in the court below, with the parties arguing then respectively the converse of what they wish to argue this morning, as to whether or not a surplus will arise at all in that eventuality. 5. In those circumstances it seems to me inescapable that this company is in fact impecunious. There may be some surplus in the liquidation if the appeal fails, but of what sum one knows not, and they are only a 50% shareholder in the company. There simply is not a shadow of evidence put before the Court as to whether they have any other assets available at all. So there is no escaping the conclusion that this is prima facie a case for making an order for security. 6. Next problem arises is this. Miss Eu for the appellants asserts that I should go into the merits of the appeal itself. She wishes to challenge in this Court the finding of the trial judge that the petitioners acted bona fide, and were not guilty of misconduct and came to the Court with clean hands. She advanced to me the arguments that she will no doubt wish to advance hereafter to the full Court on the hearing of the appeal. She submits that this is a factor which I should take into account on this application. Indeed she invited me to apply all the reasoning to an application in this Court which is to be found in Sir Lindsay Parkinson v. Triplan Ltd.(1), a decision on the security before trial. 7. I cannot accept that submission. There seems to me to be a fundamental distinction between security pre-trial, when one of the matters which the Court has to consider is the likelihood of success or failure in relation to both parties; and an application for security post-trial were one party has won and the other has lost. Prima facie it seems to me that I should not go behind the conclusions of the trial judge on this type of application. That seems to be the tenor of the somewhat sparse authorities upon this subject at the Court of Appeal level. 8. What the Court should be doing is to have regard to the closing words of the rule which are “as may be just”, and to seek to exercise its discretion in a way which will not be oppressive to the actual appellants and may have the result of precluding them from continuing with the appeal. The only way that can do that is to look rather carefully at the figures put before the Court in support of the application for security and to have regard to the fact that the principle to be applied is that the security should not exceed a reasonable estimate of the tax costs on the appeal. If there is a lurking doubt about oppression the security should be perhaps reduced to a point at the lower end of such estimate. 9. The sums involved are set out in a draft bill of costs put before me by the respondent/applicant. I have been invited to deal with that in this way. The bill ends up with a total made up of disbursements all to counsel of $325,000 and of profit costs of $142,900. The profit costs I have been invited to reduce to one third of $142,900 which for convenience I will round up $50,000. 10. Then the issue really arises as to what is the appropriate sum to provide by way of security for counsel’s fees. This is a rather more difficult and delicate subject upon which counsel had been understandably reticent. The only guidance that I have clearly got is that certain of the items which are claimed for, all day conferences for counsel, do seem to me to err on the side of generosity. As far as the more substantial matter of brief fees to leading counsel and junior counsel are concerned, I have been left with euphemistic criticisms of the figures, without an awful lot of positive assistance. Doing the best I can in this somewhat sensitive area, if I add to the $50,000 I minded to allow for the profit costs, a sum of just over double that for counsel, namely $125,000, I hope that I arrive at a figure which is
That produces a grand total of $175,000. 11. That is the figure which I order to be provided by way of security. I am happy to hear counsel on the form of the order. Whether it is thought sufficient simply to say by way of security, or security to the satisfaction of the registrar, is the open question. In the meantime there should be a stay of proceedings on the appeal until provision of the security which I am ordering. In default the appeal is to stand dismissed with costs.
Miss Alice Mok (M/S Edmund W.H. Chow & Co.) for Applicants/ Petitioners Miss Audrey Eu (M/S W.K. To & Co.) for Respondent/Appellant Mr. Chau for The Official Receiver (1) [1973] 1 Q.B. 609 |