Re Pccw Ltd

CACV 85/2009

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 85 OF 2009

(ON APPEAL FROM HCMP NO. 2382 OF 2008)

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Before: Hon Rogers VP, Lam and Barma JJ in Court

Date of Hearing: 18 August 2009

Date of Decision: 18 August 2009

Date of Handing Down Reasons for Decision on Costs: 26 August 2009

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REASONS FOR DECISION ON COSTS

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Hon Rogers VP:

1.These are the reasons for the orders as to costs which were made on 18 August 2009. The same abbreviations will be used as were used in the reasons for judgment handed down on 11 May 2009. At the conclusion of the hearing of the argument in respect of costs this court ordered that the costs of the SFC in this court and below be paid by PCRD and Starvest Limited with a certificate for 2 Counsel. This court indicated that the representation was appropriate. In respect of the costs of Hung Sau Chun and Wong Tak Lau in this court they were to be paid by PCRD and Starvest Limited with a certificate for 2 Counsel and the order for costs in respect of them in the court below to remain.

2.Whilst it was contended on behalf of the SFC and Hung Sau Chun and Wong Tak Lau that their costs should be paid by PCRD and Starvest Limited, it was the contention on behalf of PCRD and Starvest Limited that 50% of the cost of the appeal by the SFC and the cost below should be paid by the Company, that the SFC’s costs of the respondent’s notice served by PCRD and Starvest Limited should be paid by those two companies and that there should be no order of costs in favour of Hung Sau Chun and Wong Tak Lau. On behalf of the Company it was contended that the SFC should not be entitled to recover costs from any party but that, if it could, it should only be entitled to recover 50% of the costs for the reasons which had been given on behalf of PCRD and Starvest Limited.

3.In my view, the SFC’s claim to recover its costs is sound. The SFC was acting in its capacity to discharge its statutory duties in respect of the securities and futures industry, in particular in providing protection for members of the public investing in or holding financial products. In that respect it was acting in what in other jurisdictions might be regarded as a ministerial capacity. It was acting in the public interest. In this court its appeal and, thereby, its intervention succeeded. Under the Securities and Futures Ordinance, Cap. 571 section 385(6)(b) it is to be regarded for all purposes as a party to the proceedings. In accordance with the principles which in MKI Corp Ltd [1996] 1 HKC200 I considered arose from a number of authorities in particular Re Highfield Commodities Ltd. [1984] BCLC 623, Re Walter L. Jacob Ltd. [1989] 5 BCC 244 and Re Xyllyx plc (No.2) [1992] 378, the matter of costs should be approached on the basis of considering whether the SFC’s role in the litigation was properly presented. In accordance with the reasons for judgment handed down on 11 May 2009, it is clear that that is the conclusion to which this court came. On these proceedings the SFC raised the matter of share manipulation and its participation in these proceedings was based on that and confined to that. This court decided the matter on that basis.

4.The next question which falls to be decided is whether the SFC’s costs should be borne by the Company or by PCRD and Starvest Limited. Whereas in the ordinary case of a scheme of arrangement, the matter is regarded as one which the company puts forward and, if it be a scheme between the company and the creditors as it often is, creditors who successfully oppose it are entitled to their costs to be paid by the company. It is conventional that only one set of costs, as in other types of petitions, is given to successful opponents.

5.In this case it appears to me that there is force in the argument that this petition, which sought to obtain the court’s sanction of the Scheme, and the Scheme itself was for the benefit and at the behest of PCRD and Starvest Limited. It was not a class remedy for the benefit of all the shareholders. As was pointed out by Mr Poon SC, who appeared on behalf of the SFC, that was made abundantly clear in the Scheme document and the Supplemental Scheme document.

6.Although Miss Chan, who appeared on behalf of PCRD and Starvest Limited, argued that those companies’ presence was necessitated because of the possible adverse conclusions in respect of Mr Yuen, the arguments contesting the facts relating to the allegations of manipulation of the shares were made by those representing PCRD and Starvest Limited and not by those representing the Company. The arguments were not confined to whether Mr Yuen and, thus, PCRD had played any role; they extended to trying to displace the conclusions of Kwan J in respect of the activities involving Chung Nam, Kingston, Success and Radland. PCRD and Starvest Limited took part in the proceedings not as scheme shareholders, which they were not, but as the offerors who had devised the Scheme and for whose benefit it was sought to obtain the court’s sanction.

7.Moreover, PCRD and Starvest Limited could not claim to be in an analogous position to creditors involved in a scheme relating to a company’s creditors. PCRD and Starvest Limited were not scheme shareholders they were simply the offerors for the remaining shareholders’ shares and were the instigators of the Scheme.

8.In those circumstances it appears to me to be correct that the burden of costs should fall upon PCRD and Starvest Limited and not upon the Company. The Scheme was for the benefit of PCRD and Starvest Limited and not, seemingly, for the benefit of the Company. The Company’s money should not, as a rule, be expended on matters which are not for its benefit. PCRD and Starvest Limited took an active part in the proceedings and indeed pursued and their respondents’ notice.

9.As regards Hung Sau Chun and Wong Tak Lau, they were awarded their costs in the court below and no party sought to disturb that order. They were entitled to appear on this appeal and support the appeal. The appeal has been successful. For those reasons they, too, should be entitled to their costs.

Hon Lam J:

10.I agree.

Hon Barma J:

11.I agree.

Mr Jonathan Harris SC, instructed by Messrs Richards Butler, for the Applicant/1^st Respondent

Mr Winston Poon SC & Mr Godfrey Lam SC, instructed by Securities and Futures Commission, for the Intervener/Appellant

Ms Linda Chan & Mr Laurence Li, instructed by Messrs King & Wood, for Pacific Century Regional Developments Limited and Starvest Limited, the Interested Parties/2^nd and 3^rd Respondents

Messrs Baker & McKenzie for China Netcom Corporation (BVI) Limited, the Interested Party/4^th Respondent (Absent)

Wong Yuk Kwan, the Interested Party/5^th Respondent in person (Absent)

Mr Daniel R Fung SC & Mr Newman Lam, instructed by Messrs JCC Cheung & Co., for Hung Sau Chun, the Interested Party/6^th Respondent and Wong Tak Lau, the Interested Party (Independent Shareholder)

Wong Lai Chun, the Interested Party/7^th Respondent in person (Absent)