Re Legend International Resorts Ltd

HCCW 1139 /2004

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES WINDING-UP PROCEEDINGS NO. 1139 OF 2004

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Before: Hon Fok JA (sitting as an additional judge of the Court of First Instance) in Chambers

Date of Written Submissions on Costs: 21, 23 and 31 March 2011

Date of Judgment on Costs: 12 April 2011

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Introduction

1.In my Judgment dated 7 March 2011, save in one respect, I dismissed the Applicant’s summons dated 26 May 2010.  I made an order nisi that the Applicant pay 75% of the Liquidators’ costs of the summons, to be taxed if not agreed.  I also made an order nisi that the balance of the Liquidators’ costs be paid from the assets of the Company.

2.By letter from their solicitors dated 21 March 2011, the Liquidators apply for a variation of those costs orders nisi so that (a) the Liquidators’ costs of the summons include the fees and disbursements of both the Liquidators and their legal advisors, (b) the Applicant shall pay 100% of the Liquidators’ costs of the summons, to be taxed if not agreed, and (c) the balance of the Liquidators’ costs not borne by the Applicant be paid from the assets of the Company.

3.The Applicant’s solicitors responded to that application by letter dated 23 March 2011, to which the Liquidators’ solicitors have replied by letter dated 31 March 2011.

4.This Judgment is my determination of the application to vary the costs orders nisi.

The respective contentions

5.In support of the application, the Liquidators contend that their own fees and non-legal disbursements were incurred as a direct consequence of the failed application by the Applicant.  If those fees and disbursements cannot be recovered from the Applicant, they will have to be borne by the Liquidators themselves to the extent the estate of the Company is insufficient, and, even if they can, the estate of the Company will be prejudiced as a result of the failed application.

6.The Liquidators also contend the Applicant failed to better terms offered in a “without prejudice save as to costs” letter dated 14 July 2010.

7.The Applicant points out that its summons dated 26 May 2010 contained four applications, three of which were declined but one of which was allowed.  It disputes the Liquidators’ contention that it failed to better the terms of the “without prejudice save as to costs” letter since the scope of the report the Liquidators have been directed to give “far exceeds” the scope of the report offered in that letter.  The Applicant also points to the fact that the Liquidators’ counsel conceded that they should have informed the Applicant once they had decided not to hold a creditors’ meeting and not to prepare a report in early 2008 (see §48 of my Judgment).

8.As to the Liquidators’ fees and non-legal disbursements, the Applicant contends that no authority has been provided to support the Liquidators’ entitlement to these as against the Applicant and that the Applicant should not be liable to pay these costs “as if [the Liquidators] were litigants-in-person”.  In any event, they would fall to be considered by a taxing master and details of these fees and non-legal disbursements have not been provided to the court.

9.Finally, the Applicant does not accept that the Liquidators are entitled to look to the estate of the Company to recover any of their costs as the proceedings by the summons were proceedings against the Liquidators personally.  Therefore, to the extent the Liquidators’ costs and disbursements are not paid by the Applicant, it is contended they should be paid by the Liquidators personally.

Discussion

10.Dealing first with the apportionment of the costs of the summons, the costs order nisi that the Applicant should pay 75% of the Liquidators’ costs was made to reflect the fact that the Liquidators were essentially successful in resisting the summons save to a limited extent.

11.It is now apparent from reading the “without prejudice save as to costs” letter dated 14 July 2010 that the Liquidators did in fact offer to the Applicant at least as much as the Applicant obtained as a result of the summons being determined by the court.  I do not agree that the scope of the report that the Liquidators were directed to give far exceeds the scope of the report offered in the without prejudice letter, as contended by the Applicant.  It has, in substance, ended up with no more than it could have had if it had accepted the offer in that letter.

12.In the circumstances, I agree with the Liquidators’ contention that 100% of the costs of the summons should be payable by the Applicant to the Liquidators as from a date when, acting reasonably, the Applicant should have accepted the offer it contained and abandoned the summons.  The Liquidators’ solicitors sought to impose a deadline of 19 July 2010 for the acceptance of the offer in the without prejudice letter.  That deadline is on the short side.  Instead, I consider that it would have been reasonable to expect the offer to be accepted by 28 July 2010, that date being 14 days after the date of the without prejudice letter.

13.I remain of the view that the Applicant should not be required to bear all of the costs of the summons before 28 July 2010.  As indicated in my judgment, it was correctly conceded by their counsel that the Liquidators should have informed the Applicant of their decision not to hold a creditors’ meeting and prepare a report to creditors.  Had they done so, the Applicant would at least have had the opportunity of considering whether or not to issue its summons.

14.I turn to deal with the Liquidators’ own fees and non-legal expenses.  In my view, these should be paid from the assets of the Company.  It is true that the costs orders nisi in my Judgment of 7 March 2011 did not provide for the payment of the Liquidators’ own fees and non-legal expenses.  This was omitted by oversight on my part but, having reflected on where the burden for these should lie, I see no reason why the Liquidators should be entitled to these from the Applicant rather than the Company.

15.The Liquidators’ submission that these should form part of the taxable costs as between themselves and the Applicant would make the Applicant an underwriter for the Liquidators’ conduct of the liquidation.  I do not think that would be right.  Similarly, I do not consider that the risk that these fees and non-legal expenses would have to be borne by the Liquidators themselves if the estate of the Company were insufficient to meet them, or that the Company would be prejudiced even if it had sufficient funds, is a good reason to make the Applicant liable for them.

16.On the other hand, I do not consider that these should be borne by the Liquidators personally rather than by the estate of the Company, as contended by the Applicant.  The Liquidators’ fees and non-legal expenses from resisting the Applicant’s summons arose from their acting in the course of the liquidation.  To the extent that they were properly incurred, the Liquidators should be entitled, in my view, to look to the Company’s assets for payment of them.

Order

17.For the reasons set out above, I therefore clarify and vary the costs orders nisi in paragraphs 90 and 91 of my Judgment and substitute for them the following orders, namely that:

(1) The Applicant pay 75% of the Liquidators’ costs of the summons until 28 July 2010 and 100% of such costs after 28 July 2010, to be taxed if not agreed;

(2) The balance of the Liquidators’ costs of the summons, including the fees and non-legal disbursements of the Liquidators, which the Applicant is not ordered to bear, shall be paid from the assets of the Company.

18.For the avoidance of doubt, the respective parties’ costs of preparing the submissions in respect of the clarification and variation of my costs orders nisi shall form part of the costs of the summons.

Messrs Squire, Sanders, & Dempsey, for the Applicant

Messrs Mayer Brown JSM, for the Respondent, the Liquidators of the Company