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Pinemill Co. Ltd. v Lai Hong San And Others

Judgment Cited authorities 9 Cited in Precedent Map Related
Vincent
Judgment Date11 February 2003
Year2003
Judgement NumberHCCW19/1998
Subject MatterCompanies Winding-up Proceedings
CourtHigh Court (Hong Kong)
HCCW000019D/1998 PINEMILL CO. LTD. v. LAI HONG SAN AND OTHERS

HCCW000019D/1998

HCCW 19/1998

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES (WINDING-UP) NO. 19 OF 1998

____________

IN THE MATTER of WEIHONG PETROLEUM COMPANY LIMITED

AND
IN THE MATTER of Section 221 of the Companies Ordinance (Cap. 32)

____________

BETWEEN
PINEMILL COMPANY LIMITED Applicant
AND
LAI HONG SAN 1st Respondent
YUE CHUN SHAN 2nd Respondent
TONG CHI KEUNG 3rd Respondent
LIU YING SHING, CLAUDIUS 4th Respondent
D S CHEUNG & COMPANY 5th Respondent

____________

Coram: Hon Kwan J in Chambers

Dates of Hearing: 9 and 10 July 2002

Date of Handing Down of Decision: 11 February 2003

____________________________

DECISION ON COSTS

____________________________

1. On 10 May 2000, an order was made under section 221 of the Companies Ordinance, Cap. 32 by Yuen J (as she then was) for the examination of the 1st to 5th respondents, on the application of Pinemill Company Limited ("Pinemill"), the creditor that had presented a petition to wind up Weihong Petroleum Company Limited ("WHP") on a judgment debt of over HK$19 million. Pinemill is the only creditor that has submitted a proof of debt in the liquidation of WHP. The 2nd, 3rd and 4th respondents are the former directors of WHP. The 1st respondent was and is the majority shareholder and a director of Weihong (Holdings) Company Limited ("WHH"), which had later changed its name to Weihong Investment (Holdings) Limited. WHH and the 2nd respondent owned beneficially the entire issued share capital of WHP and WHH remained as a director of WHP when WHP was wound up on 18 March 1998. The 5th respondent is a firm of solicitors acting for, inter alia, the 3rd and 4th respondents, at the material time.

2. I have related part of the background of the affairs of WHP leading to the order for examination in a Ruling handed down on 21 February 2002 and I do not propose to repeat this. I also refer to the Reasons for Decision of Yuen J on 18 May 2000 for making the order for examination. Suffice it to say that the books and records of WHP were incomplete, substantial sums had passed through the bank accounts of WHP with large amounts paid to the five respondents or to companies controlled by one or more of the respondents. Discrepant versions were given to the liquidators by some of the respondents regarding the whereabouts of the books and records and the business of WHP. No assets have apparently been realised in the liquidation so far.

3. The private examination of the respondents commenced on 10 July 2001 and took 20 days to complete. As the applicant for the order of examination, Pinemill had the conduct of the examination through its counsel, as provided in the order. Pinemill was represented by leading and junior counsel throughout. The liquidators of WHP had also obtained an order from Yuen J on 10 May 2000 for leave to retain solicitors to assist them in the performance of their duties as liquidators and to remunerate those solicitors out of the assets of WHP, subject to the leave of the court. The liquidators, by their solicitors, Messrs Holman Fenwick & Willan, took part in the examination as well, although counsel was not engaged. The liquidators themselves also attended court throughout to give assistance as and when required.

4. At the conclusion of the examination of the last of the respondents on 5 February 2002, I heard an application made by the liquidators against the 3rd and 4th respondents for disclosure of their assets and liabilities on 6 and 7 February 2002. A ruling was handed down on 21 February 2002 refusing the liquidators' application. I adjourned the argument on the costs of the examination of all five respondents, as well as the argument on costs of the application on 6 and 7 February 2002, to a date to be fixed with two days reserved. This hearing took place on 9 and 10 July 2002. Save for the 1st respondent, who filed a Notice to act in person on 6 July 2002, the other respondents were represented by counsel. The 1st respondent did not attend court and gave no explanation in his letter to the court dated 6 July 2002 why he was not in Hong Kong for the dates of the adjourned hearing, which were fixed well in advance. I decided to proceed in his absence.

5. I will first set out the various applications for costs by Pinemill, the liquidators and the respondents.

The application of Pinemill and the liquidators

6. Pinemill and the liquidators seek two sets of costs (as they are represented by separate teams of lawyers) in an order along these lines: (1) against all five respondents, that they should be jointly and severally liable for the costs of the preparation of the examination proceedings; (2) against the 1st to 4th respondents individually, that each of them should pay the costs involved during the days when that individual respondent was examined in court; and (3) that the costs awarded against the respondents should be on an "enhanced" basis, namely, that costs should either be taxed on a trustee basis under O. 62 r. 28(5) of the Rules of the High Court (as in In re Nation Life Insurance Co. Ltd. [1978] 1 WLR 45), or on a common fund basis under O. 62 r. 28(3), with a direction to the taxing master under O. 62 r. 32(2) to allow items not mentioned in the scale, or to allow costs at higher rates than prescribed by the scale (as in American Express International Banking Corporation & Ors. v. Johnson & Anr. [1984] HKLR 372 at 389 to 390 and Re Irish Shipping Ltd. [1985] HKLR 437 at 446 to 447).

7. Pinemill and the liquidators also seek the following orders against these respondents in respect of various applications made in the course of the examination in which Pinemill and the liquidators were successful:

(1) against the 2nd respondent, in a ruling sought by the 2nd respondent on 13 July 2001 that certain questions put to him should be disallowed because of the privilege against self-incrimination;

(2) against the 2nd respondent, in an application of the liquidators on 14 July 2001 for disclosure of assets and liabilities;

(3) against the 3rd respondent, in an application of Pinemill on 10 July 2001 for a warrant of arrest; and

(4) against the 5th respondent, in a ruling sought by the 5th respondent on 5 February 2002 that the 5th respondent should not be required to disclose the name and address of a client unless ordered by the court.

8. Further, and regardless of whether the liquidators should obtain an order that the respondents should pay their costs, the liquidators seek an order (1) that the liquidators' costs allowed by the court should cover the time costs and disbursements of the liquidators themselves in preparing for and attending the examination, in addition to the costs of their solicitors, as their presence is necessary in addition to that of their solicitors, having regard to r. 145 of the Companies (Winding-up) Rules; and (2) that the liquidators' costs should include the costs of the stenographer in the examination and of the certification of the transcript by the stenographers, under the provisions of r. 60 of the Companies (Winding-up) Rules.

The 2nd respondent's application

9. The 2nd respondent seeks an order of costs against Pinemill and against the estate of WHP for the first day of the examination, which was adjourned on the 2nd respondent's application, as wasted costs.

The 3rd and 4th respondents' application

10. These respondents seek an order of costs against the estate of WHP in the unsuccessful application by the liquidators against them on 6 and 7 February 2002 for disclosure of assets and liabilities. They also seek an order of costs against Pinemill as Pinemill had supported that application.

The 5th respondent's application

11. The 5th respondent seeks an order of costs (1) against the estate of WHP for the costs of preparation of the examination including the costs of engaging counsel, from 14 January 2000 (when the 5th respondent served answers to the questionnaire of the liquidators) up to the hearing of the costs application in July 2002, on the ground that the liquidators had failed to seek a waiver of legal professional privilege from the 5th respondent's clients, i.e. the 3rd and 4th respondents, much earlier; and (2) against the estate of WHP and Pinemill for the costs of the 5th respondent's application for a ruling on 5 February 2002 that the 5th respondent should not be required to disclose the name and address of a client without a court order.

The jurisdiction to award costs

12. It is not in dispute that the court does have jurisdiction to award costs in proceedings for examination under section 221. Under section 52A(1) of the High Court Ordinance, Cap. 4, it is provided that "subject to the provisions of rules of court, the costs of and incidental to all proceedings in the Court of Appeal in its civil jurisdiction and in the Court of First Instance, including the administration of estates and trusts, shall be in the discretion of the Court, and the Court shall have full power to determine by whom and to what extent the costs are to be paid." R. 210 of the Companies (Winding-up) Rules provides that "in all proceedings in or before the court, ... or over which the court has jurisdiction under the Ordinance and rules, where no other provision is made by the Ordinance or rules, the practice, procedure and regulations shall, unless the court otherwise in any special case directs, be in accordance with the rules and practice of the court."

13. An examination under section 221 is a proceeding in the Court of First Instance (see In re Appleton, French & Scrafton, Ltd. [1905] 1 Ch, 749 on...

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