EXCELLENT INVESTMENT (GROUP) LTD (IN LIQUIDATION) v. SIN YUK LING

HCCW 294/2012

[2020] HKCFI 1675

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES (WINDING-UP) PROCEEDINGS NO. 294 OF 2012

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D E C I S I O N

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1.  There is before the court a Summons of the Respondent (“Ms Sin”) against the Applicant which is represented by its Joint and Several Liquidators (“JSL”) for “further directions as to the implementation” of paras 1 and 2 of the Order of this court granted on 3 August 2016 (“Order”), pursuant to O 44, r 3 of the RHC.

2.  The background of this case can be seen from the Decision of this court dated 3 August 2016.  It would be apparent from reading the Decision that there was a dispute between Ms Sin and the JSL arising from the manner in which the latter had been pursuing a Misfeasance Summons against the former despite the fact that Ms Sin had conceded from the outset that she had, and agreed, to make amends for the misfeasance. 

3.  The continuous pursuit of the hostile litigation resulted in increase in costs as well as the fees of the JSL.  In para 17 of Decision, it was stated that “these circumstances call into question the propriety of JSL’s position”.  Paras 1 and 2 of the Order provided as follows:

“1. the costs of the [Misfeasance Summons] incurred up to and including the 1st September 2014 be paid by [Ms Sin], and the costs incurred thereafter (including the hearing on 21^st April 2015) be borne by the [JSL] personally;

2. the costs of the liquidation be borne by [Ms Sin] with the exception of those costs which were incurred after 1st September 2014 for the purposes of the [Misfeasance Summons].  The excluded liquidation costs be borne by the [JSL];”

4.  Subsequent to the Decision, the parties had entered into a Settlement Agreement dated 3 May 2019 pursuant to which, inter alia, the costs of liquidation up to 1 September 2014 were settled at a compromised sum (the total fees and disbursements claimed by the JSL, including those of the Official Receiver, up to 31 August 2014 were HK$405,224.56). 

5.  However, that Agreement was preceded by an action in the District Court of the JSL to recover their fees and disbursements, a Charging Order nisi obtained by the JSL in respect of the same and an application by Ms Sin to re-open the ex parte taxation of the JSL’s costs.  The Charging Order nisi was subsequently discharged by the court and an order was made to re-open the assessment of the JSL’s costs up to 31 August 2014.  Under the Agreement, apart from the costs of liquidation up to 1 September 2014, the re-assessment application and the District Court action were also settled.  These actions provide an indication of the relationship between the parties.

6.  It must have come as an unpleasant surprise to Ms Sin to have received on 1 November 2019 another demand for liquidation costs in the sum of HK$830,010.59 for the period from 2 September 2014 to 31 October 2019.  That figure was subsequently revised to HK$796,685.25.  It appears from a report of the JSL amended on 9 May 2020 that the liquidation has still not been concluded after nearly 8 years (the Winding Up Order was made on 24 October 2012).  In other words, there is no end in sight for Ms Sin regarding her liability on the costs of liquidation. 

7.  I have to say that, on the face of it, the situation is quite alarming.  The winding up arose from an ill-fated attempt to evade the payment of a debt of HK$210,000.  The Applicant was a simple company, probably used as a corporate vehicle for property holding (see the Decision, paras 5 and 10).  One would have expected that once the misfeasance was remedied, the winding up would be concluded expeditiously and in a costs effective manner.  I do not know if there had been any material change in circumstances concerning the winding up.  The JSL are officers of the court, and they are expected to discharge their duties without regard to any ill feeling which might have resulted from the disputes which lead to the Order. 

8.  Despite my concern about the status of the winding up, I find this application very difficult to understand. Fundamentally, the Order did not require any further directions as to implementation.  Indeed, there is nothing in the Summons, nor the Skeleton Submissions of Mr Chong, who appeared for Ms Sin, to indicate what directions are being sought or what “implementation” is called for.   

9.  O 44, r 3(1) provides that: “Where a judgment given in a cause or matter contains directions which make it necessary to proceed in chambers under the judgment the Court may, when giving the judgment or at any time during proceedings under the judgment, give further directions for the conduct of those proceedings, including, in particular, directions with respect to – (a) the manner in which any account or inquiry is to be prosecuted, …”. 

10.  The meaning of paras 1 and 2 of the Order is perfectly plain.  They contain nothing which may require any follow-up proceedings.  Bluntly, the Summons is badly misconceived.  It appears from Mr Chong’s Submissions that Ms Sin is actually seeking relief from further liability over the costs of liquidation.  

11.  Whilst I can understand Ms Sin’s grievance about the continuous and substantial costs of liquidation, O 44, r 3 cannot be invoked to vary an order so as to relieve her from such liability: Re Estate of Shum Kwok Hang (deceased) [2018] 1 HKLRD 434 at §§8-10.

12.  I agree with the submissions of Mr Siu, who appeared for the Applicant, that this court has no jurisdiction to entertain any attempt to revisit the Order.  In respect of an order which has not been sealed (which does not apply in this case), the relevant principles were summarized by HH Judge Au (as he then was) in Whole Light Industries Ltd v Turbo-Knit Factory Ltd, DCCJ 3593/2006, unrep, 20 February 2008, at §6:

(1)     When a judgment or order has not been sealed or perfected, the court is not functus officio and has a discretion to review and vary or correct its own decision.

(2)     In the exercise of its discretion, the court may correct its decision for any minor or clerical mistake, or errors arising from any accidental slip or omission.  The court also has inherent power to vary its orders so as to carry out its own meaning or to make its meaning plain.  The error or omission must be one in expressing the manifest intention of the court, and the court cannot correct a mistake of its own in law or otherwise.

13.  Further, where a judgment or an order has not yet been drawn up or sealed, the court has jurisdiction to permit a party to re-open a decision, but the circumstances in which it would be appropriate for the court to exercise this jurisdiction must be exceptional: China Metal Recycling (Holdings) Limited v Chun Chi Wai, HCA 1412/2013, unrep, 8 April 2016) at §23.

14.  Where a judgment or order has been sealed (which applies here), the court’s jurisdiction to vary under the “slip rule” (O 20, r 11) is as follows: Wong Hung Kar Yee Mimi v Severn Villa Ltd [2014] 1 HKLRD 1088 at §§19-20:

(1)     The error or omission must be an error in expressing the manifest intention of the court.  The court cannot correct a mistake of its own in law or otherwise, even though apparent on the face of it.

(2)     A party cannot use the slip rule to insert, into the original order, a provision which was not there, not because of any slip in expressing the court’s intention but because it was not originally asked for.

15.  In this case, the reasons for the Order had been explained in the Decision.  In respect of the costs of liquidation, paragraph 4 of the Decision recorded that it was accepted by Ms Sin that they would have to be borne by her.  Paragraphs 1 and 2 of the Order accurately reflected the Decision. 

16.  In his viva voce submissions, Mr Chong said that the JSL had sought to recover from Ms Sin legal costs which fell outside the parameters of para 2 of the Order.  If that is the case, it would be a matter of taxation.  There is no reason to believe that the Taxing Master would have difficulty identifying what costs of liquidation “were incurred… for the purposes of the [Misfeasance Summons].” 

17.  For these reasons, this misconceived application must be dismissed.  I make an order nisi that the costs of this application be to the Applicant. 

18.  As a postscript, I am troubled by the misguided attempt to extricate from what might have been regarded as unjustified liquidation costs.  On one view, the resources wasted on this application would have been better deployed on the taxation of the liquidation costs and/or putting an end to the winding up.  Further, if there is justification for believing that the winding up is being conducted in an improper manner or for an ulterior motive, the resources should be expanded on seeking the appropriate legal redress. 

HCCW 294/2012

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES (WINDING-UP) PROCEEDINGS NO. 294 OF 2012

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D E C I S I O N

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1.  This is the JSL[1]’ application for leave to appeal against the decision on costs dated 3 August 2016 (Decision).

2.  I am unable to agree that there is a reasonable prospect of success in the intended appeal, bearing in mind especially the fact that the JSL are seeking to challenge an exercise of discretion.  I have also been asked by Mr Chong, appearing for Sin, to have regard to Ho Yuen Ki Winnie v Ho Hung Sun Stanley, unrep, HCA 391/2006, 25 May 2009. 

3.  I propose to deal succinctly with the 3 proposed grounds of appeal.  To begin, there appears to be a criticism that the court had adopted a chronology originated from Sin which “contained a number of misleading factual errors”.  Ms Cheung, appearing for the JSL, has disavowed any criticism of the court adopting, with modifications, a chronology provided by one of the parties.  The court does not blindly adopt the submissions or material before it.  If there were errors in the chronology in the Decision, they belong to the court. 

4.  However, I do not agree that there were errors in the chronology.  The “errors” are in fact the rival contentions of the JSL as to how the facts should be understood.  There is no challenge to the approach taken by the court, namely, a reasonably broad brush one (Decision, §8).  The “rival contentions” ignore, inter alia, what happened during the hearing on 15 October 2014 (Decision, p.5) and the outcome of the hearing on 21 April 2015 (Decision, p.6).  Further, it is clear from the Decision that the court did not agree with the S Summons and that was reflected in the costs order.  I am unable to see why the court’s findings of facts were “erroneous and lacked full consideration of the relevant facts”.  I do not agree that the 1^st ground of appeal is reasonably arguable.

5.  With respect, the 2^nd ground of appeal, which seeks to argue that no costs should be awarded against the JSL because they were not made a party to the proceedings, is disingenuous.  As recorded in para 4 of the Decision, Sin’s position that the costs should be borne by the JSL was made clear at the beginning of the hearing, and no point was taken by the JSL during the hearing.  Further, the JSL were asked by the court at the last hearing to address the legal position whether they are entitled to take issue on that matter on appeal, having failed to do so at the hearing.  No argument was advanced in the written submissions of the JSL filed for this hearing.  However, at 9:31 am this morning a note in reply was served on the court by way of facsimile.  I have to say that there is nothing in the note which could not have been set out in JSL’s written submissions.  The note does not address the legal position mentioned above.

6.  Furthermore, it is unreal to suggest that the JSL were somehow surprised by an application for costs against them because: (a) throughout the protracted process in resolving the proceedings in question and the costs issue, their conduct was much the focus of attention; and (b) the only other alternative is to have the costs borne by the Company, and as Ms Cheung has accepted, such a costs order would have to be paid by Sin ultimately.

7.  The 3^rd ground of appeal seeks to challenge the exercise of discretion to award costs against the JSL.  Points (a) and (f) were not taken before this court.  Points (b) to (e) seek to re-argue the case. 

8.  In the premises, this application is dismissed with costs. 

HCCW 294/2012

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES (WINDING-UP) PROCEEDINGS NO. 294 OF 2012

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D E C I S I O N

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1.  This is the adjourned hearing for arguments to deal with the issue of costs in respect of :

(a)  A Misfeasance Summons (“JSL Summons”) dated 30 June 2014 taken out by the Joint and Several Liquidators (“JSL”) on behalf of Excellent Investment (Group) Ltd (in liquidation) (“Company”) against the Respondent (“Sin”), which have been incurred after 30 June 2014; and

(b)  Sin’s Summons (“S Summons”) dated 10 September 2014.

2.  At all material times, Sin was the sole director and one of two shareholders of the Company.  For the present purpose, the material facts can be set out by way the following chronology :

Date	Events
15.4.2010	The Company entered into a sole agency agreement with Savills (Hong Kong) Ltd engaging the latter’s service for the sale of its property.
25.10.2010	After learning that the Company had sold its property through another agent, Savills (Hong Kong) Ltd issued an invoice to the former for a sum of HK$210,000.
31.3.2011	The Company had made a gross profit of over HK$7.3 million in the year ended 31.3.2011.
15.4.2011	The Company declared dividends of HK$6,587,400 (the entirety of its retained profit) to its 2 shareholders.
31.5.2011	The Company paid HK$6,587,400 to its 2 shareholders.
28.12.2011	Saville (Hong Kong) Ltd sued the Company for the unpaid invoice of HK$210,000 under DCCJ 4928 of 2011.
3.2.2012	Judgment by default was obtained by Savills (Hong Kong) Ltd against the Company.
14.8.2012	Savills (Hong Kong) Ltd petitioned for winding up of the Company based upon the unpaid judgment of HK$210,000 plus HK$6,500 fixed costs.
24.10.2012	Winding up order of the Company was made.
10.4.2013	JSL were appointed as liquidators of the Company.
3.7.2013	Master J Wong sanctioned JSL’ application to seek legal advice for the purpose of recovering the dividends paid by the Company to its shareholders and to commence legal proceedings to recover the paid dividends.
9.6.2014	Upon an ex parte application by JSL under s.199(1) of the Companies (Winding Up And Miscellaneous Provisions) Ordinance, Cap 32, Master Hui sanctioned the commencement of legal proceedings against Sin to recover the dividends paid by the Company in 2011 to its shareholders.
30.6.2014	Pursuant to the ex parte Order, JSL took out the JSL Summons against Sin seeking, inter alia: (a)  an order for Sin to repay or restore the sum of HK$6,587,400 to the Company by way of compensation; (b)  alternatively, Sin do account for and/or repay the sum of HK$5,928,660 (the dividends she received) to the Company.
13.8.2014	Call over hearing before Anthony Chan J when Sin, acting in person, offered to discharge the judgment debt of the Company.
1.9.2014	Sin, through her solicitors, wrote to JSL suggesting, inter alia, a variation of the ex parte Order to sanction the commencement of legal proceedings on behalf of the Company to recover the judgment debt of HK$210,000 with costs etc and a draft Consent Order and draft supporting affirmation were enclosed for consideration of JSL. In the draft affirmation, it was made clear that the only debt of the Company was the judgment debt and Sin was willing to discharge the same and to pay the reasonable costs of the JSL.
4.9.2014	JSL declined Sin’s proposal.
10.9.2014	Sin took out the S Summons to set aside the ex parte Order or alternatively to vary the same so as to enable JSL to commence legal proceedings in the name of the Company to recover from her thejudgment debtof HK$210,000 payable to Savills (Hong Kong) Ltd and taxed costs arising from DCCJ 4928 of 2011.
15.10.2014	Adjourned hearing before A Chan J when the court queried the appropriateness of seeking the return of the entirety of the dividends from Sin. Sin made an open offer to resolve both JSL Summons and S Summons by paying: (a)  to JSL the judgment debt of HK$210,000 with interest and costs under DCCJ 4928 of 2011; (b)  to the Petitioner and Official Receiver via JSL their costs of the winding up of the Company; (c)  to JSL their costs and disbursement of the winding up; (d)  to JSL their costs of JSL Summons up to an inclusive of 30.6.2014. Sin further suggested that the costs of the parties incurred since 1.7.14 under both JSL Summons and S Summons be determined by the court by way of paper disposal.
20.10.2014	JSL responded by asking Sin to enter into a Deed of Settlement upon various undertakings, including a term that should the agreed sum of HK$264,508.85 (judgment sum plus interest and costs in DCCJ 4928) not be paid on or before a particular day, judgment be entered against her for HK$6,597,480 (it was a sum in excess of the dividends distributed by the Company but it might be attributable to human error).
28.10.2014	Sin declined to accept the counter offer.
5.1.2015	JSL proposed 2 sets of directions for the parties to file affirmations to deal with the issue of costs.
2.2.2015	Sin proposed that directions should only be given for hearing of argument of the parties without filing affirmations.
16.2.2015	JSL insisted that Sin should execute the Deed of Settlement.
21.4.2015	Adjourned hearing before A Chan J where a Consent Order was made that: (a)  Sin would pay JSL the sum of HK$273,050.22 (with daily interest at HK$47.45), which was the judgment sum plus interest and costs; (b)  Sin would pay the costs of JSL Summons up to and including 30.6.2014 and the costs of liquidation incurred in the winding up of the Company up to and including 30.6.2014, to be taxed if not agreed; (c)  the costs of JSL Summons and costs of liquidation incurred after 30.6.2014 and the costs of 21.4.2015 be adjourned for argument; (d)  Sin had leave to withdraw S Summons and the costs thereof be adjourned for argument.

3.  For completeness, the sum of HK$273,050.22 together with interest due was duly paid by Sin after the hearing on 21 April 2015.

4.  At the hearing this morning, Mr Chong, appearing for Sin, has confirmed that Sin is seeking an order that the JSL[1] should pay the costs of and occasioned by the JSL Summons which have been incurred from and including 1 July 2014, as well as the costs of the S Summons.  As regards the costs of liquidation, Sin accepts that she would be liable for the costs of winding up of the Company incurred from and including 1 July 2014, but excluding the costs incurred for purposes of the JSL Summons (“Excluded WU Costs”).  No order should be made for the Excluded WU Costs, consequently the JSL would not be able to recover such costs. 

5.  Two points are apparent from the chronology. Firstly, this case arose from the failure by the Company to honour its payment obligation of HK$210,000 to Savills (Hong Kong) Ltd (“Savills).  Quite rightly, Savills sought to enforce the judgment it obtained against the Company resulting in its winding up and the appointment of the JSL.  The action by the JSL to seek recourse against Sin in such circumstances is not surprising.

6.  Secondly, the obstacle to the settlement of these matters was the insistence by the JSL that the dividends should be repaid to the Company and hence their failure to accept the repeated offer by Sin to put an end to these matters.

7.  There is controversy on whether the JSL Summons was justified.  Mr Chong criticised it as misconceived.  He argued that the appropriate course was to take out an application under s.275 of the Companies (Winding Up And Miscellaneous Provisions) Ordinance, Cap 32 (“Ordinance”) for fraudulent trading.  Hence, the alternative relief sought in the S Summons.  Ms Cheung, who appeared for the Company, maintains that the misfeasance proceedings were rightly brought. 

8.  In light of the fact that the dispute here is confined to costs, I do not believe that it is necessary to resolve the myriad of technical issues concerning s.276 (on which the JSL Summons was based) and s.275 of the Ordinance.  I agree with Mr Chong that the court is entitled to take a reasonably broad brush approach on costs arguments. 

9.  In my view, the key to resolving the arguments here rests in the appropriate relief under the JSL Summons.  Pursuant to s.276(1) of the Ordinance, the court might compel Sin to repay or restore the money of the Company, which had been misapplied or in respect of which she had been guilty of misfeasance or breach of duty, or any part thereof with interest.  Assuming in favour of the JSL that their application was rightly brought, it must be accepted, as Ms Cheung did, that the appropriate relief was in the discretion of the court. 

10.  There can be no serious dispute that, on the evidence before the court, the only debt of the Company was the judgment debt in favour of Savills (“Debt”).  Indeed, it appears from the audited financial statements of the Company that it was a simple company, and was probably used as a corporate vehicle for property holding. 

11.  Ms Cheung submitted that the Petition has not been advertised and that creditors may appear from the woodwork once that is done.  I am not attracted by the submission.  The Statement of Affairs was dated 30 August 2013.  As Mr Chong pointed out, the Petition was publicised.  No other creditor has come forward.  There is no indicated in the audited financial statements that the Company had any other debt.  In addition, the JSL had investigated the affairs of the Company.  There is simply no reason to suggest that Sin has misrepresented the financial position of the Company.

12.  I should add that even if it were the case that a creditor would come forward before the conclusion of the winding up, as Ms Cheung has accepted, the JSL would not be precluded from seeking relief against Sin arising from the newly discovered debt. 

13.  Sin should not be proud of what she had done in evading the liability over the Debt, but she took the first opportunity to make amends by agreeing to pay the Debt.  I was very surprised to see this case coming back to court after the call over hearing on 13 August 2014.

14.  With respect to the JSL, it was unreasonable to insist on the repayment of the entirety of the dividends.  I fail to see what useful purpose it could have served.  By the same token, it was unlikely for the court to grant such relief.  This unreasonable stance had thwarted Sin’s attempts to put an end to these proceedings and stop the wastage of both legal costs and liquidation costs.

15.  It was 8 months after the call over hearing that the JSL finally agreed to abandon the claim to have all the dividends repaid by agreeing to the Consent Order in April 2015.

16.  Ms Cheung sought to justify the JSL’ action by relying on a proposed Deed of Settlement.  That document came about after the hearing in October 2014 and in response to an open offer made by Sin.  Sin was unable to accept the terms in the Deed.  I agree with Mr Chong that, given the prevailing circumstances, the conclusion of these proceedings ought not have been hindered by an insistence on a warranty that the Company had no other liability and that judgment be entered against Sin for the entirety of the dividends in default of various payments (paras 3.1 and 4.2 of the Deed). 

17.  There is no doubt in my mind that the JSL had acted unreasonably in taking an unrealistic stance in these proceedings.  Their repeated failure to accept Sin’s offer to settle these matters means that costs and their fees are continued to be incurred.  It appears from the material before the court that the costs incurred for the JSL Summons up to and including 30 June 2014, subject to taxation, were in the sum of HK$256,537. The fees of the JSL up to 31 July 2014 amounted to HK$279,986.70.  With respect, these circumstances call into question the propriety of JSL’s position.   

18.  There can be no escape that the costs order must reflect the stance taken by the JSL.  I order that, firstly, the costs of the JSL Summons incurred up to and including the 1 September 2014 be paid by Sin, and the costs incurred thereafter (including the hearing on 21 April 2015) be borne by the JSL personally[2].  Secondly, the costs of the liquidation be borne by Sin with the exception of those costs which were incurred after 1 September 2014 for the purposes of the JSL Summons.  The excluded liquidation costs be borne by the JSL.

19.  I am not satisfied, after hearing Ms Cheung’s detailed submissions, that the JSL Summons was misconceived.  The costs of the S Summons should be borne by Sin. 

20.  As for the costs of today’s hearing, Sin has not been entirely successful.  I make an order that 2/3 of such costs be borne by the JSL.