RE FORTUNE KING TRADING LTD

HCCW 432/2012

[2020] HKCFI 591

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES (WINDING-UP) PROCEEDINGS NO. 432 OF 2012

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COSTS  RULING

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Introduction

1.  By my Judgment dated 11 March 2020, I dismissed the Trustees’ Summons which sought to reverse the Liquidators’ rejection of their proof of debt.

2.  I also made a costs order nisi that the costs follow the event, so that the Liquidators’ costs are to be paid by the Trustees to be taxed if not agreed.  The Trustees have since, on 25 March 2020, applied for variation of the order nisi.  The precise variation sought is for an order that either (a) there been no order as to costs, or alternatively (b) that 50% of the Liquidators’ costs be borne by the Trustees, and there be no order as to costs as to the remaining 50% (taking a broad brush approach).

3.  The Liquidators have responded to the variation application by their submissions dated 7 April 2020.

4.  This is my Costs Ruling.  In it, I adopt the definitions used in the Judgment.

Applicable Principles

5.  The principles applicable as to general questions of costs are not, and cannot realistically be, significantly in dispute.  But more controversy has arisen between the parties in their argument as to the applicable basis for dealing with the costs of trustees in bankruptcy, and whether they should be in a different position from any normal adversarial litigant.

6.  RHC Order 62 rule 3(2) provides that the Court shall order the costs to follow the event, except when it appears to the Court that in the circumstances of the case some other order should be made as to the whole or any part of the costs.  Order 62 rule 5(1) directs the Court to take account of various matters in the exercise of its discretion as to costs, including the conduct of the parties.  Such conduct itself includes whether it was reasonable for a party to raise, pursue or contest a particular allegation or issue.

7.  The previous general principles of costs to be found in the English case of In re Elgindata Ltd (No. 2) [1992] 1 WLR 1207 at 1214 have been considered since Civil Justice Reform by the Court of Appeal in, amongst other cases, Hung Fung Enterprises Holdings Ltd v Agricultural Bank of China [2012] 3 HKLRD 679.  At §100, Kwan JA pointed out that although the Elgindata principles continue to apply, the correct approach is to regard the proposition that costs should follow the event not as a general rule but only so as to operate to shift to the unsuccessful party the burden of showing why some other different approach should be adopted in the particular case.

8.  As to the circumstances when a wholly successful party can be deprived some part of his costs, ordinarily that will not occur unless there is evidence that that party either (1) brought about the litigation, or (2) has done something connected with the institution or the conduct of the suit calculated to occasion unnecessary litigation or expense, or (3) has done some wrongful act in the course of the transaction of which the other party complains.  But that approach is not to be applied too rigidly, as Order 62 rule 5 makes plain.

9.  In the context of a bankruptcy, the solicitors for the Trustees remind me that a trustee in bankruptcy has a statutory duty to take such steps as he considers necessary (exercising his skill and care) to maximise returns for creditors of the estate.

10.  Insofar as that submission is sought to be elevated to one that trustees in bankruptcy should not be ordered to bear costs personally, as it would discourage them from acting when it is their statutory duty to maximise returns for creditors, Mr Jason Yu for the Liquidators asserts that that would be contrary to established authority.  He submits that it is settled that liquidators who fail in proceedings that they instituted should be liable for costs personally: see Re Kam Toys & Novelty (unreported, CACV 67/2017, 13 November 2017) at §§44-45.  Further, the same principle has been applied where a trustee in bankruptcy failed to overturn a liquidator’s rejection of a proof of debt: see Trustee in Bankruptcy of Lo v Toohey [2005] 4 HKC 51 at §59.

11.  The rationale for this appears to be that a trustee in bankruptcy has a right to indemnity out of the estate, but a third party who is sued should be entitled to enforce costs against the trustee, leaving the trustee to reimburse himself out of the estate.  This is not thought to be discouraging to officeholders, as they can take steps to protect themselves by obtaining financial support from creditors in advance of proposed litigation.

12.  So, Mr Yu submits, the Trustees should be in no better position than a normal adversarial litigant.  In that context, it is settled that the well-established general rule is that costs follow the event, where the winning party is entitled to his costs even if he does not succeed on all arguments raised, and too ready a departure from that general rule may encourage unnecessary argument and undermine the utility of the rule itself.  It is also settled that the person who seeks to displace the general rule that costs should follow the event bears the burden of establishing appropriate reasons for departure from that general rule.

The Arguments and Analysis

13.  I accepted at §3 of my Judgment the fact that both the Trustees and the Liquidators were, in the unusual circumstances of the case where neither the Trustees nor the Liquidators had a personal interest in the outcome, pursuing their respective stances on behalf of the relevant creditors of the bankruptcy and liquidation estates.

14.  The solicitors for the Trustees submit that there is no suggestion that the Trustees were reckless in making the application, or that the case advanced was hopeless, even though it was ultimately dismissed.  By reference to a number of individual points, the solicitors suggest that it would have been alarming if the Trustees had not made the application, against the history of the part played by the Property.

15.  Those points include, but are not limited to: the fact that the Property was very valuable; that it was the place of the bankrupt Luu’s residence before and after he was adjudged bankrupt; and the lack of notice given before Luu caused the entire shareholding of the Company to be transferred for no consideration to another entity.  Reference is also made to: the extremely suspicious default judgment obtained by Construction; the necessity of the application heard by the then Recorder Linda Chan SC; and the natural consequences of pursuit of the Property by the Trustees as a creditor once it had been held that the Property was not held on trust for Luu.  I agree that the natural consequences do probably flow from the Recorder’s earlier decision.

16.  The solicitors for the Trustees also submit that the Summons was necessitated by the Liquidators’ failure to proceed diligently with the adjudication of the Trustees’ Proof, and that when finally adjudicated the only reason for rejecting it was that there was “no documentary evidence”. The submission is made by the solicitors for the Trustees that, as I stated in the Judgment that there was some force in the criticism as to the statement that there was “no documentary evidence”, that of itself identifies conduct on the part of the Liquidators which would warrant a variation to the costs order nisi. On the basis that the Trustees were bound to take reasonable steps to benefit the bankrupt’s estate, it was inevitable that they would make application following a Notice of Rejection on what was an “incorrect” ground.

17.  It is also submitted on behalf of the Trustees that to make a costs order against the Trustees in such circumstances would discourage office-holders from taking steps that it would otherwise be proper and appropriate for them to take, in particular when noting that a costs order against the trustees in bankruptcy is an order against those trustees personally.

18.  The solicitors also remind me that a considerable amount of the argument centred on two elements in respect of which the Liquidators were not successful.  Putting all that into the mix, it is submitted by them that in the exercise of my unfettered discretion as to costs, to be exercised judicially and departing from the general rule in an appropriate case, one of the alternate variations sought by the Trustees should be made.

19.  On the other side, Mr Yu stresses that it is unrealistic to expect the Liquidators, in rejecting the Trustees’ Proof, to have articulated the reasons in the same way a Judge would have done.  Ordinarily, if a liquidator has doubts about a proof, he should reject it and leave the creditor to prove his claim.  Further, because an appeal against rejection of a proof is a hearing de novo, the principle that costs follow the event does not depend on whether the liquidator dealt with the proof of debt reasonably or unreasonably.  So, says Mr Yu, what was or was not stated in the Notice of Rejection is irrelevant to the question of costs on the application made to the Court.  I tend to agree with that submission.  Although I accept that the reasons given for any rejection will be relevant to the consideration of whether or not to seek its reversal, ultimately an application to reverse the rejection will turn on its own merits in the light of the full argument as is deployed on the application.

20.  Mr Yu also deprecates the accusations of recklessness made against the Liquidators, in the context of the Judgment as a whole, and that the Court only determined the question of the purpose of Luu’s payments after a careful analysis of arguments which were raised by the Trustees only late in the proceedings. Indeed, I noted in the Judgment that late raising of arguments might give rise to costs implications.

21.  There is some force in Mr Yu’s point that it is improbable that the Trustees would have refrained from appealing against the rejection of the Trustees’ Proof even had a “correct” reason been given in the Notice of Rejection.  The Trustees have also given notice of intention to appeal against the Judgment itself.  The inference is fairly to be drawn that it was the rejection of the Trustees’ Proof, not the reasons given for the rejection, which provoked the Trustees application for reversal of the rejection.

22.  Mr Yu submits that there is no basis to complain about the time taken for the rejection of the Trustees’ Proof in the circumstances of the difficulties faced, with the lack of cooperation of witnesses, missing documents and the time taken to write to finance companies.  I accept that the chronology is not of great weight in the consideration as to the appropriate costs order.

23.  Mr Yu finally submits that there is no merit in the complaint that time was spent by the Liquidators on arguments which were not successful, and anyway that does not mean that the unsuccessful argument was unnecessary or unreasonably brought.  In short, I agree that (a) the issue as to the nature of Luu’s payments to the finance companies was properly raised by the Liquidators, and (b) the point on the idea of a running current account between Luu and the Company, where the Trustees were unable to show to the necessary standard any credit balance remaining in favour of Luu, was successfully pursued by the Liquidators, ultimately being determinative. As to the issue estoppel point relating to the 2017 Decision, whilst I rejected that argument I do not think it was unreasonably taken by the Liquidators.

24.  Nevertheless, overall I am persuaded that there is a good reason for some departure from the general rule as to costs following the event.  If I take the starting point to be that which I identified in the Judgment, and which I maintain to be correct, that both the Trustees and the Liquidators were pursuing what each honestly believed to be appropriate in accordance with their statutory duties, it would be unfair not to recognise the real practical difficulties which were faced in pursuing and opposing the various arguments which might have arisen, and which did arise.

25.  Both sides faced difficulties as regards limited contemporaneous documentation, and lack of cooperation from persons who would or might otherwise have been able to assist.  Both sides pursued some aspects of argument which were successful, and others which were not successful.

26.  Nevertheless, ultimately the burden was on the Trustees to make out their case, and they bore that burden irrespective of the difficulties that they faced as regards any documentation or cooperation of potential witnesses.  That is the effect of the authorities which I canvassed in the Judgment.  I am also conscious that the general rule that costs follow the event exists for a proper purpose, and some degree of caution is necessary before departure from that general rule is adopted.

Result

27.  Looking at matters in the round, and in the exercise of my unfettered discretion on the applicable approach, it seems to me that the fair costs order should depart to some extent from the general rule. I do not think departure to the extent of making a “no costs” order is warranted.  Nor do I think the ½ : ½ division put forward by the Trustees as the alternative variation is correct in the particular circumstances of this case.  Rather, and taking a fairly broad brush approach, I think that a roughly ⅓ : ⅔ division is appropriate.

28.  More precisely, I order that 65% of the Liquidators’ costs be borne by the Trustees, and there be no order as to costs as to the remaining 35%.

29.  As neither side has been entirely successful in the variation application, I shall make no order as to the costs of the submissions on costs.

HCCW 432/2012

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES (WINDING-UP) PROCEEDINGS NO 432 OF 2012

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DECISION

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1.  This is an application made by the joint and several liquidators of Fortune King Trading Limited (君裕貿易有限公司) (“Company”) on 14 October 2015 under section 200(3) of the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap 32) (“Ordinance”) for determination of the following question:

“ Whether the net balance of the sale proceeds of House 18 Severn 8, No. 8 Severn Road, Hong Kong (‘Net Balance’) paid into Court pursuant to the Order of Deputy High Court Judge Lok on 21 September 2012 under HCA 1055/2012 is an asset (a) owned legally and beneficially by the Company or (b) held on trust by the Company for and on behalf of the bankruptcy estate of Mr Luu Hung Viet Derrick.”

2.  Mr Anson Wong SC (leading Mr Tom Ng), counsel for Construction Limited (“Construction”), objects to the summons issued by Mr Wong Tak Man Stephen and Mr Osman Mohammed Arab, the trustees of the estate of Mr Luu (together “Trustees”) to adduce his 5^th affirmation dated 10 March 2017 on the basis that it was filed without leave of the court and the Trustees have failed to demonstrate exceptional circumstances for admitting this additional evidence at this stage. I do not think the objection is well founded as the purpose of 5^th affirmation is to exhibit the contemporaneous documents obtained by the Trustees which relate to the matters already canvassed by the Trustees in their earlier affirmation. As will be seen further below, given the lack of any assistance from the liquidators of the Company, the court has to rely on the documents produced by the parties, in particular the Trustees, in ascertaining the fact relevant to the question raised in the liquidators’ Summons. 

Background

3.  The Company was incorporated in Hong Kong on 28 April 2007.  Until 20 March 2012, its sole shareholder was Alphred Group Limited (“Alphred”), holding one issued share. Alphred was the sole director of the Company.

4.  Alphred was incorporated in the BVI on 28 March 2007.  On 4 May 2007, Mr Luu Hung Viet Derrick (“Mr Luu”) became its sole shareholder (holding one share) and director.  Pursuant to a written resolution dated 26 September 2008 signed by Mr Luu, one share was allotted to his wife, Ms Liu Ke Mian Lorraine (“Mrs Luu”) for US$1.  On 20 January 2012, Mrs Luu was appointed as a director of Alphred.

5.  The Company purchased House 18 Severn 8, No 8 Severn Road, Hong Kong (“Property”) on 23 July 2007 for HK$109 million.  As stated in schedule 4 to the agreement for sale and purchase dated 27 August 2007 (“SPA”), the price was paid by the Company in 4 tranches, and the last payment was made on 30 November 2007, which was also the date for completion.  At the time of completion, Mr Luu was the sole beneficial owner of Alphred and the Company. 

6.  The Property was subject to a number of mortgages and legal charges as follows:

Date of creation	Date of release	Nature	In favour of	Amount secured
4/12/2007	--	Mortgage	Standard Chartered Bank (“SCB”)	All monies
4/12/2007	26/2/2008	Second legal charge	Freeway Finance Company Ltd (“Freeway Finance”)	All monies
18/7/2008	26/9/2008	Legal charge	Goldbest International Investment Ltd (“Goldbest”)	$15 million facility, all monies
23/6/2008	5/8/2009	Legal charge	Freeway Finance	All monies
4/9/2009	27/10/2009	Legal charge	Freeway Finance	All monies
27/10/2009	21/1/2010	Second legal charge	Hong Kong Finance Company Ltd (“HK Finance”)	All monies
21/1/2010	--	Second legal charge	Sparkle Well Finance Company Ltd (“Sparkle Well”)	All monies
16/8/2010	--	Third mortgage	HK Finance	All monies

7.  On 1 August 2011, a bankruptcy petition was presented against Mr Luu.  Following a contested hearing, a bankruptcy order was made on 8 February 2012 and the Official Receiver became the provisional trustee of Mr Luu’s estate.

8.  Without any notice or consent of the Official Receiver, Mrs Luu on behalf of Alphred signed a special resolution stated to have been passed on 30 March 2012 (“Special Resolution”) to approve the transfer of the one share held by Alphred to Satisfactory Kingdom Holdings Ltd (“Satisfactory”).  There is no evidence to suggest that any consideration was paid by Satisfactory to Alphred for the transfer of the share.  This was despite the fact that by transferring the only issued share held by Alphred in the Company to Satisfactory, Mrs Luu was in effect disposing of the Company and the Property to Satisfactory.  After the transfer of the share to Satisfactory, Mr Luu and Mrs Luu continued to reside in the Property, apparently without having to pay any rent to the Company.

9.  The Property was sold to Petrina Company Limited pursuant to a sale and purchase agreement dated 30 April 2012 (“2012 SPA”) for HK$168 million and the sale was completed on 22 June 2012.

10.  Shortly before completion of the sale, on 18 June 2012, the Trustees commenced HCA 1055/2012 against Mr Luu, Mrs Luu, Alphred, Satisfactory and the Company to claim, inter alia, declarations that (1) the transfer of the one share in the Company from Alphred to Satisfactory and the approval of the transfer by the Special Resolution were void, (2) Alphred remains the sole shareholder of the Company, and (3) 100% or 50% of the balance of the proceeds of sale, after discharging the amounts owed to the mortagees and chargees, is held by the Company on trust for the Trustees.  On the same day, the Trustees applied for and obtained an ex parte proprietary injunction to enjoin the defendants from disposing of or dealing with the balance of the proceeds of sale.

11.  Pursuant to a consent order dated 21 September 2012, HK$13.4 million, which was then thought to be the net balance of the proceeds of sale was paid into court.  

12.  On 3 July 2012, Construction commenced HCA 1140/2012 against the Company to claim repayment of a debt of HK$16.8 million.  According to the statement of claim filed by Construction, the debt arose in this way:

(1)   Pursuant to a loan agreement dated 24 July 2009 (“1^st Loan Agreement”), Mr Wong Tseng Hon agreed to advance a HK$12 million loan to the Company for a term of 2 years.

(2)   By an extension agreement dated 24 July 2011 (“1^st Extension Agreement”), the time for repayment was extended for 6 months and the amount payable became HK$15 million.

(3)   On 12 January 2012, the loan was assigned by Mr Wong to Construction.

(4)   Instead of repaying the loan, on 24 January 2012, the Company and Construction entered into a second extension agreement whereby the parties agreed to further extend the time for repayment to 24 May 2012 upon the Company agreeing to repay HK$15.5 million by the extended date (“2^nd Extension Agreement”).

(5)   By another loan agreement dated 26 April 2012 (“2^nd Loan Agreement”), Construction agreed to advance a further loan of HK$1.3 million to the Company, and the Company agreed to repay HK$16.8 million to Construction within 30 days thereof, i.e. by 25 May 2012.

13.  Except the 2^nd Loan Agreement which appears to have been signed by one “Sandy”, all the agreements were signed by Mr Luu on behalf of the Company and in his capacity as the guarantor of the loan. Only 2 cheques dated 26 April 2012 in the amounts of HK$800,000 and HK$500,000 paid by Construction to the Company have been produced. 

14.  Within 2 days of the issue of the writ in HCA 1140/2012, on 5 July 2012, one “Sandy”[1] on behalf of the Company filed an acknowledgement of service and admitted the claim, whereupon Construction obtained a default judgment against the Company on 12 July 2012 for HK$16.8 million together with interest at 8% per annum from 3 July 2012 and fixed costs of HK$11,045 (“Default Judgment”).

15.  On 27 July 2012, Construction was added as the 6^th defendant in HCA 1055/2012 and the only relief sought against Construction was an injunction to enjoin it from attaching or otherwise interfering with the balance of the sale proceeds in satisfaction of the Default Judgment.

16.  Relying on the Default Judgment, on 23 November 2012, Construction presented a winding up petition against the Company in these proceedings.  A winding up order was made against the Company on 30 January 2013.  Ms Tso Yin Yee and Mr Pang Yiu Kwong, both of Vantage Advisory Limited, were appointed on 4 November 2013 as liquidators of the Company (together “Liquidators”).  Construction is the only creditor which has filed a proof of debt in the liquidation of the Company.

17.  The Trustees subsequently discovered that a sum of HK$1,435,000 had been taken from the sale proceeds of the Property and used by Mr Luu to repay a debt he owed to HK Finance.  Upon the repeated requests of the Trustees, on 10 January 2017, HK Finance repaid HK$1,435,000 to the Liquidators, and the Liquidators paid the same into court on 6 March 2017.  Taking into account this additional payment, the “Net Balance”, as defined in the Liquidators’ Summons, was HK$14,835,000.

18.  In the meantime, the Trustees applied for an order to continue their claim in HCA 1055/2012 against the Company but the application was dismissed by Master Hui on 2 December 2013.  The Trustees’ appeal was dismissed by Recorder Jat SC on 29 May 2014, as the learned Recorder considered that the Trustees’ claim for the Net Balance was relatively straight forward and could be determined by the Liquidators and, if any party was aggrieved by the Liquidators’ decision on the Trustees’ claim, they could apply to the court under section 200(5) of the Ordinance or the Liquidators could apply for directions under section 200(3).

Liquidators

19.  Mr Sebastian Hughes, counsel for the Trustees, criticises the Liquidators for their delay in making the application and their decision in not filing any evidence on the application or taking part in the hearing.  I think the criticism is amply justified.  It is clear from the 2 affirmations filed by the Liquidators that they have not conducted any meaningful investigation on the merit of the Trustees’ claim or the contentions raised by Construction.  The only thing they did was to make written requests to Mr Luu, Mrs Luu, Alphred and the former solicitors of the Company for provision of information.  When no response was received from them, the Liquidators did not pursue the matter further.  Instead, they relied on the lack of information and the conflicting stance of the parties as the reasons for not making a decision on the Trustees’ claim and even excused themselves from the substantive hearing by dressing it up as a “costs saving approach”.  This was despite the fact that they have obtained a pre-emptive costs order from G Lam J on 20 May 2015 to ensure that their fees and costs incurred in investigating and ascertaining the beneficial ownership of the Net Balance could be paid out of it.

20.  As a result of the inaction of the Liquidators, which is surprising given that it was (and still is) their duty to investigate and decide the merit of the competing claims made by the Trustees and Construction, the court has to decide the question without the benefit of any assistance from the Liquidators.  Indeed, even the basic information and documents concerning the Company, such as the accounts of the Company, audited or otherwise, are not in the evidence.

Merit of application

21.  As stated above, the question for determination by the court is whether the Company is holding the Net Balance as its legal and beneficial owner or on trust for the estate of Mr Luu.

22.  In his skeleton, Mr Hughes makes clear that the Trustees rely on the presumption of resulting trust.  He summarises the Trustees’ case in this way:

“ ….[the evidence obtained by the Trustees] supports the overwhelming conclusion that the beneficial interest in the [Property] was, at the time of purchase, held by Luu and that, therefore, the Net Balance is held on trust by the Company for and on behalf of the bankruptcy estate of Luu.”

23.  The principles governing resulting trust are not in dispute and have been conveniently summarised in Re Superyield Holdings Ltd [2000] 2 HKC 90 at 106E – 108E, per Recorder Robert Kotewall SC:

“1. A useful starting point is article 31(1) of Underhill & Hayton, Law of Trusts and Trustees (15th Ed), p 317 as follows:

‘ When real or personal property is conveyed to a purchaser jointly with others, or to one or more persons other than the purchaser, a resulting trust will be presumed in favour of the person who is proved … to have paid the purchase‑money in the character of purchaser (as opposed to that of donor or lender).’

2. The better view is that this is a rebuttable presumption of law in that:

(a) it applies as soon as the fact of contribution to the purchase price is proved; and

(b) in the absence of other evidence, it is conclusive for the party in whose favour it operates and for the purpose for which it operates.

3. The fact being presumed is that of the intention of the parties (or more precisely, the providers of the purchase‑money) in the absence of evidence of their actual intention. That being the case, the presumption can be rebutted by:

(a) the application and non‑rebuttal of the presumption of advancement;

(b) evidence of an actual intention on the part of the purchaser to benefit the holder of the legal title.

4. The principle is applicable to different combinations of factual circumstances:

(a) Where one person pays the whole of the purchase price and title is taken in the name of another, it is presumed, unless the contrary is shown, that it was intended that the property be held in trust for him.

(b) …..

(c) …..

5. The material intention is that of the provider of the purchase money. See Calverley v. Green (1984) 155 CLR 242, per Gibbs CJ at 251 and per Mason & Brennan JJ at 261.

6. The implied trust arises at the time of the purchase so that the contributor acquires an equitable interest at the outset and such interest corresponds to the share he or she paid for at the time of purchase. See Underhill & Hayton at p.321.

7. The time to take stock of the respective interest taken by the parties is the time of acquisition.

8. It follows that the time at which the respective contributions are to be calculated for the purpose of fixing the parties’ respective interest is also the time of acquisition. See Crisp v Mullings [1976] 2 EGLR 103G‑K and Calverley v. Green at 252 and 262.

9. …..

10. Where some or all of the purchase price is borrowed, the acceptance of a personal liability as against the lender to repay, for instance, by the execution of a mortgage containing a personal covenant to repay, constitutes a contribution to the purchase. …

11. The better view is that post‑completion unequal contributions to mortgage repayments, whether by prior agreement or otherwise, cannot affect the quantum of interest taken by the respective parties at the date of acquisition under, I emphasise, a resulting trust. …

12. …..

13. The burden falls upon the party asserting, in I believe Miss Wong’s words, or perhaps not, that ‘the equitable right is not at home with the legal title’. See the similar sentiments in Crisp v Mullings at 103F‑G.

14. These principles are not restricted in their application to persons within any particular category of relationships.”

24.  Mr Hughes fairly draws the attention of the court to a number of authorities where the English court held that when the purchase was made in the name of a company, the starting premise should be that the purchaser intended both the legal and beneficial interest to vest in the company (Arab Monetary Fund v Hashim, unreported, 15 June 1994; Trade Credit Finance No (1) v Dinc Bilgin [2004] EWHC 2732 at 70(e); Nightingale Mayfair Ltd v Mehta, unreported, 1999 WL 1705970, 21 December 1999, at p 15). In Underhill and Hayton Law of Trusts and Trustees, 19^th edition, at §25.11, the learned author drew the distinction between an initial purchase made in the name of the company and a subsequent transfer to the company:

“ Where A purchases property in the name of a company or trust controlled by him the normal nature (but rebuttable) inference is that beneficial ownership was intended to pass to the company or trustee, but if A transfers property from his name into that of a company or trust controlled by him, the court is ready to infer that in the circumstances the transferee was to be a nominee of A.”

25.  Mr Wong submits that the presumption of resulting trust will be rebutted if the purchase price was paid by way of a shareholder’s loan, citing Re Hansby Company Ltd, unreported, HCMP 4610/2003, 12 May 2004, per Barma J (as he then was) at §22 and Good Profit Development v Leung Hoi [1993] 2 HKLR 176 at 181, per Woo J (as he then was). This must be right as by advancing a shareholder’s loan to the company to purchase a property, the shareholder was expressing an intention to seek repayment of the loan from the company, rather than acquiring a beneficial interest in the property.  Such intention is inconsistent with any presumed intention on the part of the shareholder to acquire a beneficial interest in the property.

26.  Mr Wong also relies on the well-established principle, as expounded in Salomon v Salomon [1897] AC 22 and Macaura v Northern Assurance [1925] AC 619, that a company has a separate existence and is a legal person separate from its shareholders, and the normal rule is that a company does not hold property as an agent or trustee for its shareholders. The principle has been consistently applied and followed by the Hong Kong court in Good Profit Development v Leung Hoi [1993] 2 HKLR 176 at 179(40) – 181(25), per Woo J (as he then was), Hui Yin San v Tsoi Ping Kwan [2010] 1 HKC 585 at §25(1), per Au J, Terrian Ltd v Oriental Peer Co Ltd [1988] 1 HKLR 246 at 254H-J, per Clough JA, Luo Xing Juan v Estate of Hui Shui See (2009) 12 HKCFAR 1 at §34, per Ribeiro PJ, Re Hansby Company Ltd, unreported, HCMP 4610/2003, 12 May 2014, per Barma J (as he then was).

27.  Mr Hughes points to the following evidence which he submits shows that at the time of the purchase of the Property, Mr Luu intended to retain the beneficial interest in the Property and that the Company was used by Mr Luu “as a conduit for personal loans obtained using the security of the [Property]”:

(1)   Mr Luu was the sole shareholder and director of Alphred at the time of the purchase of the Property.

(2)   Mrs Luu only became a shareholder of Alphred on 26 September 2008 with the approval of Mr Luu, and she was appointed as a director of Alphred after the bankruptcy petition had been presented against Mr Luu.  As such, the prima facie position must be that Mrs Luu had no legal and beneficial interest in the Company.

(3)   The deposit of HK$21.8 million used to acquire the Property was paid by Mr Luu.

(4)   Mr Luu used his personal funds to repay the amounts owed to the mortagees which included:

(a)   issuing cheques of HK$435,000 and HK$280,000 on 29 January 2008 and 5 October 2009 respectively to Freeway Finance;

(b)   transferring HK$877,500 and HK$4,387,870.97 to Sparkle Well on 5 May 2011 and 24 August 2011 respectively; and

(c)   issuing a cashier order for HK$1,112,500 on 24 August 2011 to HK Finance.

(5)   Mr Luu provided personal guarantees to at least SCB and HK Finance.

(6)   Mr Luu issued personal cheques for HK$13,015,000 and HK$2,923,200 on 19 September 2008 and 26 September 2008 to pay off the loan owed to Goldbest.

(7)   Mr Luu and Mrs Luu continued to reside in the Property until at least May 2012 without having to pay any rent, notwithstanding the bankruptcy order and the transfer of the only issued share in the Company to Satisfactory.

(8)   The Company’s only asset was the Property.  It had no other asset or income.

28.  Mr Hughes submits that the above evidence gives rise to a presumption of resulting trust and, in any event, is sufficient to support a finding that the Property was held on resulting trust for its real purchaser, Mr Luu.

29.  Mr Wong submits that Mr Luu’s clear intention was to allow the Company to own the Property beneficially, and there is no room for the presumption of resulting trust to operate.  He relies on the following matters:

(1)   The Company was used for the specific purpose of acquiring the Property.  The likely intention of its shareholder, Mr Luu, was that the whole interest of the Property should be in the Company.  To impose a resulting trust would be perverse, and would defeat rather than promote the intention of the shareholder, citing Trade Credit Finance at §§70(e), 76 and Nightingale Mayfair at 15.

(2)   There must be a commercial reason why a BVI company (Alphred) and a Hong Kong company (the Company) were interposed, particularly when maintaining both companies involve costs.  To this end, the interposition is likely to serve a tax-saving purpose.  For this to work, the Property has to be beneficially owned by the Company.

(3)   The Company had been the registered owner of the Property all along and no step was taken by Mr Luu to alter this position.

(4)   At the time of the purchase, Mr Luu was only an “indirect shareholder” of the Company.  Subsequently, he became a 50% shareholder of Alphred.  To assert that Mr Luu was the beneficial owner of the Property is “to leapfrog Mr Luu, Alphred and the Company at the same time.”

(5)   The allotment of 50% share in Alphred to Mrs Luu would have been “completely pointless” had the Company been a mere trustee for Mr Luu.

(6)   The share in the Company has since been sold to Satisfactory, which is controlled by another person, Ms Wang Ying.  The transfer would have been “pointless” had the Company been a mere trustee for Mr Luu.

30.  The above matters relied on by Mr Wong are not supported by any evidence.  Nor can they be said to be matters which the court can infer from the other primary facts proved or found.  Even if (which is not the case here) the matters relied on by Mr Wong are established, they are equally consistent with Mr Luu’s intention that the Property was to be held by the Company on trust for him.  For example, the fact that neither Mrs Luu nor Satisfactory has paid any consideration for the share allotted or transferred to them is consistent with the fact that Mrs Luu and Satisfactory are holding their share as trustee or nominee of Mr Luu.

31.  In my view, the starting point is that upon Mr Luu using the Company to acquire the Property, the Company became its legal owner. There is a normal but rebuttable inference that the beneficial ownership of the Property was intended to pass to the Company.  The burden is on the Trustees to prove that the legal and equitable ownership of the Property is different, specifically the beneficial interest of the Property belonged to Mr Luu.

32.  The evidence relied upon by the Trustees (summarised in §27 above) shows that at the time of the purchase of the Property, Mr Luu provided the fund required by the Company to purchase the Property. This was apparently done without the assistance of any mortgage loan, as the first loan obtained by the Company was the one advanced by SCB 4 days after completion of the purchase of the Property (“SCB’s Loan”).

33.  The Company received the SCB’s Loan on or shortly after 4 December 2007.  There is no evidence on the amount of the SCB’s Loan.  In the completion account statement of the Property, by 22 June 2012, the redemption money payable to SCB was stated as HK$77,277,698.79.  It is therefore reasonable to infer that the amount of the SBC’s Loan was substantial.  The evidence does not deal with how the SCB’s Loan or the other loans obtained by the Company from the other financiers described in §6 above were used.  It is however clear from the summary in §6 above that prior to Mrs Luu becoming a shareholder of Alphred on 26 September 2008, the Company had already obtained 4 loans secured against the Property from SCB, Freeway Finance and Goldbest.  It is reasonable to infer that the proceeds of these loans were used by Mr Luu, as it is common ground that other than holding the Property, the Company did not have any other business or operation.  The issue is whether the proceeds of these loans (or any parts thereof) were used by Mr Luu to repay the fund he had provided to purchase the Property or were borrowed by him from the Company for his personal purposes.  If Mr Luu used the loans to repay the fund he had provided to purchase the Property, there would be no room for any presumption of resulting trust to operate.

34.  It seems to me that the evidence on this issue lies in Mr Luu’s statement of affairs dated 17 July 2012 (“SOA”).  In the SOA, Mr Luu did not state that he was indebted to the Company.  This is only consistent with Mr Luu having used the proceeds of the Loans (or part thereof) to repay the fund he had provided to purchase the Property.  Without such repayment, the Company would have substantial cash of at least HK$109 million (the purchase price of the Property) sitting in its bank account and would not have to use the proceeds of sale of the Property to discharge all the outstanding loans advanced by the financiers to the Company.  On the basis of this evidence, I find that although Mr Luu provided the fund to purchase the Property, he did so by way of a loan advanced to the Company, and he applied the proceeds of the loans (or part thereof) obtained by the Company to repay himself for the amount he had provided to purchase the Property.  This is sufficient to rebut any presumption of resulting trust in favour of Mr Luu.

35.  Even if I were wrong in finding that Mr Luu provided the fund to purchase the Property by way of a loan, I consider that the following statements emanated from Mr Luu shows that it was his intention that the Company was the beneficial owner of the Property:

(1)   In the SOA, under the section on assets, Mr Luu did not state that he was the beneficial owner of the Property.

(2)   In section F, clauses 6(a) – (b) and 8 of the mortgage made in favour of SCB, Mr Luu confirmed that the Company was the beneficial owner of all the interests in the Property and the sole owner of the Property.

(3)   In clause 3 of the second legal charge made in favour of Sparkle Well, Mr Luu confirmed that the Company was the beneficial owner of the Property.

(4)   In clauses 3.01(a), 7.01(b) and 20 of the third legal charge in favour of HK Finance, Mr Luu confirmed that the Company was the beneficial owner of the Property.

36.  Although these mortgage and legal charges were signed by Mr Luu on behalf of the Company in his capacity as the sole director (in respect of the mortgage) or authorised director of Alphred (in respect of the legal charges), it does not detract from the fact that they were statements made by Mr Luu as by signing the agreements on behalf of the Company, Mr Luu was confirming the truthfulness of these statements.

37.  I have also considered whether the fact that the statements summarised in §35 above were all post-acquisition of the Property, whereas the relevant time for determination of the beneficial interest of the Property was the time of the acquisition of the Property.  I do not consider that this would render Mr Luu’s statements to be irrelevant or inadmissible for the purpose of ascertaining his actual intention for 2 reasons. First, the statements were in effect declaration against  self-interest and, as such, are binding upon Mr Luu.  Secondly, there is nothing to suggest that between the acquisition and the time Mr Luu signed the mortgage, the legal charges and the SOA, the beneficial ownership of the Property has changed (which cannot be done without any instrument in writing and no such instrument has been produced). As such, it is immaterial that the statements were made by Mr Luu after the acquisition of the Property. 

38.  Mr Wong also points to the following statements in the other agreements entered into by the Company which, he submits, shows that the Company had consistently represented to the outside world including Construction, that the Company owned the Property beneficially:

(1)   The Company repeatedly confirmed to Construction in the 1^st Loan Agreement the 1^st and 2^nd Extension Agreements that the Company has “good and valid title to” or 100% beneficial interest in the Property.

(2)   In clause 5 of the 2012 SPA, the Company agreed to assign the Property in its capacity as the “beneficial owner”.  In clause 39, the Company “declares and confirms” to the purchaser that “no third party other than any existing mortgagee/chargee (whether related or otherwise) has any right or interest whatsoever whether legal or equitable in the Property.  The [Company] further ‘declares and confirms’ that the [Company] has the absolute right and interest in the Property”.

(3)   The assignment was executed by the Company as beneficial owner on 22 June 2012.

39.  I do not regard the above statements can be taken as evidence on the actual intention of Mr Luu as to the beneficial ownership of the Property for the following reasons:

(1)   Although Construction obtained a judgment against the Company, it was a default judgment.  It is well established that the liquidators and the court may re-open a default judgment if there is evidence to suggest that the claim made by the creditor may not be valid.  Mr Hughes has in §39(5) – (7) of his skeleton identified a number of matters which he submits renders the 1^st and 2^nd Loan Agreements and the 1^st and 2^nd Extension Agreements to be “suspicious and commercially unsound”.  I can see the force of his submissions.  However, as the present application is not concerned with the validity of Construction’s claim and the Liquidators have not conducted any investigation on such claim, I would not express any view on the validity of Construction’s claim. Nor would I assume that the 1^st and 2^nd Loan Agreements and the 1^st and 2^nd Extension Agreements were made on the dates stated or that they are binding upon the Company.

(2)   The 2012 SPA and the Assignment were both signed by “Sandy” on behalf of the Company in her capacity as the sole director of Satisfactory, which was then the sole director of the Company.  As such, the statements contained therein could not be regarded as the statements of Mr Luu.

Disposition and costs

40.  For the above reasons, the Trustees have failed to discharge the burden of proving that the Property was held by the Company on resulting trust for Mr Luu.  I find that the Company was the legal and beneficial owner of the Property and hence the Net Balance.

41.  I should add that although submissions have been made by both counsel on the validity of the transfer of the one share in the Company from Alphred to Satisfactory and the Special Resolution approving the transfer, which are the subject matters of the Trustees’ claim in HCA 1055/2012, I have not made any determination on these issues as they fall outside the question raised in the Summons.  That said, it appears that in the absence of the consent of the Official Receiver, who is the provisional trustee of the estate of Mr Luu, any purported disposal of the assets of Mr Luu would be invalid and not binding upon the Trustees.

42.  As for costs, I make a costs order nisi that:

(1)   The Liquidators are not entitled to recover their costs of and occasioned by the Summons out of the assets of the Company, as I consider that they have failed to discharge their duty in investigating the competing claims of the Trustees and Construction or providing the necessary evidence and assistance to the court on the application.

(2)   50% of the costs of and occasioned by Construction on the Summons are to be paid by the Trustees, to be taxed if not agreed and with certificate for one counsel as I do not consider that the Summons justifies the engagement of two counsel.  The other 50% of the costs incurred by Construction are to be paid out of the assets of the Company.

43.  I consider it appropriate to order 50% of the costs of Construction to be paid out of the assets of the Company, as the court derives considerable assistance from the evidence filed by the Trustees in particular the evidence those concerning the Company which should have been dealt with by the Liquidators.  Indeed, had the Liquidators performed their duty in investigating and making a decision on the competing claims, the Summons might not have been necessary.  Given that in the ordinary event, the costs incurred by the Liquidators in investigating and determining the competing claims would be paid out of the assets of the Company, it would be appropriate to order part of Construction’s costs to be paid out of the assets of the Company.

HCCW 432/2012

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES WINDING‑UP PROCEEDINGS NO 432 OF 2012

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1.  This is an appeal by the Trustees in Bankruptcy (“the Trustees”) of Mr Luu Hung Viet Derrick (“Mr Luu”) against the Order of Master Hui dated 2 December 2013 refusing the Trustees’ application for leave under section 186 of the Companies Ordinance (now Companies (Winding‑Up and Miscellaneous Provisions) Ordinance), Cap 32 (“the Ordinance”), to continue HCA 1055/2012 (“the Action”).

Background facts

2.  The material facts for the purposes of this appeal can be shortly stated.

3.  Mr Luu was adjudged bankrupt on 8 February 2012.  The Trustees were appointed on 18 April 2012.  They commenced the Action on 18 June 2012 against a number of persons, including: (1) Mr Luu; (2) his wife Mdm Liu Ke Mian Lorraine (“Mdm Liu”); (3) Alphred Group Limited (“Alphred”); (4) Satisfactory Kingdom Holdings Limited (“Satisfactory Kingdom”) and (5) Fortune King Trading Limited (“Fortune King”).

4.  By the Action, the Trustees seek declaratory and other relief mainly to the effect that Mr Luu was the beneficial owner of the property known as House 18, Severn 8, No 8 Severn Road, Hong Kong (“the Property”).  There are other claims, some related to the trust claim and some not, which I need not mention here.

5.  Fortune King was the registered owner of the Property since 2007 until it sold the Property in June 2012. Fortune King was in turn wholly owned by Alphred, a BVI company.  At all material times from 2007 up to March 2012, Mr Luu and Mdm Liu were the only shareholders of Alphred, each owning 50% of its issued shares.  Mr Luu was appointed sole director of Alphred on 4 May 2007.  Mdm Liu was appointed a director on 20 January 2012 (after the presentation of the bankruptcy petition against Mr Luu, but before he was adjudged bankrupt).

6.  The Trustees claim that Mr Luu provided the initial payment for the purchase of the Property in the sum of $21.8 million.  The remainder of the purchase price was financed by mortgages, and Mr Luu gave personal guarantees to the mortgagees.  He lived in the Property rent free.

7.  By a special resolution dated 20 March 2012, Alphred transferred its shares in Fortune King to Satisfactory Kingdom, also a BVI company.  According to the papers before me, one Wang Ying owned/controlled Satisfactory Kingdom.  It is unclear what was the consideration for the transfer of Fortune King’s shares by Alphred to Satisfactory Kingdom, or whether there was any connection between Wang Ying on the one hand and Mr Luu or Mdm Liu on the other.  The Trustees allege that after the transfer of the shares in Fortune King to Satisfactory Kingdom, Mr Luu continued to reside at the Premises for some time without paying any rent.

8.  The sale of the Property in June 2012 produced net proceeds of around $13.4 million.  The Trustees claim that Mr Luu was the beneficial owner of the Property; hence the estate rather than Fortune King should be entitled to the proceeds.  The proceeds have been paid into court pending resolution of the competing claims.

9.  On 27 July 2012, Construction Limited (“Construction”) was added as the 6^th defendant in the Action on its own application.

10.  In the meantime, Fortune King was wound up by the court on 30 January 2013 pursuant to a petition presented by Construction on 23 November 2012.  The petition was based on a judgment debt for $16.8 million which Fortune King did not dispute.  Construction is the only substantial creditor of Fortune King and is the only member of the committee of inspection.

11.  As Mr Jose Maurellet, counsel for the Trustees, put it in his skeleton, the “real fight” is between the Trustees and Construction.  That is common ground, at least from the financial perspective.

Contentions

12.  The Trustees’ main contention was that leave should be granted so that the trust claim can be more conveniently decided in the Action.  Mr Maurellet submitted that given the history of the matter and the positions taken by the relevant parties, a resolution of the beneficial ownership and entitlement to the proceeds by the court would be inevitable.  It would therefore be more appropriate that the claims be decided in a direct contest between the Trustees and Construction rather than by the Liquidators of Fortune King (“the Liquidators”).

13.  Mr Maurellet bolstered his main submission by relying on the fact that the Liquidators did not oppose the application for leave.  It was said that the Liquidators’ stance indicated that they were not keen to resolve the trust claim without court assistance.  The availability of automatic discovery in the Action was another factor relied upon.

14.  Mr William Wong SC (leading Mr Michael Lok) on behalf of Construction argued otherwise.[1]  Mr Wong submitted that the adjudication of the Trustees’ claim should take place in the liquidation.  To bolster his position, Mr Wong argued that the proprietary claim was hopeless; that even if there were an arguable case, it could be conveniently decided in the course of the liquidation; and there was no special circumstances justifying leave to continue the Action against Fortune King.

15.  The Liquidators adopted a neutral stance on this appeal, as they did before the master.  Nevertheless, Mr Derek J Y Chan, counsel appearing behalf of the Liquidators on this appeal but not before the master, disclaimed any notion that the Liquidators were not keen to resolve the Trustees’ claim, as Mr Maurellet’s skeleton suggested.  Mr Chan clarified that the Liquidators were able (and in any event under a duty) to determine the Trustees’ claim and other claims according to the evidence and materials available to them in a fair and even-handed manner.  The Liquidators took a neutral position simply because they have not received sufficient materials for them to form a view on the Trustees’ claim.  At the same time, however, the Liquidators believed (I think reasonably) that it would be likely that one way or the other, resort to the court would be required in any event, although they shared Construction’s view that a full trial of the Action involving multiple parties would likely be more lengthy and costly than an adjudication in the liquidation and the (likely) subsequent application to the court arising from the Liquidators’ decision.

Applicable principles

16.  Counsel were agreed on the applicable principles.  They referred me to two judgments of Kwan J (as she then was) in Re B+B Construction Co Ltd, HCCW 114/2001 (unreported, 4 April 2003) at §§5‑7 & 9 and Re Keen Lloyd Resources Ltd, HCCW 1134/2002 (unreported, 21 May 2004) at §§20‑21.  In short:

(a) The key question is “what is the appropriate method for determining the proposed claims—is it separate proceedings or is it the winding-up process”?

(b) Whether to grant leave depends on what is right and fair in the circumstances of the case and this involves a balancing exercise: if leaving the issue to be determined by the liquidators is less expensive and quicker than an independent action it may be more convenient that way and leave may be refused.

(c) On the other hand, proceedings will be allowed to continue when it is the most convenient method of trying a question, especially where the question raises substantial issues of disputed facts or matters of law of complexity.

(d) For the purpose of determining whether leave should be granted, it is unnecessary to investigate the merits of the claim, so long as the claim is not clearly unsustainable. 

Discussion

17.  Mr Wong, on behalf of Construction, contended that the Trustees’ claim was unarguable.  He submitted, in substance, that the use of a limited company to purchase properties was commonplace in Hong Kong.  The shareholders would typically provide the down payment/deposits—which would be treated as shareholders’ loans—and mortgagees often required personal guarantees from the shareholders. That, Mr Wong argued, was basically what had happened here.

18.  Moreover, Mr Wong reminded me that the sale of the Property took place after Alphred had transferred the shares in Fortune King to Satisfactory Kingdom.  Whether that share transfer was suspicious or not was irrelevant to the sale of the Property by Fortune King.

19.  I can see the force of Mr Wong’s argument.  However, at this stage, and without all the material evidence, I am not prepared to say that the Trustees’ claim is unarguable.  There are, in my view, some unusual features in this case which warrant more matured consideration.  For obvious reasons, it is undesirable to go into the details for the purposes of disposing of this appeal.  I would mention, by way of example only, the transfer of the shares of Fortune King to Satisfactory Kingdom, which is currently shrouded in secrecy, and the fact (if it be proved) that Mr Luu continued to live in the Property after the share transfer. The clarification of these matters may (I put it no higher than that) tend to support the Trustees’ case.

20.  That said, I am not convinced that leave should be granted.

21.  Ultimately, the Trustees’ claim appears to me to be relatively straight forward, and I do not see why the Liquidators cannot form a view one way or the other relatively quickly.

22.  In this connection, I bear in mind that the Liquidators have stated that they are able—and indeed duty bound—to form a view on the Trustees’ claim according to the evidence and materials presented to them in a fair and even-handed manner.  I see no reason to doubt that.  I also place reliance on the Liquidators’ view that a full trial of the Action, involving as it does multiple parties and matters not directly relevant to the beneficial ownership issue, is likely to be more costly than adjudication in the liquidation.

23.  I am fully conscious that the court would probably be involved, either because the party aggrieved by the Liquidators’ decision on the Trustees’ claim would most likely apply to the court under section 200(5) of the Ordinance, or the Liquidators would apply for directions as to the disposal of the proceeds under section 200(3). But, as Mr Wong rightly pointed out, at that stage the issues are likely to be more focused and would probably involve only the Trustees and Construction.  It would probably take less time, hence costs, than a full-blown action involving many parties.

24.  In short, I am not convinced that the facts and circumstances of this case warrant the granting of leave to the Trustees to pursue the Action.

Disposal

25.  Accordingly, the appeal is dismissed.  I also make an order nisi that the Trustees shall pay the Liquidators’ and Construction’s costs of the appeal on a party and party basis, to be taxed if not agreed.

Postscript

26.  During the hearing, a question arose as to whether there was any specific procedure under the Winding-Up Rules governing how the Liquidators were to determine the Trustees’ trust claim.  In the course of his submissions, Mr Wong referred me to Company Law in Hong Kong, Insolvency, 2014 §2.014, which discussed an unreported judgment of Barma J (as he then was) in Re Guangdong International Trust & Investment Corporation Hong Kong (Holdings) Limited, HCMP 1942/2002, 24 March 2005.  He suggested that the Trustees could file a proof of debt in the liquidation, as was apparently done in the GITIC case.  I found that suggestion somewhat surprising, although in the end it was unnecessary to delve into whether that proposition was correct as no one suggested that the Liquidators could not entertain or determine the Trustees’ claim.  Anyway, as no copy of the GITIC case was available at the hearing, Mr Maurellet asked for leave to file written submissions on that case once he had had an opportunity to consider it.  I acceded to that request and gave leave to all parties to file written submissions on that narrow point.

27.  Counsel for the Liquidators and for the Trustees then lodged succinct and helpful written submissions, for which I am grateful.  Both of them submitted that the GITIC case does not support the proposition that the use of the proof of debt procedure was appropriate for a trust claim, because no issue arose in that case and Barma J did not have to consider the question.  I think they are probably right, but it is unnecessary for me to decide that question in this appeal.

28.  Counsel for Construction, on the other hand, lodged a lengthy written supplemental submissions running to 16 pages, accompanied by 16 additional authorities.  The supplemental submissions canvassed a large number of points, including further submissions on points already argued at the hearing, and mostly on matters beyond the leave given.  I am sorry to say that I derived little assistance from those submissions.  Irrespective of what may be the final costs order, I would ask the taxing master when taxing the costs of this appeal to pay specific attention to whether any of the costs arising from Construction’s supplemental submissions should be allowed.

Mr William Wong SC & Mr Michael Lok, instructed by Joseph CT Lee & Co, for the petitioner

Mr Jose-Antonio Maurellet, instructed by Tanner De Witt, for the trustees

Mr Derek JY Chan, instructed by Sanny Kwong & Co, for the liquidators