Jersey Unreported Judgments

[2007]JRC116

royal court

(Samedi Division)

15^th June 2007 

Before     :

J. A. Clyde Smith, Esq., Commissioner, and Jurats Morgan and Tibbo.

 

In the Matter of Kong Wah Holdings Limited

(In Compulsory Liquidation)

And in the Matter of Akai Holdings Limited

(In Compulsory Liquidation)

Advocate R. J. Michel for the Representor.

Advocate A. D Robinson Respondent

judgment

the Commissioner:

1.        By order dated 6^th June 2007 this Court, pursuant to a letter of request dated 19^th March 2007 received from the High Court of Hong Kong and in the exercise of its inherent jurisdiction, recognised the appointment of the Representor as "Liquidator" with others of a number of Hong Kong and BVI companies, and ordered HSBC (CI) Limited (the "Respondent"), a company incorporated and carrying on business in Jersey, to provide information in relation to those companies.

2.        The form of the order was effectively agreed by the parties at the hearing but there was one issue in relation to costs incurred by the Respondent in respect of which the Court indicated that it would give its reasons for the decision it made.

3.        The Representor agreed at the hearing that the Respondent should receive its costs of and incidental to the proceedings in Jersey but that such costs should not extend to legal fees incurred by the Respondent in both Jersey and Hong Kong in relation to the application made by the Representor to the Court in Hong Kong for the letter of request to be issued.

4.        The background of the winding-up of these companies is clearly complex with the liquidators identifying some 120 companies which were or are part of the group concerned.  They have been hampered by inadequate books and records.  The Respondent had acted as banker to a number of the companies and the liquidators believe that it may have information which would assist them in their duties.  The Respondent, whilst wishing to co-operate with the Liquidators, made it clear at an early stage that it required an order of the Jersey Court before providing any information it had in its possession. 

5.        Accordingly, the Representor instructed Walkers in Jersey to advise on the issuing of a letter of request to the Jersey court.  On Walkers' advice the proposed letter of request to be issued out of the court in Hong Kong and the draft affidavit in support of that request was sent to and approved by the Viscount.  

6.        The Respondent, in contemplation of that request being issued, instructed Bedell Cristin who could see no issues, in principle, with the orders proposed to be sought from the Jersey Court.

7.        The problem arises because when the Representor applied to the court in Hong Kong for the letter of request, he also sought a direct order against the Respondent under Section 221 of the Hong Kong Companies Ordinance requiring the Respondent inter alia to deliver up the documentation to the liquidators.  Leave was obtained from the court in Hong Kong for a summons to be served out of the jurisdiction upon the Respondent in Jersey returnable before the court in Hong Kong on 20^th December 2006. The summons was served upon the Respondent on 6^th December 2006.

8.        There had been no previous intimation from the Representor that it was seeking such a direct order.  The Respondent sought advice in Hong Kong, through Bedell Cristin, on the implications of that summons and whether it should appear in the Hong Kong proceedings.  It was advised not to appear and it has not been criticised by the court in Hong Kong for failing to do so.  It is the costs incurred in that exercise that the Respondent seeks to have paid.

9.        Bedell Cristin have repeatedly sought an explanation from Walkers as to why the Respondent was summoned  directly under section 221 but has received none save that it was necessary to underpin the letter of request and was standard procedure in Hong Kong.  The Representor produced no supporting evidence of Hong Kong law or procedure in this respect.

10.      In contrast the Respondent has filed an affidavit from Peter Po Kwong Yuen, a partner in Freshfields Bruckhaus Deringer, and a Hong Kong solicitor practising in Hong Kong to the effect that there is no requirement under the Hong Kong law or procedure for the Respondent to have been directly summonsed under Section 221 before the Hong Kong courts in order for a letter of request to be issued.

11.      The power of this court to order costs derives from Article 2 of the Civil Proceedings (Jersey) Law 1956 which provides as follows:

"Subject to the provisions of this Part and to rules of court made under the Royal Court (Jersey) Law 1948, the costs of and incidental to all proceedings in the Royal Court 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."

12.      Mr Michel for the Representor argued that the "proceedings" for the purposes of this Article are the representation before this Court and any costs incurred by the Respondent in respect of the Hong Kong proceedings were out of this Court's jurisdiction.  It was for the Hong Kong Court alone to make orders in relation to costs in respect of its own proceedings.  The Respondent did not, of course, appear in the Hong Kong proceedings.

13.      Mr Robinson for the Respondent argued that this Court has a very wide discretion to determine what costs are incidental to the Jersey proceedings.  Alternatively, he argued that the Court had the power to make it a condition of the exercise of its discretion in favour of the liquidators and giving the orders sought by them that the costs incurred by the Respondent should be paid.

14.      The general principles to be considered in relation to the exercise of the Court's powers were set out in the judgment of Page, Commissioner, in the case of Watkins -v- Egglishaw [2002] JLR 1 which principles include the following:

(i)        The court's overriding objective in considering costs is, as in everything else, to do justice between the parties.

(ii)      The discretion as laid down in Article 2 of the Civil Proceedings (Jersey) 1956 is a wide one and ought not to be treated as fettered by any particular supposed rule or practice, other than that the discretion should be exercised judicially ...

(iii)     It is accordingly open to the court to have regard to any and all consideration that may have any bearing on the overriding objective of doing justice.

15.      In my view the courts powers in relation to these proceedings are wide enough to extend to costs incurred by the Respondent in relation to the section 221 summons and justice here requires that they should be paid by the Liquidator for these reasons:

(i)        The Representor knew at an early stage that the Respondent was incorporated and carrying on business in Jersey and required an order from the courts of Jersey before releasing the information it held.

(ii)       The purpose of the application to the court in Hong Kong was to obtain a letter of request to the courts in Jersey so that such orders could be made by the court in Jersey.

(iii)      The Representor gave no notice to the Respondent that it intended, at the same time as applying for a letter of request, to seek a direct order against the Respondent.

(iv)      From the evidence before this Court, there was no requirement or justification under Hong Kong law for a section 221 summons to be issued.  A direct order under that section was in any event unenforceable by the courts in Hong Kong.  Indeed it was because a direct order was unenforceable that a letter of request was being sought.

(v)       It was reasonable for the Respondent to seek advice on the section 221 summons and to follow that advice by not appearing in the Hong Kong proceedings.  Having done so it was not able to seek its costs from the Hong Kong court.

16.      Accordingly, I have ordered that the  reasonable costs and expenses of the Respondent of and incidental to the order made on the 6^th June 2007 extends to the obtaining of legal advice both in Jersey and Hong Kong in relation to the letter of request and the section 221 summons.

17.      However, if I am wrong in relation to my power to make such an order or in the manner in which I have exercised that power, the Court is in no doubt that justice demands that the Respondent's costs be so paid and the Court has, therefore, also ordered that payment of those costs shall be a condition of the orders made in favour of the Representor.

Authorities

Hong Kong Companies Ordinance s.221.

Civil Proceedings (Jersey) Law 1956.

Watkins -v- Egglishaw [2002] JLR 1.