Haldanes v China North Industries Investment Management Ltd; Haldanes v T L Management Ltd

JurisdictionBritish Virgin Islands
Judgment Date10 April 2006
Docket NumberBVIHCV 2006/0022
CourtHigh Court (British Virgin Islands)
Date10 April 2006


BVIHCV 2006/0022


China North Industries Investment Management Limited
T L Management Limited

Mr. Colin McKie and Mr. Michael Pringle of Maples and Calder for the Applicants

Ms. Hazel-Ann Hannaway of Harney Westwood & Riegels for the Respondents

(Companies — Winding — up petition based on solicitor's invoices — first company allege that fixed fee arrangement entered into and that fee paid — second company allege that all fees paid — both companies raise issue as to true nature of claim by solicitors for disputed fees — whether debts disputed on substantial grounds — whether petitions should be struck off as abuse of the process)


To what lengths must a solicitor go to recover his or her fees? Essentially Haldanes, self-styled as a ‘small firm [of solicitors] in London 1’ is seeking payment of its fees. Instead of first pursuing an ordinary action for debt in London (the place where presumably the contract was made), or Hong Kong (the place where the Respondents carry on business), Haldanes seeks to invoke the formidable insolvency

jurisdiction of this court in the jurisdiction of incorporation of both Respondents (they are International Business Companies) by asking for them to be wound up on the ground of insolvency as they have failed to meet the statutory demands made on them for payment of its invoices. The Respondents are resisting the applications saying in their turn that the alleged debts are disputed on substantial grounds and accordingly that Haldanes is not a creditor and not entitled to the relief sought.

The two applications are considered in one judgment as although not consolidated they raise identical legal issues involving the same applicants and in reality the same respondents as the controlling figure behind the entities is the man, Mr. Ronald Chum. Further, appearances were the same in both suits and Suit No. 23 followed hard on the heels of Suit No. 22, both counsel relying on the same legal authorities they cited in Suit No.22.

The Law

I find it of assistance to consider first the law on the principal issue which is whether or not the Respondents have established a prima facie case to show that the alleged debts are challenged on substantial grounds so as to preclude the court from making the orders sought.


Haldanes relied on the English High Court cases of Re A Company (No 001946 of 1991, ex parte Fin Soft Holding SA2, a decision of Harman J., Re a Company (No.0013734 of 1991)3, a decision of Mr. Roger Kaye QC and Great Britain Mutual Life Assurance Society4 which dealt with the question of what is a substantial dispute.


The Respondents relied on Civil Appeal No. 10 of 2002 Sparkasse Bregenz Bank AG v Associated Capital Corporation, a case from this jurisdiction. In the Sparkasse BregenzCase, the Court of Appeal (Byron C.J. delivered the judgment) held that the law

governing the making of winding up orders was well settled and stated the governing principles fully at paragraph 3 of the judgment.

The principles the court distills from this judgment can be summarized as follows:—

  • (1) The court has power to make a winding up order for failure to pay a due and undisputed debt over the statutory limit, without other evidence of insolvency;

  • (2) If the debt is disputed it must be on substantial or reasonable grounds, in other words there must be so much doubt and question about the liability to pay the debt that the court sees there is a question to be tried;

  • (3) If the dispute is merely as to the amount of the debt and there is evidence of insolvency the company can be wound up;

  • (4) If the onus is on the company to bring forward facts which can satisfy the court that there is something to be tried either before the court itself or in an action or by some other proceedings;

  • (5) A creditor who has served a statutory notice is not entitled to a winding up order if the company bona fide disputes the debt and there is no evidence of the insolvency of the company; and

  • (6) A debt disputed on genuine and substantial grounds cannot support a winding up petition and the petition would amount to an abuse of process.


The law as laid down in Sparkasse Bregenz was accepted by Haldanes. This decision is binding on this court and therefore there is no need to look further save to say that it is in line with the English authorities cited by Haldanes on the subject. By way of comment, it is salutary that binding authority should be cited where such exist rather than persuasive authority for all the obvious reasons. I therefore commend the diligence of the Respondents in this respect.

Method of disposal

Having regard to the tenor of the submissions made I find it helpful to set out the history of the procedural matters pertinent to the actions though I hasten to add that no points were taken on service or the other procedural matters mandated by the Insolvency Act 2003 (‘the Act’). Then I will consider the substantive issues. I shall deal with each Suit in turn beginning with Suit No.22.

Suit No. 22—The Chronological History of Procedural Matters

The statutory demand 5 for £150,000.00 was served on Offshore Incorporations Limited, the registered agents of China North Industries Investment Management Ltd. (‘China North’) here in the British Virgin Islands (‘BVI’) at 4:30pm on 6 th December, 2005 6 and thus the reference to “purported service” made by Mr. Koo 7 is not appropriate or correct. 8 (Under the caption, ‘Setting aside the Statutory Demand’ it is indicated that the company has 7 days to apply. The correct time is 14 days 9.)


The debt on which the statutory demand is based is in respect of an invoice dated 29 th April, 2005. (This invoice was annexed to the Demand but the narrative particularizing the services rendered was not attached having regard to what is on the Trial Bundle and no one has seen fit to let the court see it. Its contents remain a mystery for no explicable reason.)


The Demand (paragraph 2) recites that the amount of £150,000.00 claimed is the balance outstanding on the invoice after payment of £16,417.51. The Demand recites that the invoice (styled ‘Bill of Costs’) relates to the Supreme Court of Bermuda Action 124 / 2000 and Civil Appeal 6/ 2004, in which China North recovered US $700,000.00 by way of costs based, inter alia, on the invoice in question.


The petition for winding up was filed on 27th January, 2006 and scheduled for hearing on the 3 rd March. It was supported by the first affidavit of Mr. Geoffrey Miles, the partner in Haldanes who had the carriage of the matter.


The petition was properly served at 1:35pm on 2 nd February, 2006 on China North's registered agent.


China North filed an affidavit on 27th February, that of Mr. Koo Ming Hon (‘Mr. Koo’) the Financial Controller of China North.


On 3 rd March the court granted an adjournment at Haldanes' request to enable it to respond as clearly it did not have sufficient time to file a response. This they did by way of a second affidavit by Mr. Miles. Mr. Koo replied to this by way of a second affidavit. No leave was granted to do so but, magnanimously, Haldanes raised no objection to China North relying on this affidavit at trial although counsel did indicate that he had not had opportunity to take full instructions on it.


As is customary on these applications, the matter proceeded solely on the affidavit evidence of Mr. Miles and Mr. Koo.


The undisputed evidence gleaned from these affidavits is that Haldanes, primarily through Mr. Miles, and China North, through Mr. Chum, had a long association going back to 1978. 10 I would assume that the relationship was beneficial to both as otherwise it would not have lasted as long as it did. There is no history of late payments or non payments of Haldanes' bills prior to the matters arising on this claim. Mr. Miles deposed, ‘until the events leading up to the application herein, I have had a very close relationship with Mr. Chum and I have always admired him as an astute businessman’.11


In 1997 Mr. Chum engaged Mr. Miles to act on a matter involving litigation between China North and another entity, China North Industries Investment Limited ‘the Fund’, which took place in Hong Kong and Bermuda. To use Mr. Miles' own words, ‘it was a major dispute in 2 jurisdictions involving millions of US$.’12


Both parties agree that China North paid to Haldanes the sum of £150,000.00, on March 1 st, 2000. For convenience I will call this sum “the Deposit.” The real dispute centers around the basis on which the Deposit was made. Essentially, China North says that it had a fixed fee arrangement with Haldanes to cover all Haldanes' legal expenses. This fixed fee was not intended to include costs for Conyers Dill and Pearman ‘CDP’, (the solicitors retained by Haldanes to act on behalf of China North in Bermuda) and disbursements such as travel, hotel and out of pocket expenses. The fixed fee of £150,000.00 was pre-paid. China North maintains that it does not owe Haldanes for fees and that it paid all disbursements for which it was billed 13.


On the other hand, Haldanes claims that Mr. Chum paid the Deposit, not as a fixed fee but on account of costs and disbursements to be incurred by Haldanes in the litigation. 14 Mr. Miles said that the money was put into the firm's client account and interest accruing was credited to it. 15 Haldanes did not produce a retainer letter setting out the terms of the fee arrangement between Haldanes and China North in respect of this litigation. Indeed, not even a memorandum or a simple receipt from Haldanes to China North evidencing that the monies were paid on account was produced and certainly no documents from Haldanes to...

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