Pacific China Holdings Ltd Appellant v Grand Pacific Holdings Ltd Respondent

• Jurisdiction: British Virgin Islands
• Judge: PEREIRA JA
• Judgment Date: 14 May 2012
• Neutral Citation: VG 2012 CA 6
• Judgment citation (vLex): [2012] ECSC J0514-3
• Court: Court of Appeal (British Virgin Islands)
• Docket Number: HCVAP 2010/039
• Date: 14 May 2012

[2012] ECSC J0514-3

IN THE COURT OF APPEAL

EASTERN CARIBBEAN SUPREME COURT

Before:

The Hon. Mde. Janice M. Pereira Justice of Appeal

The Hon. Mr. Davidson Kelvin Baptiste Justice of Appeal

The Hon. Mr. Don Mitchell Justice of Appeal [Ag.]

HCVAP 2010/039

On appeal from the Commercial Division

Between:

Pacific China Holdings Limited

Appellant

and

Grand Pacific Holdings Limited

Respondent

Appearances:

Mr. Richard Millett, QC, Mr. Mark Forte and Ms. Tameka Davis for the Appellant

Mr. Matthew Hardwick for the Respondent

Civil appeal - Liability for liquidators' remuneration - Order appointing liquidators set aside - Whether the liquidators' remuneration are considered costs arising out of or in relation to the proceedings - Whether liquidator's remuneration may be recoverable by the successful party against the unsuccessful party

An order appointing liquidators was made in respect of the appellant, Pacific China Holdings Limited ("PCH"), on 11 ^th January 2010. PCH appealed that Order and on 20 ^th September 2010 the appeal was allowed and the Order set aside. The issue of liability for the liquidators' remuneration and expenses arose for determination the Court having referred those matters and the assessment of costs to be determined by the court below. PCH claimed that the respondent Grand Pacific Holdings Limited ("GPH") should bear the ultimate liability for the liquidators' remuneration and expenses, the order appointing the liquidators, sought and obtained on GPH's application, having been set aside. The judge, on considering the matters referred, concluded that in respect of determining the incidence of liability for the liquidators' remuneration, he was functus officio. He further held that in any event he would not make such an order absent a specific statutory power (holding there was no inherent jurisdiction so to do), and additionally, that the liquidators' remuneration could not be treated as costs of the proceedings. PCH launched this appeal contending, in essence, that the Insolvency Act, 2003 provided a statutory jurisdiction for so doing and that such an order could also be made under the court's costs jurisdiction

Held: allowing the appeal and ordering that GPH bear the remuneration of the liquidators and the costs of the proceedings below and on this appeal, the costs of the appeal being fixed at two thirds of the costs as assessed by the court below, that:

• 1. A successful appeal against the making of a winding up order resulting in the setting aside of that order does not and cannot equate to a termination of the liquidation under section 233 of the Insolvency Act. Wholly different considerations are engaged on a section 233 termination, which specifically states that the court may order the termination of a liquidation if it is satisfied that it is just and equitable to do so. Such termination does not anticipate a termination order taking effect retroactively. In the case at bar, where the Winding up Order was set aside on appeal as being wrongly made, it sought to 'unwind' the winding up and accordingly did not require the Court to have specific regard to just and equitable considerations before setting it aside.

  Section 233 of the Virgin Islands Insolvency Act, 2003 considered.

• 2. The Court by virtue of rule 64.3 of the Civil Procedure Rules 2000 has the power to award costs arising out of or related to any proceedings to a person who is not necessarily a party to the proceedings. The liquidators in this instance are considered persons who are not a party to the proceedings. The Court accordingly has a wide discretion in all matters relating to expenses, including the power, when necessary, to direct which of the parties is to bear the cost of the remuneration and expenses of any professional man or other officer appointed by the court to act in the proceedings which have come to an end.

• 3. GPH knowingly made an application for a winding up order when there was a real dispute as to the debt. This was an abuse of process. Moreover, GPH resisted a stay of the Winding up Order and produced no cogent evidence showing that the liquidators conferred some benefit to PCH which it would be unconscionable for PCH to keep without paying for it. Accordingly, GPH should bear the ultimate liability for the liquidators' remuneration.

PEREIRA JA

1 This appeal raises a single question: that is, whether the appellant ("PCH") having been found by this Court to have been put into liquidation wrongly, (based on a Hong Kong arbitral award) should nonetheless shoulder the ultimate responsibility for the liquidators' remuneration and expenses (together called "remuneration").

The Background

2 On 20 ^th September 2010, this Court allowed PCH's appeal against the Winding up Order made by the trial judge on 11 ^th January 2010 over it ("the Winding up Order"). The Court held that PCH had raised arguable Convention Defences 1 and accordingly the debt based on the arbitral award was genuinely disputed on substantial grounds and thus, liquidators over PCH ought not to have been appointed. On the setting aside of the Winding up Order, the parties then undertook to agree a form of order which would cover and settle all matters arising out of and incidental to the Winding up Order. Not surprisingly, the parties were unable to agree on all the terms. The Court eventually made a formal order on 12 ^th October 2010 ("the Appeal Order") having considered correspondence from both sides as well as correspondence on behalf of the liquidators whose offices had been terminated.

3 The relevant part of the Appeal Order which has spawned this second appeal is paragraph 6 which reads as follows:

"That the costs of the proceedings in the court below shall be referred back to the Hon. Justice Bannister for assessment including all questions regarding the fixing of the remuneration, costs and expenses of the Liquidators. The Liquidators' remuneration, costs and expenses including the costs and expenses, of complying with this order, shall, until fixed by the Court below and paid, operate as a lien on the assets of the company."

4 The question of PCH being reimbursed by the respondent ("GPH") in respect of the liquidators' remuneration on the setting aside of the Winding up Order had immediately become a live issue. PCH considered that it was 'plainly wrong' that PCH should be asked to bear those costs in light of its successful appeal against

the Winding up Order. This was made clear in their letter of 4 ^th October 2010 to GPH's counsel. GPH, by their letter of 5 ^th October 2010, in essence said that the question of the liquidators' remuneration was a matter properly for the Commercial Court and ended by saying: "If the Commercial Court, having heard submissions from your client, is of the view that our client should reimburse your client for the remuneration of the liquidators then this is an entirely separate matter, and one which is yet to be determined."

5 Following receipt of the Appeal Order, PCH once again sought to obtain an undertaking from GPH to meet the liquidators' remuneration and then issued an application to the Commercial Court (being the court to which the matters were referred) seeking an order (among others) that GPH pays the liquidators' remuneration ("the Remuneration Application"). It appears to me clear from the tenor of the exchanges between the parties that both sides considered that the question as to which party was to be ultimately liable for the liquidators' remuneration was to be determined by the court below.

6 The remuneration application came on for hearing before the Commercial Court judge on 24 ^th November 2010, and on 3 ^rd December 2010 he gave a written judgment thereon. Beginning at paragraph 29 of his judgment the learned trial judge dealt with the issue of the liquidators' remuneration. He concluded that he did not have jurisdiction to make an order determining the incidence of liability as between the parties in respect of the liquidators' remuneration. At paragraph 33 he had this to say:

"I do not think that I have jurisdiction to make an order now fixing Grand Pacific with ultimate liability for the liquidators' remuneration. I am, after all, with the exception of the matters specifically remitted to me by the Court of Appeal, functus officio. All that the Court of Appeal required me to do was to assess the costs and the proper amount to be allowed to the Liquidators by way of remuneration and expenses. It would be very bold of me to assume that that direction permitted me to make an order governing the incidence of the Liquidators' remuneration."

7 Having carefully scrutinised the formal order which was issued it would seem that the word "and" was inadvertently omitted after the word "regarding" and before the words "the fixing" in the second line of paragraph 6 of the Appeal Order. It was certainly intended that the learned trial judge be tasked not only with fixing the liquidators' remuneration but also with determining who should ultimately be liable for paying them. Were this not the intent then there would be no need for the words "all questions regarding" as it is difficult to see what questions could arise in relation to "the fixing of the remuneration". It would have simply read:

"That the costs of the proceedings in the court below shall be referred back to the Hon. Justice Bannister for assessment including [words omitted] the fixing of the remuneration, costs and expenses of the Liquidators."

8 A single word can certainly make all the difference and the omission is regrettable. However, I do not consider that more need be said on this aspect as it certainly does not bring closure to the matter. The learned judge went on to hold, on the assumption that he was not functus officio, that he would not in any event have ordered that GPH bears ultimate liability for the liquidator's remuneration. His reasons...