Throne Capable Investment Ltd v Agile Star Group Ltd

• Jurisdiction: British Virgin Islands
• Judge: Blenman JA
• Judgment Date: 14 January 2021
• Judgment citation (vLex): [2021] ECSC J0114-2
• Docket Number: BVIHCMAP2020/0014
• Court: Court of Appeal (British Virgin Islands)
• Date: 14 January 2021

[2021] ECSC J0114-2

THE EASTERN CARIBBEAN SUPREME COURT

IN THE COURT OF APPEAL

Before:

The Hon. Mde. Louise Esther Blenman Justice of Appeal

The Hon. Mde. Gertel Thom Justice of Appeal

The Hon. Mde. Esco Henry Justice of Appeal [Ag.]

BVIHCMAP2020/0014

Between:

Throne Capable Investment Limited

Appellant

and

Agile Star Group Limited

Respondent

Appearances:

Mr. Andrew Ayres, QC with him, Ms. Daisy Bovingdon for the Appellant

Mr. Paul Chaisty, QC with him, Mr. Jerry Samuel for the Respondent

Commercial appeal — Exercise of judicial discretion — Costs — Rules 64.6(5) and (6) of the Civil Procedure Rules 2000 — Appellate court's interference with judge's discretion to award of costs — Refusal of costs upon successfully resisting application to appoint liquidators — Whether the judge erred as a matter of principle in refusing to award the appellant costs despite having successfully resisted liquidation application — Costs follow the event — Whether failure to set aside statutory demand was sufficient basis to justify departure from general rule that costs follow the event

The appellant, Throne Capable Investment Limited (“Throne”), and the respondent, Agile Star Group Limited (Agile”), are companies incorporated in the Territory of the Virgin Islands (the “BVI”).

Agile alleged that Throne owed it money. Following a shareholder's dispute, Agile, by a letter of demand, sought repayment of the alleged debt. Agile served a statutory demand on Throne in relation to the alleged debt at their then-registered agents' office, SBC Registration Limited (“SBC”). However, neither the directors for Throne, who were listed on the register, nor its legal counsel, were made aware of the statutory demand or were in receipt of the document. The statutory demand stipulated that if Throne desired, it had fourteen days to set aside the statutory demand. There was no attempt by Throne to set aside the statutory demand as its officers were unaware of its existence.

Subsequently, Agile filed an application in the Commercial Court for the appointment of liquidators over Throne (“the liquidation application”). The liquidation application was dismissed by the learned judge after hearing oral submissions on behalf of Agile, but without calling for any oral submissions from counsel for Throne, who was also present. In addition to dismissing the liquidation application, the judge made no order as to costs and refused leave to appeal the costs order.

Throne was dissatisfied with the decision of the judge to make no order as to costs, and has appealed. The sole issue arising for this Court's determination is whether the learned judge erred as a matter of principle in refusing to award Throne costs despite it having successfully resisted Agile's liquidation application.

Held: allowing the appeal; setting aside the costs order of the learned judge and ordering that Throne is entitled to its costs on the liquidation application, to be assessed by a judge of the Commercial Court, if not agreed within 21 days of the date of this order; and awarding Throne its costs on the appeal, being no more than two-thirds of the costs in the court below, that:

• 1. The award of costs is a matter within the discretion of the judge. This discretion, like any other discretion, must be exercised judicially and on cogent reasons connected with the case. The general principle is that a successful party is entitled to its costs. A successful party, however, may be deprived of its costs, as a departure from the general rule, but only in restricted circumstances. These circumstances include where there is some misconduct, or misguided or dishonest conduct by the successful party, like an omission to take some step which ought to have been taken, and which could have saved costs.

  Rule 64.6 of the Civil Procedure Rules 2000 considered; Rochamel Construction Limited v National Insurance Corporation Civil Appeal No. 10 of 2003 (delivered 24th November 2003, unreported) followed; Donald Campbell & Co Ltd v Pollak [1927] AC 732 considered; Kierson v Joseph L Thompson & Sons [1913] 1 KB 587 considered; Re Fernforest Ltd [1991] BCC 680 distinguished.

• 2. An appellate court may interfere with the exercise of the discretion in relation to costs where the judge in the court below committed an error of principle or was plainly wrong in the exercise of his or her discretion. An appellant must therefore satisfy this Court that the judge's exercise of discretion exceeded the generous ambit within which reasonable disagreement is possible, and is clearly or blatantly wrong. In the case at bar, it is apparent that all of the factors, except one, which were considered by the learned judge in exercising his discretion, related to Throne's failure to set aside Agile's statutory demand. In the BVI, there is no legal principle that the failure of a party to apply to set aside a statutory demand will prevent it from receiving its costs if it is successful at resisting an application to appoint liquidators. Throne's failure to apply to set aside Agile's statutory demand therefore could not amount to misconduct or an unreasonable act which ought to have operated against it in the exercise of the judge's discretion, in the context of Throne's success in defending the liquidation application. In so far as the learned judge was of a contrary view, and exercised his discretion on the basis of his contrary view, he erred in principle and the exercise of his discretion was plainly wrong.

  Dufour v Helenair Corporation Limited (1996) 52 WIR 188 applied; AEI Rediffusion Music Limited v Phonographic Performance Ltd [1999] 1 WLR 1507 applied; Scherer and another v Counting Instruments Ltd and another [1986] 2 All ER 529 applied; Everbright Sun Hung Kai Company Limited v Walton Enterprises Limited BVIHC(COM)2020/0022 (delivered 9th April 2020, unreported) distinguished.

• 3. The learned judge having erred in the exercise of his discretion, it therefore falls to this Court to exercise the discretion as to costs afresh. This Court must have regard to the totality of the circumstances including whether it was reasonable for Agile to pursue the particular course that it did in seeking to appoint liquidators over Throne. Taking into account all the surrounding circumstances, including the fact that Agile was aware that Throne was disputing the debt, the Court must consider whether it was reasonable for Agile to pursue the particular course of action that it did. Agile's pursuit of the court's insolvency jurisdiction prior to obtaining a judgment on the debt, was a ‘high risk strategy’. Agile therefore ought to have ensured that it was pursuing a viable application and not one which was futile in the circumstances. As it stands, Agile should not have filed the liquidation application and did so at the risk of incurring costs where it was unsuccessful. Throne having successfully resisted Agile's application to appoint joint liquidators, albeit without even being called upon to make oral submissions, is a sufficient basis upon which to conclude that Throne, having succeeded on the application, was entitled to its costs.

  Rule 64.6(5) and (6) of the Civil Procedure Rules 2000 applied; Glaxosmithkline v UK (AID) Ltd [2004] BPIR 528 applied.

Introduction

Blenman JA

1 This is an appeal by Throne Capable Investment Limited (“Throne”) against a costs order made by a learned judge of the Commercial Court, consequent upon his refusal of an application by Agile Star Group Limited (“Agile”) to appoint joint liquidators over Throne (“the liquidation application”). The judge declined to award costs to Throne and instead made no order as to costs. Throne is dissatisfied with the decision of the judge and has appealed. Agile strenuously resists the appeal.

The Issue

2 The sole issue on this appeal is whether the learned judge erred, as a matter of principle, in refusing to award Throne costs despite it having successfully resisted Agile's liquidation application.

3 I will now provide a synopsis of the factual background in order to place the appeal in context.

Background

4 Throne is a company incorporated in the Territory of the Virgin Islands (“the BVI”) and is a wholly owned subsidiary of the Advanced Logistics Properties Service Group (“ALPS Group”), which holds the Zheng Jiang Project. Agile is also a company incorporated in the BVI and is the ultimate parent company of the Shen Yang Project. The liquidation application, made in the court below, arose out of a shareholder dispute among the owners of the Shen Yang and Zhen Jiang Projects, which are two inter-related and cross-held joint ventures in the warehousing and logistics development sector in the People's Republic of China. The Zhen Jiang Project started out as a joint venture between Mr. Xu Bin and Mr. Wang Zheng, with a later investment in the project by Mr. Huang Wei who also took an equity stake. Mr. Xu Bin is also Agile's sole director and sole registered shareholder.

5 Mr. Xu Bin was responsible for the day-to-day management and administration of the companies through which the Shen Yang and Zheng Jiang Projects were operated. He was the sole administrative contact for the registered agents of the BVI companies in both the Agile and ALPS Groups. Throne contends that in August 2018, Mr. Xu Bin took a series of steps toward disrupting and generally interfering with the Zhen Jiang Project. In response, Mr. Wang Zheng and Mr. Huang Wei also took steps to protect the management of the Zhen Jiang Project. At meetings held on 8 ^th and 10 ^th October 2018 the shareholders of the ALPS Group and Throne passed resolutions to remove Mr. Xu Bin as a director and as the companies' administrative contact for DBS Bank (Hong Kong) Limited and their then registered agent SBC Registration Limited (“SBC”), 1 and to appoint Mr. Wang Zheng as Mr. Xu Bin's replacement as director and administrative contact.

6 Mr....