Grand Pacific Holdings Ltd v Pacific China Holdings Ltd [final]

BRITISH VIRGIN ISLANDS EASTERN CARIBBEAN SUPREME COURT IN THE HIGH COURT OF JUSTICE COMMERCIAL DIVISION CLAIM NO: BVIHCV 2009/389 BETWEEN: GRAND PACIFIC HOLDINGS LIMITED Applicant and PACIFIC CHINA HOLDINGS LIMITED Respondent Appearances: Mr Jack Husbands for the Applicant Mr Richard Millett QC and Mr Mark Forte for the Respondent JUDGMENT [2009: 21 December 2010: 11 January] (Application for appointment of liquidators - applicant holder of ICC arbitration award made in Hong Kong on 24 August 2009 - award in sum of US$55 million – award unpaid – respondent company alleging award not enforceable under Part IX of Arbitration Ordinance 1976 (CAP 6) – whether substantial dispute – whether liquidators should be appointed)

[1]Bannister J [ag]: This is an application by Grand Pacific Holdings Limited (‘the Applicant’) for the appointment of liquidators over Pacific China Holdings Limited (‘the Company’). The Applicant is a company incorporated in Hong Kong. The Company is a BVI incorporated company. On 23 May 2001 the Applicant entered into what is described as a loan agreement (‘the agreement’) with the Company under which the Company was obliged to pay to the Applicant the sum of US$40 million by 31 May 2006, together with interest. Some payments were made by the Company under the agreement but no principal or interest was paid after 31 May 2002. By 31 May 2006 some US$34 million of principal and some US$14 million of interest remained unpaid and outstanding.

[2]The agreement included a choice of law clause providing that it should be construed and governed in accordance with the laws of the State of New York. Clause 14 contained an arbitration clause: ‘Any dispute or claim arising out of or in connection with or relating to this Agreement, or the breach, termination or invalidity hereof, shall be finally settled by arbitration under the Rules of Conciliation and Arbitration of the International Chamber of commerce (the “Rules”) as in force at the time of any such arbitration. There shall be three arbitrators appointed in accordance with the Rules. The place of arbitration shall be in Hong Kong. All arbitration proceedings shall be conducted in English. Each Party shall cooperate in good faith to expedite to the extent practicable the conduct of any arbitral proceedings commenced under this Agreement. The costs and expenses of the arbitration, including, without limitation, the fees of the arbitrators, shall be borne equally by each Party to the dispute or claim, and each Party shall pay its own expenses and the fees, disbursements and other charges of its counsel. Any award made by the arbitrator shall be final and binding on the Parties hereto (and each Party expressly waives the applicability of any laws or regulations that would otherwise give the right to appeal the decisions of the arbitrator), and any Party may apply to a court of competent jurisdiction for enforcement of such award. The Parties agree that any breach of this Agreement will cause irreparable injury to the other Party and that money damages will not provide an adequate remedy to the other Party, and that if any Party breaches any provision of this Agreement, any of the other Party shall have the right to require that this Agreement shall be specifically enforced.’

[3]On 21 March 2006 the Applicant filed a request for arbitration in Hong Kong. The arbitration was under ICC rules. It finally got under way in May of 2007. The arbitral tribunal (‘the Tribunal’) delivered its award on 24 August 2009. The Tribunal awarded the Applicant US$55 million, US$34 million of which was unpaid principal and the rest interest, together with continuing interest at 5% per annum until satisfaction or entry of a judgment. The Applicant was also given its costs. The Applicant has not taken steps to convert the award into a judgment nor has it taken any other steps by way of enforcement. On 15 September 2009 the Applicant requested the Company to honour the award. The Company has not done so. On 11 November 2009 the Applicant issued this application. No statutory demand has been served. The grounds for the appointment are that the Applicant is a creditor of the Company; that the Company has failed to pay its debt to the Applicant under the award as it fell due; and that the Company is therefore insolvent.

[4]The Company’s response is that it is not insolvent and that the indebtedness on which the Applicant relies in support of its application is disputed bona fide on substantial grounds. I shall take the last point first.

Bona fide dispute on substantial grounds

[5]At first blush it seems odd that a party which has agreed to submit a dispute to arbitration and been made the subject of a comprehensively reasoned award given at the end of an arbitration process that lasted for more than two years, involving two substantive hearings and the filing of exhaustive written submissions, should be in a position to say that the debt created by the award is disputed. It agreed to the process and to be bound by the result. But Mr Millett QC, who has argued this application on behalf of the Company with conspicuous skill, says that shortcomings in the way in which the Tribunal conducted the proceedings before it mean that the award is open to challenge – either directly, in the Courts of Hong Kong, or indirectly in the course of any proceedings that the Applicant might take to enforce it. He says that the grounds upon which the award is challengeable by the Company mean the debt is disputed. I am not sure that that is correct. Until and unless the award is set aside, its existence, and therefore the existence of the debt which it affirms, cannot, it seems to me, be disputed. At the time of the hearing, the Company had made no application in Hong Kong to have the award set aside, although I fully accept that time for the Company to make such an application is still running. It is true that in enforcement proceedings, the court before which enforcement was sought might refuse, on one or more of the well known grounds which apply to New York Convention awards, to permit it to be enforced, but that would be because the court found something objectionable in the process by which the award had been obtained, or declined to enforce it on public policy grounds. The award, however, would stand. Only its enforcement would be refused. So that it seems to me that as things stand the debt itself cannot be disputed. That dispute has already taken place and has been decided against the Company.

[6]Nevertheless, it does seem to me that consistently with the reasoning and policy underlying the authorities which decide that insolvency courts should refuse to appoint liquidators on the basis of debts which are the subject of challenge, it would be right, where a creditor relies upon an arbitral award which the debtor company claims is open to challenge or ought not to be enforced, for the Court to proceed by analogy to the manner in which it would have proceeded if the Company was disputing the debt as such or claiming to have a valid cross claim capable of extinguishing the debt constituted by the award. The Court does not appoint liquidators on the application of a creditor unless his debt is free from substantial challenge or (in the cross claim cases) if his ultimate status as a creditor of the company is uncertain. If a company against which an arbitral award for the payment of money has been made shows that there are substantial grounds why the award should not be enforced, that seems to me to amount to, or at any rate to be analogous to a dispute about the status of the successful party as a creditor. Another (and possibly sounder) basis for proceeding in this way is that unenforceable claims are not admissible in a winding up in this jurisdiction: Insolvency Act, 2003 (‘the Act’) sub-section 10(3). The holder of an unenforceable arbitral award is not, therefore, a creditor for the purposes of the Act: sub-section 9(1). It follows that under the scheme of the Act itself a dispute about enforceability involves a dispute about whether the Applicant is a creditor. If such a dispute is substantial (in the sense of being other than flimsy) the court should not appoint liquidators.

[7]Mr Millett QC submitted that it was important for me to keep in mind that the present application is not an application for enforcement of the award. I agree with that. In my judgment the correct approach is for me to recognize that I am not being asked, under Part IX of the Arbitration Ordinance (CAP 6) (‘the Ordinance’), to enforce the award. Instead, I should ask myself whether if that had been the application before me, I would have formed the view that the matters identified by Mr Millett QC were sufficiently substantial (in the sense in which that term is used in the authorities) to form the basis of a challenge to the enforceability of the award. In other words, I do not have to be satisfied, in order for the Company to succeed on this part of its case, that I would have refused enforcement if that had been the application before me. I have to be satisfied merely that sufficiently substantial grounds are identified by the Company to raise a real question whether the award is one that should be enforced. If that point is reached, I should refuse to appoint liquidators and leave the Applicant to establish enforceability in an application brought for that purpose.

[8]On that basis I turn to consider the Company’s challenges to the award.

The Taiwanese law issue

[9]It was part of the Company’s case before the Tribunal that the agreement was illegal under the law of what the Company claimed to be its place of performance (Taiwan) and accordingly under its chosen law (New York), on the grounds that the agreement contained a false statement which violated Taiwanese law. The Company says that while it served its expert evidence on Taiwanese law for the purposes of this submission on 16 October 2007, in good time for the first hearing on the merits fixed for 3 December 2007, the Applicant was allowed (by a ruling of the Tribunal of 19 November 2007) to lodge its reply evidence no later than 5 pm on 30 November 2007. Thus, the Company says that while the Applicant had a generous time in which to digest the Company’s evidence of Taiwanese law, the Company had one working day only to consider the Applicant’s expert evidence in answer (and no working days to consider the other side’s submissions). It is important to notice that it was only on 19 November 2007 that the Tribunal gave the Company conditional permission to plead the point at all and to lead expert evidence in support, commenting as it did so that ‘It must also be said that the application could have been brought much earlier’. The Tribunal gave the Applicant ‘the maximum time available’ to reply to the Company’s expert as part of its case management efforts to overcome any prejudice to the Applicant arising out of the fact that the point was taken late. The Company asked the Tribunal to reduce the Applicant’s time for expert evidence in answer, but the Tribunal, in a reasoned ruling, refused to do so.

[10]Mr Millett QC says that by proceeding in this way the Tribunal not only flouted the procedure agreed between the parties (by directing that expert evidence should in effect follow submissions – thus departing from the procedural protocol agreed between the parties and engaging sub-section 36(2)(e) of the Ordinance) but also gave the Company inadequate time to develop its answer to whatever the Applicant’s expert might say, with the consequence that, for the purposes of sub- section 36(2)(c) of the Ordinance, the Company was unable to present its case. I should set out the relevant parts of the Ordinance: ‘36(1) Enforcement of a Convention award shall not be refused except in the cases mentioned in this section. (2) Enforcement of a Convention award may be refused if the person against whom it is invoked proves – . . . (c) that he was not given proper notice of the appointment of the arbitrator or of the arbitration proceedings or was otherwise unable to present his case; . . . (e) that the composition of the arbitral authority or the arbitral procedure was not in accordance with the agreement of the parties or, failing such agreement, with the law of the country where the arbitration took place; . . . (3) Enforcement of a Convention award may also be refused if the award is in respect of a matter which is not capable of settlement by arbitration, or if it would be contrary to public policy to enforce the award.’

[11]I was referred to Minmetals Germany GmbH v Ferco Steel1, an authority dealing with an application to set aside leave given by the High Court in England for enforcement of a New York Convention award, made in the PRC. That authority proceeds upon the following principles, which I adopt: (1) it is for the party resisting enforcement to prove matters going to the exercise of the discretion under sub-sections 36(2)(c) or (e) or the public policy limb of sub-section 36(3) of the Ordinance; (2) a court asked to enforce an award or set aside an order for enforcement (which must involve precisely the same principles) is free to take its own view as to the overall merits of objections taken by a respondent on sub-section 36(2)(c) or (e) grounds; and (3) in addition to the caution of the courts on public policy grounds when it comes to the enforcement of awards based upon, or the enforcement of which might be productive of some illegality or equivalent vitiating factor, absence of due process may found a public policy objection under sub-section 36(3).

[12]I might add that as a matter of construction it does not seem to me at all obvious that the concluding limb of sub-section 36(2)(c) is intended to cover the case where, as a result of some procedural decision taken by the tribunal, a party is prevented from saying every mortal thing that it might wish to say in support of its case. Rather, it seems to me to be eiusdem generis with the opening two limbs of the sub-section and to cover cases such as prevention by reason of illness or enforced absence or some similar inability to appear and make submissions or, (as in Minmetals itself) an inability to deal with material available to and relied upon by the tribunal because it had no means of knowing that the tribunal was going to act upon such material. It is not, however, necessary for me to decide this point for present purposes and I shall proceed upon the footing (without deciding) that the sub-section covers the case where, as a result of a particular procedural course taken by the tribunal, a party is unable to advance every submission which it would prefer, in an ideal world, to advance or to enjoy optimum conditions in which to prepare and present its case.

[13]Applying these principles, it seems to me that one answer to the point on prejudice arising out of the timetable adopted by the Tribunal might be to say that if a party changes its case late in the day, it may have to pay a penalty when the tribunal attempts to accommodate it without also prejudicing the other party. Similar considerations might be thought to apply to the complaint that the Tribunal allowed expert evidence to follow submissions and to Mr Millett QC’s submission that the procedure adopted by the Tribunal involved a breach of paragraph 10.4.1 of the procedural protocol agreed between the parties, which provided for the Tribunal to treat the pre-hearing written submissions of the parties as containing their best case on fact and law at the time of the exchange.

[14]Consistently with the approach which I have explained in paragraph [7] of this judgment, I do not think that on an application for the appointment of liquidators I can or should resolve the question whether or not the Tribunal acted unfairly towards the Company in the respects complained of. Although I think that the Company’s points in relation to the agreed procedural protocol are thin and that the elements of unfairness upon which it relies may have been to a greater or lesser extent self-induced, I do not think that either ground, taken in isolation, can be dismissed as being so flimsy that it would be incapable, on full argument in an application to set aside an order for enforcement, of being developed so as to give rise to a substantial dispute as to enforceability.

[15]In my judgment, however, the Company’s difficulty on these points is that they cannot be taken in isolation. They have to be considered in the light of the Tribunal’s total reasoning and overall findings on the Taiwanese law point. What the Tribunal actually decided was that there was nothing in the Taiwanese law point at all. It held that there was nothing in the agreement which required performance in Taiwan; that the requirement of New York law that a vitiating illegality must be one which the parties agreed to commit intentionally was not made out on the evidence; and that accordingly all issues concerning what the effect of a hypothetical performance of the agreement in Taiwan would have been under Taiwanese law were irrelevant. It followed that the assertion that the agreement was void on this ground was without foundation2. As a matter of courtesy the Tribunal did proceed to consider the Taiwanese law point, concluding that even if Taiwanese law had been relevant, it would not have assisted the Company’s case3.

[16]Given the basis for the Tribunal’s decision on this point, it is plain that even if it were established that its ruling as to the provision of expert evidence was in some measure unfair or made it impossible for the Company to present its best case or was in breach of the parties’ procedural protocol, that can have had no impact on the outcome.

[17]Mr Husbands, who appeared for the Applicant, drew my attention to paragraph 15.82 of Joseph’s ‘Jurisdiction and Arbitration Agreements and their Enforcement’ (2005), where the author suggests that it remains open to a court to enforce an award, notwithstanding the establishment of a violation of due process, if the enforcing court is plainly satisfied that the failure complained of was immaterial to the outcome. In my judgment, this puts the matter too low. If it is plain that a procedural error, even an error which has prevented a party from presenting a part of his case, had no impact upon the outcome, it seems to me that the court should not, absent exceptional circumstances, refuse enforcement. A ruling of a tribunal which results in a party being unable to present an immaterial part of his case (even if that was not the ground for the tribunal’s decision) is not, in truth, a ruling preventing him from presenting his case, or his best case. It is a ruling which turns out merely to have prevented him from wasting time and costs on irrelevant submissions. There can be nothing unfair about that.

[18]Thus, even assuming that the manner in which the Tribunal proceeded on this point meant that the Company was ‘unable to present its case’ within the ambit of sub-section 36(2)(c) of the Ordinance or that the Tribunal’s approach was not in accordance with the agreement of the parties within the meaning of sub-section 36(2)(e), neither irregularity can have had the slightest effect upon the eventual outcome. That being so, it seems to me that it would be perverse of any court asked to enforce the award to refuse to do so on either or both of these heads. The Company’s argument on procedural irregularity affecting the Taiwanese law issue therefore fails, in my judgment, to establish that there is any substantial question arising out of the manner in which the Tribunal handles the issue which could or might conceivably cause an enforcing court to refuse to grant enforcement of the award.

[19]That leaves sub-section 36(3) and the question of public policy. The Taiwanese illegality point having been decided by the Tribunal against the Company, there is no public policy bar to enforcement on that ground. It was not suggested to me that there was any other objection founded on illegality (or any equivalent vitiating factor) to preclude enforcement in this jurisdiction. Given my decision on the natural justice/due process points raised by the Company in relation to the Taiwanese law issue, there can be no conceivable objection to enforcement on that head of public policy. The expert evidence on Taiwanese law

[20]The next issue said to impact on the enforceability of the award is linked to the first. As things turned out, the hearing of the expert evidence on Taiwanese law was put off to May 2008, because the authorities on which the experts relied had not been translated. On 3 April 2008, the Tribunal ruled that no application for leave to adduce additional authorities might be made after 7 April 2008. Leave was refused in respect of three of the additional authorities upon which the Company wished to rely and the relevant portions of the Company’s expert’s report were struck out. This, says Mr Millett QC, prevented the Company from properly presenting its case on the Taiwanese law issue.

[21]For the same reasons as I gave in paragraphs [15] and [16] above, the Tribunal’s refusal to admit this material had no impact upon its decision. The Company’s argument on the expert evidence issue therefore fails to raise any substantial question going to the exercise of the discretion whether or not to enforce under either of sub-section 36(2)(c) or sub-section 36(2)(e) of the Ordinance. For the same reasons as those which I have set out in paragraph [19] above, sub- section 36(3) is not engaged. The Hong Kong law issue

[22]The last of the three issues going to the natural justice or due process argument is the so-called Hong Kong law point. In its Pre-Hearing Submissions the Company had put the Applicant to proof that the signatory to the agreement on the Applicant’s part had been authorized (in accordance with Hong Kong law – Hong Kong being the place of incorporation of the Applicant) to sign it. The Applicant appears to have ignored this challenge. In its Post-Hearing Submissions the Company pointed out that the challenge had not been taken up and seems to have attempted to take the point (the language of paragraph 48.7 of the submissions is not precisely clear) that there was no specific evidence that the board of the Applicant had resolved that the Applicant should enter into the agreement or that the signatory should execute it on the Applicant’s behalf.

[23]There followed exchanges between the parties dealing with procedural matters and with the question whether it was necessary for the Company to prove Hong Kong law on this point. The Company’s position was that there was no need for it to prove Hong Kong law, given that Hong Kong was the seat of the arbitration. In its Reply Post-Hearing Submissions the Applicant took the points (a) that since the law of the agreement was New York law and since under New York law the agreement would be treated as validly executed, Hong Kong law was irrelevant and (b) that in any event the Company (in paragraph 48.10 its Post-Hearing Submissions) had accepted that any want of authority on the part of the signatory could have been cured by subsequent ratification on the part of the Applicant4 and that there was overwhelming evidence that (if ratification was required) the Applicant had ratified the agreement. The Applicant repeated these submissions in a letter of 24 October 2008. In that letter, the Applicant relied on two fresh (New York) authorities and a provision of the New York General Obligations Law. The Company wrote to the Tribunal on 28 October 2008 with further submissions on the issue whether the procedure established at the outset permitted the Applicant to complain about the absence of evidence as to Hong Kong law and reserving the right to respond to the new authorities mentioned in the Applicant’s letter of 24 October 2008.

[24]On 31 October 2008 the Tribunal announced that it had sufficient material ‘and arguments’ before it to ‘decide on the Hong Kong law issue’. In its submissions to this Court the Company interpreted this as meaning that the Tribunal had sufficient information to enable it to decide whether or not to entertain the Hong Kong law issue. I am not at all sure that that is what the Tribunal intended to be understood, although it is clear from an email sent by the Company to the Tribunal on 12 November 2008 that that is what the Company thought the Tribunal meant. The Tribunal replied on 14 November 2008 that it would deal with ‘the Hong Kong law issue’ within the award, which it was then in the process of drafting.

[25]In paragraphs 2.128 and 2.129 of its award the Tribunal refers to a request by the Company by letter dated 20 November 2008 for leave to make further submissions on the Hong Kong law point and to its refusal of such leave on 25 November 2008.

[26]In the section of the award dealing with the due execution of the agreement, the Tribunal took the view that the law of Hong Kong was irrelevant because the whole question was governed by New York law as the law of choice. Relying (inter alia) on one of the new authorities referred to in the Applicant’s letter of 24 October 2008, the Tribunal held that on the available materials before it the agreement must be treated as having been duly executed in accordance with the law of New York. The Tribunal did not stop there, however, but went on the hold that there was ample evidence that the Applicant had ratified the agreement.

[27]On the basis of the facts which I have attempted to summarise above the Company claims that the Tribunal acted in breach of the audi alteram partem rule and, thus, unfairly. The Company also complains that the Tribunal conducted its own research and relied upon cases which it had found but without giving the parties the opportunity to make submissions upon them. I was referred to Fox v Wellfair Ltd5 on this point.

[28]It seems to me, however, that is wholly immaterial to the outcome. Even if (contrary to the view taken by the Tribunal) the burden was on the Applicant to prove that the agreement had been duly executed on its part in accordance with Hong Kong law and even if that burden was not discharged and even if the Company was wrongly prevented by the Tribunal’s rulings from making its best case upon this issue, the Company’s position became untenable once it conceded (in my opinion, for what it is worth, inevitably) that ratification would cure any invalidity in the conclusion or execution of the agreement on the part of the Applicant. The evidence of ratification relied upon by the Tribunal in paragraph 5.15 of the award is overwhelming. Once that point is reached, it seems to me that even if (which I am prepared to assume to be the case) the Tribunal unfairly prevented the Company from making its case on the Hong Kong law point, there was no unfairness in outcome.

[29]I therefore conclude that the Company’s argument on the Hong Kong law issue fails to raise any substantial question which conceivably could or might engage the discretion under sub-section 36(2) to refuse enforcement of the award. For the same reasons as I have given in paragraph [19] above, sub-section 36(3) of the Ordinance is not engaged.

Conclusion on the bona fide dispute issues

[30]I am therefore satisfied that no issue of substance has been raised by the Company capable, on an application for enforcement of the award, of bringing into play the discretion of the Court under either of sub-sections 36(2) or 36(3) of the Ordinance.

Insolvency

[31]It will be recalled that the Applicant has served no statutory demand upon the Company, nor has it converted the award into a judgment or obtained an order for its enforcement in any jurisdiction.

[32]The Company claims that its assets exceed its liabilities. It relies upon audited financial statements to 31 December 2008 and upon management accounts as at 31 October 2009. Both sets of documents include (in the case of the financial statements, prospectively) the liability under the award. The management accounts also include a claim which the Company says it has against the Applicant in the sum of over US$20 million. If that claim is a good one, then it could be set off against the award. But that would still leave some US$35 million outstanding and payable. I notice, however, that the claim is fully provided against in the management accounts, so that in my judgment it can safely be ignored for that reason also. Current assets include a small amount of petty cash, some US$1.3 million at bank and some US$6 million on time deposit. There is a dividend of some US$11 million said to be receivable and prepayments of some US$5 million. The remaining assets appear to be largely (perhaps wholly) made up of investments in subsidiaries and are classified as long term investments. Taking all this into account, there is indeed a stated shareholders equity of some US$62 million, but as against that it is clear that the Company is in no position to pay the award, so that commercially speaking it is insolvent.

[33]The Company’s answer to this is to say that it has the benefit of a guarantee. In his affidavit in support of the Company’s opposition to this application Mr Charles Allen, a solicitor practicing in Hong Kong, says that Far Eastern International Bank (‘the Bank’) has agreed in principle to issue the Company with a guarantee in favour of the Applicant and he exhibits a copy of a draft guarantee. What he does not produce is any letter from the Bank itself in support of its agreement in principle. The draft guarantee contains wording undertaking upon demand in writing to pay to the Applicant such sums including interest and costs ‘as may be mutually agreed or finally adjudged by the BVI Court (and any court of final appeal therefrom) to be due from and enforceable against [the Company] pursuant to [the award] up to . . .US$55,000,000.’ The demand must be accompanied by a notarial copy of a final and unappealable judgment of the BVI Court and any court of final appeal therefrom) adjudging that such sums are due from and enforceable against the Company together with a certificate issued by the BVI Court (or court of final appeal) certifying that final judgment has been granted following the exhaustion of all available avenues of appeal. The draft guarantee is to expire six months after the date upon which final judgment is granted or 20 December 2010, whichever is the sooner.

[34]The Applicant objects to being compelled to accept a guarantee in this form, on the grounds, broadly speaking, that there is no reason why it should be precluded from relying upon its award and instead be compelled to take proceedings to enforce its claim by obtaining a judgment in this Court, still less of obtaining a certificate from this (or some higher) Court to the effect that judgment has been granted following the exhaustion of all avenues of appeal. I should add that for my part it seems wholly unreasonable to expect the Applicant to accept a guarantee in terms which will cause it to expire automatically unless all avenues of appeal have been exhausted by the end of 2010.

[35]In my judgment, even if the draft guarantee were in a form which I considered that the Applicant should be prepared to accept (which I do not), I can place no reliance upon the offer of a draft guarantee unsupported by any correspondence from the Bank undertaking to provide it. In my judgment, the draft guarantee has no relevance to the Company’s commercial insolvency.

Abuse of process

[36]The Company relies upon the fact that there are or have been criminal proceedings in Taiwan against principals or the relatives of principals of the Applicant. There is also evidence that the Applicant is or may be prepared to settle the award in return for additional shares in the group which controls the Company. The first of these matters seems to me to be scandalous (in the old- fashioned sense of the word) as being wholly irrelevant to the enforceability of the award and in my judgment the second, even if established, would not afford a reason to dismiss the application. It is an abuse of the process to threaten a company with an application for the appointment of liquidators which is ill founded. The present application, for the reasons I have given above, is free from any legal objection. It is not an abuse of process for an applicant to use an undisputed debt to mount a liquidator application against an insolvent company even if it is prepared to withdraw it if terms can be agreed between the parties. Liquidator applications are regularly disposed of by way of compromise.

Conclusion

[37]In my judgment the company is unarguably indebted to the Applicant in the amount of the award. There are no, or no substantial grounds for concluding that enforcement of the award would or might be refused upon an application made for that purpose. The Company is commercially insolvent and the evidence provided by the Company that it is in a position to provide a guarantee in terms of the draft does nothing to displace this conclusion or to justify adjourning or dismissing this application. I appreciate that the Company may have been intending to take steps in the Hong Kong courts to have the award set aside and had some sufficient security been offered to enable the Company to do so I would have considered whether to dismiss or adjourn this application upon such security being provided. Since no acceptable security has been offered and since the Company clearly has no current means of discharging the debt constituted by the award, I shall make the appointments sought.

Commercial Court Judge

11 January 2010

BRITISH VIRGIN ISLANDS EASTERN CARIBBEAN SUPREME COURT IN THE HIGH COURT OF JUSTICE COMMERCIAL DIVISION CLAIM NO: BVIHCV 2009/389 BETWEEN: GRAND PACIFIC HOLDINGS LIMITED Applicant and PACIFIC CHINA HOLDINGS LIMITED Respondent Appearances: Mr Mark Forte and Ms Tameka Davis for Pacific China Holdings Limited Mr Jack Husbands and Ms Julie Engwirda for Grand Pacific Holdings Limited Mr Jeremy Scott for the former liquidators of Pacific China Holdings Limited JUDGMENT [2010: 24 November; 3 December] (Litigation – costs – whether applicant liable to indemnify company against costs of liquidation where order appointing liquidators set aside on appeal)

[1]Bannister J [ag]: On 11 January 2010 on the application of Grand Pacific Holdings Limited (‘Grand Pacific’) I appointed liquidators to Pacific China Holdings (‘Pacific China’). On 20 September 2010 (‘the Court of Appeal reversed my decision, discharging The Liquidators and making various ancillary orders. in particular, the Court of Appeal ordered Grand Pacific to pay Pacific China’s costs of (‘the appeal in accordance with the scale of prescribed costs and referred the costs of the proceedings below back to me for assessment ‘including all questions regarding the fixing of the remuneration, costs and expenses of the Liquidators.’ Although the Court of Appeal did not in terms order that Grand Pacific pay Pacific China’s costs below, that is clearly the 2 sense of its order and the parties have proceeded on that basis accordingly. In this judgment I will deal first with the assessment of Pacific China’s costs of the hearing before me. Pacific China’s costs (1) Conyers Dill & Pearman (‘CDP’)

[2]There was no dispute on the quantum of leading Counsel’s fees and I accordingly allow those at US$85,886.30.

[3]CDP have submitted a Statement of costs. claiming a total of US$95,185 for their own practitioners’ fees; and the following disbursements: (1) US$4,065.48 for photocopying, printing, telephone, etc; (2) US$265 for courier services; and (3) legal fees for Sidley Austin, Hong Kong Solicitors, in the sum of US$204,780. I shall deal first with CDP’s own claim.

[4]The first item queried by Mr Husbands, who appeared together with Ms Engwirda for Grand Pacific, was an item for one hour of Ms Davis’ time on 30 October 2010. the supporting text is: ‘Register matter. Email M Chan regarding terms of engagement. Amend engagement letter: US$515.’ This work was done twelve days before service of the liquidator application and is in any event administrative work which does not properly fall within the category of claimable costs. Ms Davis, who argued CDP’s claim with great skill, accepts that it must be disallowed and I do so.

[5]There are two further entries for 12 and 25 November respectively totaling US$901.25, explained respectively as ‘Draft email to client; discussion with M Forte; organize folder’ and ‘Telephone conversation with M C[han] [of Sidley Austin]; email re fees and agenda; draft agenda.’ Mr Husbands complains about these charges. He says that there is nothing in the narrative to suggest that they were not concerned with the instructions received on 30 October 2009, which he submits were instructions to give advice on the enforcement of arbitral awards in the BVI (rather than any defence of the liquidator application which, as I have already said, had yet to be served.

[6]it is clear from the narrative of the Statement of Costs that the initial instructions must have been to provide that advice and Ms Davis set about preparing it on 4 November 2009. Such advice is independent of the issues that arose in (‘the liquidator application and Ms Davis rightly accepts that The four hours which she spent upon it on 4 November 2009 cannot be claimed. I therefore, disallow the sum of US$2,060. In my judgment, the 12 and 25 November entries were concerned 3 with the same advice. that fits tolerably well with the narrative of a schedule of costs provided by Sidley Allen, about which I shall have to say more (in a moment, and I accordingly disallow the sum of US$901.25 referable to 12 and 25 November.

[7]Mr Husbands also complains about entries for 16, 18, 19, 24, 26 and 27 November and 1 and 3 December 2009 which he submits, from the narrative, all represent further work on the same piece of advice. Bearing In mind that the burden is on (‘the payee party to prove that work done was done (in respect of the matter in which it claims and having regard to the narrative (and comparing that with the corresponding narrative in the Sidley Austin schedule) it seems to me on a balance of probability that Mr Husbands is right. I accordingly disallow a further US$7,844.05 in respect of those entries. I should mention that the entry for 3 December 2009 mistakenly gives a figure of US$5,103 for one hour’s work. This is an obvious error for US$510.30 and it is the latter figure which I have used in calculating the deduction of US$7,844.05.

[8]Ms Davis accepts that a claim for US$850 for research done on 1 December 2009 on ‘possible arrangement/strategy’ is not claimable as costs in the liquidator application and I disallow that sum accordingly.

[10]Mr Husbands complains about an entry for one and a half hours work by Mr Forte on 9 December 2009 in and about ‘internal supervision and settling of final exhibit to serve’ and ‘drafting letter re service.’ He says that this was not partner level work. I accept that submission and reduce this entry to US$772.50 (1.5xUS$510) accordingly.

[9]Mr Husbands suggests that two entries totaling US$1,655 dated 1 December 2009 were related to the same ‘arrangement/strategy/item, but there is nothing to support, that There seems to be a chronological mis-match between CDP’s references to conference calls and those of Sidley Austin, but it seems to me that the probability is that by this stage the focus was on the liquidator application. Indeed, Mr Allen, of Sidley Austin started drafting his affidavit in opposition on 2 December 2009. so. that I decline to disallow these items.

[11]Mr Husbands next complains That both Mr Forte and Ms Davis were instructed as Junior Counsel to Mr Richard Millett QC on the hearing of the application. Ms Davis points out, rightly, that this was a grave moment for Pacific China and she says and I accept that her particular role was to prepare an accurate note of the hearing that could be sent to the Clients in Hong Kong speedily 4 after the hearing. She also says that she was more familiar with the bundles. I have hesitated about this, but I think on balance that the gravity of the matter justified the attendance of a senior Junior, so I decline to disallow Mr Forte’s fee of US$5,437.50 for attending the hearing.

[12]In fact, Ms Davis did not finalise her note of the hearing until 4 January 2010. Mr Husbands complains about this. He says the fact that this task was undertaken so long after the hearing (which was attended by Mr Allen of Sidley Austin) shows that It must have been done for internal record or, perhaps, tidying up purposes rather than for the purpose of rapid transmission to the Clients. I accept this criticism and disallow the sum of US$901.25 for this item accordingly.

[13]There is an entry for 6 January 2010 the day after I distributed my judgment in draft) described as ‘Internal discussions regarding permission to appeal stay application’ (sic). Mr Husbands says that insofar as this item relates to the appeal, it cannot form part of the costs below and should be disallowed accordingly. I accept this submission in principle, but since discussing the prospects for an appeal is integral to any discussion of the prospects of obtaining a stay (which, for reasons I will give in a moment, I consider to be allowable) it seems to me that this item should not be disallowed.

[14]An entry for 10 January 2010 charges US$850 for ‘internal discussions regarding appeal’ and ‘revisions to stay documents.’ While I have accepted above that some discussion of appeal prospects is integral to the making of. a stay application, this entry seems to me to be concerned at least in part with the substantive preparations for the appeal itself. Such work is not claimable as costs in the application and for want of any guidance on apportionment I shall reduce this item by one half, or US$425.

[15]Mr Husbands complains about a number of entries for 11 and 12 January 2010, which in my judgment are attributable solely to the appeal. They total US$2,225 and I disallow this sum accordingly.

[16]When judgment was formally handed down on 11 January 2010 Mr Forte made an application for a stay. that application was not granted as asked for, although I did make modifications to the usual form of winding up order intended to mitigate, so far as possible, the effects of such an order pending hearing of the appeal. Mr Husbands submits that the stay application failed; that that failure (or at any rate the costs element of the stay application – which were included in the costs 5 awarded to Grand Pacific) was not appealed and that accordingly he should have the costs of it or at any rate he should not have to pay the costs of it It seems to me that the answer to this submission is that the application for a stay was properly made as part of the proceedings before me and that the Court of Appeal’s order requires me to assess Pacific China’s entire properly allowable costs of the proceedings as a whole, including the application for a stay. I do not, therefore, propose to disallow any items insofar as they are properly attributable to the stay application.

[17]As I have already indicated, however, work done solely in and about the appeal cannot be claimed. I accordingly disallow (roughly) one half of the item for 6 January 2010 (‘teleconference re next steps; further discussion on stay; consider Bannister J’), or US$190; and all entries In part K of Grand Pacific’s Points of Reply Schedule other than the entry for MJF of US$2,537 on 13 January 2010, totaling US$8,621.25, or, together with the US$190, US8,811. 25.

[18]the total of these deductions comes to US$24,847.80, thus reducing the amount claimed by CDP from US$95,185 to US$70,337.20, a reduction of some 25%.

[19]Although it is a very rough and ready method, It seems to me that that percentage reduction should be reflected in the amount claimed for photocopying, etc, which I accordingly reduce to US$3,000. I bear in mind that it was CDP who prepared The hearing bundles. (2) Sidley Austin

[20]I now turn to the Sidley Austin fees. When the hearing opened all that was before the Court was a breakdown of hours spent by six fee earners giving a total amount on a time spent basis of US$204,780, or very nearly three times the amount which I have allowed to CDP. After the hearing had been going for some minutes, Ms Davis, who was dealing with this part of the case, produced from among her papers one copy of a document headed ‘Sidley Austin – Time Detail’, showing in some detail the amount of time alleged to have been spent by that firm in and about this matter. The document was copied and then seen for the first time by Mr Husbands and by the Court. In the judgment distributed to the parties in draft, I expressed disquiet at the late production of this critical document, but I understand that it results from a hitherto prevailing practice not to particularise the make up of the bills of foreign lawyers. Ms Davis was, therefore, merely following established practice. I should say that in the Commercial Division I regard CPR 69B.11(3) as 6 applying as much to the fees of foreign lawyers as to those of lawyers practising within the jurisdiction. They should be itemised in the same manner. Mr Husbands chose not to ask for an adjournment and dealt with the matter on the hoof, but given the very short time within which he had to consider and respond to the document, I must scrutinise the Sidley Austin costs with particular care so as to ensure that Mr Husbands’ Client is ordered to pay only such sums as can be justified.

[21]the disproportionate size of the Sidley Austin fees was rightly recognized by Ms Davis by her immediate concession that they should be reduced by 30%. In my judgment, that is nothing like enough. as a start, it seems to me that since the Sidley Austin fees largely (although not entirely) reflect work done by Sidley Austin in parallel with CDP, the first step must be to reduce The Sidley Austin fees by 25% to reflect the reduction which I have made to CDP’s fees. Accordingly, I disallow US$50,000 before going any further. Next, there is a claim for disbursements of approximately US$20,000. There is no material explaining the composition of those disbursements, let alone justifying them, and I propose to disallow them in full accordingly.

[22]The fees of instructed foreign lawyers are themselves treated as a disbursement In a BVI assessment. In other words, they have to be justified as a reasonable expense incurred by the BVI lawyers (in and about the conduct of the case In the BVI. I accept Mr Forte’s submission that in a case involving foreign clients where English is not the first language and where the clients will need to have matters explained to them by local lawyers and to give instructions through local lawyers, the retention of local solicitors is appropriate and proper. I also accept that in (the present case Mr Allen of Sidley Austin had first hand knowledge of the arbitration proceedings which were at the centre of the application and that it was accordingly sensible and reasonable to instruct him to prepare the affidavit in opposition. the time sheets show that the preparation of that document took three fee earners (Mr Allen, Ms Chan and Ms Tse) an unspecified number of hours over some nine days.

[23]More work was done In making arrangements for and drafting a guarantee to be deployed at the hearing (in an attempt to persuade the Court that this was a sufficient security to justify dismissing the petition. the document did not stand scrutiny, but it seems to have involved Mr Allen, Ms Chan and Ms Tse in an unspecified number of hours of work spread over five days. That work is not a recoverable disbursement. 7

[24]Further, Mr Wong spent some nine hours at a cost of approximately US$2,660 doing research on the law relating disputed debts with reference to Article 5 of the New York convention. that work cannot be justified as a proper disbursement by BVI lawyers.

[25]Next, Mr Allen spent three days In travel from Hong Kong to the BVI and three days getting back, having done 7.5 hours work on the way out and a further 5.25 hours on the way back. The short schedule at page 12 of Tab 2 of the application bundle indicates that Mr Allen charged for twenty six hours of travelling time (which presumably included the hours actually worked) at his then charge out rate of approximately US$616 per hour, or US$16,016. Mr Allen also charged CDP for

[26]Finally, Sidley Austin charged some US$11,704 (approximately) In post hearing costs. in my judgment, that cannot stand as a proper and recoverable disbursement in the application.

[27]I shall accordingly disallow the figure of US$38,364 (being the aggregate of the figures identified in paragraphs

[28]The justifiable costs, It seems to me, are general client liaison and care and attention (including liaising with CDP) and the production of Mr Allen’s affidavit, which would obviously involve consultation with Mr Millett QC. Bearing in mind that from start to finish the matter took a little over two months and assuming that client liaison, etc, justifies eight hours per week of partner time (including keeping up to date with the progress of the matter), one arrives at a figure in the region of US$40,000. Given that other fee earners would necessarily have been engaged, I propose to 8 allow a figure of US$50,000 to cover this element. I am also going to assume that preparation of Mr Allen’s affidavit and ancillary consultation justifies 25 hours of partner time, which gives a figure of US$15,400. I am going to add a further US$2,500 for other fee earners in respect of that task and award a round figure of US$18,000 for preparation of the affidavit. that gives an overall figure of US$68,000, which is similar to the amount (which I have awarded to CDP. It is also roughly 75% of the amount claimed by Sidley Austin after the disallowances made in paragraphs

[29]By the second part of paragraph

[21]to

[30]It emerged at the hearing that the Liquidators and Pacific China had already agreed the amount of remuneration for which Pacific China’s assets were to be liable, so that there was no need, as between the Liquidators and Pacific China, for me to assess the Liquidators’ remuneration. But it was the primary submission of Mr Forte, who argued this part of the application on behalf of Pacific China, that Grand Pacific should be ordered either to pay the remuneration directly to the Liquidators or (which I think was where the submission finally ended up) to provide Pacific China with an indemnity against it, so that Pacific China could recoup what it was obliged to pay out under the order. I indicated that I would decide that point first but that should I hold that Grand Pacific was obliged to pay or provide an indemnity, I would give it an opportunity to challenge the quantum of the figure agreed between the Liquidators and Grand Pacific, while commenting that I would need some persuading to disturb the figure agreed between Pacific China and the Liquidators. 9

[31]By ordering that the Liquidators’ remuneration should be secured by a lien on the assets of Pacific China until paid, the Court of Appeal was, in my judgment, ordering that that remuneration was to be paid out of the assets of Pacific China. Although Mr Forte, who argued this part of the application, did not, I think, formally concede as much he rightly did not make any submissions to the contrary. Indeed, the very imposition of a lien necessarily implies an underlying debt and Mr Scott produced authority to that effect during the course of the hearing. It follows that the primary liability for the Liquidators’ remuneration, etc, under the Court of Appeal’s order rests upon Pacific China.

[32]Mr Forte does not argue that the order of the Court of Appeal provides for Grand Pacific to meet the remuneration, etc, of the Liquidators between the date of my order and its discharge by The Court of Appeal. He submits, however, that paragraph 8 of the order shows that the Court of Appeal ‘conceptually had no problem in ordering the Liquidators’ costs to be met by Grand Pacific.’ I cannot accept this submission. I read paragraph 8 as being remedial, in the sense that any money paid out to Grand Pacific after my order, primarily in satisfaction of the liability under the arbitration award, but also in respect of the Liquidators’ remuneration, was to be repaid to Grand Pacific, in the former case because the award remains under challenge and in The latter case to abide the outcome of the assessment of the Liquidators’ remuneration provided for by paragraph 6. Paragraph 8 is not concerned with the incidence of liability for the Liquidators’ remuneration.

[33]I do not think that I have any 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.

[34]Nevertheless, in deference to The excellent arguments addressed to me, I shall briefly give my reasons why, if I had been persuaded that I had jurisdiction to do so, I would not have made an order that Grand Pacific should be the party ultimately responsible for the Liquidators’ remuneration and expenses. Shirlaw v Taylor [1991] FCA 415 at para [39]10

[35]In the absence of specific statutory provision, there appears to be no inherent jurisdiction in the Court to award compensation (or ‘damages’) against one party in favour of another for losses (other than litigation costs) suffered as a result of what turns out to be the erroneous grant of final relief by the Court and no authority has been cited to me to the contrary. As I understand it. the Court awards damages or compensation only In respect of actionable wrongs committed by a defendant. This would appear to be the reason why it has been the long standing practice of the Court to extract a cross undertaking in damages (given to the Court, not to the opposing party) when granting interim relief. If the Court was possessed of an inherent jurisdiction to award compensation for losses suffered as a result of orders which it turns out should not, for whatever reason, have been made, there would be no need to insist on cross undertakings. For a history of the origins and purposes of the cross undertaking see Smith v Day (which has to be read together with Griffith v Blake ).

[36]in the case of final orders the court below or the appellate court may order a stay pending appeal, but I know of no case and none has been cited to me where, following a successful appeal, the unsuccessful party has been ordered to compensate the successful appellant for losses flowing, not from the conduct of the unsuccessful party, but from The very existence of the order which has been successfully appealed. Nor is it the practice of courts of first instance, when making a final determination of an issue in favour of one party, to insist upon his undertaking to be liable for losses consequential upon the making of the order in case it is successfully appealed. the explanation appears to lie in the firmly established, principle that a final order is treated as determinative until successfully appealed, so that the successful party can safely act upon It in the sense that all acts done pursuant to the order are valid and effective as done. It does not seem to be the case that the party obtaining the order is liable to the other if the existence of the order itself or acts done pursuant to it turn out to have caused him loss or prejudice. That is what seems to distinguish the consequences which flow from the grant of a final, as opposed to an interim injunction. (1882) LR 21 Ch D 421 (1884) 27 CH D 47411

[37]Mr Forte relied heavily on the decision of the Inner House of the Court of Session in Graham v John Tullis (Plastics) Limited4 . In that case the appointment of a provisional liquidator had been discharged because the winding up petition in respect of which it had been made was dismissed. The relevant Scottish legislation provided that ‘Without prejudice to any order that The court might make as to expenses, the provisional liquidator’s remuneration should be paid to him . . and the amount of any expenses incurred by him should be reimbursed: (a) if a winding up order is not made, out of the assets of the Company (b) if a winding up order is made, as an expense of the liquidation.’ Having approved counsel for the company’s recognition of the fact that the reference to expenses which I have italicized in the opening line of the quotation above meant what in the BVI would be described as legal costs, rather than the provisional liquidator’s remuneration and disbursements, the Inner House went on to say that ‘in an appropriate case’ the charges incurred by the Company to the provisional liquidator may form part of the legal costs recoverable by the company if the petition for winding up is dismissed. Although the decision as a whole received the approval of Carnwath J in Re UOC Corporation5 , it was not necessary for the purposes of Carnwath J’s decision that he approve the passage which I have referred to above.

[38]I would not have derived any assistance from Tullis even had I thought that I had jusirdiction to make an order in the terms sought by Mr Forte. For one thing, it deals with a provisional, not a final appointment and turns upon the proper construction of foreign legislation. That part of the decision which treats the remuneration of a provisional liquidator as part of litigation costs appears to me to be unpersuasive. First, because, although the assets of a company stand available to satisfy it, the remuneration of a provisional liquidator is in no sense ‘incurred’ by a company. Instead, the assets of the company are made liable for its discharge by statutory force. On that basis alone it cannot amount to an expense or disbursement of the company. Secondly, costs (‘expenses’ in Scotland) means litigation costs. One has only to glance at the relevant provision of the CPR to see that that is so. Collateral loss suffered in consequence of and subsequent to a Court order cannot properly be described as a litigation cost. [1991] BCC 398 [1998] BCC 19112

[39]This conclusion seems to me to be reinforced in this jurisdiction by the fact that sub-section 172(4) of the Insolvency Act, 2003 (‘the Act’), dealing with provisional liquidators, makes express provision for the Court, where a provisional liquidator has been appointed, but where no liquidator is subsequently appointed on the hearing of the originating application, to order the person on whose application the provisional liquidator was appointed to pay or contribute to the remuneration and expenses of the provisional liquidator. This power exists in addition to the power under sub-section 170(5) of the Act to insist, when the application for the appointment of a provisional liquidator is made, upon the provision of security for his remuneration. The power under sub-section 172(4) may, however, be exercised only where the Court is satisfied either that the applicant misled the Court when making the application or acted unreasonably in making the application. Presumably, the same principles would apply when the Court is invited to enforce any security provided under sub-section 170(5).

13.25 hours spent on 21 December 2009 in ‘preparing for hearing, including reviewing skeletons and meetings with Counsel and Conyers; attending hearing emails and telephone discussion with Ms Chan. In my judgment, none of this is a proper disbursement or chargeable to Grand Pacific. Of course his Clients were entitled to have Mr Allen present at the hearing. They are not entitled, in my judgment, to charge Grand Pacific for his having been there. Mr Allen’s travelling and attendance on 21 December 2009 represents just over US$24,000.

[24]to

[26]above). Together with the other sums which I have disallowed, that reduces the overall figure to a little over US$96,000, less some appropriate deduction in respect of the guarantee. If one hazards that probably involved time costing some US$5,000, these disallowances reduce the amount claimed to just over US$90,000. That leaves it for me to assess what of the other work done by Sidley Allen is a justifiable disbursement which it is reasonable and fair for Grand Pacific to pay.

[26]above. These comparisons seem to me to afford a rough check that the figure at which I have assessed the Sidley Allen disbursement is proportionate and reasonable and fair for Grand Pacific to pay. The Liquidator’s remuneration

[6]of its order of 12 October 2010 the Court of Appeal ordered that the Liquidators’ remuneration, costs and expenses, including the costs and expenses of complying with the order, should, until fixed by the Court below and paid, operate as a lien on the assets of [Pacific China]. By paragraph 8 of the same order the Court of Appeal ordered that within seven days following the production to Pacific China of an account of what had been paid out to Grand Pacific or to the Liquidators after they were appointed, Grand Pacific must repay to Pacific China all sums so paid out. The account required was duly produced and showed that no sums had in fact been paid out either to Grand Pacific or to the Liquidators.

[40]Two conclusions may be drawn from the enactment of sub-section 172(4). The first is that if there was a general power in the Court to compensate for losses flowing from the very making of a court order once that order is set aside, the provision would be unnecessary. The second is that the fact that the Act insists that particular misconduct must be established before the jurisdiction conferred by the sub-section reinforces the conclusion that there is no inherent power to compensate for the direct consequences of orders which turn out to have been wrongly made. If there were such a power, it would be surprising for the Act to go out of its way to put restrictions upon its exercise in the case of provisional liquidator appointments.

[41]The Act makes no similar provision dealing with the final appointment of liquidators. That seems to me to indicate that it was not intended that the Court should have any such power in respect of final orders. Even if that is wrong, it seems to me to be implicit in the language of sub-section 172(4) that the legislature did not envisage any party coming under any obligation to pay or reimburse a liquidator’s remuneration (provisional or final) unless the party at whose instance the order was made had misled the Court or acted unreasonably in making the application. There is no good reason why an applicant obtaining a final order for the appointment of a liquidator should be under any wider liability for his remuneration if the order is set aside than an applicant who obtains a provisional appointment. 13

[42]Mr Forte says that because the making of a liquidator application upon a disputed debt is often described as an abuse of the process, Grand Pacific must be taken to have acted unreasonably in the present case. That submission fails to distinguish between error of law and unreasonable conduct in the making of the application, which is what the subsection is plainly directed at – i.e. conduct in pari materia with misleading the Court. So that if I thought that there was some power to order compensation when a final liquidator appointment is set aside (which I do not), I would not be persuaded to make such an order unless satisfied at least that the Court had been misled or that there had been unreasonable conduct in the making of the application. Neither applies here.

[43]For these reasons, even if I was not functus, I do not consider that I would have had any jurisdiction to order Grand Pacific to indemnify Pacific China against the fact that the Liquidators’ costs and expenses were ordered to be paid out of the assets of Pacific China as part of my order in this case. Commercial Court Judge 3 December 2010