RE MILLIE’S SHOES FACTORY LIMITED AND OTHERS

HCCW000019/1985

IN THE SUPREME COURT OF HONG YONG

HIGH COURT

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COMPANIES MINDING-UP

NOS.

12 OF 1985

13 OF 1985

14 OF 1985

15 OF 1985

19 OF 1985

28 OF 1985

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IN THE MATTER of the Companies Ordinance (Cap. 32)

and

IN THE MATTER OF Millie’s Shoes Factory Limited

Millie’s Trading Company Limited

Millie’s Wholesale Centre Limited

Miliie’s Property Management Company Limited

Millie’s Handbag & Shoes Factory Limited

Sum Chun High Quality Shoes Factory Limited

______________

Coram : Hon. Jones J. In Chambers

Date of hearing : 18th December 1985

Date of Ruling : 18th December 1985

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RULING

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1. On the 21st November 1985 I made a ruling on a matter that arose at the previous hearing of the present summonses issued by the applicantsthe Provisional Liquidators of Millie’s Shoes Factory Limited and five other companies in the Millie’s group. The facts are set outin that ruling and I do not propose to repeat them. At the outset today, Mr. Allen on behalf of the official Receiver unreservedlywithdrew the allegations that had been made at that hearing against the applicants and tendered his apologies which were acceptedby Mr. Dicks who appeared on their behalf. Mr. Woollard then proceeded to conduct the case today on behalf of the Official Receiver.

2. Since the last hearing, a letter has been written to the applicant’s solicitors by the Official Receiver which is dated the 9th December1985 in which he sets out the broad basis on which he seeks to argue the issues relating to the applications which are as follows:-

(1) The proper approach to the Provisional Liquidators’ fees in these matters is that set out in Re Carton Limited (1923) 39 TLR 194.

(2) The circumstances of these liquidations were not sufficiently exceptional to justify the award of fees on a time-costbasis and a percentage of can provide an adequate remuneration.

(3) In the event that the Court is with the Official Receiver on (1) above but against the official Receive on (2) abovein assessing your clients’ remuneration on a time-cost basis the Court should have regard to the proper scope of their duties inthe circumstances and the manner in which the duties were carried out and for this purpose the Court should as in the taxation ofthe time element in a solicitor’s bill have regard to the nature of the case and the amount of time that should be expended on sucha case by a reasonably competent practitioner.

(4) In the event that the Court is against the official Receiver on (1) above and is of the view that the fixing of feeon a time-cost basis is appropriate the Official Receiver nonetheless argues that the nature of the case and the amount of time thatshould be spent by a reasonably competent practitioner are the proper oriteria a for assessing what time-cost should be allowed.

(5) The decision in Re Joseph Phillips Ltd. [1964] I All E.R. 441 is applicable only in circumstances where by reason of limitations upon the provisional liquidators’ powersor premature cessation of his appointment there have been no substantial realisations upon which a percentage fee can be calculated.The position is otherwise in these liquidations.

………………………………it is the Official Receivers submission that if the Court decidesyour clients are entitled to payment on a time-cost basis it follows that the time spent and its productivity will have to be examinedagainst an objective standard of a reasonably competent practitioner.

Should the Court accede to this approach it would then be the submission of the Official Receiver that the properperson to apply the relevant standard and to pass the bill in detail would be a Master.”

3. Additional evidence has also been placed before the Court by way of affidavits from the applicants Mr. Timso and Mr. Stevenson andby Mr. Woollard for the Official Receiver. These affidavits in the main are concerned with the work and conduct of the liquidations.Certain paragraphs of Mr. woollard’s affidavit are in fact inadmissible, but it is unnecessary for me to comment further for thepurposes of the present ruling.

4. Great reliance has been placed by Mr. Wollard on Re Carton Limited (1923) 128 L.T. 629 as support for the Official Receiver’s contention that the applicants’ fees should be charged on a percentage basis or by referenceto a scale. In that case Lawrence J. at p. 631 had this to say :-

Now there is no enactment or rule fixing the scale of remuneration of voluntary liquidators, and it is well settledthat the court, when called upon to fix such remuneration, is not bound by the scale applicable to the official receiver when actingas liquidator in a compulsory winding-up. Every case must be considered on its merits.

The present practice of the court, in the absence of special circumstances, is to be guided by the scale fixe forthe remuneration of trustees in bankruptcy.

The reason for adopting this practice is, first, because the court has found that the most satisfactory method to adopt is to fixthe remuneration on a percentage basis, whenever the basis yields a fair remuneration, and to avoid whenever possible a time basis.”

The second reason that was given is not relevant.

5. It is quite apparent from a reading of this case that it is not an authority to support the contention that the liquidator’s remunerationis to be fixed by reference to a scale or by way of a percentage. Indeed I understand from Mr. Woollard that he does not now assertthat there is any such rule or scale. In my opinion it would be wrong for me to accede to any invitation to set out guidelines tothe Taxing Master as to the basis upon which he should determine the proper remuneration of the applicants. This case must dependon its own facts.

6. Having regard to the criticisms that have been levelled at the applicants by the official Receiver, the Taxing Master will have todecide whether adequate remuneration can be provided by reference to a scale or a percentage or whether the time basis is appropriate.Whichever basis is to be applied can only be determined after a full investigation into the facts by the Taxing Master.

7. Adequate remuneration means sufficient remuneration to compensate the applicants for the work that they have done, provided thatit was properly incurred. If the Taxing Master is unable to decide what is adequate by reference to a scale or percentage, he maytake all relevant circumstances including the time factor into consideration. The Taxing Master should exercise his discretion onthe taxation on the usual wellknown principles.

8. Accordingly the fees of the applicants are referred to the Taxing Master for taxation. In fact I made such a reference on the 12thJanuary 1985. However, the Official Receiver and the applicants’ solicitors requested: that I hear the summonses with regard to thebasis upon which the remuneration should be taxed. I have today expressed my views that this was not the correct procedure to adoptfor it would amount to giving an answer to a hypothetical question. The fees and any argument thereon should have been directed asI have said to the Taxing Master at the outset. Both parties were at fault in this respect with the result that I shall make no orderas to costs.

9. The summonses should not have been issued by way of separate miscellaneous proceedings, but should have been instituted in the companieswinding-up proceedings. I shall therefore make a formal order that all the papers in the miscellaneous proceedings be transferredto the companies winding-up actions.

(B.L. Jones)

Judge of the High Court

Representation:

Mr. A.R. Dicks (Coward Chance) for former provisional liquidators.

Mr. Woollard for Official Receiver