Re Titan Petrochemicals Group Ltd (Costs)

• Jurisdiction: Bermuda
• Judgment Date: 17 November 2021
• Docket Number: Commercial Jurisdiction 2019 No 383
• Court: Supreme Court (Bermuda)

In the Matter of Titan Petrochemicals Group Limited

And in the Matter of the Companies Act 1981

[2021] Bda LR 96

Commercial Jurisdiction 2019 No 383

In The Supreme Court of Bermuda

Costs following contested winding up hearing | whether company entited to the “usual compulsory order” providing for paymment of the company's costs for preparing and appearing at the hearing | Bathampton order | non-party costs order | relevant principles to be applied

The following cases were referred to in the judgment:

In re a Company [1991] 1 WLR 1003

In re Bathampton Properties Ltd [1976] 1 WLR 168

Aiden Shipping Co Ltd v Interbulk Ltd [1986] AC 965

Goknur Gida Maddeleri Enerji ve Sanayi AS v Aytacli [2021] 4 WLR 101

Symphony Group Ltd v Hodgson [1994] QB 179

Secretary of State for Trade & Industry v Liquid Acquisitions Ltd [2002] EWHC 180

Mr S White and Mr J McSweeney for Sino Charm International

Mr R Williams for the Company

Ms L Zuill for Zhang Qiandong

RULING ON COSTS of Hargun CJ

1. This Ruling deals with the identification of the appropriate order which the Court should make following its Judgment dated 11 August 2021 (“the Judgment”). The background to these proceedings is set out in the Judgment.

2. The winding up proceedings related to the Petition presented by Sino Charm International Limited (“Sino Charm” or the “Petitioner”) seeking a winding up order in relation to Titan Petrochemicals Group Limited (the “Company” or “Titan Group”) under section 161(e) of the Companies Act 1981 (the “Act”). The Petition was based upon a Statutory Demand for the debt which remained unpaid. The essential dispute between the parties at the hearing was whether the debt in question was disputed bona fide and on substantial grounds.

3. The parties filed extensive affidavit evidence in support of and in opposition to the winding up Petition. In support of the Petition, in addition to the affirmation of Xue Zhengye formally verifying the Petition, the Petition was supported by seven affirmations of Mr Zhou Bing (“Mr Zhou”), a director of Sino Charm. In opposition to the relief sought in the Petition, there were three affirmations by Mr Lai Wing Lun (“Mr Lai”), who is the non-executive Chairman of the Titan Group and has the day-to-day conduct of the liquidation of Fame Dragon International Investment Limited, (“Fame Dragon”), a 66.46% shareholder of the Titan Group, two affirmations of Zhang Qiandong (“Mr Zhang”), an executive director of the Titan Group, and an affirmation of Lui Kit Yit of Messrs. Michael Li & Co., solicitors acting for the Titan Group in the Hong Kong proceedings, who exhibited the pleadings filed in the Hong Kong action.

4. The Petition was supported by Marine Bright Limited (“Marine Bright”), who claimed to be a creditor of the Company for at least HK $423,000,000. Marine Bright's standing as a creditor of the Company was disputed by Docile Bright Investments Limited (In Liquidation) (“Docile Bright”), who claimed to be a creditor of the Company for the same debt and opposed the relief sought in the Petition. The Petition was also opposed by Fame Dragon.

5. Following a two-day hearing, the Court by its Judgment concluded that the Company's dispute in relation to the Petitioner's debt was not being pursued bona fide and on substantial grounds. In the circumstances, the Court dismissed the application of the Company that the Petition should be dismissed. The Court also expressed the view that there was persuasive evidence that the Titan Group was, in fact, insolvent and was likely to be insolvent at the time of the presentation of the Petition.

6. Having considered the views of the creditors and contributories, the Court concluded that the appropriate order to make was that the Company be wound up under the provisions of sections 161(c) of the Act.

7. The Judgment was formally handed down on 11 August 2021. At that hearing, the Court ordered that the Petitioner's costs be paid out of the assets of the Company as an expense of the liquidation (i.e. in priority), as were the costs of Marine Bright, a supporting creditor.

8. The issue of costs in respect of the Company and other parties who appeared to oppose the Petition was adjourned, with directions for filing submissions. The hearing of that application took place on 15 October 2021.

Summary of the position of the parties in relation to costs

9. At the hearing, the Petitioner sought the following orders in relation to the issue of costs:

• i. The usual order that there should be no order as to costs for those contributories/creditors appearing on the Petition to unsuccessfully oppose it;

• ii. A non-party costs order against Mr Zhang that he pay the Company's costs of the Petition on the basis that he was the person who instigated unjustifiable opposition to winding up and/or an order that;

• iii. The Company's costs of the Petition are not to be paid until all secured creditors have been paid in full (the Bathampton order).

10. The position taken by the Company was that the Court should make the “usual compulsory order” made on a winding-up petition which provides for the payment of the company's costs for preparing and appearing at the hearing of a successful winding up petition as an expense of the liquidation. The Company contended that there was no evidence that the sole executive director of the Company acted for an improper purpose or for personal gain. The Company submitted there is no factor which would justify anything other than the “usual compulsory order”.

11. The position taken on behalf of Mr Zhang was identical to the position taken by the Company. Mr Zhang also urges the Court that the appropriate order to make in the circumstances of this case was the “usual compulsory order”.

Applicable legal principles

12. As noted above, the “usual compulsory order” made on the winding up petition includes provision for the payment of the company's costs for preparing and appearing at the hearing of the successful winding up petition as an expense of the liquidation. This proposition is supported in paragraph 3–157 of French, Applications to Wind Up Companies, 4th ed, OUP.

13. Mr Williams for the Company argues that in this case...