Where a bankruptcy order has been made and the Official Receiver/trustee in bankruptcy has been appointed, how should their fees and expenses be dealt with if the bankruptcy order is later set aside following the debtor’s successful appeal? Further, if the bankruptcy proceedings were commenced in breach of an exclusive jurisdiction clause should costs be awarded on an indemnity basis?
These questions were recently considered by the Court of Appeal in Re Guy Kwok-Hung Lam  HKCA 1099. Three key points can be gleaned from the judgment:-
- The CA is not persuaded that a general rule or presumption should be adopted in Hong Kong for ordering indemnity costs against a litigant who has brought proceedings in Hong Kong in breach of a jurisdiction agreement. This applies to all proceedings brought in breach of a jurisdiction agreement and not just to bankruptcy petitions (§21)
- The CA further clarified that it has inherent jurisdiction to deal with issues relating to fees and expenses incurred by the Official Receiver and the trustee in bankruptcy after a bankruptcy order is made, as such a jurisdiction is “part and parcel of the discharge of the trustee consequent upon the setting aside of the bankruptcy order” (§46)
- In general, the fees and expenses properly incurred by the Official Receiver and the trustee in bankruptcy should, absent special circumstances, be met in the first instance by the bankrupt’s estate. That said, other things being equal, there may ordinarily be a strong argument for making the petitioner bear the fees and expenses if the bankruptcy order ought not to have been made at all, the Court has an unfettered discretion to decide this issue (§§53, 55, 59)
The decision provides much-needed guidance on the vexed question of costs and expenses following the setting aside of a bankruptcy order. The rejection of the presumption of ordering indemnity costs against a litigant who has brought proceedings in Hong Kong in breach of a jurisdiction agreement has far-reaching implications going beyond bankruptcy proceedings.
Jose Maurellet SC and Nick Luxton, instructed by Ropes & Gray, acted for the Petitioner / Respondent.