Recorder Jenkin Suen SC granted costs on an indemnity basis to the Plaintiff after the Defendant withdrew a Statutory Demand on a disputed debt.

The Plaintiff took out an Originating Summons (“OS”) to injunct the Defendant from presenting a petition based on a disputed Statutory Demand. The Defendant withdrew the Statutory Demand after Hon Linda Chan J’s observation that “[i]t appears that the debt is subject to a bona fide dispute on substantial ground and, therefore, cannot form the subject matter of a statutory demand”. The Plaintiff applied for costs on an indemnity basis whilst the Defendant contends that there should be no order as to costs albeit accepting that the Plaintiff is the effective winner of the OS.

Recorder Suen SC took the chance to summarise the principles of costs in a winding-up context: [6]. The Recorder found that the Defendant was not entitled to file affirmation evidence as leave was specifically refused by Hon Linda Chan J, and even if it was allowed to rely on further evidence, it would not assist it. The Recorder also agreed with the Plaintiff that it was no answer for the Defendant to say it only realised after reading the Plaintiff’s affirmation that the Plaintiff has a bona fide defence and the Defendant should have appreciated that there was a bona fide dispute as the alleged debt was based on an oral agreement and not particularised in the Statutory Demand.

The Court agreed with the Plaintiff and emphasised that winding-up proceedings are only intended for straightforward cases, and the Defendant issuing a statutory demand regarding a debt which it should have appreciated was subject to a bona fide dispute amounted to an abuse of process: [30]-[31]. As such, costs on an indemnity basis were awarded to the Plaintiff.

Simon So and Jack Hui represented the Plaintiff. The Full Judgement was published on https://legalref.judiciary.hk/lrs/common/ju/ju_frame.jsp?DIS=163102&currpage=T.