Summary
Liquidators may often consider it necessary to bring proceedings
on behalf of the insolvent company to seek to recover assets or
obtain compensation on the company's behalf. If that action
fails, and the insolvent company does not have the funds to meet
any costs order made against it, the liquidator is potentially
personally exposed to paying those costs pursuant to a non-party
costs order.
This could operate harshly for liquidators. Every piece of
litigation has a winner and a loser. If the liquidator is seeking
to make a recovery for the company, in the interests of its
creditors, should it face personal liability for costs in the event
the action is unsuccessful?
On 11 November 2015, the Hong Kong Court of First Instance
handed down an important judgment clarifying the applicable test to
determine the personal liability of liquidators for non-party costs
arising out of the pursuit of litigation in liquidations.
