HERMAN BUDIHARDJO (ALIAS SIM HOK TJIONG)(SINCE DECEASED) AND OTHERS v. HADI GUNAWAN (ALIAS SIM HOK KHUN) AND OTHERS

HCA 441/2012

[2021] HKCFI 2246

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 441 OF 2012

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(By original writ and order to carry on
dated the 21^st day of November 2014)

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DECISION ON COSTS

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1.  This is the paper application for the disposal of the costs issues in this action.

2.  After a 23-day trial, I handed down the judgment in this action (“the Judgment”).  In this Decision, I will adopt the same abbreviations that I used in the Judgment.

3.  It was ordered in the Judgment that:

(i)  Hadi do provide an account of Herman’s Emoluments and Directors’ Fees to the Plaintiff;

(ii)  Henry do provide an account of the remaining sale proceeds of the Singapore Jardine Shares to Hadi; and

(iii)  save as aforesaid, both the HRH’s claims and Hadi’s counterclaims be dismissed.

4.  The background of this case and my reasons in support of the making of the said order have been fully set out in the Judgment and I do not want to repeat the same here.  In particular, my main findings have been stated in §437 of the Judgment.

COSTS OF THE MAIN ACTION

5.  So far as the Main Action is concerned, there is no dispute that HRH would have to pay Hadi’s costs.  The differences between the parties are: (i)  whether discount should be given as the court had ordered Hadi to provide an account of Herman’s Emoluments and Directors’ Fees to HRH; and (ii)  whether certificate for 3 counsel should be given.

6.  On the first issue, Mr Jat, SC, counsel for Hadi, submits that, although the court granted limited relief in respect of Herman’s Emoluments and Directors’ Fees, Hadi should be regarded as the successful party in the Main Action.  Hadi had, throughout the proceedings, acknowledged that Herman’s Emoluments and Directors’ Fees formed part of the “Hou Zhang” and was willing to account for them.[1] Hadi had in fact already made partial distributions of Herman’s Emoluments and the Directors’ Fees to some of the siblings, and a substantial portion of the remaining sums were placed in a joint account in the names of Harry and Madam Lam.[2]  Whilst there were prior suggestions by Hadi to have the sum distributed to Simsons’ shareholders as per the agreed arrangement set down by SFS, such proposal was rejected by HRH.[3]

7.  On the other hand, Mr Man, SC, counsel for HRH, submits that a discount of 5% should be made because of HRH’s success in obtaining the said limited relief.  In terms of quantum, Hadi’s case throughout the trial was that these items had already been accounted for, namely: (i)  the sum of $953,000 representing Herman’s Emoluments from May 2001 to March 2011; and (ii)  $960,000 representing the Directors’ Fees for the years 2003 to 2011. However, it was only after Judgment that Hadi eventually accepted that he ought to account for: (i)  $1,366,500 for Herman’s Emoluments from June 2001 to March 2011; and (ii)  $1,200,000 for the Directors’ Fees for the years 2001/2002 to 2010/2011.

8.  However, it is only fair to say that the court had not spent any time to deal with the quantum of the unpaid Herman’s Emoluments and Directors’ Fees at the trial.  The court left it to the parties to work out the quantum.  Though Hadi might have adopted a contentious stance in respect of the other claims, I do not believe that the litigation would have gone that far if the only issue was quantum for these unpaid payments.  This costly and time-consuming litigation could probably have been avoided.  Hence I refuse to give any discount to Hadi’s costs in the Main Action for the limited relief granted in respect of Herman’s Emoluments and Directors’ Fees.

9.  So far as certificate for counsel is concerned, it is well settled that certificate for 3 counsel will only be justified in the “most difficult” cases which are distinguished by their complexity.[4]  The fact that the paying party was also represented by more than 2 counsel is only relevant in that it may support an argument that the case was exceptional.  Sometimes it gets the receiving party home, but sometimes it does not.[5]  Ultimately, as a matter of principle, the issue remains whether the case is most difficult or exceptional.

10.  The trial lasted for 23 days.  The action was factually complicated in that it required consideration of family history over a period of time.  However, I agree with Mr Man that it is not a case of exceptional complexity.  In the end, it boiled down to the court’s assessment of Rudy’s and Hadi’s evidence and the interpretation of various documents relied on by HRH to establish the existence of the alleged Sim Family Trust Fund. Hence, this case is not one of such exceptional complexity that justifies certificate for 3 counsel.  I only order certificate for 2 counsel.

COSTS OF THE COUNTERCLAIM AND THE ADOPTION OF THE BROAD-BRUSH APPROACH

11.  The Counterclaim consisted of 2 separate claims: (i)  the Misrepresentation Claim; and (ii)  the claim relating to the account for the sale of the Singapore Jardine Shares (“the Jardine Shares Claim”).  The details of these claims have been fully set out in the Judgment and I do not want to repeat the same here.

12.  The Misrepresentation Claim failed hopelessly and there is no dispute that Hadi shall have to bear the costs of such claim.  On the other hand, the court granted relief in respect of the Jardine Shares Claim, and so the issue here is what should be the proper costs order for the Counterclaim in light of these results.

13.  Mr Man submits that the HRH should get 95% of the costs of the Counterclaim.  Since the Jardine Shares Claim was only a minimal aspect of the whole action, Hadi should pay the bulk of the costs of the Counterclaim.  In fact, Henry had all along admitted that he had received the Singapore Jardine Shares from Hadi for no consideration and he had treated them as belonging to Hadi.  HRH’s position was only that, if they were successful in their case that Hadi was the trustee of the Sim Family Trust Fund which contained the Singapore Jardine Shares, it was incumbent on Hadi to explain the source of the fund used to acquire the Singapore Jardine Shares.  In any event, HRH were entitled to set-off the sales proceeds of the Singapore Jardine Shares by giving credit for them in Hadi’s accounting.  Hence, HRH’s position on the Singapore Jardine Shares was part and parcel of their case on their claim against Hadi.  As the court ruled against HRH on their claim, Henry had to account to Hadi for the Singapore Jardine Shares.

14.  On the other hand, Mr Jat argues that it was not the case that HRH were willing and ready to account for the Singapore Jardine Shares.  HRH put Hadi to strict proof of his entitlement to the same and insisted on intertwining the outcome of Hadi’s counterclaim with the outcome of HRH’s own claims in respect of the alleged Sim Family Trust Fund.  Under such circumstances, he should be regarded as the successful party in the Jardine Shares Claim.  Given that Hadi had succeeded in one of his two counterclaims, the costs of these counterclaims should be set-off against each other and there should be no order as to costs of the Counterclaim.

15.  Before I deal with the proportion of the costs of the two separate counterclaims, I want to address a more fundamental issue as to whether the court should make separate costs orders for the Main Action and the Counterclaim, or whether the court should adopt a broad-brush approach and order HRH to pay Hadi a portion of his costs of the whole action taking into account the rough portions of the Main Action and the Counterclaim.

16.  Mr Man submits that the multitudinous areas of expenditure in this litigation from pleadings (including multiple amendments)  to discovery to witness statements to trial, and the level of costs involved, are too complex to be dealt with fairly on a broad-brush approach.  This may be right.  However, taking into account the history of the case, it would be very difficult for the taxing master to apportion the costs between the Main Action and the Counterclaim.  In particular, the taxing master was not sitting at the trial and so it would be very difficult for him or her to apportion the time at the trial for the Main Action and the Counterclaim.

17.  Due to the peculiar circumstances of this case, I consider it more appropriate for the court to adopt a broad-brush approach to give one set of order for costs for the whole action rather two sets of order for respective costs of the Main Action and the Counterclaim.

18.  A lot of the time at the trial had been spent on the cross-examination of Hadi.  He was found to be a bad witness.  Though the court did not find any dishonesty on his part, his evidence was found to be confusing and full of contradictions.  The reliability of Hadi’s evidence played an important part in both the adjudication of the Main Action and the Misrepresentation Claim, and Hadi cannot be regarded as a successful party in establishing himself to be a reliable witness.  In my judgment, this is also a relevant factor in determining the final costs order in this case.  As it would be extremely difficult for a taxing master to apportion the costs between the Main Action and the Counterclaim under such peculiar circumstances, I consider it more appropriate to adopt a broad-brush approach and order one set of costs in the present case.

19.  In assessing the portions of costs for the two separate claims in the Counterclaim, it is clear that the Misrepresentation Claim took up a substantial part of the Counterclaim.  In my judgment, HRH should get at least 90% of the costs of the Counterclaim.

20.  There is also an issue as to whether the costs of the Misrepresentation Claim should be paid by Hadi on an indemnity basis. Relying on the decision in Xu Zhiqiang v Ng Kwok On[6], Mr Man submits that where serious allegations of fraud had been made and were found by the court after trial to be unfounded, unsupported by evidence, or ought not to have been made, that would be a special and unusual feature that would justify indemnity costs.

21.  I am not prepared to order costs to be paid on such basis.  The present case is very much a dispute between the family members relating to matters which happened many years ago.  HRH brought the claim in the Main Action against Hadi many years later, and as a result Hadi had to recall matters which happened quite some time ago.  The long lapse of time and the aging process might have distorted their memories.  In any event, I do not accept that there is special or unusual feature in the present case that justifies indemnity costs.

22.  If the court were to adopt a broad-brush approach, HRH suggest that they should pay 50% of Hadi’s costs of the whole action while Hadi submits a higher percentage of 75%.

23.  For the reasons given above, Hadi should get the costs of the Main Action and HRH should get the costs of at least 90% of the Counterclaim.  Taking into account that: (i)  considerable time had been spent in testing the credibility of evidence of Hadi; (ii)  Hadi had failed to establish that he was a reliable witness; and (iii)  the reliability of Hadi’s evidence was most relevant in the adjudication of the Main Action and the Misrepresentation Claim, I order HRH to pay for 60% of Hadi’s costs of the whole action.

THE COSTS OF 3 SPECIFIC APPLICATIONS

24.  I also have to deal with the costs of 3 specific applications.

(i)   Costs of the discovery summonses

25.  On 8 October 2013, HRH took out a summons seeking disclosure of 2 classes of documents from Hadi relating to the Account Documents and Henry’s Ledgers (“the Specific Discovery Summons”).  Hadi then confirmed he had disclosed all Henry’s Ledgers in his possession.  As for the Account Documents, Hadi said he was not able to obtain them from the relevant banks.  This was disputed by HRH, who were able to obtain bank statements by going down to a branch of the bank in person and making a request.  HRH proposed that their representative and Hadi could go down to a branch of the bank together, but this was rejected.

26.  On 13 February 2014, HRH wrote to the banks requesting for disclosure of documents.  The banks only agreed to do so if Hadi gave consent. Hadi refused to give his consent unless HRH agreed to bear his costs for the Specific Discovery Summons.  On 26 February 2014, HRH took out the discovery summons against the banks (“the Non-Party Discovery Summons”).  On 10 April 2014, the court eventually allowed the application under the Non-Party Discovery Summons.  By the consent summons dated 22 July 2014, the parties agreed to reserve the costs as between HRH and Hadi of the Specific Discovery and the Non-Party Discovery Summonses.

27.  The documents disclosed are relevant for the consideration of the issues at the trial.

28.  Having considered these circumstances, I make the following orders:

(i)  The costs of the Specific Discovery Summons and the Consent Summons be costs in the cause of the Main Action.

(ii)  Save that the costs of the 10 April 2014 hearing be to HRH with certificate for counsel, there be no order as to costs of the Non-Party Discovery Summons.

29.  For the Specific Discovery Summons, I agree that the costs can be regarded as part and parcel of the costs of the proceedings.  However, the consideration of the costs for the Non-Party Summons may be different.  Whether the issue of the Non-Discovery Summons was necessary depended very much on the conduct of the parties.  If Hadi had been co-operative, the hearing on 10 April 2014 could have been avoided.  Hence, there should be no order as to costs for the Non-Party Discovery Summons and Hadi has to pay for the costs of the hearing on 10 April 2014.

(ii)    Costs of the adjournment summons and the adjournment

30.  By the adjournment summons dated 17 February 2017 (“the Adjournment Summons”), Hadi applied for a 10-day adjournment of the trial scheduled to commence on 20 February 2017.  The ground for the application was the unfortunate sudden illness of Mr Jat who was the counsel for Hadi at the trial.

31.  The Adjournment Summons was heard on the first scheduled day of the trial, where Hadi amended the request to an 8-day adjournment.  In the event, the court ordered the trial to be adjourned for 3 days to 23 February 2017.  There was a further adjournment of 27 February 2017, after HRH completed their oral opening submissions.

32.  There is an issue between the parties as to whether Hadi should pay for the costs caused by such unfortunate adjournment.  In any event, Mr Jat argues that there should be no costs wasted or occasioned by the adjournment. The trial was fixed for 20 days.  Despite the adjournment, the evidence of the case was concluded within the allotted 20 days.  3 more days were fixed in the following 2 months to hear the final submissions.  Due to the complicated factual issues involved in this case, the parties could not have been expected to make the final submissions immediately after the conclusion of evidence. Hence, 3 more days for final submissions were inevitable.  Under such circumstances, Mr Jat submits that, despite the unfortunate event, there should be no costs wasted or occasioned by the adjournment.

33.  Had there been no adjournment, the trial on evidence would have finished a few days earlier.  I agree with Mr Jat that it would be unrealistic for final submissions to be made within the allotted 20 days.  As unused refreshers (resulting from the earlier conclusion of the trial on evidence)  are not properly recoverable in taxation[7], the unused costs of the last few days would not be recoverable from the other side in any event.  Under such circumstances, HRH’s cost occasioned by the adjournment should be limited to one refresher for the hearing on 20 February 2017 (in which the Adjournment Summons was heard).  I am of the view that HRH should be entitled to recover such costs.

34.  As mentioned above, Hadi is going to get a portion of his costs of the whole action.  In assessing such costs, Hadi cannot obtain any costs for the hearings on 20-22 and 27 February 2017 which were directly caused by the adjournment.

35.  Hence, I make the following costs order: save that the costs of the Adjournment Summons including the refresher for the hearing on 20 February 2017 be paid by Hadi to HRH and that Hadi has to bear any of his own costs of the Adjournment Summons and occasioned by the adjournment including any of costs which may be occasioned by the scheduled hearings on 20-22 and 27 February 2017, there be no other costs ordered in respect of the Adjournment Summons.

(iii)   Costs of Hadi’s third party summons

36.  Shortly before the conclusion of the oral evidence at the trial, HRH settled the case with the 2^nd to 6^th Defendants.  The evidence in the trial closed on 21 March 2017.  By a summons dated 3 April 2017 (“the Third Party Summons”), Hadi applied to issue a Third Party Notice to SFS’s estate seeking indemnity or contribution.  Apparently, this was for the purpose of protecting Hadi’s right in the case that he was to be found liable for HRH’s claim.

37.  The application came before me on 15 May 2017, which was scheduled for the hearing of the final submissions by the parties.  At that stage of the proceedings, the issue of the third party notice would certainly complicate the trial, as SFS’s estate had to be brought back to the proceedings despite the earlier settlement.  Furthermore, I would expect Hadi to have alerted the court about the possible third party proceedings before HRH concluded the settlement with the 2^nd to 6^th Defendants, as I might not have dispensed with the attendance of the legal representatives of the 2^nd to 6^th Defendants if that were to occur.  If the court were to allow the Third Party Summons on 15 May 2017, the trial would have to be adjourned as the 2^nd to 6^th Defendants were not attending the trial after the settlement.  Further, the third party proceedings might have been academic in view of the adjudication by the court. To avoid all these complications, I adjourned the Third Party Summons pending the judgment of the court in respect of the claims vis-à-vis HRH and Hadi.

38.  According to Mr Jat, the Third Party Summons was necessitated precisely because of HRH’s late dropping of claims against SFS’s estate.  Before that, SFS’s estate was an existing party and there was no need for Hadi to issue the Third Party Summons against SFS’s estate.

39.  As mentioned above, given the peculiar circumstances of this case, I would expect Hadi to have informed the court of the possible third party proceedings against SFS’s estate before the conclusion of the settlement between HRH and the 2^nd to 6^th Defendants.  That would be essential for the effective management of the trial.  As Hadi had not done so, the 2^nd to 6^th Defendants ceased to participate in the trial after the conclusion of the settlement.  Further, the parties might have reconsidered the settlement if earlier notification were given, and a different outcome might not have resulted in the need to issue the Third Party Summons.  Finally, the Third Party Summons served no particular purpose in light of the final judgment in this case.  In such circumstances, I consider that the appropriate costs order for the Third Party Summons is one of no order as to costs.  I therefore so order.  

THE FINAL COSTS ORDER

40.  For the above reasons, I order that, subject to the costs orders mentioned in §§28, 35 and 39 above, HRH do pay to Hadi 60% of his costs of this whole action with certificate for 2 counsel.

41.  Since both camps have succeeded in some issues on costs, I make a costs order nisi that there be no order as to costs in respect of the present paper application which shall be made absolute 14 days after the date of the handing down of this Decision on Costs.