WAN KWOK LEUNG v. WAN KWOK LING BONNIE, the sole executrix of the estate of Wan Nin Sing, the Deceased AND ANOTHER

HCMP 906/2022

[2024] HKCFI 2742

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 906 OF 2022

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BETWEEN

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DECISION ON COSTS

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INTRODUCTION

1.  The background of this action may be gleaned from this Court’s Decision dated 14 December 2023 ([2023] HKCFI 3286) (“the Decision”).

2.  In a gist:

(1) By the OS[1] filed on 13 July 2022, the plaintiff applied for disclosure of the Estate Account, the Trust Accounts and certain supporting documents in relation to the affairs of the Family Trust;

(2) On 9 September 2022, the defendants provided the plaintiff with:

(a) A copy of the Estate’s Account;

(b) A copy of the Family Trust Account; and

(c) Copies of supporting documents in relation to the Estate’s Account and the Family Trust Account.

(3) The plaintiff was not entirely satisfied with the aforesaid documents, and therefore refused to discontinue this action despite the defendants’ request;

(4) As directed by Master Hui at the call-over hearing held on 22 December 2022, the plaintiff prepared the List of Complaints on 1 February 2023. It is noted that by then all the affirmations herein have been filed;

(5) At the 2^nd call-over hearing held on 20 April 2023, the defendants’ counsel informed Master Hui that an accountant would be appointed to deal with the List of Complaints;

(6) The defendants eventually replied to the List of Complaints on 31 October 2023;

(7) As the plaintiff considered that the defendants had failed to address all the issues raised, he refused to discontinue the action and insisted to proceed with his application in the substantive hearing;

(8) Having considered the parties’ concessions and submissions made at the substantive hearing on 14 December 2023, this Court handed down the Decision by which the 2^nd defendant was ordered to disclose certain documents. The plaintiff’s application for Trust Account was adjourned sine die with liberty to restore. Parties were directed to write to the Court jointly no later than 14 June 2024 so as to seek further directions on the pending application for Trust Account and/or on the disposal of this action, as the case may be.

3.  As far as cost was concerned, it was ordered by consent that the costs of the parties of the substantive hearing be paid out of the Estate, but the costs of the action was reserved pending the disposal of the plaintiff’s application for Trust Account.

4.  Upon receipt of the documents from the 2^nd defendants, the plaintiff agreed not to pursue for the Trust Account further. Therefore, pursuant to a joint application of the parties, this Court granted leave to the plaintiff to discontinue the proceedings.

5.  What the parties could not agree on is the cost of the action. While the plaintiff asked for the entirety of his cost to be paid by the Estate, the defendants submitted that the plaintiff should only be entitled to 50% of his cost. This is the only issue to be dealt with hereinbelow.

THE LEGAL PRINCIPLES

6.  The applicable legal principles are trite and undisputed.

7.  In Yoe Han Yauw v Yoe Han Hian & Others [2022] HKCA 498, Au JA had the following to say:

“19. It is trite that costs are a matter of wide discretion for the judge. The discretion is to be exercised in accordance with principles and with a view to reality and justice […].

20. The relevant principles on the exercise of discretion as to costs has further been succinctly summarised by Lam VP (as he then was) in YBL v LWC (No 2) [2017] 2 HKLRD 783 at [10]:

‘(a) Whilst the courts often started with the proposition of costs following the event, it was no longer the general rule but a starting point (Hung Fung Enterprises v Agricultural Bank of China [2012] 3 HKLRD 679 applied);

(b) There had to be some justification for depriving a successful party of his costs;

(c) In measuring who was the successful party and the extent of his success, the court must examine the reality and justice of the case. Thus, in Hysan Development Co Ltd v Town Planning Board (No 2), no order as to costs was made notwithstanding the success of the appellant in reversing the Court of Appeal's decision because they did not achieve the full objects of their appeals (Hysan Development Co Ltd v Town Planning Board (No 2) (2016) 19 HKCFAR 635 applied);

(d) In addition, under O.62 r.5, the court in exercising its discretion should take into account the matters set out in r.5(1) as might be appropriate in the circumstances;

(e) Order 62 r.5(2) highlighted conduct which the court could take into account including whether it was reasonable for a party to take an issue, the manner in which the matter was pursued or defended, the extent of success, and conduct before, as well as during the proceedings;

(f) If a successful party had brought the litigation upon himself or had done some wrongful act in the course of the transaction, he could be deprived of his costs.’

21. It is also not necessary to establish that a successful party has acted unreasonably or improperly in raising an issue for it to be deprived of whole or part of its costs. The Court may so order where the failed allegation of the successful party has caused a significant increase in the length or costs of the proceedings: Re Elgindata Ltd (No 2) [1992] 1 WLR 1207 at p1214; and Zhuhai International Container Terminals (Jiuzhou) Limited v Lo Tong Hoi (unreported, CACV 181/2011, 31 July 2012) at [33]. However, while the Court in the exercise of its discretion may refuse to make a costs order in favour of a successful party, it is most unusual and rare for a successful party to be ordered to bear the costs of the unsuccessful party: Jiang Zhong v Yeung Chun Leung [2018] 1 HKLRD 886 [2018] HKCA 48 at [6.21] per Cheung JA.”

8.  In Coqueen Company Limited v Chui Wai Kwan & Others (HCMP 438/2010, unreported, 8 December 2015), To J also explained that:

“37. If a plaintiff wishes to avoid the consequence of having to pay costs for the withdrawal, he may seek the court’s leave to discontinue under Order 21 rule 3(1). Under this rule, the court has complete discretion to grant leave to discontinue on such terms as to costs as it thinks fit. The guiding principle is fairness and justice in the circumstances: Covell Matthews & Partners v French Wools Ltd. Invariably the court takes into account two legal principles when deciding on the terms as to costs. First, Order 62 rule 10(1) provides a convenient starting point. Second, the principle that costs follow event usually applies.

38. A plaintiff applying under this rule has to show he has a good reason to discontinue the action. What is a good reason depends on the circumstances of the case. Examples of good reasons include: that the dispute has become academic; that a crucial witness has died or has otherwise become unavailable; that the subject matter of litigation has ceased to exist; or that the defendant has no means to satisfy any judgment which may be awarded against him. A good reason does not necessarily entitle a plaintiff to unconditional leave to discontinue. It is only the threshold which he must overcome before the court would even consider whether to grant leave to discontinue on terms without costs. Absence of good reason must necessarily mean the starting point applies.

39. If a good reason is shown, the second principle comes into play. Because of the starting point and the general rule that costs follow event, plaintiffs are frequently given leave to discontinue or withdraw only on terms of their paying the defendants’ costs, unless the court is satisfied that it has a proper basis for making a different order: Lloyds Bank Ltd v National Westminster Bank Ltd. This principle was confirmed by the English Court of Appeal in that same case. Hence, it was described as the “general rule” by Keith J (as he then was) in Trend Publishing (HK) Ltd v Vivien Chan & Co (a firm) and by Chadwick LJ in BCT Software Solutions Ltd v C Brewers & Sons Ltd.

40. To persuade the court to depart from the general rule, the minimum a plaintiff has to do is to show that the discontinuance is for reasons other than an acknowledgment of defeat or likely defeat.”

9.  In Hui Heon Ming Herman v Incorporated Owners of Ho On Mansion [2023] HKCA 643, Chow JA held on the facts of that case that where both parties therein wanted the application to be withdrawn or discontinued because the underlying dispute had been resolved upon the Respondent therein providing the documents sought by the Applicant, this constituted a good reason to depart from the general rule that a respondent is entitled to costs when proceedings in the Lands Tribunal are discontinued. While Hui Heon Ming Herman is a Lands Tribunal case, I cannot see why the same approach should not be adopted herein. Mr Yip for the defendants has not argued otherwise.

DISCUSSION

10.  When considering the issue of cost of the action, I think it is important to express my view at the outset that the plaintiff must be regarded as the successful party of the action:

(1) Despite the plaintiff’s repeated requests for various documents since 4 August 2021, he was only provided with the Trust Deed on 30 December 2021 but nothing else;

(2) It was only upon his commencement of the present action that he was provided with further documents.

11.  In my view, this has important bearing on the issue of cost.

12.  I have not forgotten that the plaintiff accepted at the substantive hearing that there may not be any immediate need for the Trust Account, and as a result that part of the application was not pressed upon. However, it should be noted that that stance was adopted by the plaintiff upon the defendant’s various concessions made. In any event, the application for Trust Account did not lead to significant increase in the length or costs of the proceedings. Therefore, the exclusion of Trust Account as part of the order would not affect my view as expressed in the preceding paragraphs.

13.  The defendants relied on a number of grounds to support their argument that the plaintiff should only be entitled to half of his costs.

14.  First, Mr Yip for the defendants submitted that the Court should examine the reality and justice of the case (YBL v LWC (No 2) at [20(c)] as quoted in Yoe Han Yauw), and in doing so the Court, it was said, should take into account whether the plaintiff should be allowed to ask for extensive disclosure in relation to the trust business in the first place.

15.  With greatest respect, while Mr Yip recognised that “the submissions shall not go too far into the appropriateness of disclosure as if the OS is to be reheard again”[2], he is doing exactly that when advancing this argument, which in my view is not permissible.

16.  In YBL v LWC (No.2), when Lam VP (as he then was) stated that “the Court must examine the reality and justice of the case”, it was in the context of measuring who was the successful party and the extent of his success. In this regard, I am of the view that the Court should in the present case consider what the plaintiff has achieved by commencing this action which I have explained above.

17.  Second, the defendants emphasised that the plaintiff’s requests for Category 5 and Category 6 documents had been refused. However, I do not think this would impact on the Court’s decision on the cost of the action, because:

(1) The arguments on these 2 categories of documents did not take much time at the substantive hearing, and definitely did not lead to significant increase in the length or costs of the proceedings;

(2) More importantly, in fact the defendants have agreed that the plaintiff should be entitled to the entirety of his cost of the substantive hearing (subject to taxation on common fund basis).

18.  Third, the defendants drew my attention to the fact that the Court has made no order on the Category 4 documents. With respect, this argument has been made in total disregard of the reality of the situation – the Court did not deal further with such documents only because counsel for the defendants (not Mr Yip) agreed at the substantive hearing to provide a number of audited financial statements of Diamond King Limited and Excellent International Limited, and as a result, this Court agreed that the purpose of the plaintiff could be served even without the Category 4 documents.

19.  Finally, the defendants submitted that they had given no indication that they would refuse to provide the plaintiff with audited financial statements. It was said that if the plaintiff had requested for such financial statements earlier (rather than at the substantive hearing only), many of the disputes could have been avoided.

20.  The defendants have overlooked the letter of the plaintiff’s solicitors’ dated 22 November 2023 in which there were express complaints made in respect of the defendants’ failure to provide audited financial statements. Such complaints were left unanswered before the substantive hearing on 14 December 2023.

21.  Furthermore, it should be noted that, as far as the Category 2 documents (audited financial statements of the 2^nd defendant for 2019 – 2023) are concerned, it was the submission of the defendant’s counsel (not Mr Yip) in his skeleton submission dated 7 December 2023 (lodged for the purpose of the substantive hearing) that “there is no hard and fast rule that only audited financial statements are acceptable”.

22.  In other words, assessing the entire situation objectively, I do not think the whole matter could have been resolved amicably earlier even if the plaintiff had made the requests for audited financial statements earlier.

23.  This argument is therefore rejected.

CONCLUSION

24.  To conclude, I hold that the plaintiff should be entitled to his costs of the action.

ORDER

25.  By reasons of the aforesaid, I make an order that:

(1) The plaintiff’s costs of and incidental to this action (including all costs reserved and the costs of this cost application) be paid out of the Estate, to be taxed on common fund basis if not agreed;

(2) The defendants’ costs of and incidental to this action (including all costs reserved and the costs of this cost application) may also be paid out of the Estate.