WANG DIN SHIN v. NINA KUNG

HCAP8/1999

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

PROBATE JURISDICTION ACTION NO. 8 OF 1999

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DECISION ON COSTS

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1.  On 20 August 2004 I handed down the decision (“the Decision’) on the summons issued by the Joint Administrators pendent lite (“the Administrators”) to adjourn the defendant’s application to remove the Administrators (“the Removal Application”) until after the final determination of the probate proceedings and the appeals therefrom, and for directions on the capacity in which the defendant may make the removal application and also the scope of the defendant’s application (“the Administrators’ Application”).

2.  I allowed the Administrator’s Application and made an order in terms of paragraph 1 of the summons.  I made no order on paragraphs 2 to 5 of the summons as it was not necessary to do so.  I also made an order nisi that: 

“the defendant pays the plaintiff and the Administrators the costs of the application, to be taxed in the case of the Administrators on an indemnity basis, if not agreed, and the Administrators’ own costs be paid out of the estate on trustee basis.”

3.  On 1 September 2004, the plaintiff applied by letter to vary the costs order nisi to include a certificate for two counsel.  On the same day, the Administrators also applied by letter to vary the costs order nisi to include a certificate for three counsel. 

4.  On 2 September 2004, the defendant applied by letter (with reasons given) to replace and substitute the costs order nisi by the following:

“The costs of the Administrators’ application be in the cause of the Removal Application. The Administrators own costs are to be reserved.”

5.  As the parties had indicated that an oral hearing was not required, I had on 7 September 2004 directed for written submissions be lodged and provided a timetable for so doing.  It appears from subsequent correspondence that the fax containing the directions did not reach the plaintiff’s and the Administrator’s solicitors such that the time initially provided for them to lodge written submissions had lapsed without their notice.  Eventually, the Administrators and the plaintiff sent in the written submissions on 20 and 29 October 2004 respectively.  On 23 November 2004, the defendant put in her written submissions in reply.     

The defendant’s application

6.  The defendant’s application seeks three matters as follows:

(1)    The costs of the Administrators’ Application be made costs in the cause of the Removal Application.

(2)    In the event the costs of the Administrators’ Application is not to be made costs in the cause of the Removal Application, the costs of the Administrators should be taxed on party-and-party basis.

(3)    The Administrators’ own costs be reserved to be dealt with together with the Removal Application. 

Costs in the cause of the Removal Application ?

7.  The defendant argues that the Administrators’ Application is an interlocutory application; as such the costs should not be awarded to the plaintiff or the Administrators at this stage.  It is said that the merits of the Removal Application have yet to be determined, that it is just and fair to leave the costs to be dealt with at the conclusion of the Removal Application when the court will be in a position to assess whether there are merits in the Removal Application and that the costs order nisi has the effect of requiring the defendant to bear the costs of the plaintiff and the Administrators even if the defendant were to succeed eventually in the Removal Application.

8.  For the plaintiff, it is argued that the defendant’s opposition to the Administrators’ Application is unmeritorious and had unnecessarily involved the plaintiff and the Administrators in a lengthy hearing such that it is appropriate for the court to exercise discretion to make the costs order nisi.

9.  For the Administrators, it is argued that the Administrators’ Application is a free standing and self-contained application that had been heard and adjudicated upon.  It is also said that for practical purposes, with the Removal Application being adjourned until after the final resolution of the probate action, when the appointment of the Administrators would also cease, the Removal Application can be said to have been finally disposed of by the decision on the Administrators’ Application.

10.  In general, the award of costs is a matter of discretion, which is to be exercised judicially.  There is no rule requiring the costs of an interlocutory application to be reserved or made costs in the cause.  The court can deal with the question of costs at any stage.  An underlying principle in exercising the discretion is that a successful party is in general entitled to be paid his costs, unless there are circumstances justifying a different order: Order 62 rule 3(2) of Rules of the High Court and see Hong Kong Civil Procedure 2004 vol.1 para.62/3/4.

11.  In the present instance, the Administrators and the plaintiff, having succeeded on the application, are as a matter of general rule entitled to be paid their costs.  Although the outcome of the Administrators’ Application has an impact on the conduct of the Removal Application, the determination of the Administrators’ Application does not require an examination of the merits of the Removal Application.  The adjudication of the Administrators’ Application is a discrete matter.  There is no necessity or justification to make the plaintiff’s and the Administrators’ costs entitlement dependent on their success at the Removal Application.  The defendant has opposed the Administrators’ Application and failed, there is no injustice in ordering the defendant to bear the costs of the plaintiff and the Administrators of the present application, even if the defendant were ultimately to be successful in the Removal Application.      

12.  The application to have the costs of the Administrators’ Application made costs in the cause of the Removal Application has no merits and should be refused.

Indemnity costs to the Administrators ?

13.  The defendant’s main argument in seeking a variation of the basis of taxing the Administrators’ costs is that there is no or no proper basis for departing from the usual party-and-party award.  It is said that indemnity costs should not normally be ordered against a respondent to an application unless his conduct has been oppressive or with base ulterior motive.  It is also pointed out that in the past, costs were awarded to the Administrators on party-and-party basis.

14.  For the Administrators, it is argued that the Administrators’ application is necessitated by the defendant’s conduct in bringing the Removal Application, which is to promote the defendant’s personal interest and is not to advance the interest of the estate.  The plaintiff supports the indemnity costs order, contending that the court’s discretion to award indemnity costs is not restricted to the manner in which the application is opposed, and that the court is entitled to have regard to the history of the proceedings. 

15.  Under Order 62 rule 28(3) of Rules of the High Court, the court has a broad discretion to make an award of indemnity costs.  The award can be made against an applying party as well as against a responding party to a proceeding.  In principle, there has to be some special and unusual features for an in indemnity costs order to be made.  But the circumstances are not restricted to where the proceedings were scandalous or vexatious, or had been initiated or prosecuted maliciously, or for an ulterior motive, or in oppressive manner, or to circumstances that constitute an affront to the court.  The court may have regard to any matter relating to the litigation and the parties’ conduct in it and also the circumstances leading to the litigation.  The parties’ attributes, including their resources, and the character of the proceedings are relevant considerations.  The discretion is not to be fettered or circumscribed beyond the requirement that taxation on an indemnity basis must be appropriate: Town Planning Board v. Society for Protection of the Harbour Ltd (No. 2) (2004) 7HKCFAR 114.   

16.  I am of the view that an indemnity costs order in favour of the Administrators is appropriate having regard to the following circumstances and considerations:

(1)    The defendant is not entitled to pursue or protect her separate interest in these administration proceedings and by way of an application to remove the Administrators.  The defendant’s separate personal interest is also adverse to the interest of the estate: see paragraphs 20 to 37 of the Decision.

(2)    The Administrators’ Application is driven by the legitimate concern that there will be a serious diversion of attention and resources from the ongoing administration if the Administrators were required to meet the Removal Application.  Among other things, it will be a costly and time-consuming exercise to respond to the very lengthy affirmation and bulky exhibits adduced by the defendant in support of the Removal Application: see paragraphs 49 to 52 of the Decision.

(3)    There is no necessity or justification for the defendant: (a) to invoke and assert her separate and distinct interest as a co-shareholder or partner of the deceased in making an application for the removal of the Administrators, and (b) to make the Removal Application so late in the day: see paragraph 54 of the Decision.       

(4)    The Administrators’ Application was brought in the interest of and to protect the estate.

(5)    If the Administrators’ costs were to be on party-and-party basis, the estate will have to suffer the payment of costs not recovered under taxation, and will become smaller than what it would be.

17.  In my view, it is both unfair and wrong to subject the estate to the shortfall of costs bearing in mind that as the Court of Appeal’s judgment stands, the defendant is not entitled to share in the estate and the Administrators’ Application is brought about by the way in which the defendant has chosen to conduct the Removal Application.  In this regard, it is to be noted that the defendant has also put in very heavy opposition to the Administrators’ Application.  The 14^th affirmation of the defendant in opposition runs up to 64 pages with no less than 12 arch-lever files of documentary exhibits.  The time and costs involved in properly dealing with the affirmation is evidently tremendous.

The Administrators’ own costs

18.  The defendant says that the costs order nisi has the effect of allowing the Administrators to recover their own costs from the estate even if the Removal Application were successful.  The defendant argues that the appropriate course is to reserve the Administrators’ own costs to the conclusion of the Removal Application when the court can decide whether the Administrators should be allowed to recover their costs against the estate.

19.  The position of the Administrators’ own costs falls to be governed by Order 62 rule 6(2) of Rules of the High Court.  Under the rule, a person who is a party to a proceeding in the capacity of trustee, is entitled to have the costs of the proceeding, insofar as they are not recovered from the other party to the proceeding, paid out of the trust properties, and the court may only order otherwise if the trustee has acted unreasonably or has in substance acted for his own benefit rather than for the benefit of the trust.

20.  Central to the defendant’s argument that the Administrators’ own costs should be reserved is the contention that upon the conclusion of the Removal Application, the court will be in a position to assess the Administrators’ conduct and to adjudge whether the Administrators have acted appropriately in opposing the Removal Application.  The defendant is proceeding on the assumption that the court presently cannot take a considered view of the reasonableness and propriety of the Administrators’ conduct in issuing the summons. 

21.  However, I had in paragraphs 10 to 13 of the Decision dealt with the criticisms levelled against the Administrators in issuing the summons.  In particular, I reject the argument that the Administrators are pursuing their personal interest by the summons and I also hold that it is in the interest of the estate to make the Administrators’ Application.  In my view, whether the Administrators’ Application is appropriate and reasonable can be considered independently from the Administrators’ conduct in administering the estate, which is challenged by the Removal Application.  Likewise, it can be viewed separately from the Administrators’ conduct in opposing the Removal Application.  There is, in short, no need to reserve the Administrators’ own costs to until the conclusion of the Removal Application. 

22.  For the above reasons, the defendant’s application in relation to the costs order nisi fails.

The plaintiff’s and the Administrators’ applications

23.  The defendant has not put in separate submissions in relation to the plaintiff’s and the Administrators’ applications to certify the matter fit for more than one counsel.  In the circumstances, considering that the defendant was also represented by three counsel and given the importance of the case to the parties, I consider it appropriate to provide for a certificate for three counsel. 

Conclusion

24.  For the reasons set out above, the costs order nisi is varied to provide for a certificate for three counsel.  Subject to this, the costs order nisi is made absolute.  The costs of the applications to vary should follow event.  The defendant is to pay the plaintiff and the Administrators their costs on the applications to vary.  Adopting the reasons set out above, the Administrators’ costs are to be taxed on indemnity basis and the Administrators’ own costs are to be paid out of the estate on trustee basis.