YE JINXIANG v. KAM PING KWONG

HCAP 25/2012

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

PROBATE ACTION NO. 25 OF 2012

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D E C I S I O N

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1. On 28 November 2014, I handed down the decision in respect of the application by the defendant (“Kam”) for determination under O.14A of the Rules of the High Court (“RHC”) and the application by the plaintiff (“Ye”) to strike out the defence and counterclaim of Kam under O.18, r.19 (“the Decision”). I dismissed both applications.

2. Following the above event, I made a nisi order that Ye should have his costs of and occasioned by Kam’s summons; while Kam should have his costs of and occasioned by Ye’s summons (but not including the costs of the hearing).  All costs shall be taxed, if not agreed, with certificate for counsel.  Kam’s own costs shall be taxed in accordance with legal aid regulations.

3. By summons filed on 8 December 2014, Ye applies to vary the costs order by adding that by operation of section 16C of the Legal Aid Ordinance, Cap 91, the Director of Legal Aid (“DLA”) shall pay, for and on behalf of Kam, Ye’s costs (inclusive of profit costs, counsel fee, disbursement, interest accrued thereon, taxation fees and taxation costs) of and occasioned by Kam’s summons.  Kam opposes that.

4. The parties seek a paper ruling and, for such purpose, have lodged their respective written submissions.  Noting the potential consequence of the order being sought, I have directed that the DLA be alerted of the application so that the DLA could be heard on this.  The solicitors for Kam have since reported that the DLA would endorse their submissions in opposition.

SECTION 16C

5. Section 19(1) provides that:

“A court or the Court of Final Appeal may make an order for costs in favour of or against an aided person in the same manner and to the same extent as it may make an order for costs in favour of or against any other person but such an order may only be enforced against the aided person and the Director to the extent permitted by section 16C.”

6. Section 16C reads:

“(1) Subject to section 18A, the liability of an aided person and of the Director for costs shall be determined in the following manner-

(a) an aided person shall not be liable for costs incurred by the Director on his behalf-

(i) in the case of costs incurred under the Supplementary Legal Aid Scheme, except in accordance with section 32; and

(ii) in any other case, in excess of such aided person's contribution;

(b) where a court or the Court of Final Appeal makes an order for costs against an aided person, or an agreement is entered into for the payment of costs by an aided person, in favour of a person not receiving legal aid-

(i) in any case in which the party not receiving legal aid is a defendant or respondent in the proceedings (other than a defendant or respondent to a counterclaim or cross-petition), or in the case of an appeal (including an appeal to, or an application for leave to appeal to, the Court of Final Appeal) is a respondent therein (other than a respondent to a cross-appeal) such costs shall be paid by the Director;

(ia) in any case in which the party not receiving legal aid is a defendant to a counterclaim or respondent to a cross-petition, or in the case of an appeal (including an appeal to, or an application for leave to appeal to, the Court of Final Appeal) is a respondent to a cross-petition, the costs occasioned by the counterclaim, cross-petition or cross-appeal filed by or on behalf of the aided person shall be paid by the Director;

(ib) in any case in which the party not receiving legal aid is an appellant in an appeal (including an appeal to, or an application for leave to appeal to, the Court of Final Appeal) and in the court whose judgment or order is appealed against the plaintiff was an aided person, such costs shall be paid by the Director; and

(ii) in any other case, neither the Director nor the aided person shall be liable for such costs unless a contribution is payable by the aided person under section 18(1)(b); in which case the Director on behalf of the aided person shall pay such costs to the extent that the contribution is in excess of the costs incurred by the Director on behalf of the aided person; and

(c) where a court or the Court of Final Appeal makes an order for costs against an aided person, or an agreement is entered into for the payment of costs against an aided person, in favour of a person who is also receiving legal aid, neither such person shall be liable for such costs in excess of his contribution and the contribution of the party who is liable for the payment of costs under such order or agreement shall be charged first with the costs of both parties and thereafter the contribution of the other party shall be charged to the extent of his own costs in so far as such costs are not recovered from the contribution of the party liable to pay costs.

(2) Subsection (1),in so far as it relates to the costs of an aided person, relates only to costs arising in respect of proceedings to which, and during the period to which, a legal aid certificate relates, and nothing in that subsection shall otherwise affect the liability for costs of an aided person.

……”

7. Section 16C(1) provides for the mandatory manner in which the liability of an aided person and of the DLA for costs shall be determined, when the aided person is faced with an adverse costs order.  Section 16C(1)(b) sets out the scenarios in which an order of costs is made against an aided person in favour of a non-aided person.  This is the applicable subparagraph in the present case.

8. In the submission on his behalf, Ye describes his application as one seeking my clarification as to whether or not it is my intention that the costs order, upon the application of the above provisions, would be an empty judgment on costs.

9. O.62, r.3(2A) of the RHC provides that the court has the discretion to make any order as to costs of and incidental to any interlocutory proceedings; and the court may order the costs to follow the event or make such order as the court sees fit.  I did so in accordance with the outcome of the hearing, and in the manner and to the extent as permitted by section 19(1) above.  Insofar as the incidence of liability for costs is concerned, the costs order speaks for itself, and there is no ambiguity or other intention behind it that requires clarification.

10. Ye is seeking to incorporate what are properly matters of enforcement as terms of the costs order.  In raising his query, Ye seems to be acknowledging that the enforcement of the costs order pursuant to section 16C(1)(a) and (b), literally read, would result in his not being able to recover his costs, albeit made in his favour.  Indeed he proposes to read section 16(1)(b)(i) other than literally with a view to making the DLA pay his costs of and occasioned by Kam’s O.14A application.

11. A couple of points to note.

12. First, section 16C(1)(b) exhaustively sets out the various scenarios where a costs order is made against a legally aided person in favour of a non-aided person.  This is reflected by the catchall provision under subsection (1)(b)(ii).

13. Second, the common feature of §§(i), (ia), (ib) and (ii) of section 16C(1)(b) is that such costs have been brought about and occasioned to the non-aided party by the aided person having vexed him by claim, counterclaim or appeal, but unsuccessfully.  Costs occasioned to the non-aided person in successfully claiming against an aided defendant or in successfully counterclaiming against an aided plaintiff shall not be payable by the DLA, save as provided in section 16(1)(b)(ii).  However, if the unsuccessful aided defendant appeals against the judgment or order obtained by the non-aided plaintiff but unsuccessfully, the costs of the appeal occasioned to the non-aided plaintiff, as the respondent in such appeal, shall be paid by the DLA pursuant to section 16(1)(b)(i).

14. The common feature was noted by the Court of Appeal in Common Luck Investment Limited v Director of Legal Aid, CACV 375/2001 (4 December 2001) (at §§23-24, per Woo JA).  On further appeal, the Court of Final Appeal gave a similar summary of the scenarios under section 16C: see Common Luck Investment Ltd v Director of Legal Aid, FACV1/2002 (30 July 2002) at §20.

15. It is important to note the Court of Appeal’s explanation of the intent and rationale behind section 16C and thus its strict construction (per Woo JA):

“13. Both parties before us accept and rely on what was said by the Judge at pp 10R-11E of his judgment, as follows:

“The common feature is that liability falls on the Director when the aided person prosecutes unsuccessfully a claim, counterclaim or appeal.  Even in the situation where the appellant is unaided liability will only ensue where the aided person has prosecuted a claim in the court below.  So in simple and wide terms, when an aided person prosecutes a case and loses or loses on appeal, the director pays.  When an aided person defends a case and loses, the Director only pays to the extent of the aided person’s contribution, if any.”

14.   I think that the Judge’s observations are correct.  The intent and spirit of the provisions in s 16C of the Ordinance, according to my understanding, are that the Director will only be bound to pay the costs to the successful defendant where a legally-aided claimant is unsuccessful in his claim, because he has assisted the claimant to bring the claim which may not have been brought without the assistance that is made available from public funds.  The reverse is that the Director will not pay the costs of a successful unaided claimant awarded against an aided unsuccessful defendant because the claim was initiated by the claimant and thrust upon the defendant who had no choice but to defend and the Director was merely assisting the defendant in defending such a claim.  The fact that the aided litigant has been granted legal aid is indicative of his poor financial position so that there is little hope that his successful opponent will be able to recoup costs from him.  The liability of the Director to pay costs is thus an additional benefit to the unaided litigant conferred by statute and resort is made to public funds.  Such statutory provisions must therefore be strictly interpreted.”

16. Ye argues that the designation of the parties’ respective positions in this action differ from a usual case, in that he did not choose to be the plaintiff.  He argues that the ‘natural plaintiff’ should have been Kam; and the references to the parties in the provisions should be construed with reference to the ‘natural plaintiff’ and ‘natural defendant’ accordingly.

17. The history of the matter was set out in the Decision (at §§4-9).  It started with Kam’s application for grant in respect of the estate in question (HCAG 4883/2010).  Then Ye entered a caveat (HCCA 2837/2012); and took out an application for various reliefs.  The master dismissed the application with directions for the commencement of the present action.  According to Ye, which is not disputed by Kam for the present purpose, the master at the beginning directed that Kam should commence the probate action.  However Kam indicated that legal aid approval would have been necessary for that to be carried into effect, which was then unknown.  To expedite the matter, the master directed Ye to commence the present action instead.

18. In this respect, Yeung J (as he then was) in Common Luck (above) had this to say:

“40. Section 16C of the Legal Aid Ordinance clearly prohibits the payment out of the legal aid fund of a plaintiff’s costs of his successful claim against a legally aided defendant. The rational is that it is up to a plaintiff to decide if he wants to commence proceedings against someone who is not good for the costs. If he chooses to do so, he should not be in a better position than he would have been but for the statutory provisions. As Woo JA has put it, the liability of the Director to pay costs is thus an additional benefit to the unaided litigant conferred by statute and resort is made to public funds.

41. Such argument in my view applies only in cases where the plaintiff has a genuine option whether to sue or not but not in a case where a plaintiff is compelled to sue to rid himself of unjustifiable claims against his right or interest. In such a case, a plaintiff either has to put up with unlawful and unjustifiable fetters over his right or interest or sue. When he sues, those who have made unjustifiable claims are assisted by the Director to maintain what is ultimately held to be not maintainable. If unassisted by the Director, the legally aided defendant might have given in at an earlier stage or not fought the case at all.

……

44. I hope the legislature would consider giving an unaided plaintiff wider rights to be paid his costs by the Director and that the court might be given some discretion to order the Director to pay the costs of a successful plaintiff who has been forced to sue a legally aided defendant in order to rid himself of unjustifiable fetters against his interest.

45.   But the Legal Aid Ordinance in its present form has made it abundantly clear that the Director is not liable for any part of the costs of the claim made by an unaided plaintiff.”

19. It may be said that the respective positions of the parties in the present action were designated by the court’s direction instead of entirely a matter of choice.  However, even on that basis, the circumstances of the present case still differ from the kind in Common Luck, which caused Yeung J to make his comment cited above.

20. In Common Luck, the registered owner of the land was prima facie entitled to resumption compensation.  In the absence of challenge, it would have been bound to succeed without much to proof. It was the claimant who intervened and put forward his challenge on the basis of alleged right arising out of adverse possession.  Therefore it may be said that there would be good sense in directing the intervening claimant to be the plaintiff instead of the registered owner (as opposed to what the court actually directed).  The Court of Final Appeal in Common Luck made a similar observation (at §§22-23).

21. The application for grant in the circumstances of the present case is different.  Neither Ye nor Kam in the instant case could claim to be prima facie entitled to the grant.  Whichever of them applies for the grant, he would have to establish his capacity and entitlement. In fact, it was Kam, in his alleged capacity as the deceased’s natural brother, who filed the application for grant, and in respect of which Ye has lodged his challenge by way of caveat twice on differently formulated bases.  The question of which of them should have the ‘natural plaintiff’ and the ‘natural defendant’ is not as apparent as that in Common Luck.  The consideration of this question and the designation of their respective positions in this action are likewise not as material as that in a case like Common Luck.

22. In this connection, I also refer to what Bokhary PJ (as he then was) said in the final court’s decision in Common Luck:

“24.  Turning to the first contention as to the law, I begin by observing that there is nothing in the language of s.16C which suggests that its references to plaintiffs and defendants are implicitly to be qualified so as to be read as references to “natural” plaintiffs and defendants.  Expressions like “plaintiff” and “defendant” are well understood terms of art which appear without implicit qualification in statutes, rules, pleadings, judgments and court orders.  So much for language, but what about context?

25.   In many situations the law looks beyond form and at substance instead.  That is done in order to arrive at reality.  But in the present context, the reality is this. The obvious intention of s.16C is to provide a code by which a non-aided person’s costs entitlement against the Director can be seen from the face of the court’s order.  This avoids disputes which might even result in further litigation. And it necessarily involves going by the parties’ formal designation.  In the vast majority of cases, form will naturally follow substance when it comes to who is the plaintiff and who is the defendant.  The risk of a mismatch between substance and form in that regard can arise in a case like the present.  I mean proceedings not begun by writ which are ordered to continue as if begun by writ, and in which directions are made as to who is to be the plaintiff and who is to be the defendant.  But that risk can be catered for ¾ and I dare say will in future be catered for ¾ by submissions with an eye to s.16C’s implications.”

23. The present case is faced with the same reality.  The parties were directed to take their respective positions in this action.  Contented or not, the parties are bound by that as at today.  It is not for the court now to import words into the provisions of section 16C in order to manifest what, according to Ye, should have been the just designation of their respective positions.

24. Ye also put forward his construction of the provisions in the context of interlocutory proceedings.  He argues that ‘the proceedings’ in section 16(1)(b)(i) shall include interlocutory proceedings; and in such proceedings, an application stands to be treated as a claim, and the respective positions of the parties are dictated by who was the applicant and who was the respondent.  Whilst he is the plaintiff in this action, he was the respondent to Kam’s O.14A application.  Fitting himself into the position of the defendant under section 16(1)(b)(i), the costs of and occasioned to him by the unsuccessful application, he argues, should be paid by the DLA.

25. Again Ye is rehearsing the argument that in construing section 16C, the court looks at what Ye says to be the substance, namely, which party is bringing about the proceedings (only that this time,  interlocutory proceedings) and which is at the receiving end of them.  Indeed a non-aided plaintiff may feel aggrieved, when he could not recoup his costs of successfully resisting interlocutory applications taken out by the aided defendant, especially when the applications are unmeritorious and numerous.  The answer to that, I think, still lies with the rationale behind the limited manner in which the public fund is made by statute to bear the consequence of the risk in respect of costs that the non-aided person would have had to take when deciding to claim against a person with no financial resource.

26. Ye at the same time argues that Kam’s O.14A application, if successful, would have been followed by some sort of counterclaim for relief as set out in his pleading. Therefore Ye’s costs of defending the application should form part of its costs of defending the counterclaim, and thus recoverable from the DLA.  His further submission leaves one with no doubt that he is relying on section 16C(1)(b)(ia).

27. Effectively Ye is contending that his case falls to be governed by both subparagraphs (i) and (ia) of section 16C(1)(b). This cannot be right, as the scenarios under the respective subparagraphs under section 16C(1)(b) were so worded that they do not overlap.

28. I also do not agree with the substance of Ye’s argument.  Ye argues that he is a ‘defendant to a counterclaim’ under section 16C(1)(b)(ia); and the O.14A application served part of the purpose of Kam’s counterclaim.  He resisted the application and thus part of the counterclaim successfully; and therefore should have his costs paid by the DLA.

29. By way of counterclaim in this action, Kam is seeking to establish his entitlement to grant in his alleged capacity as the natural brother of the deceased; and on this basis (together with the denial of Ye’s case) to have the court pronounce that he is so entitled.  The O.14A application was taken out with a view to defeating Ye’s claim.  Had that been entertained and ruled in favour of Kam, he would have expected the dismissal of Ye’s claim.  That would have been success in his defence, not counterclaim.  The situation differs from where the counterclaim merely mirrors the defence and must be allowed as a consequence of the success of the defence.  It cannot be said that because Kam needs to be succeed both in his defence and counterclaim, the O.14A application was thus part of his counterclaim for the purpose of the statute.

30. In any event, the O.14A application failed because it was inappropriate in the circumstances of the case.  That is not, and does not reflect, the failure of Kam’s defence or counterclaim on the merits.  All would be matters for trial.

31. The fallback of Ye, by way of his further submission, is that the O.14A application serves the purpose of clarifying the entitlement or priority in the application for grant, and therefore the costs of that should be paid out of the estate of the deceased.  The short answer is that this is not what is sought by Ye’s summons for variation of the costs order.  Both parties are yet to establish their alleged entitlement to the estate.  This alternative contention, even if entertained, is devoid of merit.

ORDER

32. For the above reasons, I do not agree that the costs order nisi dated 28 November 2014 calls for variation as sought by Ye. Ye’s application is dismissed; and the nisi costs order is hereby made absolute.  Ye shall pay Kam’s costs occasioned by this application, including the costs of the hearing before the master on 17 December 2014.  Costs shall be taxed, if not agreed.  Kam’s own costs shall be taxed in accordance with legal aid regulations.  In the absence of application within 14 days to vary, this costs order shall become absolute as well.