LAU KIN WING KEN AND ANOTHER v. DENG YUJIAO One of the Proving Executors of the Estate of Lau Heung, Deceased AND ANOTHER

CACV 49/2018

[2019] HKCA 1086

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 49 OF 2018

(ON APPEAL FROM HCAP 21/2013)

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J U D G M E N T

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Hon Lam Ag CJHC (giving the Judgment of the Court):

1.  Since we handed down our main judgment on 11 July 2019 dismissing the appeal, 2 summonses were issued in relation to the costs order nisi at [94] of the judgment. The costs order nisi was that the Plaintiffs shall pay the costs of the appeal with certificate for two counsel. The summonses are as follows:

(a)  A summons of the Defendants of 23 July 2019 seeking variation of the costs order nisi so that (i) the costs of the appeal be paid by the Plaintiffs to the estate with certificate for 2 counsel; and (ii) Defendants’ own costs be paid out of the estate to be taxed on trustee basis with certificate for 2 counsel. 

(b)  A summons of the Plaintiffs of 1 August 2019 seeking extension of time to vary the costs order nisi so that the Plaintiffs would bear their own costs of the appeal but not the Defendants’ costs.

2.  The Plaintiffs need an extension of time for their summons because it was taken out beyond the period prescribed under Order 42 Rule 5B(6).  However, as Mr So submitted (on behalf of the Plaintiffs), in light of the summons of the Defendants of 23 July 2019, the costs order nisi did not become absolute.  In light of the circumstances leading to the delay on the part of the Defendants as set out in their affirmations and the short duration of the delay (7 days), we grant the extension of time to the Plaintiffs.

3.  From the written submissions lodged by counsel, the following are the crucial issues for the determination of these summonses:

(a)  The general approach on costs when a party having unsuccessfully challenged a will in a probate action further brought an appeal against the first instance judgment and failed again in the appeal;

(b)  In the present circumstances, bearing in mind the general approach, whether the Plaintiffs should be ordered to pay the costs of the appeal.

4.  The general approach for costs in a probate action was discussed by Ribeiro PJ in Nina Kung v Wong Din Shin (No 2) (2006) 9 HKCFAR 800.  It has subsequently been applied by the Court of Final Appeal in Tam Mei Kam v HSBC International Trustee Ltd (2011) 14 HKCFAR 512 where Bokhary PJ summarized the principles as follows at [48]:

“ (1) The general rule that costs should follow the event applies where a party has unsuccessfully raised opposition to a will. Spiers v English [1907] P 122; Re Cutcliffe’s Estate [1959] P 6; Nina Kung v Wang Din Shin, (2006) 9 HKCFAR 800.

(2) There are two exceptions to the general rule. The first is where the litigation is caused by the conduct of the testator or the residuary beneficiary: the costs of the litigation would normally come out of the estate. This is not the case here. The second exception is where the circumstances are such that there are reasonable grounds for opposing the will: the court would allow good cause to be shown why the general rule should not apply. In such a case, the unsuccessful party will not usually be condemned in costs, although he may not be given his costs out of the estate. See Williams, Mortimer and Sunnucks on Executors, Administrators and Probate 19^th ed. paragraph 40-06. Mitchell v Gard (1863) 3 Sw. & Tr. 275; Spiers v English; and Nina Kung v Wang Din Shin, paragraphs 11 to 14.

(3) Where the opposing party goes beyond putting the proponent of the will to strict proof of its validity, such as putting forth a positive case of, say, undue influence, fraud or forgery, the litigation becomes hostile. In such a case, the general rule applies and if he is unsuccessful, he will be ordered to pay the costs of the other party. This is to ensure that a party would not unjustifiably challenge the will with the hope that the costs of doing so will be borne by the estate or the other party. Mitchell v Gard, at 279. See also Nina Wang v Wang Din Shin, paras 15 to 17.

(4)   Where the opposing party having failed to challenge the will before the judge takes the matter on appeal, there is little or no reason why this should not be regarded as hostile litigation or why he should not be ordered to pay the costs of the other parties to the appeal (on a generous basis, if necessary), if he turns out to be unsuccessful.”

5.  These are the general principles.  However, as costs are ultimately a matter of discretion, the principles must be applied in light of the circumstances of the case.  In this regard, in respect of proposition (4) above, the reasons for an appeal being dismissed can vary. Whilst we respectfully agree that with the failure at the court below an appeal can generally be regarded as hostile litigation, there could occasionally be cases where the bringing of an appeal may still be considered as reasonable for the purpose of the second exception.  For example, where through no fault on the part of a party challenging a will, a first instance judge has overlooked an important aspect of a case which the appellate court was able to resolve in favour of the proponent of the will notwithstanding the lack of first instance determination, the appellate court may have to examine if the bringing of such appeal comes within the second exception. 

6.  But this would be an exceptional situation and the omission has to be really material for resolution of any legitimate outstanding doubt about the will and not attributable to the neglect on the part of the party to take the relevant point at first instance.  Thus, in general an unsuccessful party challenging a will would have to bear the costs of an appeal if the appeal is dismissed.

7.  As submitted by Mr To by reference to some Australian authorities[1], there are sound rationale for such a general rule.  First, in light of the determination by the first instance judge, whatever doubts there might have been in respect of a will should have been resolved.  With the benefit of a reasoned judgment from the court, the non-acceptance of the findings or analysis by the judge on the part of an appellant would not per se be a good reason for extending the protection under the first or second exceptions to him.  Second, as the costs of the executor will be borne by the estate, the estate should not be unduly burdened by a further round of litigation when previous doubts on the will have by then been settled by the first instance judgment.  Litigation is expensive and unchecked litigation could substantially deplete the estate.  It would unlikely be the wish of a testator for his estate to be squandered away on legal expenses. 

8.  As reiterated in Re Estate of Au Kong Tim [2018] 3 HKLRD 752, if the court finds that a party cannot rely on any of the exceptions, the usual rule on costs in hostile litigation shall apply.

9.  Mr So submitted that Tam Mei Kam v HSBC International Trustee Ltd, supra, was an exceptional case and the general rule is that the two exceptions apply with equal force to the costs of an appeal.  With respect, this submission fails to pay regard to the resolution of doubts by the first instance judgment.

10.  We can now turn to how the principles are to be applied in the present appeal.

11.  In the court below, Chow J found that the challenge by the Plaintiffs came within the second exception.  Hence, the judge held in his Reasons for Decision of 2 May 2018 at [8] to [9] and ordered the Plaintiffs to bear their own costs but do not have to pay the costs of the Defendants:

“ 8. I consider, however, that the second exception applies because the circumstances in the present case were such that it was reasonable for the Plaintiffs to investigate the validity of the November Will, having regard to the conflicting MMSE results before and after the making of the November Will as well as the contemporaneous medical notes and records which, in my view, raised a genuine issue as to whether the Deceased was suffering from dementia and whether he had the requisite testamentary capacity at the time of the making of the November Will. As it was, I eventually came to the conclusion that:-

(1) the Deceased was not suffering from dementia at the time of execution of the November Will;

(2) on the basis that he was not suffering from dementia or delirium at the material time, there was no basis to say that he had no testamentary capacity to make the will as per the test laid down in Banks v Goodfellow; and

(3) even if the Deceased was suffering from dementia at the time of execution of the November Will, he still had the requisite testamentary capacity to make the will at that time.

9.  However, the fact that I found that the Deceased had testamentary capacity after considering the evidence adduced by the parties does not mean it was unreasonable for the Plaintiffs to seek to investigate the validity of the November Will in the first place.”

12.  Mr So submitted that the Plaintiffs’ attacks on the validity of the Will in the appeal were similar to those in trial, and they did not cross the boundary of reasonable inquiry.

13.  With respect, this cannot be a reason for departing from the general position that a party who unsuccessfully challenged a will a second time by way of appeal should bear the costs of the appeal.  As discussed in our main judgment, the doubts raised by the Plaintiffs had been satisfactorily addressed by Chow J in the first instance judgment.

14.  Moreover, perhaps prompted by the judgment in Re Estate of Au Kong Tim supra, new lines of argument were run in the appeal. However, we have concluded those points could not assist the Plaintiffs and Chow J had not addressed the same by reason of the manner in which the case was fought before him.  It is not a case of the judge overlooking important matters.  Thus, the new points cannot be a ground for departure from the general rule.

15.  We therefore hold that the Plaintiffs should bear the costs of the appeal.

16.  There is no opposition to the costs of the appeal being taxed with certificate for two counsel except in respect of the costs of the summonses.  The Defendants did not instruct two counsel in respect of the summonses.  Hence, we will order that the costs of the Defendants in the appeal (not including the costs of the summonses) be taxed with certificate for two counsel.

17.  In respect of the summons of the Defendants, there is no opposition from Mr So that the Defendants shall have their costs from the estate taxed on trustee basis.  We shall order accordingly.

18.  For the reasons above, we shall also order that the Plaintiffs shall pay the estate for the costs of the Defendants in the appeal. 

19.  Mr So submitted that the costs liability of the Plaintiffs shall be paid out of the 1^st Plaintiff’s shares in the estate.  Mr To disagreed as the distribution of the estate is a matter of administration which does not fall within the scope of the probate action and this appeal.  At present, the administration of estate has not been completed. There is no reason for the acceleration of distribution to the 1^st Plaintiff alone in advance of the completion of the process of administration by virtue of his costs liability in the probate action.  

20.  We agree that it does not lie in this court’s power in hearing an appeal from a judgment in the probate action to pre-empt matters related to the administration of estate.  The distribution of the estate, including the share of the 1^st Plaintiff, is a matter of administration.  We therefore decline to make the order as suggested by Mr So.

21.  In summary, we order as follows:

(a)  Save we grant an extension of time to the Plaintiffs to apply by summons, the summons of the Plaintiffs is dismissed;

(b)  We vary our costs order nisi in terms as per paragraph 1 of the summons of the Defendants. 

22.  In respect of the costs of the summonses, we order the Plaintiffs to pay the costs of the same in the same manner as we have ordered in respect of the costs of the appeal except there will not be any certificate for two counsel for the summonses.  Since there would be taxation for the costs of the appeal, we shall also leave the costs of the summonses for taxation instead of doing it by way of gross sum assessment.