LEUNG CHUNG CHING EDWIN AND ANOTHER v. THE ESTATE OF LEUNG ON MEI AMY, DECEASED AND ANOTHER

HCMP 2033/2012

MISCELLANEOUS PROCEEDINGS NO 2033 OF 2012

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DECISION ON COSTS
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Introduction

1.  This is a decision in relation to costs following this Court’s judgment dated 30 July 2014 finding in favour of the plaintiffs’ claim.  This Court made a costs order nisi that each party bear their own costs which the plaintiffs now challenge by seeking recovery of their costs from a non-party to the proceedings, namely the personal representative of the estate of the deceased. 

Background

2.  The two plaintiffs are the parents of Leung On Mei, Amy (Amy), who died under tragic circumstances without leaving a will. She was survived by her husband, Sit Wai Yuen, Henry (Henry), and their young daughter, Angel.  As Amy had died intestate, the two beneficiaries of her estate are Henry and Angel. 

3.  The plaintiffs brought an action against the estate of Amy for a declaration that a commercial property registered in her name was in fact beneficially owned jointly by them and a consequential order for the transfer of the property back to them. 

4.  It was clear that the plaintiffs’ claim had to undergo a determination by the Court because of the circumstances of the case (which were as a result of the plaintiffs’ making) and the issue that had to be tried.  As there was no personal representative appointed for the administration of Amy’s estate at the commencement of the action, it was agreed by consent that Henry be appointed as the representative for the limited purpose of conducting and defending the claim by the plaintiffs: Order 15, rule 6A (1) and (4) of the Rules of the High Court, Cap 4A. 

5.  Without a personal representative of the estate, the plaintiffs would have had to apply for the appointment of the Official Solicitor to represent Amy’s estate: Order 15, rule 6A(5A). 

6.  I should point out that in correspondence between the solicitors of the parties, the plaintiffs’ solicitors sought Henry’s agreement to be appointed the representative of the estate in order for the plaintiffs to make their claim.  The solicitors for Henry agreed and a consent order had been drafted and submitted by the plaintiffs’ solicitors, which had not been signed, including terms that Henry’s appointment as the representative of the estate was for the purpose limited to the conduct and defence of the action and that costs incurred by him in the conduct and defence of the action would be paid out of the estate.  Although, the arrangement as to costs for defending the claim was a matter between Henry and the estate with Henry and his daughter being the only beneficiaries.

7.  By this action, it had to be shown to the Court’s satisfaction that Amy was holding the property as trustee on a resulting and/or constructive trust for the benefit of her parents.  Henry contested the plaintiffs’ claim, contending that the property was a gift from them to Amy and therefore should form part of Amy’s intestate estate. 

8.  It emerged during the course of the proceedings that the relationship between the plaintiffs and Henry had seriously deteriorated.  Henry gave evidence in opposition to the evidence presented by Amy’s parents and her sister.  In deciding in favour of the plaintiffs’ claim, I accepted the evidence presented on behalf of the plaintiffs and rejected the evidence of Henry on the key issues as to the arrangement that had been struck between the plaintiffs and Amy. 

9.  The reason for the costs order nisi was explained at §156 of the judgment:

“156. In light of my reasons, I make a declaration that the 17^th floor property in the name of Amy was held on trust for Mr and Mrs Leung and accordingly I order the 17^th floor property be transferred to them. I make an order nisi that each party bear their own costs. I do so, on the basis that the issue of the ownership of the property needed to be determined by a court and the estate of Amy had to address the issue in these proceedings. I also bear in mind that Angel is one of the two beneficiaries of the estate of Amy and I would not wish to put the financial burden of the plaintiffs’ costs on the estate in the circumstances of this case.”

The two applications

10.  On 20 August 2014, the plaintiffs took out a summons to vary the costs order nisi of the action.  The application was made pursuant to Order 42, rule 5B.  The order sought was that the costs order made on 30 July 2014 be varied so that the costs shall follow the event and be borne entirely by Henry, as representative of the defendant.  The summons was set down for hearing on 29 September 2014. 

11.  It appears that in the meantime, on 27 August 2014, the defendant took out a notice to appeal the judgment of the Court (CACV No.181 of 2014). 

12.  On 25 September 2014, by agreement of the parties a consent order was made that the costs summons be adjourned sine die with liberty to restore pending the result of the defendant’s appeal and that the hearing of the summons be vacated. 

13.  I am informed that the defendant’s appeal was dismissed by the Court of Appeal on 9 September 2015.  It was followed on 8 October 2015 by the plaintiffs making an application to resume their costs summons and informing the Court that they intended to take out a summons to apply for leave to join Henry as a party to the action pursuant to Order 62, rule 6A.  It resulted in directions being given by the Court in addressing the various matters for the hearing of the costs summonses. 

14.  On 10 November 2015, the plaintiffs took out a summons pursuant to Order 62, rule 6A seeking an order that Henry be joined as the 2^nd defendant in the action for the purpose of costs only and that this and the other summons be heard on 2 December 2015. 

15.  On 26 November 2015, by agreement of the parties a consent order was made that the hearing on 2 December 2015 be vacated and fixed for 15 February 2016 together with the plaintiffs’ summons dated 20 August 2014. 

16.  It seems that it would be preferable that all matters arising from or in connection with a final judgment of the Court are dealt with before a hearing of any appeal from that judgment.  The reasons for this are that all matters relating to a case should be resolved by the trial court in a reasonable time and in a just and efficient manner, and the appellate court should be seized of all matters arising from or in connection with a final judgment in the event that they need to deal with or resolve any of them in consequence of the appeal and its decision.  This will depend on the particular circumstances of the case. 

The argument on costs

17.  The plaintiffs argue that costs should follow the event, and as they were the successful party of the litigation they should have the whole of their costs; and that the whole of the costs liability should be borne by Amy’s husband, Henry, who was appointed as the representative of Amy’s estate for the limited purpose of conducting the defence of the present proceedings and who for that purpose had given evidence.

18.  The defendants argue that the two summonses should be dismissed with costs to them on the basis that the costs order nisi was appropriate and within the discretion of the Court and that Henry should not bear the costs personally as he was not a party to the proceedings. 

19.  Henry took no issue to being joined as a party to the proceedings and the argument before me was whether or not he should bear all or any of the plaintiffs’ costs if the estate was liable for them.

Relevant statutory provisions

20.  There is a wide discretion conferred on the Court to determine by whom and to what extent costs are to be paid which can in certain circumstances extend to a non-party to the proceedings. 

21.  Section 52A of the High Court Ordinance, Cap 4, so far as material provides:

“(1) Subject to the provisions of rules of court, the costs of and incidental to all proceedings in the Court of Appeal in its civil jurisdiction and in the Court of First Instance, including the administration of estates and trusts, shall be in the discretion of the Court, and the Court shall have full power to determine by whom and to what extent the costs are to be paid.

(2) Without prejudice to the generality of subsection (1), the Court of Appeal or the Court of First Instance may, in accordance with rules of court, make an order awarding costs against a person who is not a party to the relevant proceedings, if the Court of Appeal or the Court of First Instance, as the case may be, is satisfied that it is in the interests of justice to do so.

…”

22.  Order 62, rule 6A so far as material further provides:

“(1) Where the Court is considering whether to exercise its power under section 52A or 52B of the Ordinance to make a costs order in favour of or against a person who is not a party to the relevant proceedings-

(a) that person must be joined as a party to the proceedings for the purposes of costs only; and

(b) that person must be given a reasonable opportunity to attend a hearing at which the Court shall consider the matter further.

…”

23.  The procedure that should be followed when addressing an issue of costs against the non-party is broken up into two stages.  The first stage requires the Court to consider whether the non-party should be joined, and the second stage requires the Court to consider whether a costs order should be made against the non-party.  See Sun Focus Investment Ltd v Tang Shing Bor [2012] 5 HKLRD 853 at §19.

24.  As I have mentioned there was no issue taken by Henry to be joined as a party for costs.  It was suggested that prior to determining whether Henry should be liable for the costs, it would be first appropriate for the Court to determine the extent of the costs liability as between the plaintiffs and Amy’s estate and then proceed to consider whether the costs liability of Amy’s estate should be borne wholly by, or otherwise shared with, Henry.  See Chiu Tak Kwong v Tan Yufang [2010] 5 HKLRD 718.

Liability of the costs

25.  The challenge by the plaintiffs as to the costs order nisi is based on the principle that costs should follow the event, and as they were the successful party they should receive the whole of their costs. 

26.  Ms Winnie Chan, counsel for the plaintiffs, in support of the plaintiffs’ application for costs refers to certain rules and legal principles where costs would be normally awarded to the successful party.

27.  Ms Chan relies on the rules of the court that address relevant considerations when granting costs to a party to argue that the plaintiffs fall within these rules and therefore should be given their costs.  She refers to Order 62, rule 3(2) which so far as material provides that:

“(2) If the Court in the exercise of its discretion sees fit to make any order as to the costs of or incidental to any proceedings (other than interlocutory proceedings), the Court shall, subject to this Order, order the costs to follow the event, except when it appears to the Court that in the circumstances of the case some other order should be made as to the whole or any part of the costs.”

28.  She also refers to Order 62, rule 5, which so far as material provides:

“(1) The Court in exercising its discretion as to costs shall, to such extent, if any, as may be appropriate in the circumstances, take into account-

(aa) the underlying objectives set out in Order 1A, rule 1;

…

(e) the conduct of all the parties;

(f) whether a party has succeeded on part of his case, even if he has not been wholly successful; and

…

(2) For the purpose of paragraph (1)(e), the conduct of the parties includes-

(a) whether it was reasonable for a party to raise, pursue or contest a particular allegation or issue;

(b) the manner in which a party has pursued or defended his case or a particular allegation or issue;

(c) whether a claimant who has succeeded in his claim, in whole or in part, exaggerated his claim; and

(d) conduct before, as well as during, the proceedings.”

29.  Ms Chan further relies on rules of the court which concern instances where a party who would otherwise be entitled to his costs, of depriving him of costs or awarding costs against him, to argue that the plaintiffs do not fall within this rule and therefore should not be denied their costs.  She refers to Order 62, rule 7, which provides that where costs had been incurred by a party’s improper and unnecessary acts and omissions, the Court may direct that any costs to that party in respect of it should not be allowed to him and that any costs occasioned by it to other parties shall be paid by him to them.  It is required under this rule that the Court shall have regard to the following matters:

“(aa) the underlying objectives set out in Order 1A, rule 1;

(a) the omission to do anything the doing of which would have been calculated to save costs;

(b) the doing of anything calculated to occasion, or in a manner or at a time calculated to occasion unnecessary costs;

(c) any unnecessary delay in the proceedings.”

30.  Ms Chan argues that when it comes to determining the issue of costs, the starting point is that costs follow the event in that the successful party will have its costs paid by the losing party.  She acknowledges that whilst this general rule can be displaced, the burden is on the losing party to show that a different approach is to be adopted.  She refers to Hung Fung Enterprises Holdings Ltd v Agricultural Bank of China [2012] 3 HKLRD 679.  She also refers to KJ v KMLM, HCMC 4/2010, 21 May 2014, unreported, and On Your Mart Co Limited v Cosway (HK) Limited, HCA 1060/2012, 11 November 2015, unreported, but these cases, as one would expect, were decided on their particular facts and circumstances, and offer little, if any assistance in deciding the question of costs in the present case. 

31.  Ms Chan notes that circumstances that justify departure from the general rule are encapsulated in two English Court of Appeal cases of Re Elgindata Ltd (No 2) [1992] 1 WLR 1207 at 1214 and Ritter v Godfrey [1920] 2 KB 47 at 60.  She highlights the following f guiding principles as summarised in Elgindata:

(i) Costs are in the discretion of the court.

(ii) They should follow the event, except when it appears to the court that in the circumstances of the case some other order should be made.

(iii) The general rule does not cease to apply simply because the successful party raises issues or makes allegations on which he fails, but where that has caused a significant increase in the length or costs of the proceedings he may be deprived of the whole or a part of his costs.

(iv) Where the successful party raises issues or makes allegations improperly or unreasonably, the court may not only deprive him of his costs but may order him to pay the whole or a part of the unsuccessful party’s costs.

32.  Ms Chan submits that the principles in Elgindata make it quite clear that in order to convince the Court to depart from the general rule, the losing party must show (a) the successful party has raised issues or allegations that failed in the end and that such issues or allegations had significantly increased time and costs of proceedings, or (b) there has been unreasonable or improper conduct on the part of the successful party.  She acknowledges that the principles in Elgindata are guiding principles in dealing with costs which after the advent of the Civil Justice Reform were slightly modified in that the Court is more readily to depart from the general rule in order to encourage litigants to be more selective in points they take.  She argues, however, that such departure from the general rule should still be approached with circumspection so as not to undermine the utility of it.  See Mo Ying v Brillex Development Limited and anor, HCA 111/2011, 9 June 2014, unreported, at §4(2) and Commissioner of Inland Revenue v HIT Finance Limited [2008] HKEC 1078 at §7.

33.  The overall thrust of Ms Chan’s argument is that in order for the Court to go against the general rule, the Court must look at the conduct of the successful party as justifying a departure from it, and that in the present case there is nothing in the conduct or presentation of the case by the plaintiffs that should not entitle them to their full costs. 

34.  Whilst as a general rule costs follow the event, it is provided by Order 62, rule 3(2) that the Court has the power to order some other order “where it appears to the Court that in circumstances of the case some other order should be made as to the whole or any part of the costs”.  This statement indeed highlights the fact that costs are in the discretion of the Court: Order 62, rule 2(4) and section 52A(1). 

35.  Although the principles in Elgindata continue to apply after the Civil Justice Reform, the approach under this new regime is to regard the proposition that costs should follow the event not as a general rule but as operating to shift to the unsuccessful party the burden of showing why some different approach should be adopted on the facts of a particular case.  This was helpfully explained by Kwan JA in Hung Fun Enterprises (supra) as follows:

“100. Although the principles in Re Elgindata (No 2) [1992] 1 WLR 1207, 1214A-C continue to apply after the Civil Justice Reform, the approach these days is to regard the proposition that costs should follow the event not as a general rule but only operates to shift to the unsuccessful party the burden of showing why some different approach should be adopted on the facts of a particular case (Chan Mei Yiu Paddy v Secretary for Justice (unrep., HCAL 16/2007, [2010] HKEC 1910), para.5 (Saunders J)), the rationale being that a mechanistic adoption of follow the event principle may result in parties incurring unnecessary costs in civil litigation (Wong Kam Tong v Tin Shing Court, Yuen Long (IO) (No 2) [2012] 2 HKLRD 1128, paras.10-13).

101. To deprive a wholly successful defendant of costs, the relevant considerations are as stated by Atkin LJ in Ritter v Godfrey [1920] 2 KB 47, 60:

‘In the case of a wholly successful defendant, in my opinion the Judge must give the defendant his costs unless there is evidence that the defendant (1) brought about the litigation, or (2) has done something connected with the institution or the conduct of the suit calculated to occasion unnecessary litigation and expense, or (3) has done some wrongful act in the course of the transaction of which the plaintiff complains.’

102. Atkin LJ further explained at pp.60-61 that by (1) is meant that the defendant “has so conducted himself as to lead the plaintiff reasonably to believe that he had a good cause of action against the defendant, and so induce him to bring the action”. Such conduct may be unreasonable or improper, or conduct other than that which constitutes the alleged cause of action. (2) and (3) may possibly overlap and would include improper conduct in or connected with the litigation calculated to defeat or delay justice.

103. It is not necessary to prove all three matters to deprive a wholly successful defendant of costs, one or more of those matters would do.  The principles in Ritter v Godfrey have been applied in Hong Kong, see for example the decision of the Court of Appeal in Ho Shu Kwong v Chiang Chun Yuan [2002] 3 HKLRD 419, para.18.”

36.  It has been said that since the Civil Justice Reform, the Court is more ready to take an issue-based approach and that it is no longer necessary for a party to have acted unreasonably or improperly to be deprived of his costs of a particular issue on which he has failed, nor is it necessary to show that the successful party has deliberately wasted time and costs.  See KJ (supra) at §17 per To J.

37.  The problem with Ms Chan’s argument as I see it, is that it is solely focused on looking at the question of costs by reference to the conduct or presentation of the case by the successful party, and whilst this may very well be a matter the Court can and should take into consideration when deciding the questions of costs, it is not the only matter. 

38.  As propounded under the guiding principles on costs, the Court can depart from the general rule when it appears to it that in the circumstances of the case some other order should be made.  Consequently, in the overall circumstances of a case, there may be occasion when the Court departs from the general rule and does not order that the losing party pay the successful party’s costs.

39.  For sake of argument, it could very well be that the successful party had to litigate the claim because of circumstances attributed to him in order for it to be established before and by a court of law.  In other words, it was an inevitable litigation that the successful party had to take because of circumstances of his own making and the nature of the claim.  I will say more about this later in my decision as this was a factor that I took into account when I made the costs order nisi that each party bear their own costs. 

40.  In the circumstances of this case, it comes to a question as to whether there were excessive costs incurred by the way the defence case was conducted.

Henry’s liability for costs

41.  A non-party can be made liable for costs in a variety of circumstances, including:

(a) where the non-party was the “real party” who funded, controlled and benefitted from the outcome of the litigation;

(b) where the non-party was responsible for bringing the proceedings;

(c) where proceedings were brought in bad faith for an ulterior motive; and

(d) other conduct which made it just and reasonable to make the costs order against the non-party.

See Tsang Tat Keung v Lam Yun Fong and anor, HCMP 2903/2012, 16 July 2013, unreported, at §8; Kong Lai Restaurant Limited v Swallow Kingdom Properties Limited and anor, DCCJ 1332 /2012, 23 January 2014, unreported, at §§39 to 44.

42.  Ms Chan relies on Dymocks Franchise Systems (NSW) Pty Ltd v Todd and others [2004] UKPC 39 where the Privy Council acknowledged that a costs order may be made against a non party where he is the real party to the litigation, in that the litigation is substantially under his control and giving him access to justice for his own purposes or benefit.  She submits that this is the case with Henry.

43.  Ms Chan also refers to several cases where a non-party was ordered to pay costs, but a careful examination of them reveals that they were very much decided on their specific facts and circumstances. They were To Pui Kui v Ng Oi Che and ors, HCA 522/2008, 27 June 2014, unreported, where the son manipulated the mother in commencing and prosecuting the action, and Chiu Tak Kwong v Tan Yufang [2010] 5 HKLRD 718 where the non-parties stood to benefit from the outcome of the action and so assisted by giving evidence on behalf of the plaintiff.

44.  Ms Chan submits that from the evidence it is clear that Henry funded the defence and that as a beneficiary of the estate and an occupant of the property where he was conducting a dental clinic, he was serving his own interests in defending the claim and accordingly he was in effect the real party to the litigation.

Henry’s argument against costs

45.  Ms Deanna Law, counsel for the defendant, argues that costs are being sought against Henry as a non-party and therefore such an order should only be made in exceptional circumstances.  She submits that the Court should treat an application of this kind with considerable caution, bearing in mind that the ultimate question is whether in all the circumstances it is just to make such an order. 

46.  Ms Law has taken me to Symphony Group Plc v Hodgson [1994] QB 179 and to the following principles at 192H-194D:

“However, it seems to me that the particular circumstances of this case require this court to accept the invitation of Lord Goff in Aiden Shipping Co Ltd v Interbulk Ltd [1986] AC 965 and to lay down some principles for the guidance of judges of first instance when they are asked to make an order for costs against a non-party, and in doing so I am well aware of what Lloyd LJ said in Taylor v Pace Developments Ltd [1991] BCC 406, 408: “There is only one immutable rule in relation to costs, and that is that there are no immutable rules.”  I am also aware of the observations warning against laying down rules for the exercise of a discretion in relation to costs generally by Bowen LJ in Jones v Curling (1884) 13 QBD 262, 271 and by Brett MR in The Friedeberg (1885) 10 PD 112, 113.  Nevertheless I am fortified by the fact that Lord Goff considered that such guidance might well become necessary and I believe that the circumstances of this case indicate the present necessity for guidance.  In my judgment the following are material considerations to be taken into account, although I do not suggest that there may not be others which are relevant.

(1) An order for the payment of costs by a non-party will always be exceptional: see per Lord Goff in Aiden Shipping Co Ltd v Interbulk Ltd [1986] AC 965, 980F.  The judge should treat any application for such an order with considerable caution.

(2) It will be even more exceptional for an order for the payment of costs to be made against a non-party, where the applicant has a cause of action against the non-party and could have joined him as a party to the original proceedings.  Joinder as a party to the proceedings gives the person concerned all the protection conferred by the rules, as to e.g. the framing of the issues by pleadings; discovery of documents and the opportunity to pay into court or to make a Calderbank offer (Calderbank v Calderbank [1976] Fam. 93); and the knowledge of what the issues are before giving evidence.

(3) Even if the applicant can provide a good reason for not joining the non-party against whom he has a valid cause of action, he should warn the non-party at the earliest opportunity of the possibility that he may seek to apply for costs against him.  At the very least this will give the non-party an opportunity to apply to be joined as a party to the action under Ord. 15, r. 6(2)(b)(i) or (ii).

Principles (2) and (3) require no further justification on my part; they are an obvious application of the basic principles of natural justice.

(4) An application for payment of costs by a non-party should normally be determined by the trial judge: see Bahai v Rashidian [1985] 1 WLR 1337.

(5) The fact that the trial judge may in the course of his judgment in the action have expressed views on the conduct of the non-party constitutes neither bias nor the appearance of bias.  Bias is the antithesis of the proper exercise of a judicial function: see Bahai v Rashidian [1985] 1 WLR 1337, 1342H, 1346F.

(6) The procedure for the determination of costs is a summary procedure, not necessarily subject to all the rules that would apply in an action.  Thus, subject to any relevant statutory exceptions, judicial findings are inadmissible as evidence of the facts upon which they were based in proceedings between one of the parties to the original proceedings and a stranger…”

47.  It is worthwhile also noting the principles as stated in Dymocks Franchise Systems that have relevance to the present application at §25:

“(1) Although costs orders against non-parties are to be regarded as “exceptional”, exceptional in this context means no more than outside the ordinary run of cases where parties pursue or defend claims for their own benefit and at their own expense. The ultimate question in any such ‘exceptional’ case is whether in all the circumstances it is just to make the order. It must be recognised that this is inevitably to some extent a fact-specific jurisdiction and that there will often be a number of different considerations in play, some militating in favour of an order, some against.

(2) Generally speaking the discretion will not be exercised against “pure funders”, described…as “those with no personal interest in the litigation, who do not stand to benefit from it, are not funding it as a matter of business, and in no way seek to control its course.” …

(3) Where, however, the non-party not merely funds the proceedings but substantially also controls or at any rate is to benefit from them, justice will ordinarily require that, if the proceedings fail, he will pay the successful party’s costs.  The non-party in these cases is not so much facilitating access to justice by the party funded as himself gaining access to justice for his own purposes.  He himself is ‘the real party’ to the litigation, a concept repeatedly invoked throughout the jurisprudence… Nor, indeed, is it necessary that the non-party be ‘the only real party’ to the litigation…  provided that he is ‘a real party... in very important and critical respects’.

(4) Perhaps the most difficult cases are those in which non-parties fund receivers or liquidators (or, indeed, financially insecure companies generally) in litigation designed to advance the funder's own financial interests… their Lordships would hold that, generally speaking, where a non-party promotes and funds proceedings by an insolvent company solely or substantially for his own financial benefit, he should be liable for the costs if his claim or defence or appeal fails. As explained in the cases, however, that is not to say that orders will invariably be made in such cases, particularly, say, where the non-party is himself a director or liquidator who can realistically be regarded as acting rather in the interests of the company (and more especially its shareholders and creditors) than in his own interests.”

48.  Dymocks Franchise Systems was considered by the Court of Final Appeal in The Liberty Container (2007) 10 HKCFAR 256, where it was held at §§30 to 33:

“30. … Funding a litigant who could not otherwise afford to litigate facilitates access to justice. But access to justice is not the only objective to be considered. The due administration of justice involves many other objectives. These include: discouraging ill-founded claims and defences; compensating in costs litigants put to expense in the successful pursuit or defence of a claim; and leaving the control of a claim or defence in the hands of the person whose claim or defence it is. Just as it would be inimical to access to justice if all funders were seriously exposed to costs orders, so would it be inimical to these other objectives if no funder could be ordered to pay costs. No perfect solution has been found. But the balance which has emerged from cases like Knight, Hamilton and Dymocks provides, in our view, a good general guide when deciding whether or not to order costs against a funder who comes within the scope of s.52A.

31. This balance involves drawing a distinction between, on the one hand, a pure funder who funds litigation to facilitate access to justice by the funded litigant and, on the other hand, a self-interested funder who funds litigation not so much to do that as to gain access to justice for his own purposes. We hesitate to adopt or devise anything as a hard and fast test for deciding who is or is not a pure funder. But we think that the courts can usefully guide themselves by normally treating as pure funders those and only those who have no personal interest in the litigation, do not seek to benefit from it, are not funding as a matter of business and do not seek in any way to control its course. On this basis, a creditor who funded litigation for the benefit of the general body of creditors including himself is not a pure funder…

33. At least normally, costs should not be ordered against a pure funder even though that regrettably leaves the funded litigant’s successful opponent uncompensated in costs.  But justice will normally require that a self-interested funder whom the law can reach be ordered to pay the costs of the funded litigant’s successful opponent.”

49.  All these principles and observations are important and need to be borne in mind when looking realistically at the circumstances of the case to ascertain whether the non party was the driving force behind the litigation and involved in it in such a way and to such an extent that he should be made liable for costs. 

50.  Ms Law argues that in ascertaining whether Henry was the real party it was necessary to look at the overall circumstances and it was not simply an exercise of determining whether certain characteristic features of a real party could be attributed to him.  She makes four points. First, Henry had to fund the defence because of the circumstances of the case and that no funds had been released from the estate.  Secondly, it was a fact that Henry was a beneficiary of the estate but he was one of two beneficiaries, together with his daughter who was a minor, and he was obliged to test the claim made against the estate.  Thirdly, Henry was invited by the plaintiffs to conduct and defend the action who consented to him to be the representative of the estate.  Fourthly, there was a reasonably arguable case that the property was a gift from the plaintiffs to Amy.  She also adds that the proceedings have been unfortunately infected by the strained relationship between the plaintiffs and Henry.

Discussion

51.  Ms Chan’s argument comes to this.  The plaintiffs were wholly successful in their claim and therefore they should get their costs which Henry should pay personally.  There are two bases to her argument.

52.  The first is that Henry was “the real party”, in that he funded, controlled and benefited from the outcome of the litigation. 

53.  The second is that Henry raised issues against the plaintiffs’ claim that were without substance and rejected, and as a consequence unnecessarily protracted the proceedings.  She points to the fact that Henry argued that the property in question was a gift from the parents to Amy and because of their resentment of him sought to retract the gift out of spite against him.  She argues that on all matters that he relied on in support of this contention he was disbelieved and was not acting in the interest of the estate but rather in his own personal interest.  She notes that in resisting the plaintiffs’ claim, not only was Henry to benefit as a beneficiary of the estate but also as an occupier of the property in question where he was operating a dental clinic. 

54.  Ms Chan acknowledges, however, that the plaintiffs had to bring an action against the estate to establish their claim.  She recognises that for this purpose it was necessary that someone acted as the representative of the estate.  The plaintiffs sought and received Henry’s agreement to act as the representative of the estate for the purpose limited to the conduct and defence of the action.  This was agreed to between the parties.  She also recognises that had Henry not consented to act as the representative, the plaintiffs would have had to take out proceedings for the appointment of an Official Solicitor for the estate in order to represent the estate against the plaintiffs’ action.  This is an unusual feature to the case which is relevant to the question of costs. 

55.  The fact is that the plaintiffs entered into an arrangement with Amy which was not documented or formalised in any meaningful manner.  Accordingly, the proceedings were inevitable given the arrangement that was in place and what had to be established according to law. 

56.  Ms Chan argues that Henry funded and controlled the litigation on behalf of the estate, and as a beneficiary of the estate and an occupier of the property in question, he had a personal interest to serve in resisting the plaintiffs’ claim.  She submits that he was the “real party” to the action and therefore should be made liable for the costs that ordinarily would be awarded to the plaintiffs.  From my overall assessment of the situation it was clear that Henry was in the driving seat of the litigation and controlling it and seeking to defend the action by questionable arguments.

57.  Ms Chan also argues that a substantial portion of the proceedings were occupied by the stance taken and arguments presented by Henry.  She points out that Henry vigorously contested the plaintiffs’ claim on the ground that the property was a gift by the plaintiffs to Amy and that the death of Amy had instilled hostility between himself and the plaintiffs’ family, and so the plaintiffs retracted the gift.  She submits that as a consequence various issues were raised by Henry which unnecessarily protracted the time and cost of the litigation.  Whilst there were various matters from both sides that detracted from the main issue of the case concerning the legal status of the property, there was always the lingering question as to whether the property was a gift from the plaintiffs to Amy.

58.  It still remains whether Henry by the way in which he has conducted the defence has unnecessarily and unreasonably protracted the proceedings for which he should be made responsible by an order for costs.  It became clearly apparent during the course of the trial of the action that there is a strained relationship between the plaintiffs and Henry. It has clearly spilled over into this action.  Putting aside this unfortunate circumstance, it is the case that I rejected the evidence of Henry on various matters in finding that the plaintiffs had made out their claim.  There was, however, an issue as to whether the property in question was gifted by the plaintiffs to Amy and in that respect the plaintiffs have brought about the circumstances that necessitated these proceedings.  The estate had to address the claim accordingly.  So therefore in theory the plaintiffs who were primarily responsible for these proceedings, should bear the costs of them.  However, there were matters that Henry relied on in resisting the plaintiffs’ claim that were soundly rejected by me and in my view unnecessarily and unreasonably protracted and complicated the case. 

59.  I am of the view that the estate should not bear any liability for the plaintiffs’ costs for the reason that the litigation was inevitable due to the plaintiffs’ making, but I am of the view that Henry in the conduct and defence of the claim went beyond what was necessary and reasonable and therefore should personally bear the costs that were occasioned by the plaintiffs because of this.  On my estimation of the time taken to deal with the unnecessary and unreasonable matters raised by Henry, I am of the view that Henry should pay 20 percent of the plaintiffs’ costs.  As to the costs of the costs applications, I am of the view that each party should bear their own costs.  The plaintiffs sought the entire costs from Henry and were not successful in that regard in that I only made a partial award of 20 percent.

Conclusion

60.  For the foregoing reasons, I make an order that Henry be joined as a party to these proceedings and that the costs order nisi is varied, which is now made absolute, so that the terms of the order is that Henry pay 20 percent of the plaintiffs’ costs, to be taxed if not agreed.  There is no order of costs against the estate.  There is no order as to costs on the plaintiffs’ two summonses.