TO PUI KUI v. NG KWOK PIU AND OTHERS

HCA 523/2008

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 523 OF 2008

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D E C I S I O N

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1.  When I found in favour of the plaintiff at the end of November last (2012), I anticipated that an argument over any costs order that I made would arise. Hence, my order was an order nisi since there was not available to the parties or to me, any opportunity to hear such an argument before the following April (2013).

2.  Accordingly, the order I then made was for the plaintiff’s costs to be paid by the company CAGL, some of whose directors and/or shareholders had been responsible for a number of matters which I have set out in my judgment.  At that time, I did not know the full picture concerning the shareholdings in and control of this family company, but I was aware that some of the parties who had supported the plaintiff were defendants to the action (and necessarily so in view of the issues involved) and might be unfairly penalised in respect of costs.  I also had perhaps the unrealistic hope that common sense would prevail amongst the parties found liable, to the extent that steps might be taken to wind up the company, realise the assets and achieve an equitable distribution of the funds.  That has not happened and accordingly, I have now had to consider carefully, aided by counsel’s arguments, what costs orders I should make which properly reflect the force of the judgment, and do justice to the various parties involved.  What is readily apparent before I consider the individual positions and arguments, is that given my findings, no member of the successful group, i.e. Mother’s group, should have to bear, directly or indirectly, any costs of the action which they had to bring or in which they participated, whatever nomenclature was applied to them as parties.

3.  The basic principle following the outcome of an action is that the unsuccessful parties should pay the costs of the successful parties − costs follow the event.  The onus is therefore upon the losing party to show why in the circumstances of this case, that basic principle should be displaced.  Accordingly, I invited Mr William Wong then appearing for the 1^st, 4^th, 5^th, 7^th & 9^th defendants to advance his arguments at the outset.  I had had the advantage of reading his detailed submissions before the hearing so that I knew what form and substance they would take.

4.  Mr Wong’s written arguments included a reliance upon a series of letters written by the solicitors for Philip’s Group putting forward, with what I regard as unrealistic deadlines for acceptance, a series of “offers” which Mr Wong contends should be seen as “open” offers, which, in view of their non‑acceptance by the plaintiff, should carry with them heavy sanctions in respect of costs.

5.  Before I consider those letters in detail, it is important and highly relevant to note the time context in which these letters were written and the way in which the opportunity arose for the defendants’ solicitors to lay the basis for their creation.

6.  I was asked by the parties during the course of the trial on at least one occasion to give them the opportunity to see if their differences could be resolved and the action settled.  I was more than content to do so particularly, since this was a bitter family conflict and I had expressed my own views about the unhappy state of affairs, I hope carefully, about the cost of the litigation, and my sadness at seeing a dead man’s hard won wealth, accumulated for the benefit of his widow and their large family, apparently being frittered away.  The allegations against each other were becoming extreme and I could foresee a situation whereby the “House of Ng Po Sum” would be forever divided against itself.

7.  It was obvious from my experience and the indications then given to me, that these would be “Without Prejudice” discussions with a view to achieving a sensible resolution.  I had no idea at that stage that they might be used to try and stake out strategy or tactics for a particular group in the event of a certain outcome should settlement not be achieved and the trial proceed to its conclusion.   Such concessions by the court are not to be used in such a fashion.  If they were it would be tantamount to giving a party free rein to carry on pre-trial manoeuvrings and tactical activities under the cloak of “Without Prejudice” discussions in the course of the trial.   The time for that activity was past when the trial began.     

8.  At the adjourned hearing, Mr Sussex resumed the leading role for Philip’s Group and his submissions in relation to costs fell into three self-contained parts.

9.  Firstly, I will take his argument that the applications to vary my nisi order in respect of costs by members of Mother’s Group, is out of time.

10.  This does not get off the ground.  I made it clear, in my absence from Hong Kong that my order was a “nisi” order, even though I had not expressly used the term “nisi”, and I invited written submissions or a hearing on my return from Hong Kong in mid‑April.  It was never my intention to require any party to issue a specific summons for the purpose of arguing against the “nisi” order.  That would have been a waste of time, paper and cost.  Some of the defendants, acting in person, sought by a summons a separate order for costs in respect of their own involvement. They in fact supported their mother’s case, and with the exception of Jeremy gave evidence on the behalf.  Their position was effectively as witnesses for the plaintiff even though they had to be made defendants to the plaintiff’s action.  I do not, however, think it appropriate that they should seek separate costs order applicable to themselves as parties.  However, as I have indicated a formal summons was in any event unnecessary.

11.  Jeremy’s position is somewhat different.  He did not give evidence although he allied himself with his mother’s cause. Nonetheless, he was a party and the question of his costs has to be considered.

12.  The second aspect is the effect of the letters from the solicitors acting for Philip’s Group which with one exception were sent to the plaintiff’s solicitors during the course of the trial.

13.  At a pre-trial hearing on 20 September 2012, I think I expressed my concern about the costs of this extensive litigation which involved all surviving members of the family, nine in number.

14.  The first letter from the solicitors for Philip’s Group to be considered is dated 24 September 2012.  It is headed “Without Prejudice save as to costs”.  There had been some preceding discussion between the respective leading counsel for the parties. The letter containing a proposal for settlement was expressed to be put forward “as a gesture of goodwill”, at the outset.

15.  The proposal encompassed the family companies, and other assets.  It was not limited to the matters raised in the action which I was then about to try. 

16.  At the end of the letter, it was indicated that the offer would remain open until 1:00 pm on 29 September and failing acceptance within that period, the defendants (Philip’s Group) would seek costs against the plaintiff on an indemnity basis if (and this is my emphasis) “our clients claim and/or defence prevails after trial.”

17.  The first oddity in the proposal is the statement that it was put forward as a “gesture of goodwill” yet was given an unrealistic time scale and a threat of a costs sanction in a certain event. The event did not, of course, materialise and the ambit of the approach went well beyond that of the action 523 of 2008.  In my judgment this offer cannot be termed an open offer with sanctions attached to it.  In order to evaluate it, if the argued sanction was to apply (which I find does not and cannot), one would have to examine each and every aspect of the proposed offer.  That is not practicable or appropriate.  It is impossible to disentangle any distinct proposal in respect of action 523 of 2008 from it.

18.  It was, in fact, answered by a letter from the solicitors for Mother’s Group dated 28 September before the expiry of the ultimatum.  It was, as one would expect, marked “Without Prejudice” and “save as to costs” also appeared.  It contained, again unsurprisingly, a counter proposal, encompassing all the actions.  Although I am in no position to determine the reasonableness or otherwise of these written negotiations, I would, had I been in a position to do so, have given my blessing to any efforts to achieve a compromise of all the actions, which achieved an equitable result for all the parties.  To that counter proposal the plaintiff’s solicitors invited a reply before 2 October 2012, 4 days hence. 

19.  There was then a significant lapse of time, in the content of this case.  The trial of this action started on 3 October 2012.  On 16 October Mr Charles Sussex S. C. for Philip’s Group asked me to allow the day for discussions with a view to achieving a settlement.  Whether that was to be limited to the case I was trying or to be on a broader, perhaps comprehensive basis, I know not, but then, of course, I was not privy (nor should I have been) to the earlier correspondence to which I have referred.  I had, however, on 15 October at the end of the day’s proceedings, expressed quite openly, though in closed session, my concern about the costs involved in this litigation and the drain on the family assets, collectively or individually quite apart from the effect on the family of the deceased. 

20.  On the following day (17 October) both parties asked for a further day, and with my clear encouragement, I allowed them to have it.  On 18 and 19 October Mr Sussex and tacitly with the support of Mr Nigel Aiken S. C. for the Mother’s Group, asked for yet another day.  By the end of that time – Friday 19 October 2012 – four days out of the week had been allowed to all parties to try and achieve a settlement.  I was conscious that was perhaps unusually long but my antennae led me to believe that what the parties were trying to achieve was a comprehensive settlement for all actions which would leave the parties with a clear resolution and an end to the internecine conflict.  It was in the interests of all that this goal should be attained if at all possible.  The weekend was to intervene and gave added time to that end.

21.  It was on the Monday of the following week, 22 October 2012, that Mr Sussex informed me that the time granted had been wasted, and was indiscreet enough to blame the Mother’s Group for intransigence or whatever term best fitted his attitude.  His comment was inappropriate in the context of what I had regarded as having taken place, viz discussions and meetings on a “Without Prejudice” basis, the nature of which would not be made apparent to me save in the form of an agreed settlement at the end of such contact.

22.  As a result of this dispute over what should be the proper order for costs, it was revealed to me what had taken place during those four days or so which I had allowed to the parties on the usual trusting basis – “Without Prejudice” discussions and negotiations which if they succeeded would dispose of this action and/or the remaining actions, and, if they did not, would simply result in this action continuing, however frustrated one or more of the parties and possibly the judge, might feel.  It was never intended to give the opportunity for recriminations and tactical manoeuvring for a future advantage by any party.  As I have said earlier the courts system is not to be used to that end.

23.  A number of letters were sent by the solicitors for Philip’s Group.  The first, of 16 October, which was the first of the four days on which I had suspended the trial of the action, revived their letter of 24 September. It was marked “URGENT SAVE AS TO COSTS” whatever that curiosity may mean, and the initial part of the text purported to turn that earlier ““Without Prejudice” letter into an “open” offer, available until the following day (17 October).  The “sanction” behind it – if it be such – was repeated as an application for costs on an indemnity basis “if our client’s claim and/or defence prevails after trial and appeal, if any.”

24.  This letter was followed by another of the same date.  (Again oddly marked “URGENT SAVE AS TO COSTS”).  It referred to the discussion between the parties’ respective counsel as a result of which a further offer of settlement was made, the text of which was set out in the letter. Once again it reviewed all areas of dispute as featured in the various actions, and how it was proposed that the family assets should be distributed. Obviously, it went far beyond the ambit of Action 523 of 2008 and it was impossible to extract from it any precise offer in respect of that particular area of conflict.

25.  It was expressed to remain open until close of business on 17 October. (By that time, of course, I had not granted a further day’s indulgence for negotiations.)  It repeated the same purported sanction which I repeat only for the sake of emphasizing its terminology which I must assume was well-considered in view of the importance which I am asked to attach to this correspondence:

“If the offer is not accepted within that period, our clients shall seek costs against your clients on indemnity basis if our client’s claim and for defence (as the case may be) prevails after trial, or in the appeal (if any).”

26.  There was also a threat in relation to the possible winding up of CAGL which I do not need to consider.  For the reasons indicated earlier the letter is not one which can be treated as an open offer with clear cut sanctions attached to it which can be used as the basis of a costs order against the plaintiff’s group.

27.  Within the bundle of this short correspondence is a letter dated 17 October 2012 from Messrs Yeung & Co.  It is not entirely clear whether that firm acts for Jeremy Ng or EBDN (or both) but since it is specifically concerned with HCA 188 of 2010 it does not fall to be considered by me.  

28.  I can take the next few letters from the solicitors for Philip’s Group quite shortly.  The letter of 18 October 2012 repeats the open offer approach of a comprehensive composite settlement but excluding HCA 188 of 2010.  It was a response to the proposal made by the plaintiff’s counsel.  I am not privy to that nor should I be.  The offer was to be open “to close of business on 18 October 2012”.  The identical purported “sanction” in respect of costs appears at the end.

29.  The next letter, that of 20 October 2012, is of the same type – a comprehensive proposal for settlement but excluding HCA 188 of 2010 and requiring the mother (the plaintiff) to agree to give evidence for the plaintiff (i.e. Philip’s Group) in that action.  How that could ever be a genuine offer, encompassing that as a required undertaking, is beyond my comprehension at least.  The offer was open until 10:00 am on 22 October – the exact time the court was due to sit after the weekend.  The same purported “sanction” in respect of costs appeared at the end.

30.  The first letter of 22 October sought to put forward an alternative offer.  By now, of course, the previous “offers” had lapsed and now been replaced by this new one. It was expressed to be open until close of business on 22 October 2012.  The hearing recommenced on that morning.  Again the purported sanction was repeated.

31.  Finally, in the second letter of 22 October is conveyed another alternative “offer”.  This replaces all previous offers and is expressed to be open until 24 October 2012 at 10:00 am.  It contained the same provision in relation to the costs “sanction” which had appeared in every previous letter.  On that day 22 October 2012, the trial resumed before me. 

32.  The only effective letter for me to consider is therefore that second letter (and possibly the first) of 22 October 2012 because they supersede the earlier letters, the “offer” or “proposal” in which had lapsed.  But even if I had to consider those earlier letters on an individual basis (and in effect I have already done so) they would fail, as does the last, to meet Mr Sussex’s argument, for the following reasons :

(1)             They are not open “offers” which meet the criterion of Order 62 rule 5(1)(d). In any event they were predicated on the basis of Philip’s Group succeeding. It did not.  Nonetheless, I have considered all those matters in exercising my discretion.  Having said that, all the circumstances and considerations taken together, leave me in no doubt as to how I should treat the approaches of the Philip’s Group of defendants.

(2)             There was no specific self-contained consideration of the action 523 of 2008 being tried before me and for which I had suspended the trial to permit negotiations, and certainly no express offer limited to the issues of that trial.

(3)             For the purposes of trying to identify how the “offer” could be seen to relate to this action, it would have been necessary to consider the issues of all the actions and separate them.  That was not a burden to be imposed upon the court.  It is probably impossible to do so in any event.

33.  In setting out the above, I am in no way condemning any effort to achieve a comprehensive settlement of all the disputes in one final and irrevocable agreement.  I make it clear that common sense dictates such a course.  I hope, though it may only be a pious hope, that this can yet be achieved.  Some sensible thought should be given to an agreed valuation of all the assets derived from the father’s work and wealth subject to excluding his out-and-out lifetime gifts of property (not shares) which are unarguably in the ownership of individuals.  To achieve such a settlement I would encourage the abandonment of a cultural notion or tradition (if it be such) that the eldest son should receive a disproportionate benefit by reason of his being the eldest son and his having received a favoured advantage over his siblings during his father’s life time.  I suspect that his concern to maintain his excessively favoured position has been a sticking-point in negotiations to achieve a sensible solution.  Even he must realize that, if my suspicion is correct, the two halves of this family will remain at war forever if a fair resolution is not achieved – fair means fair and just for all.

34.  But quite apart from the material or technical deficiencies in the forms of the offers, I need to set out a fundamental reason why the correspondence which I have had to consider, could not and should not succeed in setting up a kind of sanction or support other threats designed to put the Mother’s Group at risk on costs.

35.  In effect instead of there being a hiatus in the trial in which meaningful, ‘bona fides’ efforts were being made to achieve such a sensible and commendable settlement, the court was left in a state of suspense whilst lawyers for Philip’s Group tried to establish a protracted tactical exercise by correspondence from which they might at some later stage derive a strategic advantage.  I have already referred to what Philip’s Counsel said in blaming the plaintiff for the failure to achieve a settlement.  With the benefit of hindsight that now seems to be indicative of the defendants’ lawyers seeking to create a platform from which they might obtain some costs advantage or prejudicial advantage in the course of the trial.  I condemn that approach.   

36.  This sort of activity, whose proper place is pre‑trial with to‑ing and fro-ing at meetings or on paper, is not to be permitted when a judge is asked to allow the parties time to see if a settlement can be achieved during the course of a trial.  Such a concession is a misuse of an indulgence if it is used to try and buy time for tactical advantage and it must not be allowed to happen.  It may mean that judges will be reluctant to allow counsel and solicitors time for so-called discussions and negotiations with a view to settlement if there is a risk of one or more parties seeking to revert to pre-trial tactics in order to give their clients some advantage.  Judges might have to spell out that time so granted during the course of a trial will not be misused in such a way.   Although counsel’s arguments for Philip’s Group fail root and branch on the earlier grounds I have set-out, they fail ‘ab initio’ on this latter ground.   

37.  Finally, I turn to the argument advanced that the plaintiff succeeded only on one aspect of her claim, namely in relation to the attempted disposition of the residue of the father’s shareholding in CAGL.

38.  It is true that the plaintiff failed to satisfy me on the balance of probabilities that there had been a forgery of the “official” allocation of shares in CAGL – the second resolution of 3 March 1997 in which the original “proposed” or “resolved” allocation of shares to the mother had been dramatically reduced. 

39.  I do not propose to rehearse the findings in my judgment on this aspect which are inextricably linked in my view with my findings in respect of the failed documentation which purported to divest the father of his residual shareholding.  I made it clear that I suspected with good cause, and reasons given, that there had been some chicanery or “jiggery – pokery” in relation to the documents dated 3 March 1997, in the hands Philip, Stephanie and Tony Ng, but I could not be satisfied that there had been forgery.  But the picture reflected by the significant change in the distribution of the shares – and the existence of two conflicting questioned allocation documents – was wholly inconsistent with the late father’s hitherto declared concern for his wife’s material position.  Even so there was good evidence that there was a forger ‘at large’ if not within the family then at the service of a member of the family.

40.  My judgment is to be read as a whole and not be compartmentised simply because I dealt with groups of documents discretely.  I am satisfied that the judgment reflected what it was intended to do, namely, that the mother had in principle and in significant respects, made out her case.  It would be wholly inappropriate to try and apportion costs simply because she had not been able to prove forgery in respect of some part of an overall series of transactions which remain suspect.  Accordingly, I reject the defendant’s contentions on this ground.

The Final Order for Costs

41.  The plaintiff shall have her costs of this action to be borne by the defendants who opposed her, namely Philip, Stephanie, Tony and Olympia.  I have some sympathy for the last named who was brought in under Philip’s umbrella and who, I sense, was influenced by her brother.  My consideration of her evidence indicates her negligible value as a witness.  Nonetheless she was called to give evidence against her mother’s case.  It is clear that my original order, as I feared at the outset despite my hope that a certain event might supervene, would have been unjust to the plaintiff, to her children who supported her case, and even to Jeremy who did not give evidence but appeared in person.   

Eleanor, Angela and Andrew Ng

42.  Though defendants in the action they gave important evidence for the plaintiff, crucially so since the plaintiff did not herself give evidence. Her cause was also their cause.  They were also cross-examined, sometimes at great length on a wide-ranging basis, on behalf of Philip’s Group. Accordingly, their expenses of coming to Hong Kong and of being here for the essential days of the trial and any preliminary proceedings are also to be paid by the 1^st, 4^th, 5^th and 7^th defendants as part of the plaintiff’s costs, but not on the basis of separate costs orders.

Jeremy Ng

43.  As a defendant, he had to be present and represented himself.  He was not called by either party and did not wish to give evidence in his own cause. He had an undoubted interest in the proceedings because although the action of primary concern to him, HCA 188 of 2010, was not being tried by me, it was, it appears, always in the background and certainly his interest featured in the four days or so of discussions during the course of the trial.  I have concluded, therefore, that he is in no different a category than that of the other defendants who were members of Mother’s group and therefore the costs of his being in Hong Kong for the trial and any preliminary proceedings must also be paid by Philip’s Group – the 1^st, 4^th, 5^th and 7^th defendants.  

44.  There is no need for me to consider the position of the 9^th defendant.

45.  The order is that the costs of the plaintiff to include the costs of the 2^nd, 3^rd and 8^th defendants as her essential witnesses, and the costs of the 6^th defendant as an essential potential witness and necessary party to the action (but limited to this costs of being in Hong Kong for the trial and any preliminary proceedings) be paid by the 1^st, 4^th, 5^th and 7^th defendants, with a certificate for 2 counsel.

46.  All the costs are to be taxed if not agreed.