QI MIN LIANG AND OTHERS v. NANYANG COMMERCIAL BANK TRUSTEE LTD

HCMP2508/2003

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 2508 OF 2003

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JUDGMENT ON COSTS

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1.  The background for this case has already been set out in the Reasons for Judgment handed down on 6 January 2010 and I shall not repeat them here. On 19 November I have ordered the defendant to pay into court all the balance sum in respect of the estate of Zhang Wen Jing, deceased (“ZWJ”). Previously I have ordered that the two disputed sums under the estate of ZWJ to be decided in separate proceedings. Accordingly these proceedings would probably come to an end since the defendant, upon the aforesaid payment into court, ceased to be the administrator of the said estate.

2.  Both sides, by their written submissions, asked for costs to be paid by the other side. 

3.  The plaintiffs divided the proceedings into 4 stages.  The first one is from the commencement of these proceedings (i.e. 12 June 2003 to 15 July 2003).  The defendant however emphasised on what had happened before the commencement.  This pre-action period, to my mind, is very important as will appear hereinbelow. 

4.  The plaintiffs comprised the husband of ZWJ and six children.  They made the following serious allegations against the defendant, namely :

(1)     breach of its fiduciary duty towards the beneficiaries;

(2)     in severe conflict of interest, the defendant utilizes its position as administrator improperly to delay or hinder the due administration of the estate with a view to coerce the beneficiaries to succumb to the admission of claims brought by certain creditors including itself and the claimants represented by the defendant;

(3)     it prolonged the due administration of the estate and exposed the beneficiaries to the risk of an usual order of costs to be borne by the estate together with the probable erosion of the estate by additional administration fees levied periodically by itself as administrator. 

5.  The defendant however painted a totally different picture.  Basically it submitted that the plaintiffs by their solicitors had unreasonably and unnecessarily commenced these proceedings by the originating summons.  They had turned a blind-eye to pre-action communication and resolution with the defendant before and after the commencement of the proceedings.  These unmeritorious claims and allegations made against the defendant were intended to advance the plaintiffs’ own benefit, rather than for the benefit of the estate and its due administration.

6.  The following is the chronology of the event leading up to the commencement of these proceedings, namely :

(1)     26 June 2002 : The defendant granted the letters of administration to estate of Choy Jing Ming.  ZWJ is one of the sisters of Choy who died suddenly leaving the plaintiffs as the beneficiaries to her estate. 

(2)     30 July 2002 : The defendant informed the plaintiffs and in particular the 1^st plaintiff Qi Min Liang (“QML”) that it was applying to the Estate Duty Office for Estate Duty clearance papers. 

(3)     13 November 2002 : D informed QML that Estate Duty clearance papers were obtained and it was applying for a grant of the letters of administration from the High Court. 

(4)     11 December 2002 : D reported to QML about the progress of probate application. 

(5)     24 January 2003 : D informed QML that it was in the course of obtaining a grant of letters of administration.  

(6)     7 February 2003 : D informed QML on issuance of grant and an application for an order under r. 60A of NCPR. 

(7)     7 March 2003 : D informed QML that a notice under r. 60A of NCPR is published in Hong Kong Government Gazette and two local newspapers. 

7.  In April and May the defendant lost contact with QML.  In fact on 5 March 2003, the defendant was informed that QML was of old age and was residing at an elderly home.  However the defendant was informed by the son of QML, Qi Lian Hua (“QLH”), the 3^rd plaintiff, that :

(1)     QLH had never visited his father, and he did not know the address or telephone number of the elderly home, nor did he know how to contact QML;

(2)     he further claimed that his brother Qi Lian Guo (“QLG”) the 4^th plaintiff herein knew the location of the elderly home.  However QLH repeatedly failed and/or declined to give the address and phone number to the defendant despite the numerous follow-up and requests by the defendant;

(3)     QLH asked the defendant to stop looking for his father QML and alleged that QLH himself should be contacted for all matters relating to the estate of the deceased;

(4)     QLH later claimed to know how to go to the elderly home but refused to bring the representative of the defendant, Ms Shum, to see QML.  The two brothers QLH and QLG even refused to meet Ms Shum in Shanghai city for a face-to-face discussion of the matter. 

8.  On 8 May 2003, the Bank of China Shanghai informed the defendant that the brother of the deceased, Zhang Wen Qi, provided two Chinese documents purported to be a Revocation of Appointment and Authority by QLH to the defendant dated 2 May 2003 and an undated Power of Attorney from QLH to one Sun Ken Kenneth.  However :

(1)     Zhang Wen Qi refused and/or unable to produce the originals of the two Chinese documents for verification and confirmation;

(2)     the signature of QML appeared beneath the signature of QLH and the date of the document;

(3)     on 9 May 2003, the defendant wrote to QLH for clarification as to whether it was the intention of QML to revoke the appointment and authority given to the defendant, and if so, a Notarial Certification of Revocation should be executed to signify his intention. 

(4)     However the defendant received no further reply from any one of the Qi family.  

9.  Instead, on 29 May 2003 Messrs Paul Cheng & Co. (“PC&C”) wrote to the defendant and claimed that they acted for QML and all his family members.  They requested the defendant to provide the exact amount of the estate of the Deceased and the calculation sheet to be supported by documents. 

10.  On 5 June 2003, i.e. just 7 days afterward, PC&C wrote to the defendant threatening that unless the defendant furnish the said documents within 5 days, the plaintiffs shall commence legal proceedings under O. 85(2) of RHC to direct the defendant to furnish and to verify accounts and to make payment into court. 

11.  On 10 June 2003 Messrs Fong & Ng Solicitors (“F&N”) acting for the defendant, wrote to PC&C for confirmation that QML had revoked all his previous appointment and authority granted to the defendant. 

12.  The next day on 11 June 2003 PC&C wrote to F&N again for confirmation as to whom F&N were representing.  However PC&C did not confirm that QML had revoked his previous appointment and authority granted to the defendant.  Instead on the same day without allowing time for F&N to reply, PC&C wrote again to the defendant alleging that it was in the course of inviting the court for assistance and would serve the court documents on the defendant soon.  It even went on to state that :

“in order to minimise the inconvenience caused to beneficiaries and to save unnecessary costs and expenses, no doubt you as Administrator will

(i) not object to release to beneficiaries forthwith of those monies not disputed;

(ii) agree to the disputed monies to be determined by the Court with the assistance of you as Administrator and our Client as beneficiaries; and

(iii)  make payment into Court of those disputed monies, say within 10 days.”

13.  On the next day 12 June 2003, i.e. just one day later, PC&C acting completely contrary to what it stated on its letter the day before to save unnecessary costs and expenses, filed the present originating summons on behalf of the plaintiffs. 

14.  It begs the question of why PC&C would be so eager to commence proceedings and pre-empt any response and proposal made by the other side without even answering the defendant’s reasonable concern and enquiry as to the instructions and authority of QML. 

15.  Thereafter on 18 June 2003 PC&C requested the defendant to indicate if the latter “would consent to the said application being made without attendance in court”.  However it also indicated that they were “now arranging a date of hearing to be fixed and no doubt in due course a copy will be served on you”. 

16.  On the same day, in order to withhold any unnecessary action, the defendant wrote to PC&C informing them that the defendant had referred PC&C’s letters and court documents to its legal advisor who would give a reply in due course.  

17.  On 20 June 2003 PC&C wrote to the defendant again alleging that the defendant had acted unreasonably in incurring costs to engage the service of legal advisor to make a reply.  This allegation is inconceivable.

18.  On 26 June 2003, F&N acting for the defendant wrote to PC&C and pointed out that “the above action is entirely unnecessary and inappropriate, which will inevitably result in waste of time and legal fees.”  F&N proposed that in order to settle the matter speedily and amicably, the defendant shall furnish to PC&C the draft statement of estate account and the relevant Deed of Release and Indemnity, provided that :

(1)     the defendant is able to confirm with QML directly if he intends to have the matter dealt with in the way as suggested by PC&C; and

(2)     the plaintiff’s discontinue the action and vacate the hearing on 15 July 2003 forthwith.

19.  By reason of the aforesaid chronology of defence, the defendant had reasonable ground to doubt the alleged revocation of the appointment and authority granted to the defendant and his new instruction given to PC&C by QML.  The whereabout of QML was not known and it was not known if QLH and/or QLG had the authority to represent their elderly father and in turn the whole family.  There was also the issue of whether the father was aware of the actions of the two sons.  These important fundamental questions were not answered by PC&C.  Instead they had completely ignored the questions of authority raised by the defendant.  If PC&C did not have the proper authority to act for QML, the requests made by it would not be proper and valid.  It is the duty of the defendant as administrator to make sure that for information relating to the estate of the deceased to be disclosed, the administrator was corresponding with a firm of solicitors with proper authority to act on behalf of QML and all six other children. 

20.  It was only after the plaintiffs filed the affirmation of Cheng Ki Yeung, solicitor, on 7 July 2003, PC&C wrote to F&N attaching a letter allegedly handwritten by QML to confirm his authorization of PC&C to handle matters in relation to the estate of the deceased. 

21.  It was only at this very late stage the plaintiffs addressed to concern of the defendant, contrary to the objective of costs saving, as allegedly intended by the plaintiffs’ solicitors. 

22.  The defendant has never declined to the plaintiffs’ request for accounts and supporting documents.  In fact, even at paragraph (5) in the 2^nd affirmation of Cheng Ki Yeung, it referred to the defendant’s readiness to tender accounts and make distribution to the plaintiffs.

23.  The defendant had made this attitude very clear from the outset.  It is difficult for the plaintiffs to justify the commencement of these proceedings, especially given that the defendant was still at an early stage of administering the estate. 

24.  I must say that I totally agree with the submissions of the defendant that these proceedings are wholly unjustified.  Particularly, it should not be commenced without the plaintiffs’ solicitors clarifying its authority for QML and the revocation by QML of the defendant authority. 

25.  For the aforesaid reason I consider that the plaintiffs should pay the costs of the defendant. 

Further consideration

26.  The second more serious question to ask is why would PC&C so eagerly commence these proceedings?  PC&C must know the plaintiffs would not gain any benefit from these proceedings when the defendant, being the administrator of the estate of the deceased, was ready and willing to furnish the account of the estate.  The circumstances point strongly to the inference that PC&C commenced these proceedings for their own financial benefits. 

27.  Should PC&C bear costs personally to these proceedings?  The CFA decision in the case of Ma So So Josephine v Chin Yuk Lun and another (2004) 7 HKCFAR 300 directed that there should be a two-stage proceedings before making an order to show cause as to why a solicitor should not bear costs personally in any proceedings.  At the first stage solicitors should be given a chance to make representation to show cause as to why such an order should not be made. 

28.  Accordingly, plaintiffs’ solicitors, PC&C would be given 21 days from the date hereof to file and serve an affidavit on its clients, being the plaintiffs, explaining why an order to pay wasted costs should not be made against them.  No doubt the plaintiffs have to be separately represented and PC&C would have to explain it to their clients. The proceedings thereafter shall be conducted between the plaintiffs and his previous solicitors only. 

Order

29.  The plaintiffs shall personally bear the costs of the defendant in these proceedings. 

30.  Solicitors for the plaintiffs shall file an affidavit to show cause as to why a wasted costs order should not be made against them personally and serve the same on the plaintiffs within 21 days hereof.  The plaintiffs shall have 21 days to file and serve an affirmation in reply thereto.