CHEUNG MAN KWONG THOMAS v. MOK CHUN BOR

 DCCJ 2133/2007

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 2133 OF 2007

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JUDGMENT ON COSTS

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1.  On 11 August 2009, I handed down Judgment in these proceedings, ordering the Defendant, Mr. Mok, to pay to the Plaintiff Mr. Cheung the sum of $514,406, with interest, and granting other orders sought in the Statement of Claim. Directions were, by consent, given on 25 August 2009 for written submissions to be filed by the parties on the question of costs. The following is my decision on the costs of the action.

2.  In view of the findings made in my Judgment, there can be no doubt that as the losing party, Mr. Mok has to pay all the costs of the action. The sole remaining question for determination is whether Mr. Mok is entitled to the costs to be paid from the estate of the deceased Madam Lin, of which he is the administrator.

3.  Under Order 62 rule 6 (2) of the Rules of the District Court, where a person is a party to any proceedings in the capacity of personal representative, he shall, unless the Court otherwise orders, be entitled to the costs of those proceedings out of the fund held by the personal representative; and the Court may otherwise order only on the ground that the personal representative has acted unreasonably, or has in substance acted for his own benefit rather than for the benefit of the fund. I can find no evidence that Mr. Mok has in substance acted for his own benefit, as opposed to acting for the benefit of the estate. The question is whether he has, in all the circumstances of this case, acted unreasonably in the defence of these proceedings.

4.  Mr. Cheung further relies on s. 53 (1) of the District Court Ordinance, which provides that the costs of and incidental to all proceedings in the Court, including the administration of estates and trusts, are in the discretion of the Court, and the Court has full power to determine by whom and to what extent the costs are to be paid. I accept that on the question of costs, the Court has full power and discretion, the general rule being that the costs should follow the event, unless there are special circumstances existing in the case to order otherwise.

5.  It is clear from my Judgment that I find little or no merit in the defences put forward by Mr. Mok or on his behalf in the Defence filed. Nevertheless, I accept that as administrator, Mr. Mok is entitled to put Mr. Cheung to proof of his claim of the oral trust created by agreement between Madam Lin and Mr. Cheung, and of Mr. Cheung's entitlement to the entire sum of $514,406 claimed. However, and as I have emphasized in paragraph 77 of my Judgment, the burden on Mr. Cheung is simply to prove the trust arrangement and his interests to the entire Tax Refund of $514,406 on the usual standard of a balance of probabilities. I remain of the view that when Mr. Cheung produced the Financial Statements, the tax returns signed by Madam Lin, the Authorization, the Lin Undertaking and the Mok Undertaking, in the absence of any evidence on Mr. Mok's part to suggest that Madam Lin had operated any business in the name of Ocean which is unrelated to Mr. Cheung's consultancy services to Pilot HK and hence to show that Madam Lin and the estate had any interest in Ocean's profits and the tax paid, Mr. Mok had no basis to further retain the refund received from the IRD.

6.  On the evidence adduced at trial, the Financial Statements were produced by way of discovery in these proceedings in November 2007, whereas the documents signed in 2000 were produced to Mr. Mok at the latest around the time of receipt of the IRD 26/9/06 Letter before the commencement of proceedings in May 2007. These are the relevant and material documents.

7.  Although Mr. Dominic Chan only gave evidence on his correspondence with the IRD by way of oral testimony at trial, those acting for Mr. Cheung have pointed out that it was only at the commencement of trial that distinction was sought to be made by Mr. Mok in relation to the different references appearing in the correspondence, and which were in due course explained by Mr. Chan in his evidence. If the matter of the file references was considered by Mr. Mok to be material, he and his solicitors could have made inquiries prior to the commencement of proceedings, and the explanation given by Mr. Chan in his oral testimony might have been proffered without the necessity of legal proceedings, or lengthy cross-examination at trial. It cannot be seen from the correspondence exchanged between the parties' solicitors prior to trial that this issue had been raised at all for clarification, either before commencement of proceedings, or before trial.

8.  In any event, Mr. Mok 's conduct of the defence in these proceedings goes beyond putting Mr. Cheung to proof of his claims to the sum of $514,406. I refer to paragraph 78 of my Judgment. Even prior to commencement of these proceedings, Mr. Mok had, in the letters issued by his solicitors, challenged the effect and authenticity of the Lin Undertaking. In the light of Mr. Mok 's testimony in Court, these earlier, inconsistent claims sound hollow.  If Mr. Mok had simply required Mr. Cheung to prove, by oral testimony of himself and of Mr. Chan in Court, the trust arrangement on which Mr. Cheung relies and the difference between the sum of $514,406 and $150,000, the preparation of the case could have been more simplified and the trial of the action, by my assessment, could have been shortened. As a result of the way in which the defence was actually conducted, Mr. Cheung had to spend one full day in court to give evidence, Mr. Chan spent another day in court, whereas Mr. Mok also spent in total a good part of a day in court.

9.  In all the circumstances, I consider that Mr. Mok had acted unreasonably in the manner of his defending the claims made by Mr. Cheung in these proceedings, and had by so doing unnecessarily increased the legal costs incurred by Mr. Cheung and the estate. I consider it appropriate to order that Mr. Mok be only entitled to seek 50% of the costs of the action from the estate, and the balance be borne by himself personally.

10.  In relation to the basis of taxation, Mr. Cheung seeks his costs to be taxed on an indemnity basis. From the judgment of the Court of Final Appeal in Town Planning Board v. Society for Protection of the Harbour Ltd. (2004) 7 HCCFAR 114, it is clear that indemnity costs are not confined to cases brought with an ulterior motive or an improper purpose, or where there is deception or underhand conduct on the part of the losing party. In the exercise of its unfettered discretion on costs, the Court is entitled to take into account any matter relating to the litigation, the parties' conduct in the litigation, and the circumstances leading to the litigation.

11.  Even accepting Mr. Mok's entitlement as administrator to require Mr. Cheung to prove his case on a balance of probabilities, and bearing in mind that the Financial Statements were only produced in November 2007, I consider that Mr. Mok's conduct of the defence, as illustrated in paragraph 8 above and as more exemplified in my Judgment of 11 August 2009, was in many respects unreasonable. Such conduct has unnecessarily increased Mr. Cheung's costs, and undermines the objectives of the Rules of the District Court under the Civil Justice Reform, to increase the cost-effectiveness of any practice and procedure to be followed in relation to proceedings before the Court, to ensure that a case is dealt with as expeditiously as is reasonably practicable, to promote a sense of reasonable proportion and procedural economy in the conduct of proceedings, and to ensure that the resources of the Court are distributed fairly. In these circumstances, it is appropriate to order that 50% of Mr. Cheung's costs of the trial should be paid by Mr. Mok on an indemnity basis.

12.  I accordingly order that Mr. Cheung's costs of the action are to be paid by Mr. Mok, with certificate for Counsel, and that Mr. Mok is only entitled to claim 50% of the costs out of the estate of Madam Lin. Mr. Cheung's costs of the action are to be taxed if not agreed on a party and party basis, save that 50% of Mr. Cheung's costs of the trial are to be taxed if not agreed on an indemnity basis.