KAN SHIU CHEONG FREDERICK v. KAN SIU YING ERNEST AND OTHERS

HCMP 490/2006

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 490 OF 2006

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D E C I S I O N

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1. This is an application by the 1^st, 2^nd, 4^th, 7^th and 8^th defendants, by summons dated 3 June 2014, for an apportionment of their costs such that those costs can be taxed on trustee basis (for the 1^st defendant) and on party and party basis (for the 2^nd, 4^th, 7^th and 8^th defendants) as was ordered by Cheung J (as he then was) on 31 May 2010.

Background

2. This matter relates to the estate of the late Kan Man Wai, deceased (“the Deceased”) who died on 1 June 2005.

3. The Deceased left a will in which he appointed the plaintiff and the 1^st defendant as his executors and trustees of his will.

4. After the death of the Deceased, the plaintiff, as one of the executors, started to query as to the whereabouts of 136,000 HSBC shares as being part of the estate of the Deceased.

5. There is a Transfer Form dated 20 March 2003 (signed by the 1^st defendant) evidencing the transfer of the 136,000 HSBC shares to the 2^nd defendant who is the natural mother of the 1^st defendant and the wife of the Deceased. (The plaintiff being an adopted son of the Deceased, the 2^nd defendant was therefore not the natural mother of the plaintiff).

6. By his solicitor’s letter dated 17 December 2005, the 1^st defendant informed the plaintiff that the transfer of the said 136,000 HSBC shares was a gift by the Deceased to the 2^nd defendant.

7. Not content with that, the plaintiff wanted to make further inquiry as to the circumstances of that transfer of the 136,000 HSBC shares.

8. That resulted in a deadlock and disagreement between the plaintiff and the 1^st defendant as executors of the estate of the Deceased.

9. In March 2006, the plaintiff, as one of the executors of the estate of the Deceased commenced the present proceedings by way of a Beddoe Application asking for the following directions from the court:

(a) That the plaintiff be at liberty to claim against the 2^nd defendant on behalf of the estate of the Deceased for a declaration that the 136,000 HSBC shares belongs to the estate of the Deceased;

(b) A pre-emptive costs order; and

(c) That the 1^st defendant be prevented/restrained from interfering with the plaintiff issuing and continuing proceedings against the 2^nd defendant.

10. Apart from the two executors, all the other beneficiaries to the estate of the Deceased were also named as defendants. They include the 3^rd 5^th and 6^th defendants being respectively the wife, son and daughter of the plaintiff and the 4^th, 7^th and 8^th defendants being respectively the wife and two daughters of the 1^st defendant. Named as 9^th defendant is the concubine of the Deceased who is also a beneficiary under the will of the Deceased.

11. In so far as the Beddoe application was concerned, the parties were split into two camps. The plaintiff’s family members sided with the plaintiff and supported the Beddoe application. On the other hand, the 1^st defendant’s family together with the 2^nd defendant opposed the Beddoe application.

12. The Beddoe application was heard on 31 May 2010 by Cheung J who refused the pre-emptive costs order but gave the plaintiff liberty to pursue his claim against the 2^nd defendant with his own funds unless the plaintiff were to succeed in that intended action against the 2^nd defendant. If the plaintiff failed in that intended action against the 2^nd defendant for the recovery of the 136,000 HSBC shares, the costs of the Originating Summons herein was ordered be borne by the plaintiff personally without recourse to the estate of the Deceased including all reserved costs as follows:-

(a)     The costs of the 1^st defendant as an executor to be taxed on a Trustee basis;

(b)    The costs of the 2^nd, 4^th, 7^th and 8^th defendants to be taxed on a Party and Party basis.

13. The plaintiff thereafter commenced the intended action against the present 2^nd defendant under HCA 1147 of 2010 (as the 1^st defendant therein) and also named the present 1^st defendant (as the 2^nd defendant therein).

14. By order of the court dated 23 April 2013 the plaintiff’s claim against the present 1^st defendant in HCA 1147 of 2010 was struck out.

15. By a further order of the court dated 25 October 2013, the plaintiff’s claim against the present 2^nd defendant in HCA 1147 of 2010 was dismissed by consent.

16. Accordingly, the claims brought by the plaintiff in HCA 1147 of 2013, the subject matter of the Beddoe application herein, wholly failed.

17. By a Consent Summons filed in the present proceedings on 25 October 2013, a cost order of the court was made dated 1 November 2013 (“the Cost Order by Consent”) as follows:

(a) The plaintiff do pay costs of this proceeding (including all costs reserved) of the 1st defendant to be taxed on trustee basis if not agreed; and

(b) The plaintiff do pay costs of this proceeding (including all costs reserved) of the 2^nd, 4^th, 7^th and 8^th defendants to be taxed on party and party basis if not agreed.

18. The solicitors for the 1^st, 2^nd 4^th 7^th and 8^th defendants have now prepared their Bill of Costs for the purpose of taxation. Because of the two different bases of taxation ordered in the Cost Order by Consent, that Bill of Costs is separated into 4 different parts as follows:

(a)     Part 1 – costs which relate to all of the 1^st, 2^nd, 4^th 7^th and 8^th defendants jointly and which totals $719, 344.90;

(b)    Part 2 – costs which relate to the 1^st defendant only amounting to $739,151.00;

(c)     Part 3 – costs which relate to only the 2^nd, 4^th, 7^th and 8^th defendants amounting to $51,707.00; and

(d)    Part 4 – costs amounting to $6,700 which was provided for by the estate of the Deceased.

19. The total amount of the Bill of Costs comes to $1,516,902.90

The present Application

20. The present application relates only to Part 1 of the Bill of Costs.

21. Part 2 will simply go to taxation on a Trustee basis as ordered and Part 3 will be taxed on party to party basis as ordered.

22. Part 4 has no bearing on the present application since those costs will be borne by the estate of the Deceased.

23. In so far as Part 1 is concerned, the defendant’s solicitors submitted that those costs should be apportioned 95% to the 1^st defendant and the remaining 5% to the other 4 defendants.

24. His reasons for so suggesting was that the 1^st defendant was the main defendant in the Beddoe application opposing the same and was instrumental in giving instructions to the solicitors acting for those defendants in opposing the Beddoe application.

25. A further reason put forward by the defendants’ solicitor was that all the other beneficiaries named in the Beddoe application had to be named as defendants by reason of the rules of procedure pertaining to such an application.

26. On the other hand, the plaintiff opposed the suggestion by the defendants that Part 1 of the Bill of Costs should be apportioned 95% to the 1^st defendant and 5% to the other 4 defendants. Instead counsel appearing for the plaintiff suggested that any apportionment to Part 1 of the Bill of Costs ought to be made in equal shares as between all the 5 defendants such that 20% of the Part 1 costs would be apportioned to each of the 1^st, 2^nd 4^th, 7^th and 8^th defendant equally.

27. Counsel for the plaintiff disagreed that the 1^st defendant should be looked upon as the main defendant in opposing the Beddoe application, but that each of those 5 defendants had opposed that application in their own right as they were entitled to. It was further submitted that even if the 1^st defendant was instrumental in giving instructions to the solicitors and being the main person liasing with the solicitors in opposing the application, he was only acting as the agent of the other defendants in so doing.

28. Counsel for the plaintiff has also taken me thorough the various items listed in Part 1 of the Bill of Costs to show the kind of work done was done for all the 5 defendants jointly such as the perusal of the other side’s documents and the preparation and attendance of hearings.

Decision

29. Both parties in making this application (the defendants) and in opposing this application (the plaintiff) are unable to refer me to any precedent or authority which could be of assistance in apportionment of the cost which would pertain to the 1^st defendant (as opposed to the other 4 defendants) in Part 1 of the Bill of Costs prepared by the solicitors.

30. Mr. Lee who appeared for the defendants conceded that as a starting point, costs which relates to a number of defendants but cannot be indivisible among them, would normally be apportioned between them equally. However, he goes on to submit that in the present case, for the reasons advanced by him, the court should exercise its discretion to apportion a larger part of the Part 1 costs to the 1^st defendant..

31. I cannot accept the defendants’ contention that the 1^st defendant is the ‘main defendant’ in opposing the Beddoe application. Whilst the 1^st defendant may have been the spearhead, with the rest of his family members rallying behind him, each and every one named as a defendant by the plaintiff is entitled in his or her own right to either support or oppose the Beddoe application.

32. I accept the contention of counsel for the plaintiff that while the 1^st defendant may have been instrumental in liaising with and giving instructions to the solicitors in opposing the Beddoe application, but in so doing, he was acting as an agent for those other of the defendants who were also opposing that application. Indeed, each of them could have individually instructed solicitors of their own choice to oppose that application. The fact that they elected to instruct the same solicitor as the 1^st defendant to oppose the Beddoe application does not make the 1^st defendant the main defendant.

33. However, a more important factor in the resolution of this dispute, would be the fact that the defendants’ solicitors have seen fit to split the Bill of Costs into 4 parts as already stated above.

34. It is common ground between the parties that Part 4 of the Bill of Costs has no relevance to this issue in dispute since those costs had been provided for by the estate of the Deceased and therefore I can safely exclude consideration of Part 4.

35. As for the remaining three Parts, Part 2 relates to those costs which relates only to the 1^st defendant. Thus Part 2 will invariably be taxed on trustee basis as per the Consent Cost Order. There is no dispute as to that.

36. Part 3 which relates to only the costs of the other 4 defendants (other than the 1^st defendant) will be taxed on party and party basis. Again there is no dispute.

37. What remains is the disputed Part 1 which relates to costs of all 5 defendants.

38. It is therefore clear to me that those costs which is divisible and which can properly be said to have been incurred for the 1^st defendant in his capacity as executor and trustee have already been separated and put under Part 2.

39. Likewise, those costs which is divisible and which can properly be said to be incurred by the other 4 defendants other than the 1^st defendant, have also been separated and put under Part 3.

40. Therefore the Part 1 costs must be those costs which cannot be divisible as among the 5 defendants. This can be seen to be so when one looks at the items of costs particularized under Part 1. The items under Part 1 relate to matters such as considering, reviewing and also inspecting the documents from the other side, drafting affidavit of witness (Leung Sit Kuen), attending the hearing of summonses and directions hearings, as well as hearing  before a judge, applying to set case down and attending court to fix date for hearing, attending mediations and communication with the mediator, the preparation for hearing including the hearing bundle and brief to counsel as well as the hearing of the Originating Summons and preparation of the Order thereafter.

41. Looking at those items particularized under Part 1 of the Bill of Costs, it is clear that those costs relate to all the 5 defendants jointly and are indivisible.

42. Moreover, the fact that the 1^st defendant is himself an executor and trustee of the estate of the Deceased is, per se, not a sufficient reason that his costs under Part 1 should be apportioned differently from that of the other 4 defendants. After all, that matter has already been taken into consideration in the Consent Cost Order in that the 1^st defendant’s costs would be taxed on a different basis than the other defendants.

43. For the above reasons, I can see no good reason to accede to the suggestion of the defendants and to apportion the costs under Part 1 to be 95% to the 1^st defendant and 5% to the other 4 defendants.

44. For the same reasons, I also reject the fallback position of the defendants to apportion some other percentage of costs but higher to the 1^st defendant than for the other 4 defendants in relation to Part 1.

45. In my view, it is only fair that Part 1 of the Bill of Costs be apportioned equally as between all the 5 defendants such that each of the 1^st, 2^nd, 4^th, 7^th and 8^th defendants will be apportioned 20% of the Part 1 costs as suggested by counsel for the plaintiff. I so order.

Costs

46. There will be a costs order nisi that the 1^st, 2^nd, 4^th, 7^th and 8^th defendants do pay to the plaintiff the costs of and occasioned by this application to be taxed if not agreed.