CHIU MAN FU AND OTHERS v. CHIU CHUNG KWAN YING

HCAP9/2005

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

PROBATE ACTION NO 9 OF 2005

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DECISION ON COSTS

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Introduction

1. By a judgment handed down on 31 January 2012, I dismissed the plaintiffs’ claim and entered judgment for the defendant propounding the 2003 Will in its solemn form.  I further made an order nisi that the plaintiffs shall pay the defendant the costs of the action, including all costs reserved, to be taxed if not agreed.  The plaintiffs now apply to vary the order nisi arguing that either costs of all the parties should be borne by the Deceased’s estate on a common fund basis or there should be no order as to costs.  The defendant applies for indemnity costs from 30 January 2012, that is the day before the judgment was handed down, on the ground that it was the latest date on which the plaintiffs could have accepted her sanctioned offer dated 15 March 2011 (“the Offer”).

2. Pursuant to my directions, the parties lodged written submissions which I have considered with care.  For present purposes, I do not propose to deal with every point taken by them.  Suffice it to say that I have already taken all the points into account in arriving at my conclusion.  I begin with the plaintiffs’ application.

The applicable principles

3. The law on costs in probate actions is well settled : see Ribeiro PJ explained in Nina Kung v Wang Din Shin (No 2) (2006) 9 HKCFAR 800, at paras 10 – 19.  For present purposes, it is sufficient to give a brief summary as follows.

4. The award of costs as between the parties in contested probate proceedings is in the court’s discretion.  The general rule is that when the opponent to a will fails, costs should follow the event unless the case falls within one of the two exceptions :

(1)  The litigation is caused by the conduct of the testator or the residual beneficiary, in which case the costs would come out of the estate; or

(2)  The circumstances lead reasonably to an investigation of the will’s validity, in which case there should be no order as to costs.

5. To invoke the exceptions, the unsuccessful opponent is entitled to rely on the facts and view them as they were presented to him.  But he must have also taken all proper steps to inform himself as to the facts of the case before undertaking the proceedings, failing which the general rule of costs following the event may well apply.

6. Even if the case prima facie falls within one of the two exceptions, if the opposition to the will goes beyond putting the proponent to strict proof of its validity and takes the form of hostile litigation, the general rule of costs following the event is likely to apply.

Are the exceptions engaged?

7. In arguing that the exceptions are engaged, Mr Sarony, SC for the plaintiffs placed heavy reliance on the facts as presented to the plaintiffs back in 2005 and additions/variations when the trial commenced.  Broadly they may be categorised as :

(1)  The sudden death of the Deceased;

(2)  The manner in which the defendant informed the plaintiffs of the Deceased’s death and the 2003 Will;

(3)  The death certificate that was first presented to the plaintiffs gave “dementia” as one of the causes of death, which was later amended by Dr Ng, who said that it was a mistake;

(4)  The Deceased’s long term use of drugs and medication;

(5)  There had been no neurological examination of his mind at the relevant time in 2003 and no proper mental state examination had been carried out by Dr Ng on 5 June 2003;

(6)  The irrationality of the 2003 Will; and

(7)  The Deceased’s personality and way of life which gave rise to confusion, rendering it proper and necessary that the court’s opinion should be taken on the validity of the 2003 Will.

I will first consider if they are capable of supporting the 1^st exception.

8. Points (1) and (3) do not concern the Deceased’s or the defendant’s conduct.  They have nothing to do with the validity of the 2003 Will at all.  They are irrelevant for the purpose of the 1^st exception.  Point (2) only concerns the defendant’s conduct.  But where the residual beneficiary’s conduct is said to have caused the litigation, that conduct must have a bearing on the making of the will or on its validity at its inception.  Here, the defendant’s conduct in question has no bearing on the making of the 2003 Will or its validity at all.  So the 1^st exception is not engaged.

9. The thrust of Mr Sarony’s submissions based on Points 4 to 7 is that those facts made it quite proper and necessary that the opinion of the court should have been taken on the validity of the 2003 Will.  With respect, I disagree.

10. As I have found, none of the plaintiffs was able to testify to any abnormality of the Deceased’s mind.  I do not think they could honestly say that they entertained a reasonable belief that the Deceased had any mental problem because of his long term use of drugs and medication.

11. Further, what is crucial is that all the independent factual witnesses (other than Mr Pak whose evidence I rejected) testified that the Deceased was mentally sound all along.  Their evidence, which is not challenged on cross-examination, has a significant bearing on the Deceased’s testamentary capacity.  That point is fairly recognised and accepted by the plaintiffs’ experts.  These factual witnesses are available from the outset and the plaintiffs could have and ought to have approached them in order to inform themselves of the relevant facts before they decided to launch these proceedings.  The same applies to the two treating doctors.  Their evidence sheds considerable light on the Deceased’s testamentary capacity.  The plaintiffs ought to have taken their evidence into account before deciding to litigate.  Under these circumstances, it does not lie in the plaintiffs’ mouth to claim that they reasonably believed that the Deceased had an unsound mind.

12. The evidence of the independent witnesses on how the Deceased had conducted his daily and business affairs also negates any suggestion that his personality or way of life, however peculiar it might have been, could have raised any reasonable doubt on the soundness of his mind.

13. The argument based on the irrationality of the 2003 Will must be rejected because, as I have already found, it was rational when viewed objectively with all the surrounding circumstances in mind.  The defendant was the natural beneficiary of the Deceased’s vast estate.  And the decision to disinherit all the 9 Children including the plaintiffs (while entrusting the other children born by Ms Chan and Ms Lam) was explicable by the Deceased’s personality trait and his prejudice held against them.

14. For the above reasons, I hold that the 1^st exception is not engaged.

15. Also for the same reasons above, I do not think the plaintiffs could have reasonably believed or held a bona fide belief that there were good grounds for impeaching the 2003 Will or the circumstances were such that they reasonably led to an investigation.  The 2^nd exception is not engaged.

Hostile litigation in any event

16. Even if I were wrong and the exceptions were engaged, the manner in which the plaintiffs had conducted the proceedings clearly goes beyond putting the defendant to strict proof of the validity of the 2003 Will. They did run a positive case that the Deceased lacked testamentary capacity.  In the course of advancing their case, the plaintiffs strenuously challenged the credibility of the defendant and her witnesses.  Some of the attacks and the related submissions are bothering on alleging fraud, although technically they had not pleaded fraud or undue influence.  Plainly, the plaintiffs had on the whole conducted the litigation in a most hostile fashion.  Having done so, they should bear the costs consequence. 

17. The plaintiffs’ application for variation of the costs order is refused.

Indemnity costs

18. I now turn to the defendant’s application for indemnity costs, which can be disposed of shortly.

19. On 4 March 2011, the defendant made an offer, marked without prejudice, to settle the present action, the maintenance proceedings (HCMP2042/2007) and the guardianship proceedings (HCMP1586/2006) by paying them a sum of HK$30 million and costs of all the three actions.  The offer lapsed on 7 March when the plaintiffs did not make any reply.

20. Then by letter dated 15 March 2011, the defendant made the Offer, stated to be a sanctioned offer, which was also marked without prejudice as to costs, in these terms :

“On an entirely without prejudice save as to costs basis, and to protect our client’s position on costs, our client is prepared to offer an ex gratia sum of HK$30 million to the Plaintiffs to be paid within 60 days of our client’s receipt of the grant of probate from the Probate Registry if the Plaintiffs consent now to the grant of probate of the 2003 Will in favour of our client.

Again, on a wholly without prejudice save as to costs basis, we are prepared, if they agree to accept our proposal, to pay the Plaintiffs’ costs up to date in HCAP 9/2005.

This sanctioned offer is open until 1 p.m. on 16 March 2011.

Pursuant to the provisions of Order 22, Rules of the High Court [Cap 4A], this sanctioned offer could only be accepted with leave of the Court.”

Again the plaintiffs did not respond.

21. The defendant relied on the Offer in asking for indemnity costs.  Her reliance on the Offer is however misplaced.

22. Order 22, rule 3 of the Rules of the High Court provides :

“ (1) An offer by a defendant to settle the whole or part of a claim or an issue arising from the claim does not have the consequences specified in this Order unless it is made by way of a sanctioned offer or a sanctioned payment or both.

(2) Where an offer by a defendant involves a payment of money to the plaintiff, the offer must be made by way of a sanctioned payment.

(3) A sanctioned payment may only be made after the proceedings have commenced.”

A plaintiff may include a counterclaiming defendant, as is the defendant here : see Order 22, rule 1(1).

23. If the Offer is to be treated as one being made by the defendant as a plaintiff in her capacity as a counterclaiming defendant, it fails to state whether it relates to the whole of her counterclaim or part of it as required under Order 22, rule 5(3)(b).  It also fails to provide that the plaintiffs as offerees may only accept it if the parties agree on the liability for costs as required by Order 22, rule 8(2)(b).  The failure to strictly comply with the mandatory requirements under the rules is fatal : see Montrio Limited & Another v Tse Ping Shun David, HCA757/2009, 17 February 2012, unreported, a decision of mine, at para 9.  The Offer does not qualify as a sanctioned offer.

24. If the Offer is to be treated as one being made by the defendant as a defendant, then it offends Order 22, rule 3(2) because she could only make a sanctioned payment in the prescribed form and manner as provided under Order 22, rule 8.

25. It follows that the Offer is not a sanctioned offer that the defendant can rely on to ask for indemnity costs.

26. Now, the Offer is marked without prejudice save as to costs.  As such it is caught by the exclusionary rule under Order 62, rule 5(1)(d) :

“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 –

(d)  any written offer which is expressed to be ‘without prejudice save as to costs’ and which relates to any issue in the proceedings, but the court may not take the offer into account if, at the time it is made, the party making it could have protected his position as to costs by means of a sanctioned payment or a sanctioned offer under Order 22.”

The court accordingly cannot take it into account to impose indemnity costs against the plaintiffs.

27. The defendant’s application for indemnity costs fails.

Conclusion

28. For the above reasons, I see no reason why the costs order nisi should be varied.  It is now made absolute.

29. In light of my conclusion, I think there should be no order as to costs as between the parties for their respective application for variation.  And I so order.  The plaintiffs’ own costs are to be taxed in accordance with the legal aid regulations.