RE YHM

HCMH 62/2017

[2019] HKCFI 2304

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MENTAL HEALTH CASE NO. 62 OF 2017

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HCA 1469/2018

[2019] HKCFI 2304

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1469 OF 2018

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(Heard together)

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DECISION ON COSTS

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1.  There are two sets of proceedings between the parties. They are HCMH No. 62 of 2017 (“the MHO Application”) and HCA No. 1469 of 2018 (“the EPOA Proceedings”). The applicant in the MHO Application and the plaintiff in the EPOA Proceedings is Mr S. The respondent in the MHO Application is his mother Madam Y and the interested person in the application is his younger brother Mr O. Madam Y and Mr O are the 1^st and 2^nd defendants respectively in the EPOA Proceedings. I gave judgment on 4 June 2019 against Mr S in both proceedings. I also made costs orders nisi that he should pay the costs in both proceedings to Madam Y and Mr O.

2.  Madam Y and Mr O have applied to vary the costs orders nisi.  They seek costs to be paid by Mr S on indemnity basis in the MHO Application.  For the EPOA Proceedings, they want Mr S pay party and party costs up to 31 October 2018 and indemnity costs from 1 November 2018 with enhanced interests at 4% above judgment rate on the indemnity costs as from 1 November 2018 until payment on the ground that Mr S had unreasonably rejected their Sanctioned Offer dated 9 October 2018.  The Sanctioned Offer was issued for both proceedings in accordance with O 22 r 5 of the Rules of the High Court.

3.  Mr S opposes the application to vary the costs order nisi of the MHO Application from party and party basis to indemnity basis.  He however agrees to pay costs of the EPOA Proceedings on a party to party basis up to 31 October 2018 and on indemnity basis from 1 November 2018 with enhanced interests at 2.5% above judgment rate on the indemnity costs.  Since the Sanctioned Offer was issued for both sets of proceedings, I take it that Mr S also agrees to pay costs and enhanced rate of interests for the EPOA Proceedings to be taxed on the same terms as for the MHO Application that he has agreed to.  In any case, I do not see any difference between the two sets of proceedings on this issue of costs as the same Sanctioned Offer was issued for both of them.

4.  Hence, the dispute between the parties are on:

(i)  whether the costs of the MHO Application should be taxed on indemnity basis; and

(ii)  what is the rate of enhanced interests for the indemnity costs in the EPOA Proceedings as from 1 November 2018 (which should be the same for the indemnity costs in the MHO Application as from 1 November 2018 if I should refuse indemnity costs for the whole of this set of proceedings)?

Indemnity Costs in HCMH 62/2017 (MHO Application)

5.  Mr Tai and Ms Lee, counsel for Madam Y and Mr O, submitted that costs in the MHO Application should be taxed on indemnity basis because Mr S should not have brought this application in the first place and/or he brought it with an ulterior motive or improper purpose.

6.  They submitted that before Mr S commenced the MHO Application on 24 July 2017, Madam Y had already executed her first enduring power of attorney (“EPOA”) on 3 November 2015, which was duly registered with the Registrar of the High Court on 18 July 2016.  The existence of the EPOA had a significant impact on the MHO Application.  It could be a potential ground for dismissing the MHO Application outright (which was what I did in my judgment) because (a) Madam Y’s wish should be respected, and (b) the appointment of a committee in the MHO Application might be superfluous if there are no “gaps” in the EPOA (which was indeed the case).

7.  They further submitted that the MHO Application is ex parte in nature.  Mr S and his legal advisers were thus under a duty to make full and frank disclosure.  The duty applied to facts known to them and those they would have known had they made proper inquiries.  But they failed to make any enquiry with Madam Y or Mr O or at all on the existence of the EPOA before commencing the MHO Application.  In any case, they could and should have discovered the EPOA because it was available for public inspection at the High Court Registry.  Had they discovered the EPOA, Mr S could and should have promptly challenged its validity rather than commencing the MHO Application.  As a result, the costs incurred in the MHO Application are wasted since the Court dismissed the MHO Application after upholding the EPOA. 

8.  Madam Y and Mr O also argued that Mr S had commenced the MHO Application not in good faith and improperly for advancing his own personal interests.  They referred to Mr S’s failure to look after Madam Y properly or to take her to regular medical check-ups and appointments.  They also said that Mr S had refused to return to Madam Y her personal belongings including her ID card, personal name chop and bank passbooks, and even dissipated Madam Y’s assets on various occasions.

9.  Mr Wong, counsel for Mr S, submitted that his client did not commence the MHO Application to advance his personal interests or in bad faith.  He referred to §9 of the Certificate of Family and Property filed for Mr S in the MHO Application.  It stated that “[s]ubject to the Court’s approval, it is proposed to appoint the Applicant [Mr S] as the Committee of Madam Y (“the Proposed Committee”).  If Mr M (another brother) and [Mr O] are willing to be appointed as the proposed committee, the Applicant agrees that they should be appointed as well.  Alternatively, the Applicant also agrees to appoint a professional to be the proposed committee if this Honourable Court deems it to be appropriate.” 

10.  Mr Wong further submitted that Mr S would not gain any personal advantage as he proposed that Mr O or a professional could be appointed.  Hence, Mr S did not commence the MHO Application with any ulterior motive.  His only purpose was for managing the property and affairs of Madam Y properly.

11.  I agree with Mr Wong’s submissions that Mr S, in commencing the MHO Application, did not appear to have any ulterior motive to benefit himself or advancing his personal interest. It is plain that he did not intend to monopolize the management of Madam Y’s properties and affairs.  In fact, he would have no control over Madam Y’s properties or affairs if a professional should be appointed as the committee. I also cannot see any evidence showing that he had commenced the application other than in good faith.  He had the support of what appeared to be sound medical evidence though I rejected such evidence after thorough consideration.

12.  Regarding the alleged failure of Mr S and his lawyers to find out the existence of the EPOA, I also do not agree with the submissions of Mr Tai and Ms Lee.  From the correspondence disclosed, the solicitors of Mr S enquired by letter dated 6 April 2017 with Mr O on whether he had any objection to the commencement of the MHO Application.  On 11 April 2017, Madam Y’s solicitors wrote to Mr S’s solicitors.  They referred to the letter to Mr O and conveyed Madam Y’s objection to the MHO Application and her wish to manage her affairs by herself.  But Madam Y’s solicitors did not mention that their client had already made the EPOA on 3 November 2015 which was registered with the Registrar of the High Court on 18 July 2016. Mr O did not even reply to Mr S’s solicitors. 

13.  If Madam Y should have advised Mr S about the EPOA, all wastage of costs, if any, could have been avoided.  Mr O in his third affirmation also made plain that he had not sought Madam Y’s permission to disclose to Mr S about the EPOA.  If the costs of the MHO Application should have been wasted because of the existence of the EPOA, the wastage was caused by both sides.  It lies ill in the mouth of Madam Y or Mr O to put the whole blame of wastage, if any, on Mr S. 

14.  Furthermore, it was desirable to have both proceedings to move ahead tandem as Madam Y was in her nighties and it would have been too late to start the MHO Application if it should wait until after the invalidation of the EPOA.  Furthermore, the holding of the EPOA valid did not mean that there was substantial wastage as the substantial costs for the medical evidence were incurred for both proceedings. 

15.  In the premises, I decline the application by Madam Y and Mr O for the costs of the whole MHO Application to be taxed on indemnity basis. 

Indemnity Costs & Enhanced Interest in HCA 1469/2018 (the EPOA Proceedings)

16.  Mr S agrees to any costs on indemnity basis from 1 November 2018.  The dispute is on the rate of enhanced interest on such costs.  Madam Y and Mr O want 4% above the judgment rate whilst Mr S only agrees to 2.5%. 

17.  Mr Tai and Ms Lee referred to three cases.  They are McPhilemy v Times Newspapers Ltd (No 2) [2002] 1 WLR 934 (EWCA), KR v Bryn Alyn Community (Holdings) Ltd [2003] PIQR P30 (EWCA) and Union Glory Finance Inc v Merrill Lynch International Bank Ltd (unrep), HCA 2494/2013, 13 December 2016.  In McPhilemy and KR v Bryn Alyn Community (Holdings) Ltd, the Court of Appeal adopted a rate of 4% above the base rate from the date upon which the work was done or liability of a disbursement was incurred as a generous assessment of the costs of money.  In Union Glory, the learned Judge adopted a “simplified” global approach in ordering 2.5% above judgment rate.  That was half of what he would otherwise have ordered, in view of the fact that awarding interest on each item of costs from the dates on which work was done or incurred would be overly complicated. 

18.  Madam Y and Mr O are seeking 4% above the judgment rate from 1 November 2018.  However, the bulk of the indemnity costs were incurred at the trial on 29-30 November, 3 and 10 December 2018. Interest on such costs cannot be awarded from 1 November 2018 when the liability for them had not been incurred.  I would therefore adopt the approach used in Union Glory.  I would however order interest on the indemnity costs incurred from time to time from 1 November 2018 at the rate of 3.5% above the judgment rate to accrue from 1 November 2018 to the date of payment.  I order 3.5% because the bulk of the indemnity costs were incurred very close to 1 November 2018.

The Calderbank offer

19.  Madam Y and Mr O have issued a Calderbank offer on 10 June 2010 giving Mr S the option to settle the costs for both proceedings at HK$1,500,000.  However, this sum is just below the full costs for the two proceedings at HK$1,513,029.  Since I have refused to order indemnity costs for the MHO Application, the total sum of taxed costs payable to Madam Y and Mr O would be less than HK$1,500,000.  Hence, the Calderbank offer would not have any effect on Mr S’s liability for costs.

Discounted costs and pro bono service for Madam Y and Mr O

20.  Mr Tai and Ms Lee also submitted that Madam Y and Mr Too had been given discounts of legal costs and pro bono services by their lawyers.  Hence, the costs payable by Mr S to them should be taxed on indemnity basis.  I suppose this request for indemnity costs is to offset the reduction of their costs resulted from the discounts and pro bono services.  I disagree with this submission.  The costs payable by Mr S are to reimburse the costs paid or payable by Madam Y and Mr O.  The discounts and pro bono services were effected by their lawyers for their benefit.  To require Mr S to pay them indemnity costs will not restore to their lawyers the loss to the extent of the discounts and pro bono services, but will just benefit them again. I do not think this is right.

Summary assessment of costs

21.  Madam Y and Mr O seek summary assessment of the costs.  They submitted that summary assessment is appropriate as the assessment is neither complex nor substantial.  Even if Mr S seeks to dispute about the amount claimed, the dispute can be resolved in a broad-brushed manner.  In light of the history of this case and the deteriorating condition of Madam Y, it is highly undesirable that the issue of costs be delayed any further. 

22.  Mr Wong however submitted that there are two complete sets of proceedings.  There are pleadings, affirmations, witness statements, expert reports and a four-day hearing. The 3 statements items and the costs involved are substantial.

23.  I agree with Mr Tai and Ms Lee that these costs should be summarily assessed.  Though there are pleadings, affirmations and witness statements, they are still suitable for summary assessment, there are no elaborate discovery proceedings.  The costs for medical and expert evidence are substantial but are easy to tax.  Bearing in mind Madam Y’s age and her current financial condition as disclosed in the 3^rd affirmation of Mr O, which is not too good, I think the taxation of costs can and should be concluded as soon as reasonably practicable. 

Order

24.  In the premises, I do vary the costs orders nisi.  I order that Mr S do pay Madam Y and Mr O costs for both the MHO Application and EPOA Proceedings on party to party basis up to 31 October 2018 and on indemnity basis from 1 November 2018.  Mr S should also pay interest on the indemnity costs incurred from time to time from 1 November 2018 at the rate of 3.5% above the judgment rate to accrue from 1 November 2018 to the date of payment.

25.  Regarding the costs of this application, Mr S initially opposed the application for variation in toto.  He however changed his position in Mr Wong’s submissions.  I have accepted some of these submissions.  But the changes came rather late.  Madam Y and Mr O have lost on the quest for indemnity costs for the MHO Application and did not succeed in toto on the rate of interest issue.  Looking at the matter in the round, I would order that there be no order as to costs for the two applications for variation.

26.  I further order that Madam Y and Mr O do file and serve their draft bills of costs within 10 days from today.  Mr S should file and serve his objections, if any, within the next 7 days.  Madam Y and Mr O may file and serve their replies, if any, within the next 7 days.  The assessments will be done on paper.