LAU KIN SHUN FREEMAN, Administrator of estate of LAU WAI CHAU, deceased v. MA WAH YAN and WONG CHI LEUNG, co-administrators of the estate of LAU LEUNG CHAU, deceased AND OTHERS

HCMP 3924/1995

[2024] HKCFI 1521

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 3924 OF 1995

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AND

HCMP 3209/1996

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DECISION

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A.  INTRODUCTION

1.  On 12 January 2024, this Court handed down a Decision (“the Decision”) pursuant to which the Summonses[1] have been dismissed.

2.  In the Decision, this Court made the following costs order nisi (“the Order Nisi”):

(1)  The costs of the Summonses of the Administrator and of the 1^st and 2^nd fongs shall be borne by the 5 fongs, and such costs shall be summarily assessed in lieu of taxation on trustee basis;

(2)  Liberty for the receiving parties to apply for a further direction that the costs payable by the 5 fongs be paid out from the Estate in satisfaction of the 5 fongs’ share in the Estate, upon the receiving parties’ unsuccessful attempt to enforce the above costs order against the 5 fongs by other means;

(3)  The 5 fongs’ costs of the Late Affirmation Summons shall be paid by the plaintiff, which is to be summarily assessed, and shall be offset by their liability to pay the plaintiff’s costs;

(4)  There be no order as to the costs of the 1^st and 2^nd fongs of the Late Affirmation Summons.

3.  The 5 fongs are now applying to vary the Order Nisi (“the Variation Application”).  Their positions may be summarised as follows:

(1)  While the 5 fongs accept that they should bear the costs of the Administrator, such costs should be limited to the costs of one solicitors’ firm (Messrs. Philip Chan & Co – acting for the Administrator in the 1995 Action) only, and the costs of the other solicitors’ firm (Messrs. Chui & Lau – acting for the Administrator in the 1996 Action) should be disallowed (“the Two Separate Solicitors’ Firms Argument”);

(2)  Only 50% of the costs of Messrs. Philip Chan & Co should be allowed (“the Failed Issues Argument”)[2];

(3)  There should be no order as to costs in respect of the 1^st and 2^nd fongs; alternatively, even if their costs were to be allowed, such costs should not include their costs for the substantive hearing held on 21 August 2023 (“the Argument on 1^st and 2^nd fongs’ Costs”).

4.  In other words, the 5 fongs are only seeking to vary paragraph 1 of the Order Nisi.

B.  LEGAL PRINCIPLES

5.  The applicable legal principles are trite.

6.  In Yoe Han Yauw v Yoe Han Hian & Others [2022] HKCA 498, Au JA set out the general principles as follows:

“19. It is trite that costs are a matter of wide discretion for the judge. The discretion is to be exercised in accordance with principles and with a view to reality and justice […]

20. The relevant principles on the exercise of discretion as to costs has further been succinctly summarised by Lam VP (as he then was) in YBL v LWC (No 2) [2017] 2 HKLRD 783 at [10]:

‘(a) Whilst the courts often started with the proposition of costs following the event, it was no longer the general rule but a starting point (Hung Fung Enterprises v Agricultural Bank of China [2012] 3 HKLRD 679 applied);

(b) There had to be some justification for depriving a successful party of his costs;

(c) In measuring who was the successful party and the extent of his success, the court must examine the reality and justice of the case. Thus, in Hysan Development Co Ltd v Town Planning Board (No 2), no order as to costs was made notwithstanding the success of the appellant in reversing the Court of Appeal's decision because they did not achieve the full objects of their appeals (Hysan Development Co Ltd v Town Planning Board (No 2) (2016) 19 HKCFAR 635 applied);

(d) In addition, under O.62 r.5, the court in exercising its discretion should take into account the matters set out in r.5(1) as might be appropriate in the circumstances;

(e) Order 62 r.5(2) highlighted conduct which the court could take into account including whether it was reasonable for a party to take an issue, the manner in which the matter was pursued or defended, the extent of success, and conduct before, as well as during the proceedings;

(f) If a successful party had brought the litigation upon himself or had done some wrongful act in the course of the transaction, he could be deprived of his costs.’

21. It is also not necessary to establish that a successful party has acted unreasonably or improperly in raising an issue for it to be deprived of whole or part of its costs.  The Court may so order where the failed allegation of the successful party has caused a significant increase in the length or costs of the proceedings: Re Elgindata Ltd (No 2) [1992] 1 WLR 1207 at p1214; and Zhuhai International Container Terminals (Jiuzhou) Limited v Lo Tong Hoi (unreported, CACV 181/2011, 31 July 2012) at [33].  However, while the Court in the exercise of its discretion may refuse to make a costs order in favour of a successful party, it is most unusual and rare for a successful party to be ordered to bear the costs of the unsuccessful party: Jiang Zhong v Yeung Chun Leung [2018] 1 HKLRD 886 at [6.21] per Cheung JA.”

7.  In Ko Hon Yue v Chiu Pik Yuk, the wife and intended administratrix of Liu Ching Leung (廖正亮), deceased & Another [2018] HKCFI 1973, Chu JA (as her Ladyship then was) also took the view at [16] that:

“[…] post-CJR the Courts are more ready to make costs orders that reflect the outcome of different issues, and it is no longer necessary for the winning party to have acted unreasonably or improperly to be deprived of his costs of a particular issue on which he has failed: Pfeiffer GmbH v. Cheung Hay Kit t/a Sun Wai Construction, supra, at [20]; and Chan Shun Kei t/a Chan Shun Kei Construction Works v. Hong Kong Construction (Hong Kong) Limited formerly k/a Hong Kong Construction (Holdings) Limited at [25].  The objective, as explained by Lord Woolf MR in AEI Rediffusion Music Ltd v. Phonographic Performance Ltd [1999] 1 WLR 1507 at 1522-1523, is to require litigants to be selective as to the points to take because “[i]f you recover all your costs as long as you win, you are encouraged to leave no stone unturned in your effort to do so.”  In this regard, the third principle in Re Elgindata (No. 2) [1992] 1 WLR 1207, 1214 A-C should be less generally followed.”

8.  The Administrator’s counsel have drawn this Court’s attention to what DHCJ Jonathan Chang SC said in Happy Fish Company Limited v Tang Jeb Ming [2023] HKCFI 600 at [3] as follows:

“Whilst costs are in the unfettered discretion of the court, costs should normally follow the event. The general rule does not cease to apply just because the successful party raised issues on which he fails. After all, costs are not to be decided according to a score sheet on how many issues have gone one way or another. In any litigation, it is not unusual for a winning party to have raised (and failed on) one or more issues, but this by itself does not attract a costs sanction. There is no doubt a discretion in the court to deprive a successful party of the whole or part of his costs if he has caused a significant increase in the length or costs of the proceedings by raising issues on which he did not succeed, and this can be done even if it was not unreasonable to have raised those issues. But the necessity of an issue is not to be judged with the benefit of hindsight. The court should give real weight to the overall success of the winning party and approach the question of costs from such a perspective.”

9.  However, it should be noted that the costs order in Happy Fish Company Limited was made after trial as opposed to a costs order of an interlocutory application.  The part on “general rule” in the above quotation should therefore be inapplicable herein.  Having said that, I agree with his Lordship when he explained that the “score sheet” approach should not be adopted and that the matter should not be judged with the benefit of hindsight.

10.  When the Court is dealing with an interlocutory application, what To J stated in Melvin Waxman & Another v Li Fei Yu & Another [2013] 6 HKC 424 at [19] is important:

“Summing up on the post-CJR position, I think the court has much wider discretion as to costs in interlocutory proceedings. Unlike other proceedings, the general rule of costs following the events do not apply. The court is entitled to take into account all the circumstances of the case, including those set out in rule 5, to make such order as it thinks fit. In the exercise of its discretion, the court may take the issue-based approach or may take into account merit of the parties’ case or the possible outcome of the action. The circumstances of interlocutory proceedings are so numerous that it is impossible to make any general rule. Costs to follow the event and costs be to the successful party’s costs in the cause are obvious options.”

11.  With the above in mind, I now turn to the specific bases relied on by the 5 fongs.

C.  DISCUSSION

C1.  The Two Separate Solicitors’ Firms Argument

12.  As a matter of background:

(1)  Messrs. Philip Chan & Co is the Administrator’s solicitors on record in the 1995 Action;

(2)  Messrs. Chui & Lau is the Administrator’s solicitors on record in the 1996 Action[3];

(3)  The Summonses had been served by the 5 fongs’ solicitors not only on Messrs. Philip Chan & Co but also on Messrs. Chui & Lau;

(4)  It was admitted by the 5 fongs that their application for interim distribution had to be taken out in both the 1995 Action and the 1996 Action so as to satisfy procedural requirement in joining all the 8 fongs and the Administrator[4];

(5)  The same team of counsel has been engaged by Messrs. Philip Chan & Co and Messrs. Chui & Lau to represent the Administrator at the substantive hearing of the Summonses.

13.  In a gist, it was argued on behalf of the 5 fongs that:

(1)  As a matter of principle, there should be no separate representation for co-plaintiffs: Noor Maritimes Ltd v Calandra Shipping Co Ltd [2018] 2 HKLRD 1408, [2018] HKCFI 1136, at [12] – [16];

(2)  While there was a reason for dual representation in the past, such a reason no longer existed;

(3)  As the stance disclosed in the respective affirmations filed by Messrs. Philip Chan & Co and Messrs. Chui & Lau was basically the same, the Administrator did not need 2 firms to advance the same contentions. It follows that the costs of Messrs. Chui & Lau had been incurred unnecessarily, and therefore their costs should not be allowed;

(4)  The main focus of Messrs. Chui & Lau was its contention that the Court should pay regard to 4 actions in which the 5 fongs had been ordered to pay costs to the Administrator (“the Costs of 4 Actions Argument”). However, at the end of the day, the alleged liability was not found to be relevant by this Court.

14.  With respect, I disagree with these submissions.

15.  First, the 5 fongs’ reliance on the authority of Noor Maritimes Ltd is misconceived because the situation in that case is totally different.  As the Administrator pointed out, if the principles set out in the said authority were to be applied, the 5 fongs should have raised the challenge early, so that the Court would consider whether to grant leave for such “dual representation” at an earlier stage.  However, no such challenge has ever been made.  That implies that even the 5 fongs considered it unnecessary for such leave to be granted before the substantive application could be heard.

16.  Second, given the long history of the cases concerned herein, and the background set out in [12(2), (3) and (4)] above, this Court would have granted leave for such “dual representation” anyway.

17.  Third, the identities of the defendants in the 1995 Action and the 1996 Action are not entirely the same.  The issues involved in those actions were also different. Hence, it is not unreasonable for both the solicitors’ firms on record to appear for the Administrator in the present application, so that points which were peculiar to one of those actions (if any) could be considered for the protection of the Administrator.  I should also add that, even if at the end of the day no such points existed, I would still take the view that the engagement of Messrs. Chui & Lau was justified, because the assessment of the necessity of separate representation should not be done with the benefit of hindsight.

18.  Fourth, in fact, the same team of counsel has been engaged by both solicitors’ firms to appear for the Administrator at the substantive hearing of the Summonses.  In my view, this has been a very reasonable approach taken by solicitors for the Administrator.

19.  Fifth, although the Costs of 4 Actions Argument was not accepted (partly because it was not necessary to decide on this point anyway because the total amount of the other existing/potential expenses/liabilities was so large that the Court would not have acceded to the application for interim distribution in any event), the advancement of this argument has not significantly increased the length or costs of the application. Therefore, I am not prepared to disallow the costs of Messrs. Chui & Lau on this basis.

20.  The Two Separate Solicitors’ Firms Argument is therefore rejected.

C2.  The Failed Issues Argument

21.  The Administrator’s stance in the interim distribution application has been summarised by this Court in the Decision at [21] as follows:

(1)  All parties had agreed to devise a scheme in having the compensation monies collected and to be paid into joint account(s) on account of all costs and expenses incurred for probate and administration (including remuneration of the administrator) to be paid out first before any distribution could be made.  The scheme has been in place for 20 years, and the 5 fongs should not be allowed to depart from such past practice easily (“the Agreed Scheme Argument”);

(2)  No distribution should be made without any execution of “release and indemnity” (“the Release and Indemnity Argument”);

(3)  Substantial costs and expenses would have to be spent by the Estate before the completion of administration thereof.  The Estate should reserve sufficient amount of monies to meet these liabilities (“the Costs and Expenses Argument”);

(4)  The 5 fongs still owe the Estate money as agreed or ordered by the court.  Pursuant to the rule of Cherry v Boultbee (1839) 4 My & Cr 442, such outstanding sums should be paid by the 5 fongs first before any residual compensation monies should be distributed to them (“the Cherry v Boultbee Argument”).

22.  This Court eventually came to the following conclusions in relation to the above arguments in the Decision:

(1)  The Agreed Scheme Argument did not assist the Administrator because, among other things, the compensation monies covered by the said agreed scheme had been depleted and the monies which were sought to be distributed were “new compensations”;

(2)  The Court did not need to deal further with the Release and Indemnity Argument because counsel for the 5 fongs had made clear in their skeleton argument in reply that they were willing to execute “release and indemnity”;

(3)  The total amount of existing/potential liability/expenses of the Estate would be much more than $45.4 million (the amount of interim distribution sought).  Hence, taking a prudent and cautious approach, no distribution should be made;

(4)  No view was expressed on the Cherry v Boultbee Argument because:

(a)  It was undesirable to do so since the parties had not addressed the Court on the effect of the case of Alan C. W. Tang, Joint and Several Trustee in Bankruptcy of the estate of Lo Siu Fai Louis v John J. Toohey, Joint and Several Liquidator of Global March Limited (CACV 177/2004, unreported, 3 October 2005) on the application of the rule of Cherry v Boultbee;

(b)  It was not necessary to do so in the light of the Court’s conclusion on the Costs and Expenses Argument.

23.  It is now argued on behalf of the 5 fongs that:

(1)  Out of the 4 arguments summarised above, the Administrator only succeeded on the Costs and Expenses Argument which was an argument on “quantum”;

(2)  None of the other 3 arguments on “liability” really assisted the Administrator at the end of the day.

24.  I will deal with the 3 “liability” arguments first.

25.  When considering the issue of costs, I do not think the Court should treat it as if the Administrator has failed in the Release and Indemnity Argument, because he simply has not. 

26.  The same approach is applicable to the Cherry v Boultbee Argument in the light of the reasons set out in [22(4)] above. In respect of [22(4)(a)] above, neither party had drawn this Court’s attention to the authority of Alan C. W. Tang.  There is no reason why only the Administrator should be “punished” for such failure.  The fairer way to deal with the situation is not to take this failure into account.

27.  The only argument which the Administrator has failed to succeed as far as “liability” is concerned is the Agreed Scheme Argument.

28.  However, I am of the view that the time spent on this issue was not to the extent that justified the adoption of issue-based approach when the Court considers what cost order should be made.

29.  I now turn to consider the arguments on “quantum”.  The 5 fongs argued, among other things, that:

(1)  While the Administrator originally estimated that the existing/potential liabilities/expenses of the Estate would amount to $112.29 million, the Court ended up estimated that the amount should only be $69.27 million.  In other words, the Administrator had exaggerated the figure;

(2)  The estimation of Messrs. Philip Chan & Co’s costs of taxation and other outstanding costs including claims from all other fongs given by the Administrator was not supported by details at all;

(3)  The Administrator mainly succeeded due to the impact of the Master’s Costs Decision (handed down on 16 October 2023 – see [32] of the Decision), and not much had been contributed by the affidavits in opposition filed by the Administrator;

(4)  Looking at the items of expenses in the summary table at [76] of the Decision, the only head of expenses which the Administrator was really successful was “Administrator’s remuneration” which was a short and discreet issue;

(5)  The Administrator did not reply to the 5 fongs at all before the Summonses were taken out. 

30.  I do not think these arguments assist the 5 fongs.

31.  First, despite the fact that the Administrator’s estimation of potential/existing liabilities/expenses was much more than the figure arrived at by this Court at [76] of the Decision, I am not persuaded that the Administrator’s costs recoverable from the 5 fongs should be cut down for this reason:

(1)  I do not think it should be treated as if the Administrator has exaggerated a claim of damages as such, as he was not going to have any personal advantage in the matter;

(2)  It should be apparent from the Decision that the amount of $69.27 million was arrived at on a broad-brush basis, which was adequate to deal with the interim distribution application.  For example:

(a)  The figure of $10.5 million was taken to be Messrs. Philip Chan & Co’s costs of taxation because this was the 5 fongs’ alternative case which was closer to the reality.  The same figure was adopted as the 5 fongs’ own costs on a broad-brush basis only (see [50] – [56] of the Decision);

(b)  When considering the figure of enhanced interest, this Court only assumed that the 5 fongs’ contention was correct without holding that the Administrator’s estimation was wrong (see [59] – [60] of the Decision);

(c)  This Court did not find it necessary to make any ruling on the Administrator’s suggestion that a sum of $10 million be reserved for payment of other outstanding costs including claims from all other fongs, partly because the other parts of the Decision were adequate to deal with the application before the Court.

32.  Second, the 5 fongs’ complaint that the Administrator’s estimation of Messrs. Philip Chan & Co’s costs of taxation and other outstanding costs including claims from all other fongs (Head H of the table at [76] of the Decision) was not supported by details is not justified.  For the purpose of the interim distribution application, I am of the view that it was good enough for the Administrator to give a rough figure.  In any event, the Administrator’s estimation of Messrs. Philip Chan & Co’s costs of taxation turned out to be on the low side.  In relation to the figure under Head H, this Court decided that no further discussion thereon was required only in the light of the Court’s ruling on the other items of existing/potential expenses/liabilities. 

33.  Third, much weight should be given to the fact that the 5 fongs’ application for interim distribution failed totally.

34.  Fourth, while I accept that the Master’s Costs Decision indeed had an important bearing on the outcome of the 5 fongs’ interim distribution application, I do not think this factor should be taken to be a point favourable to the 5 fongs. This is because it was all along the Administrator’s contention that large amount of provision should be made to cater for possible adverse result in the Master’s Costs Decision, and such a contention had been proved to be correct. 

35.  Fifth, I do not think the 5 fongs’ assertion that the only head of expenses which the Administrator was really successful was “Administrator’s remuneration” is correct. The most obvious examples are the Administrator’s case on the provision for costs of taxation and provision for enhanced interest which have been accepted in principle.

36.  Sixth, the 5 fongs had been opportunistic when they blamed the Administrator for not making reasonable proposal for the release of the compensation money.  The 5 fongs were all along legally represented.  In the light of the ongoing taxation proceedings in HCMP 593/2007, they should have known well that the Estate would face a large amount of potential liability.   Yet, they made the interim distribution application.  In these circumstances, I do not think the Court should give any weight to the Administrator’s silence upon receipt of the 5 fongs’ request for proposal.

37.  To conclude, the Failed Issues Argument is rejected.

C3.  The Argument on 1^st and 2^nd fongs’ Costs

38.  The 5 fongs have made a number of arguments in support of their submissions that there should be no order as to the 1^st and 2^nd fongs’ costs or alternatively they should be deprived of their costs of attending the substantive hearing.

39.  Firstly, it was submitted by the 5 fongs that all that the 1^st and 2^nd fongs had said in their affirmations filed for the purpose of the interim distribution application were that they had presented solicitors’ bills of costs but the same were yet to be paid, and that they asked for payment from the compensation monies.

40.  Although the said description is correct as far as the 2^nd fong is concerned, the same cannot be said to be the case of the 1^st fong, who had, for example, also given in his affirmation an estimation as to the potential legal costs to be incurred by the 1^st fong so that the Court could take the same into account when considering the interim distribution application. 

41.  Be that as it may, I do not accept that the 2^nd fong should be deprived of his costs on this basis, because he was plainly entitled to inform the Court the outstanding legal costs claimed to be payable by the Estate which the Court should take into account.

42.  The position in relation to the 1^st fong is even more obvious, because his evidence was not as limited as the 5 fongs alleged.    

43.  Secondly, it was argued that there is no evidence as to how the 1^st and 2^nd fongs’ interest would be affected by the outcome of the interim distribution application.

44.  With greatest respect, this is an argument which is made to be rejected.  As beneficiaries of the Estate, the 1^st and 2^nd fongs apparently have an interest to see that the Estate is properly administered, and to express their stance at the substantive hearing that no interim distribution should be made without adequate reservation of monies to meet potential liabilities and expenses.

45.  Thirdly, the 5 fongs argued that they had offered that there be summary assessment of the costs claimed by the 1^st and 2^nd fongs, and that a reasonable sum be retained from the compensation monies for payment of the assessed costs, but this offer was not accepted by them.  Hence, it was said, at the end of the day, they had failed to achieve anything more than the offer.

46.  Insofar as it is the 5 fongs’ submission that because the 1^st and 2^nd fongs could not get more than what they had been offered and as a result they should be punished on costs, I disagree.  The 5 fongs’ offer was totally beside the point.  As mentioned, the 1^st and 2^nd fongs had the right to be heard because their interest as beneficiaries might be affected by the 5 fongs’ application.  Furthermore, they had obtained more than the offer by reason of the Decision because the Court had refused the 5 fongs’ application, having taken into account the stance of the 1^st and 2^nd fongs that no distribution should be made unless adequate funds had been reserved.

47.  Fourthly, it was alleged that the 1^st and 2^nd fongs’ attendance at the substantive hearing was wholly unnecessary and the costs incurred were disproportionate.  This argument must be rejected, as the 1^st and 2^nd fongs were entitled to be heard. 

48.  Hence, it is my view that the 1^st and 2^nd fongs should be entitled to their costs, and such costs shall be paid by the 5 fongs.

49.  The 5 fongs then stated that even if the 1^st and 2^nd fongs are entitled to costs, their costs should not be assessed on trustee basis but on party and party basis.  However, in their written submissions, the 5 fongs’ counsel did not put forward any argument in support of such a contention. 

50.  In arguing that the assessment of costs should be on trustee basis, counsel for the 2^nd fong had drawn this Court’s attention to the case of Cheung Pui Yuen & Others v Worldcup Investments Inc. & Others (2009) 12 HKCFAR 31, in which Lord Scott of Foscote NPJ referred to different classes of cases as categorized in Re Buckton [1907] 2 Ch 406, at 414 – 415 as follows:

“56. The case on costs, as explained by Mr Thomas, is based on the principle that where proceedings have been properly instituted for the benefit of a trust fund, or a deceased’s estate, the court may, in an appropriate case, make an order for the costs of the proceedings to be borne by the fund or estate, as the case may be. The principle was explained by Kekewich J in In re Buckton [1907] 2 Ch 406 at 414/415. He referred, first, to cases in which trustees ask the court to determine some question which has arisen in the administration of the trust. In such cases, said Kekewich J, the general rule would be that the costs of all necessary parties would be taxed as between solicitor and client and paid out of the estate. He then referred to a second class of case in which the question for determination by the court is raised not by the trustees but by some of the beneficiaries. In such a case, if the question raised would have justified an application by the trustees but for some reason or other the application has been made by beneficiaries, the same costs consequences, he said, should follow:

‘The application is necessary for the administration of the trust, and the costs of all parties are necessarily incurred for the benefit of the estate as a whole.’ (p.415)

Kekewich J distinguished, however, the first and second classes of case from the third class, a class where the application to the court is made by a beneficiary but is, in substance although not in form, an adverse claim made in hostile litigation.  In such a case, said the judge, the rule applicable to hostile litigation should be applied and the unsuccessful party ordered to pay the costs.”

51.  Counsel for the 2^nd fong, having referred to the above authority, then proceeded to argue that the present case falls within the 3^rd class of cases as described in Re Buckton.

52.  In reply, counsel for the 5 fongs disagreed that this case should belong to the 3^rd class of cases as set out in Re Buckton, on the ground that it is not a claim made by one class of beneficiaries adverse to the interest of another class in a hostile litigation.  Having said that, the 5 fongs’ counsel did not state positively that this application should be treated as falling within the 2^nd category.  That in fact is understandable, because they had frankly accepted at the outset that they should bear the Administrator’s costs and that they did not seek to recover their own costs from the Estate at all.  They would not have done so if this is a 2^nd category case.

53.  The situation in the present case illustrates that while it is desirable to have uniformity in practice as far as costs is concerned, it is difficult to devise a set of general rules which can cover all kinds of different scenarios. 

54.  On my part, I would look at the matter in this way: The 1^st and 2^nd fongs were entitled to be heard and costs would have to be incurred anyway.  In the event the 5 fongs were successful in their interim distribution application, this Court would have ordered that the 1^st and 2^nd fongs be entitled to recover their costs from the Estate, and in such a case their costs would have been taxed/assessed on trustee basis.  However, in the present case, the 5 fongs did not succeed in their interim distribution application.  As they should bear the consequence of their failed application, they should be ordered to pay the costs of the 1^st and 2^nd fongs.  However, if the 1^st and 2^nd fongs’ costs were ordered to be assessed on party and party basis as suggested by the 5 fongs, the 1^st and 2^nd fongs would be worse off because they would recover less amount of costs.   My query is: why should the 1^st and 2^nd fongs’ entitlement be decided by reference to the success/failure of the 5 fongs’ application?  That does not sound right. 

55.  The Argument on 1^st and 2^nd fongs’ Costs is therefore rejected.  In my view, a fairer order should be that the 5 fongs should bear the 1^st and 2^nd fongs’ costs on a basis which is higher than the party and party basis.  However, should such costs be assessed on trustee basis?

56.  In the course of considering the Variation Application, this Court noted that Order 62 rule 28(5) of the Rules of the High Court (“RHC”) provides that:

“The Court in awarding costs to which this rule applies to any person may if it thinks fit and if –

(a) the costs are to be paid out of a fund, or

(b) the person to whom the costs are to be paid is or was a party to the proceedings in the capacity of trustee or personal representative,

order or direct that the costs shall be taxed as if that person were a trustee of the fund or as if the costs were to be paid out of a fund held by that person, as the case may be, and where the Court so orders or directs rule 31(2) shall have effect in relation to the taxation in substitution for paragraph (2) of this rule.”

57.  In the present case, the 1^st and 2^nd fongs’ costs are to be paid by the 5 fongs rather than out of a fund.  Further, the 1^st and 2^nd fongs are not party to these proceedings in capacity as trustee.  In other words, neither of the conditions under Order 62 rule 28(5) of the RHC is satisfied. 

58.  There is thus a question mark as to whether it is correct for the Court to order assessment of costs on common fund basis.  As this issue has not been touched on by any of the parties, the 5 fongs and 1^st and 2^nd fongs have been invited to lodge further written submissions, which they have duly done so.

59.  The 5 fongs agreed that the Court has no jurisdiction to order assessment on trustee basis under the circumstances set out in [57] above.

60.  However, the 1^st and 2^nd fongs disagreed.  In a gist, they submitted that:

(1)  The Court has a general discretionary power under section 52A(1) of the High Court Ordinance (Cap.4) to order costs on any basis of taxation, including the trustee basis even if the case does not fall within the 2 categories in Order 62 rule 28(5) of the RHC;

(2)  Both the cases of EMI Records Ltd v Ian Cameron Wallace Ltd. & Another [1983] 1 Ch. 59 and Overseas Trust Bank Ltd. v Coopers & Lybrand (a firm) and Others [1991] 1 HKLR 177 support their submissions that the Court has power to order assessment of costs on trustee basis.

61.  Section 52A(1) of the High Court Ordinance provides that:

“Subject to the provisions of rules of court, the costs of and incidental to all proceedings in the Court of Appeal in its civil jurisdiction and in the Court of First Instance, including the administration of estates and trusts, shall be in the discretion of the Court, and the Court shall have full power to determine by whom and to what extent the costs are to be paid.” (emphasis added)

62.  The 1^st and 2^nd fongs emphasised that it is provided in the said statutory provision that “the Court shall have full power to determine by whom and to what extent the costs are to be paid”. It was argued that by reason of such a provision, it does not matter even if the present case does not satisfy either of the conditions provided in Order 62 rule 28(5) of the RHC.

63.  With respect, I cannot agree on this argument, which has overlooked the opening phrase of the said section 52A(1): “subject to the provisions of rules of court”.  With the existence of this phrase, it is simply not arguable that the Court’s power to determine to what extent costs are to be paid is unlimited to the extent that it can be exercised in contravention of the provisions of Order 62 rule 28(5) of the RHC, which has been validly made by the Rules Committee pursuant to the power given under section 54(2)(c) of the High Court Ordinance[5].

64.  I now turn to the two authorities relied on by the 1^st and 2^nd fongs. 

65.  In EMI Records Ltd, the then provision of Order 62 rule 28 of the Rules of the Supreme Court did not mention about taxation on indemnity basis at all.  The issue before the court in that case was whether the court may make an order for taxation on a basis other than those contained in the said rule 28.  It was held that:

“[…] The wide general discretion given by section 50(1) of the Judicature Act 1925 can be curtailed by rules of court, because the subsection is expressed to be subject to them. Where there are rules which express a plain prohibition […] then the discretion cannot be exercised so as to disregard that prohibition. On the other hand, where there is no express prohibition, but merely an affirmative provision in the rules, then even if that affirmative is expressed in imperative terms, as by the word ‘shall’, the court is not deprived of its statutory discretion to order costs on some basis other than that set out in the affirmative provision. On this footing the provision that all taxation ‘shall’ be on a party and party basis operates as a provision that all taxations shall be on that basis unless the court either exercises the express powers given by the rules to direct some other basis of taxation, or else exercises its statutory discretion to go outside rule 28. In my judgment, the wording of the rules is not strong enough to confine the courts to making orders within rule 28 and exclude their discretionary power to make orders on other bases.” (emphasis added)

66.  It can therefore be seen that this authority, if anything, only reinforces the view that “trustee basis” is not a viable option herein, since Order 62 rule 28(5) of the RHC has obviously curtailed the wide general discretion of the Court given under section 52A of the High Court Ordinance.

67.  Overseas Trust Bank Ltd. v Coopers & Lybrand (a firm) can be dealt with quickly.  With respect, this case does not add anything to the analysis which is applicable to the present case, as Godfrey J (as his Lordship then was) simply followed the approach adopted by Sir Robert Megarry in EMI Records Ltd.  Therefore, without disrespect to counsel, I do not consider it necessary to discuss this case further.

68.  I therefore take the view that it is more appropriate for the 1^st and 2^nd fongs’ costs to be assessed on common fund basis instead of trustee basis[6].

D.  ORDER

69.  By reasons of the aforesaid, I dismiss the 5 fongs’ Variation Application. 

70.  The Order Nisi is varied to the extent that the 1^st and 2^nd fongs’ costs shall be summarily assessed in lieu of taxation on common fund basis rather than trustee basis.  Subject to this variation, the Order Nisi is hereby made absolute.

E.  COSTS OF THE VARIATION APPLICATION

71.  It is ordered that the 5 fongs shall bear the costs of the Variation Application of the Administrator and of the 1^st and 2^nd fongs, save that there be no order as to the costs of the further written submissions lodged by the 1^st and 2^nd fongs dated 23 May 2024 as they had failed to alert the Court of the jurisdictional matter in their earlier submissions.

F.  FURTHER DIRECTIONS ON ASSESSMENT OF COSTS

72.  Costs shall be summarily assessed on papers.

F1.  Costs of the Summonses

73.  As far as the costs of the Summonses of the Administrator and of the 1^st and 2^nd fongs are concerned, this Court has received the following Statements of Costs:

(1)  An Amended Statement of Costs dated 24 October 2023 lodged by Messrs. Philip Chan & Co for the Administrator;

(2)  A Statement of Costs (dated 15 August 2023 probably by mistake) lodged by Messrs. Chui & Lau for the Administrator which was lodged together with the above Amended Statement of Costs on 24 October 2023;

(3)  A Statement of Costs dated 15 August 2023 lodged by Messrs. C. S. Chan & Co for the 1^st fong;

(4)  A Statement of Costs dated 8 March 2024 lodged by Messrs. Ernest Tang, Solicitors for the 2^nd fong.

74.  In [108] and footnote 21 of the Decision, this Court has directed the parties to lodge and serve fresh statements of costs in order to avoid confusion.  However, only Messrs. Ernest Tang, Solicitors had complied with such a direction.  In order to save time, this Court does not insist that the Administrator and the 1^st fong shall lodge fresh statement of costs.  However, if any of the Statements of Costs set out in the preceding paragraph is not the latest version, the relevant receiving party shall inform the Court and the 5 fongs’ solicitors immediately, and lodge and serve the latest version within 2 days hereof. 

75.  The 5 fongs shall lodge and serve their Statement of Objection within 7 days of this Decision. 

F2.  Costs of the Late Affirmation Summons

76.  Pursuant to paragraph (3) of the Order Nisi which has now been made absolute, the 5 fongs’ costs of the Late Affirmation Summons shall be paid by the Administrator, and shall be offset by their liability to pay the Administrator’s costs.

77.  The 5 fongs shall therefore lodge and serve their Statement of Costs within 7 days hereof.

78.  Messrs. Philip Chan & Co shall lodge and serve Statement of Objection on behalf of the Administrator within 7 days thereafter.

F3.  Costs of the Variation Application

79.  All receiving parties have lodged and served their respective Statement of Costs in respect of the Variation Application together with their written submissions.

80.  The 5 fongs shall lodge and serve their Statement of Objection within 7 days hereof.

81.  For the avoidance of doubt, summary assessment shall be conducted upon the expiry of the deadlines set out under sections F1, F2 and F3 above no matter whether any statement of objection has been lodged.