TO PUI KUI v. NG KWOK PIU AND OTHERS

CACV 281/2012
CACV 1/2013 &
HCMP 2466/2012
(Heard together)

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NOS. 281 OF 2012, 1 OF 2013 AND

MISCELLANEOUS PROCEEDINGS NO 2466 OF 2012

(ON APPEAL FROM HCA NO. 523 of 2008)

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JUDGMENT

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Hon Lam VP (giving the Judgment of the Court):

1.  This judgment deals with 2 matters:

(a) The order for costs consequential to our judgment of 21 August 2014; and

(b) The application by the 6^th defendant for leave to appeal to the Court of Final Appeal.

Costs

2.  In our judgment of 21 August 2014, we made a costs order nisi that the plaintiff shall pay the costs of the 1^st, 4^th, 5^th, 7^th and 9^th Defendants [“the successful defendants”] in the appeals (with certain specific exceptions).

3.  Following that, there were 2 summonses:

(a) A summons of 3 September 2014 issued by the successful defendants asking for costs below and that all the costs be paid by the plaintiff personally; and

(b) A summons of 4 September 2014 issued by the plaintiff asking for an order that she be indemnified by the estate in respect of all costs awarded against and incurred by her.

4.  Submissions were lodged by parties according to directions given by the court and we have read them.

5.  There is not much dispute that the successful defendants should have the costs of the appeal, the only question is whether the costs should be paid by the plaintiff personally or ultimately be borne by the estate.

6.  Re Lee Shuk Yee [2005] 4 HKC 318 (affirmed on appeal in [2006] 3 HKC 396) stands as authority for the proposition that irrespective of the question of indemnity, the costs order should be made against the plaintiff personally.  In other words, even if there were to be an indemnity, the plaintiff bears the risk of the estate not having enough assets to pay for such costs liability.

7.  On the question of indemnity, we accept the submission of Mr Aiken SC that the absence of a Beddoe application is not fatal to the plaintiff.  In this respect, we agree with the analysis of Deputy High Court Judge Au-Yeung (as she then was) in Chan Gordon v Lee Wai Hing (No 2) [2011] 2 HKLRD 1029.  The question is whether the costs were properly incurred and the court should consider whether leave would have been granted if a notional Beddoe application had been made.

8.  The merits of the notional Beddoe application have to be assessed by reference to the state of affairs at the notional date(s) when such application(s) should have been made.  Thus, it is not right to have regard to the benefit of hindsight gained after the trial or the appeal in question.

9.  In the present context, there are at least 3 possible notional dates:

(a) The date before the action below was launched;

(b) The date before the appeal in CACV 1 of 2013 was launched; and

(c) The date before the plaintiff decided to resist the appeal of the successful defendants in CACV 281 of 2012.

10.  In respect of the costs of the appeal, (b) and (c) are relevant.  The notice of appeal in CACV 281 of 2012 was issued on 27 December 2012 whilst the notice of appeal in CACV 1 of 2013 was issued on 2 January 2013.  A respondent’s notice was issued by the plaintiff in CACV 281 of 2012 on 16 January 2013.  Thus, for all purpose and intent, the decision by the plaintiff to launch an appeal (in CACV 1/2013) was probably made around the same time as her decision to resist the appeal in CACV 281 of 2012.  Thus (b) and (c) can be regarded as the same for present purposes.

11.  Examining the matter as things stood in late December 2012 and early 2013, there was a judgment by Deputy High Court Judge Seagroatt in the plaintiff’s favour of the share transfer issue but against the plaintiff on the allotment issue.  On the allotment issue, the plaintiff faced a very high threshold in persuading the Court of Appeal that the judge was wrong in not finding forgery, particularly in light of the joint expert evidence, the evidence as to effect being given to the allotments over the years and her not giving evidence at the trial.  On this ground alone, we do not think the court would have granted a Beddoe order to cover the plaintiff’s costs exposure in CACV 1 of 2013.

12.  Further, there is another important consideration which applies to both the costs in the appeal and the costs below.  Though on the face of the pleadings the claims were advanced on behalf of the estate, it is clear that in substance the disputes are fought between the children with the plaintiff siding with some of them against the successful defendants.  The plaintiff also had her personal interest in advancing the claim on the allotment issue.  The reality of the situation is borne out by the fact that some of the children gave evidence for the plaintiff against the successful defendants at the trial whilst the plaintiff herself chose not to testify and the stance taken by such children in the appeals.  In such circumstances, had there been a Beddoe application, the court would have had to consider whether the case falls within the principle of Evans v Evans [1986] 1 WLR 101 at p.107:

“ … in a case where the beneficiaries are all adult and sui juris and can make up their own minds as to whether the claim should be resisted or not, there must be counterveiling considerations of some weight before it is right for the action to be pursued or defended at the cost of the estate …”

13.  The plaintiff did not put forward any material before us to show that there is any countervailing consideration.  The mere assertion in counsel’s submissions that the plaintiff did not act solely for her own personal interest and the interests of those children supporting her is not enough.  Nor are we persuaded by the other matters referred in Mr Aiken’s submissions (the circumstances leading to the revelation of the allotment and the transfer and the rejection of the evidence of the successful defendants by the judge) that this is a case where a Beddoe order would have been made in favour of the plaintiff.  There are a host of other matters which counsel did not allude to but are potentially relevant in a notional Beddoe application as highlighted in the judgments of Deputy High Court Judge Tam SC in HCA 522 of 2008, 3 March 2014 and 27 June 2014. Of course, the notional Beddoe judge would not have the benefit of those judgments at the notional dates of applications.  However, some of events or matters mentioned in those judgments had taken place before the action was commenced by the plaintiff and they might shed light on the motive of the plaintiff in pursuing the claims here.     

14.  This consideration applies to both appeals and the trial below.  Taking account of these matters, it can readily be seen that in essence the disputes were between the two camps in the family.

15.  Mr Aiken referred us to Order 62 Rule 6(2).  That rule provides for the right of a trustee or personal representative to recover his own costs out of the trust fund or trust properties.  But that right is subject to the power of the court to order otherwise on the ground that the trustee or personal representative has acted unreasonably or in substance acted for his own benefit rather than for the benefit of the fund.

16.  That rule was considered by the Court of Appeal in Ip Cheung Kwok v Sin Hua Bank Trustee Ltd CACV 79 of 1988, 28 Nov 1990.  As explained there, in the context of a trustee or personal representative who had not obtained the protection of a Beddoe order in advance, he has to show that his costs were properly incurred.  Clough JA cited and applied at p.8 to 9 the observations of Bowen LJ in In re Beddoe [1893] 1 Ch 547 at p.562:

“ The principle of law to be applied appears unmistakably clear. A trustee can only be indemnified out of the pockets of his cestui que trust against costs, charges, and expenses properly incurred for the benefit of the trust --- a proposition in which the word ‘properly’ means reasonably as well as honestly incurred. While I agree that trustees ought not to be visited with personal loss on account of mere errors in judgment which fall short of negligence or unreasonableness, it is on the other hand essential to recollect that mere bona fides is not the test, and that it is no answer in the mouth of a trustee who has embarked in idle litigation to say that he honestly believed what his solicitor told him, if his solicitor has been wrong-headed and perverse …”

17.  On the facts of that case, the Court of Appeal held that the bank should only be allowed to have such costs out of the trust fund as it would have incurred had it applied timeously for a Beddoe order (assessed at $200,000, see p.17 of the judgment)and deprived it of indemnity for a substantial portion of costs incurred.  At p.14, Clough JA said:

“ If a properly constituted Beddoe application had been made to authorise the Bank to defend the action on the substantive issues, the Attorney General would have been one of the parties required to be joined and entitled to be heard.  It is to us inconceivable that the Bank could properly have been authorised by the court to defend the action or pursue its counterclaim at the expense of the trust fund in the face of the denial by the Attorney General that the trusts were charitable.  The only basis upon which the Bank could have been heard at all in support of charity was that it was protecting its own interests.  On that basis it would be acting for its “own benefit rather than for the benefit of the fund” within the meaning of Order 62 rule 6(2).”

18.  Though the situation is not the same in the present case, it is also appropriate to ask what would have happened if the plaintiff had brought properly constituted Beddoe applications (a) before she started the action; and (b) before she lodged her own appeal and resisted the other appeal.  And this brings us back to the analysis we have gone through in the earlier paragraphs.  Further, in a properly constituted Beddoe application, in line with modern practice, all the children would have a right to be heard even though those adverse to the plaintiff’s claims might not have access to sensitive information like the lawyer’s advice on merits.  Those children would set forth out the full picture of the disputes between the different camps and in light of that and the principle in Evans v Evans it is unlikely that the court would grant a Beddoe order in such circumstances.

19.  Since the plaintiff acted for her own benefit in pursuing the claims and the appeals and the battle was essentially between two different camps in the family, we shall dismiss the plaintiff’s application for an indemnity from the estate.

20.  This ruling applies to both the costs in the appeals and costs below.

21.  For the costs below, Mr Aiken and the 3^rd Defendant argued that the successful defendants should not get all the costs below in any event because:

(a) The trial was originally intended to be a trial of 6 actions and it was on the first date of trial that the judge ordered that it should only be a trial of  HCA 523 of 2008;

(b) At the trial, those defendants spent much time on cross-examining the plaintiff’s witnesses on issues not directly related to HCA 523 of 2008;

(c) Those defendants took out interlocutory applications in the course of the trial which were unsuccessful;

(d) The judge rejected the evidence of all the successful defendants and the records produced by them as genuine contemporaneous documents (when in fact they were reconstruction); and

(e) Several days of trial time were taken up by negotiations in which there was no genuine offers from the successful defendants.

22.  In our judgment, (a) is an issue of apportionment which should be undertaken before the taxing master.  The other issues cannot be disposed of without hearing the successful defendants.  For that limited purpose, we shall direct a short hearing (with an estimate of 1 hour) for that purpose.

23.  We would confirm our order for costs at para 88 of our judgment of 21 August 2014.  We decline to order any indemnity for the plaintiff’s costs out of the estate.  As for the costs below, for the above reasons, there shall be a short hearing as directed under the preceding paragraph.  Pending such hearing, if parties could agree on the appropriate order for costs below in light of what had been said in this judgment, they can lodge a consent summons for this court’s endorsement.

Leave to appeal to the Court of Final Appeal

24.  Leave to appeal is sought by the 6^th Defendant on the basis that:

(a) Leave should be granted as of right as the subject matter of the dispute, the ownership of the 20 shares in the 9^th Defendant, exceeds the statutory limit of $1 million;

(b) The appeal raised questions of great, general or public importance [“the GPI ground”]; and

(c) Leave should be granted on the otherwise limb of s 22(1)(b) of the Hong Kong Court of Final Appeal Ordinance [“the Ordinance”].

25.  With respect, we agree with Mr Sussex SC (on behalf of the successful defendants) that the intended appeal does not come within the as of right provision in s 22(1)(a) of the Ordinance.  The relevant approach for determining whether that provision is engaged was set out in Chinachem Charitable Foundation Ltd v Chan Chun Chuen (2011) 14 HKCFAR 798 at para 20.  The subject matter which value is relevant is the value of the claim instead of the value of any property or proprietary right which has some connection with it.  Such value must be clearly quantifiable in order to engage the provision.  Further, the order that the court may make on appeal must have the immediate effect of conferring or imposing on the relevant parties a financial benefit or detriment in the quantified amount.

26.  In Pacific Electric Wire & Cable Co Ltd v Texan Management Ltd FAMVs 5, 6, 7 & 8 of 2014, 14 Oct 2014, the Appeal Committee of the Court of Final Appeal applied that approach to a claim in respect of some shares in companies which at the apex of a corporate network.  Various problems on valuation were identified at paras 14 to 25 of the judgment.  At para 26 Ribeiro PJ had this to say:

“ ... What the controversy between the parties plainly shows is that it cannot by any means be asserted that the value of the claim is clearly quantifiable in the sum of $1 million or more. Nor is it the case that the Court’s order … had the immediate effect of conferring or imposing on [the intended appellant and respondent] a financial benefit or detriment in an ascertained or readily ascertainable quantified amount. To translate the value of the shares from their US$3 par value to a real value, there is clearly a need for further adjudicatory processes requiring resolution of contentious questions as to the proper methodology and as to what conclusions can properly be drawn, given the seriously depleted state of the group’s financial records. Such processes of assessment, quantification or apportionment are likely to be extremely difficult and may, in some cases be virtually impossible. … This is not the type of case the ‘as of right’ procedure was meant to cover.”

27.  That was a case in which the applicant for leave filed substantial evidence on valuation of the shares in question.  Before us, the 6^th Defendant did not file any evidence regarding the value of the 20 shares.  It was simply asserted by Mr Bleach SC on behalf of the 6^th Defendant that as the company CAGL was the 99% owner of various subsidiaries which owned property valued in 1997 at over $81m according to a witness statement of the 5^th Defendant, the 20 shares have an approximate value of at least $13 million or alternatively $24 million odd before re-organization and $13 million odd post re-organization.

28.  Such valuation was disputed by Mr Sussex.  Amongst other matters, Mr Sussex referred to the dispute between the parties (to be litigated in an action to be tried at the Court of First Instance) which would affect the value of the shares.  Notwithstanding Mr Bleach’s reply by reference to the current state of affairs, we are not satisfied that it can be said presently without regard to such dispute that the shares had a readily ascertainable value of over $1 million.

29.  Turning to the GPI ground, it is not necessary to set out the questions raised in para 2 of the Amended Notice of Motion of 30 October 2014.  It suffices to record that Mr Bleach properly accepted that those were new points which were not raised before the judge or before us.  We are minded to follow the established practice in this court that leave would not be granted by this court in such circumstances, see Kung Ming Tak Tong Co Ltd v Park Solid Enterprises Ltd CACV 227 of 2005, 26 June 2007.

30.  Further, we are of the view that the contentions have no merit.  It is quite clear, as Mr Bleach had to accept, that the plaintiff has pleaded that the signatures were forged.  We do not see how it can be argued that the plaintiff did not put forward a positive case of forgery in light of that.  It is not a case of bare denial by the plaintiff.  See para 14(3) of the Statement of Claim.  Unlike the probate cases (where the party seeking a grant has to prove a will to get probate) or the scenarios in Club Deluxe Ltd v Club Metropolitan Ltd [1995] 2 HKLR 69, Lee See Woo v Chan Chun Fai CACV 10 of 2010 and Pacific Electric Wire & Cable v Texan Management CACV 90 of 2012, 17 Sept 2013 (where the plaintiffs in the two former cases, in Pacific Electric Wire & Cable the defendant,have to put forward and thus prove the relevant documents to support their claim), the present case is a pure and simple challenge by the plaintiff to the share transfers which bore the signatures of the father on the basis of an allegation of forgery. 

31.  Once we reach this conclusion, there is simply no basis to grant leave on the otherwise limb as Mr Bleach relied on the arguability of the burden of proof contention to support his application in that regard.

32.  Thus the application for leave by the 6^th Defendant falls to be dismissed.

33.  Mr Sussex also raised the objection that the 6^th Defendant did not have locus to seek leave and his application for leave was an abuse of process.  We are inclined to agree with him that the application is an abuse of process.  The plaintiff, who is the administratrix of the estate, did not seek leave to appeal to the Court of Final Appeal against our judgment.  The claim was a claim advanced on behalf of the estate and though the 6^th Defendant is a beneficiary, he himself has no locus to prosecute such a claim, see Lewin on Trusts 18 Edn para 43-01 and Tsang Yue Joyce v Standard Chartered Bank [2010] 5 HKLRD 628.  The 6^th Defendant took a passive role in the trial.  Though a witness statement of his was filed, he did not give evidence and the statement was not adopted as evidence.  The present application, as we have seen, is made by reference to a point which had not been taken at any stages and it is a hopeless application.  We do not see any reason why the 6^th Defendant should be permitted to do so in such circumstances.

34.  We are minded to award costs against the 6^th Defendant on indemnity basis in the leave application.  Having considered the statement of costs submitted by the successful defendants, we fix such costs at $201,088.

Re : To vary costs order nisi

Re: Leave to appeal to the Court of Final Appeal