XIAO XIONGWEI, sole executor of the estate of TSANG WONG MEI, DECEASED AND ANOTHER v. TO SHING WO AND SIU HING FONG as Managers of TIN HAU WUI AND ANOTHER

DCCJ 3746/2019

[2020] HKDC 1081

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 3746 OF 2019

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DECISION

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INTRODUCTION

1.  Before this Court is the summons taken out by the 2^nd defendant (by original action) applying for an order that the 1^st and 2^nd plaintiffs (by original action) should give security for his costs from the commencement of the proceedings up to and including the stage of exchange of witness statements.  Originally, the 2^nd defendant asked for security in the sum of $900,000.  The amount was later reduced to $521,080.

2.  This application is based on the grounds that (a) the 1^st and 2^nd plaintiffs (who are the same natural person) are resident out of the jurisdiction, and (b) the 1^st and 2^nd plaintiffs provided an incorrect address in the Writ of Summons. 

3.  The 1^st and 2^nd plaintiffs oppose this application on both liability and quantum.

4.  The present proceedings were originally commenced in the High Court. Shortly after the close of pleadings, the 2^nd defendant took out the present application on 28 February 2019.  Subsequently, pursuant to the order made by Registrar Kwang of the High Court on 21 June 2019, the whole proceedings (including the present application for security for costs) were transferred to the District Court. 

5.  At the hearing, the 2^nd defendant was represented by Mr Aidan Tam of counsel, and the 1^st and 2^nd plaintiffs were represented by Mr Yeoh of Messrs Leung Kin & Co, their solicitors.  The 1^st defendant did not participate in this application.

6.  At the conclusion of the hearing, I indicated that I would deliver a written decision on a later day, which I do now.

BACKGROUND

7.  The 1^st and 2^nd plaintiffs (by the original action) are the same natural person Mr Xiao Xiong Wei (“Mr Xiao”).  Mr Xiao was named as the 1^st plaintiff in his capacity as the sole executor of the estate of Tsang Wong Mei, deceased (“Madam Tsang”), and as the 2^nd plaintiff in his personal capacity.  Mr Xiao is the biological son of Madam Tsang[1] and the stepson of Mr Siu Chi Hung, deceased (“Mr Siu Senior”)[2].  Mr Siu Senior and Madam Tsang married in 1977[3].  Mr Siu Senior died intestate in 2006[4], and Madam Tsang was the administratrix of Mr Siu Senior’s residual estate[5].  Madam Tsang died in 2014 with a will appointing Mr Xiao as the sole executor of her estate[6].

8.  Out of his previous marriage, Mr Siu Senior had a biological son Mr Siu Kwong Cheung (“Mr Siu Junior”), the 2^nd defendant (by original action)[7].

9.  The present proceedings concern the inheritance of Mr Siu Senior’s interests in a share (“the Share”) of Tin Hau Wui (“the Wui”).  The managers of the Wui were named as the 1^st defendant (by original action).

10.  According to Mr Xiao, the inheritance of the Share should be governed by the Intestate’s Estate Ordinance.  In reliance on s 4 thereof, Mr Xiao contends that the interests of the Share should be divided into 3 parts.  The first part (representing half of the interests in the Share) should be devolved to Madam Tsang, as the surviving spouse of Mr Siu Senior.  Mr Xiao and Mr Siu Junior, being both surviving issues of Mr Siu Senior, should each be entitled to a quarter of the interests of the Share[8].

11.  The main contention of Mr Siu Junior is that Mr Siu Senior’s interest in the Share does not form part of his estate, the reason being that the Wui is a family tong and all interests of its shares should be enjoyed by the direct male descendants of the founders of the Wui[9], namely Mr Siu Junior.  Alternatively, Mr Siu Junior avers, even if the Wui is not a family tong, the same practice should in fact be the binding customs of the Wui, which were recognized by the Chinese customary law[10]. Accordingly, neither the estate of Madam Tsang nor Mr Xiao would be entitled to the interests of the Share[11].

12.  Furthermore, according to Mr Siu Junior’s defence, even if the provisions of the Intestate’s Estate Ordinance apply, Mr Xiao would not be qualified within the meaning of “issue” under the ordinance, as he is neither a biological son nor a lawfully adopted son of Mr Siu Senior[12]. In this scenario, Mr Siu Junior avers that Mr Xiao would not be entitled to any interest of the Share, and that only Mr Siu Junior and the estate of Madam Tsang would each be entitled to half of the interests of the Share[13].

13.  In the present proceedings, Mr Xiao and Mr Siu Junior each seek from the Court declarations to the effect in their favour[14], as well as orders mandating the Wui, who was also named as the 3^rd defendant (by counterclaim), to register their names as members of the Wui/holder of the Share and to distribute the benefits derived from the Share accordingly[15].  Both Mr Xiao and Mr Siu Junior also claim damages against each other[16].

APPLICATION FOR SECURITY FOR COSTS

14.  As mentioned above, Mr Siu Junior took out the present application on the grounds that Mr Xiao is not an ordinary resident in Hong Kong and his address stated in the Writ of Summons is incorrect.  It has also been mentioned that Mr Siu Junior requested in the present application for security in the sum of $900,000, but the sum was later reduced to $521,080[17].

15.  In addition to the above, Mr Tam also relied on the fact that, in their initial response to the request for security, Mr Xiao’s solicitors have accepted liability to give security, but only proceeded with negotiation in respect of the quantum[18]. Mr Tam argued that, in absence of leave to withdraw the admission, Mr Xiao would be bound to have accepted the liability to pay security.

16.  It is not disputed by Mr Xiao that he is not a resident in Hong Kong, as well as that he does not have substantial assets here[19]. It is also admitted that Mr Xiao is not the registered owner of the address stated in the Writ, but he can be contacted through the address[20].

17.  In his 1^st and supplemental affirmations, it appears that Mr Xiao’s grounds of opposition are that the order for giving security for the 2^nd defendant’s costs would stifle his claim[21] and that the amount claimed was overambitious[22].

18.  On behalf of Mr Xiao, Mr Yeoh submitted that the out-of-jurisdiction residency and the inaccuracy of the address as stated in the Writ were only “preconditions” and that the Court was required to look at all the circumstances of the case before security for costs was to be ordered[23]. It was contended that the Court should not grant security in this case because of the following reasons:-

(1)     Even if the Plaintiffs’ claim was to be dismissed because of the failure to give security, it remained necessary for the Court to rule on the issue as to who would be entitled to the interests of the Share in pursuance of Mr Siu Junior’s counterclaim.  And it would not be appropriate to order security against Mr Xiao, such that it would prevent him to defend the said counterclaim[24]. Also the costs for Mr Siu Junior in defending the claim would virtually be the same as those for him to prosecute his counterclaim[25]. I will refer this as the “same issue” ground.

(2)     The “real attacker” in these proceedings was indeed Mr Siu Junior in respect of his counterclaim and it would not fair to Mr Xiao to fund him for prosecuting his counterclaim[26]. I will refer this as the “real attacker” ground.

(3)     That Mr Xiao’s claim was meritorious[27].

(4)     The order for security for costs would stifle Mr Xiao’s claim[28].

(5)     The quantum suggested by Mr Siu Junior was overambitious and premature[29].

WITHDRAWAL OF COUNTERCLAIM

19.  At the beginning of the hearing, Mr Tam orally applied to the Court (together with a draft summons) for the followings:-

(1)     Leave [be] granted to the Plaintiff (By Counterclaim) to withdraw his Counterclaim herein entirely;

(2)     Paragraphs 65 to 75 of the Defence and Counterclaim filed herein on 5 November 2018 do [stand] for the sole purpose of the Defence of the 2^nd Defendant (By Original Action); and

(3)     Costs of this application and of the Counterclaim be to the 1^st and 2^nd Defendants (By Counterclaim).

20.  Shortly after the hearing, Mr Siu Junior formally took out a summons for the withdrawal of his counterclaim and sought the same reliefs as indicated above.  The said summons is returnable on 3 December 2020.

21.  Apparently, this withdrawal application was made as a response to the “same issue” ground and the “real attacker” ground.

22.  At the hearing, Mr Yeoh confirmed that Mr Xiao had no objection for the withdrawal of Mr Siu Junior’s counterclaim.  He however opposed the proposal that paragraphs 65 to 75 of the Counterclaim were to stand as parts of Mr Siu Junior’s defence.

23.  Having considered Mr Siu Junior’s counterclaim in details, I agree with Mr Yeoh’s submissions.  I note that paragraphs 65 to 68, and 71 are mere repetition of Mr Siu Junior’s defence[30], and I do not see any necessity for them to remain as the defence.  In the remaining paragraphs, Mr Siu Junior asserted his rights over the Share and claimed damages against Mr Xiao.  In my view, if these paragraphs remain to stand, it is more likely than not that they would cause prejudice, embarrassment, or delay the fair trial in respect of Mr Xiao’s claim.  I would therefore strike out paragraphs 65 to 75 of the Counterclaim as a consequence of the withdrawal.

24.  I would also order that the costs of Mr Siu Junior’s withdrawal application, as well as the costs of, incidental to and occasioned by the Counterclaim be paid by Mr Siu Junior to the 1^st defendant and Mr Xiao in any event, to be taxed if not agreed.

25.  Since I have already in this decision dealt with Mr Siu Junior’s summons filed herein on 17 November 2020, I would also order that the hearing of the said summons returnable on 3 December 2020 be vacated.

LEGAL PRINCIPLES FOR SECURITY FOR COSTS

26.  Order 23, r 1(1)(a) and (c) of the Rules of the District Court provides that, where, on the application of a defendant to an action, it appears to the Court either that the plaintiff is ordinarily resident out of the jurisdiction or that his address is not stated in the writ or is incorrectly stated, then if, having regarded to all the circumstances of the case, the Court thinks it just to do so, it may order the plaintiff to give such security for the defendant’s costs of the action as it thinks just.

27.  The principles governing the Court’s exercise of its discretion to give security under O 23 are trite.  For the purpose of this application, it suffices for me to note the following salient points:-

(1)     The effect of the wordings of the said O 23, r 1 confers upon the Court a real discretion, and indeed the Court is bound, by virtue thereof, to consider the circumstances of each case, and in the light thereof to determine whether and to what extent or for what amount a plaintiff may be ordered to provide security for costs[31].

(2)     There is no inflexible rule or practice that a plaintiff resident abroad will be ordered to give security for costs.  However, as a matter of discretion, it is the usual ordinary or general rule of practice of the Court to require the foreign plaintiff to give security for costs, because it is usually just to do so[32]. The purpose of giving security is to ensure that a successful defendant will have a fund available within the jurisdiction of the Court against which it can enforce the judgment for costs[33].

(3)     A major matter for consideration is the likelihood of the plaintiff succeeding.  In exercising its discretion, the Court may take into account the merits of the plaintiff ’s claim.  If the case of the plaintiff is genuine and strong, no order for security would be granted.  On the other hand, an order for security would usually be granted if the plaintiff cannot clearly demonstrate that it has a high degree of probability of success at trial.  The Court will also have to consider the defendant’s prospects of success; in other words, whether it has an arguable defence.  This is to be approached in a broad-brush manner, and the court is not to embark on an assessment exercise as though it were considering an application for summary judgment under O 14[34].

28.  Furthermore, O 23, r 1(3) provides that the references in the rule to a plaintiff and a defendant shall be construed as references to the person (howsoever described on the record) who is in the position of plaintiff or defendant, as the case may be, in the proceeding in question, including a proceeding on a counterclaim.  The legal principles in this respect are also trite and have been conveniently summarized by Mr Justice Yam J in the Ai Zhong case[35].  These principles are relevant insofar as the “same issue” and “real attacker” grounds are concerned.  For the reasons that I will explain later, these grounds have become moot due to Mr Siu Junior’s withdrawal of the counterclaim.  Accordingly, I do not propose to set out the principles in details here.

DISCUSSION

(1)     The “same issue” ground is no longer valid

29.  Initially, Mr Yeoh submitted that, in light of Mr Siu Junior’s counterclaim, it remains necessary for all the issues to be fully litigated even if Mr Xiao’s claim is to be dismissed.  Mr Yeoh stated “It is unimaginable that [Mr Siu Junior] would give up his claim to the [Mr Siu Senior’s] Share if [Mr Xiao] suddenly decided not to sue.”[36]

30.  But now, in view of Mr Siu Junior’s withdrawal of the counterclaim, this submission is no longer valid.  There are no longer any concerns that Mr Xiao would be asked to fund Mr Siu Junior’s prosecution of the counterclaim, nor does it remain an issue that the order for security for costs would prevent Mr Xiao from defending against Mr Siu Junior’s counterclaim.

31.  In the event that Mr Xiao’s claim is to be dismissed, it appears to me that nothing would be left for the parties to litigate.

32.  Also, it is no longer valid for Mr Yeoh to submit that Mr Xiao had only taken the first step ahead of Mr Siu Junior and that he should not be prejudiced for doing so[37]. In view of the withdrawal of the counterclaim, Mr Xiao is now the only party who asserts the rights (on his own behalf and on behalf of Madam Tsang’s estate) over the Share, although I accept that Mr Xiao’s proposed distribution also affects Mr Siu Junior, as Mr Siu Junior will still be entitled to a quarter of the interests of the Share.  In my view, in light of Mr Siu Junior’s withdrawal of the counterclaim, this ground has become moot.

(2)     The “real attacker” ground is no longer valid

33.  As accepted by Mr Yeoh during the hearing, the withdrawal of the counterclaim would provide a complete answer to the “real attacker” ground.  I accordingly reject this ground as well.

(3)     The merits of Mr Xiao’s case cannot resist an order for security

34.  What remains to be disputed between the parties is the question whether Mr Xiao’s claim is so strong and genuine that the Court should not order security against him.  Without any surprise, Mr Yeoh urged me to answer this question in the affirmative.  On this ground, Mr Yeoh heavily relied on the Million Way Ltd case[38], where Mr Justice L Chan J opined that the Wui was not an ancestral worship or a family tong.  However, as Mr Yeoh fairly accepted, this finding is based on the concession of the parties there.  Clearly, it neither represents the ratio decidendi of the case, nor constitutes res judicata in any sense, nor amounts to an estoppel preventing Mr Siu Junior from contesting against Mr Xiao’s claim in the present case.  In such circumstance, I do not think the Million Way Ltd case can take Mr Xiao’s claim very far.

35.  Even if the Court finds the Wui to be a Chinese worshipping trust, it does not automatically follow that the ordinary intestacy rules should apply. It would still remain an issue for the Court to determine as to what the exact rules are in the context of governing the inheritance of the interests and benefits of the shares of the Wui.  As Mr Tam submitted, this is a mixed question of law and fact.  In such circumstance, I cannot say at this stage that it is more likely than not that the ordinary intestacy rules as advocated by Mr Xiao should apply.  I do not find that Mr Xiao’s case is of a high probability of success in this respect.

36.  Furthermore, even if the ordinary intestacy rules apply, Mr Tam referred me to the Leung Lai Fong case[39], where the Court of Final Appeal found that the word “mother” in s 4 of the Intestates’ Estate Ordinance only meant natural mother of the intestate.  Mr Tam submitted that, by the parity of reasoning, Mr Xiao, who is the stepson of Mr Siu Senior, could not be fallen within the meaning of “issue” of Mr Siu Senior under the ordinance. On the other hand, Mr Yeoh argued on behalf of Mr Xiao that the Court of Final Instance[40] had ruled that the word “children” includes children of a tin fong, who was not the biological mother of the children.  In the Yam Ying Hung case[41], Mr Justice Yam J ruled that the applicants there were de facto (and therefore de jure) children of their deceased stepmother (which was a tin fong of their father)[42].  Mr Tam responded by pointing out that that case is distinguishable because the applicants there relied on the now repealed s 2(2)(b) of the Intestates’ Estate Ordinance, which was expressly only applied to women and not to men[43].

37.  Obviously, it is premature for me to put forth my view in respect of the issue concerning the definition of “issue” in the Intestates’ Estate Ordinance.  Suffice it for me to say that, on a broad-brush approach, Mr Xiao’s case does not appear to me to have enjoyed a high probability of success in his claim, such that the merits thereof can resist an order for security to be made against him.

(4)     The order for security would not stifle Mr Xiao’s claim

38.  The point regarding the stifling of Mr Xiao’s claim can be disposed of briefly.  In response to the original request for $900,000, Mr Xiao deposed in his supplemental affirmation that, given his financial situation, it was highly probable that he would be unable to proceed with his claim if he was burdened with Mr Siu Junior’s security for costs[44]. However, Mr Xiao made no response after the claimed amount for security was reduced to $521,080.  Even if I accept that a sum of $900,000 would have stifled Mr Xiao’s claim, there is no evidence before me that the reduced amount would have the same effect.

39.  Indeed, Mr Yeoh submitted during the hearing that Mr Xiao was able to pay the security, but that he was unwilling to do so.

40.  Also, in my view, Mr Xiao’s offer of security in the sum of $400,000 is a clear indication that the order for security for costs would not stifle his claim against the defendants.  I also agree with Mr Tam that the facts that Mr Xiao had been unemployed 6 years ago and formed his business in 2017 could not reflect his current financial situation and could not assist him in this regard.

41.  I do not accept as a matter of fact that the order for security for costs would stifle Mr Xiao’s claim.

(5)     Whether Mr Xiao has accepted liability to pay security is not material

42.  Both Mr Tam and Mr Yeoh had spent quite a bit of time on the issue whether Mr Xiao accepted liability to pay security.  I have already set out Mr Tam’s argument in paragraph [15] above.  During the hearing, Mr Yeoh responded that what Mr Xiao did in the relevant letter was to accept Mr Siu Junior’s proposal to negotiate on quantum.  The letter should not be interpreted as an acceptance of liability to pay security for costs.

43.  For the reasons I set out above, after Mr Siu Junior’s withdrawal of the counterclaim, I cannot see any valid grounds for Mr Xiao to resist Mr Siu Junior’s application for security for costs.  Accordingly, it is not necessary for me to determine whether or not Mr Xiao had in fact accepted liability to pay security.  Even if Mr Xiao did not accept liability to pay, there is no reason for me not to exercise my discretion to make an order for security against him.

(6)     Quantum of security

44.  As mentioned above, Mr Siu Junior requested a sum of $521,080 as the security of his costs up to and including the exchange of witness statements. Mr Yeoh criticized the amount as excessive, especially the hours spent on communication with various parties (39 hours) and on the professional works (56 hours at solicitor’s costs and 22 hours at trainee’s costs).  Mr Tam responded, and I agree, that the Court should not undertake a mini-taxation in fixing the quantum of the security, and the Court should instead assess the amount on a broad-brush approach.

45.  Mr Yeoh further criticized the quantum on the basis that the skeleton bill failed to differentiate between the costs to defend the claim and the costs to prosecute the counterclaim.  I do not agree with Mr Yeoh that Mr Siu Junior’s bill was so unhelpful that the Court should dismiss the application for security for costs on this ground. 

46.  In this respect, Mr Tam accepted during his closing submissions that the Court might apply a certain discount on the claimed amount so as to reflect Mr Siu Junior’s subsequent withdrawal of the counterclaim.  I agree.  On a broad-brush approach, I find it fair and just to apply a 50% discount on the amount claimed by Mr Siu Junior.  Accordingly, I fix the amount of security at $260,000, after rounding up. 

47.  I would also allow Mr Xiao to furnish the security within 14 days from the date of this decision.

COSTS

48.  I have not heard any submissions from the parties in respect of costs. However, at this stage, I would like to make the following preliminary observations:-

(1)     Naturally, the starting point is the principle that costs should follow the event.  In the view of the result of this application, Mr Siu Junior may be regarded as the successful party.  In normal course of event, he would be entitled to costs.

(2)     However, after the Civil Justice Reform, the said principle that costs follow the event is no longer a prescribed usual order.  In exercising its discretion as to costs, the Court should have regard to O 62, r 5 of the Rules of the District Court, in particular the conduct of all the parties (r 5(1)(e)). According to r 5(2), the conduct of the parties includes:-

(a)     whether it was reasonable for a party to raise, pursue or contest a particular allegation or issue;

(b)     the manner in which a party has pursued or defended his case or particular allegation or issue;

(c)     whether a claimant who has successful in his claim, in whole or in part, exaggerated his claim; and

(d)     conduct before, as well as during, the proceedings.

(3)     Firstly, it should be noted that the success of this application was largely due to Mr Siu Junior’s (one may opine, belated) withdrawal of his counterclaim.

(4)     It is not unreasonable to infer from the withdrawal of counterclaim that the “same issue” ground and the “real attacker” ground are indeed meritorious, otherwise there would not be any reason for Mr Siu Junior to make such an application at the eleventh hours.

(5)     If the “same issue” ground and the “real attacker” ground are meritorious, then it cannot be said to be unreasonable for Mr Xiao to contest the application on both liability and quantum, leaving aside the hotly contested point regarding Mr Xiao’s alleged acceptance of liability to pay.  It should be marked that I did not make any ruling on whether Mr Xiao did in fact accept liability to pay security.

(6)     Even if I take into account the alleged acceptance of liability, the end result of this application ($260,000) is very close to the initial offer made by Mr Xiao ($200,000)[45], and indeed fails to bid the subsequent offer of his ($400,000)[46]. I of course do not lose sight of the fact that the result of this application is largely affected by subsequent developments of the case, notably the transfer of proceedings to the District Court and the withdrawal of counterclaim.  That said, the reality remains that Mr Siu Junior fails to achieve a result, which is close to what he had asked for.

(7)     Having said the above, it should also be borne in mind that, based on the materials before me, Mr Xiao did not renew his offer after the transfer of proceedings to the District Court, or after Mr Siu Junior’s reduction of the claimed amount of security.  Instead of doing so, Mr Xiao insisted on contesting on both liability and quantum.

(8)     Finally, it should also be taken into account that the grounds of opposition put forth by Mr Xiao in his affirmations are unmeritorious and rejected by the Court. 

49.  As observed in the preceding paragraph, neither Mr Xiao nor Mr Siu Junior could be said to have conducted this application in a flawless manner. In my view, the matters stated above provide justification for me to depart from the normal rule that costs follow the event.  I take a provisional view that both Mr Xiao and Mr Siu Junior should bear their own costs of this application.  I would make an order nisi to that effect, which will become absolute after 14 days unless there is an application to vary the order.

DISPOSITION

50.  As regards Mr Tam’s oral application to withdraw the counterclaim (as well as Mr Siu Junior’s summons filed herein on 17 November 2020), I make the following order:-

(1)     Leave be granted to the Plaintiff (By Counterclaim) to withdraw his Counterclaim herein entirely, and paragraphs 65 to 75 of the Defence and Counterclaim filed herein on 5 November 2018 be struck out consequentially;

(2)     Costs of this application (and the summons filed herein on 17 November 2020), as well as the costs of, incidental to and occasioned by the Counterclaim be paid by the Plaintiff (By Counterclaim) to the 1^st and 2^nd Defendants (By Counterclaim) in any event, the amount of which is to be taxed if not agreed; and

(3)     The hearing of the Plaintiff (By Counterclaim)’s summons filed herein on 17 November 2020, which is returnable on 3 December 2020, be vacated.

51.  As regards Mr Siu Junior’s application for security for costs, I make the following order:-

(1)     The 1^st and 2^nd Plaintiffs (by Original Action) do provide security for the costs of the 2^nd Defendant (by Original Action) from the commencement of these proceedings up to and including the exchange of witness statements as to facts by paying a sum of $260,000 into Court within 14 days from the date of the Order herein and that in the meantime all further proceedings be stayed;

(2)     If the 1^st and 2^nd Plaintiffs (by Original Action) fail to provide security in accordance with paragraph (1) herein above, the claim by the 1^st and 2^nd Plaintiffs (by Original Action) against the 2^nd Defendant (by Original Action) be dismissed with costs without any further order of the Court; and

(3)     The said sum of $260.000 be paid by a deposit into an interest-bearing account and that the interest thereon is to be utilized as security for costs.

52.  There be also an order nisi that both the 1^st and 2^nd Plaintiffs (by Original Action) and the 2^nd Defendant (by Original Action) are to bear their own costs of this application.  Unless there is an application for variation, this order nisi will become absolute after 14 days from the date hereof.  To facilitate the variation application:-

(1)     The applicant may apply to vary the costs order nisi by lodging a written submission (not exceeding 5 pages) with authorities (if any) within 14 days from the date hereof;

(2)     The respondent may within 7 days thereafter lodge a written submission in response (not exceeding 5 pages) with authorities (if any); and

(3)     The Court will determine the application on the papers without an oral hearing.