EDWARD LAU, WONG & LOU (A FIRM) AND ANOTHER v. YIU HO MING HERMES AND OTHERS

HCMP 1047/2018

[2021] HKCFI 3804

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 1047 OF 2018

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DECISION

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Ruling

1.  Pursuant to the order which I made on 14 July 2021, the issue of the costs of the 1^st and 2^nd applicants is to be disposed of on the papers.

2.  Having considered the written submissions lodged by (a) the applicants, (b) the 1^st to 9^th respondents, and (c) the 10^th respondent, I now order that the applicants’ costs in these proceedings, including all reserved costs and the costs incurred on the service of the originating summons on the 10^th respondent out of jurisdiction, be borne by the 10^th respondent, to be taxed if not agreed.

3.  I also make the following costs orders nisi:

(1)  The 10^th respondent do pay the applicants’ costs of this paper application, to be taxed if not agreed.

(2)  The 10^th respondent do also pay the 1^st to 9^th respondents’ costs of this paper application, to be taxed if not agreed.

4.  I set out my reasons below.

5.  Parties have filed fairly lengthy affidavit evidence for this paper application.  It is unnecessary to deal with all the points that arise from it.  It is clear from the chronology and the correspondence exchanged between the parties that the 10^th respondent had been behaving in an unreasonable and unco-operative manner in opposing the applicants’ application for payment into court.  The 10^th respondent should be held responsible for the applicants’ costs which could have been saved if he had acted reasonably and consented to the application at an earlier stage.

Background

6.  The 1^st to 8^th respondents and the 10^th respondent are siblings.  The 9^th respondent is a corporate vehicle acquired by their late father for holding the family assets.  After the death of the father in 1998, disputes arose between all the respondents on the one hand and the younger brother of the father (the uncle) on the other.  Litigation followed.  Eventually, in 2009, in HCA 821/2008, the uncle was ordered to pay the sum of $21,807,023.15 (“the Sum”) together with interest and costs to the respondents.

7.  The 1^st applicant was the firm of solicitors acting for all the respondents in the above action. 

8.  The Sum was held by the 1^st applicant for all the respondents.

9.  However, among the respondents, there was disagreement as to the release and distribution of the Sum as between them.  The 1^st applicant was therefore unable to obtain unanimous instruction from the clients over the Sum.  The firm had then held on to the Sum.

10.  In 2016, there was exchange of correspondence between the 1^st applicant, the 1^st to 9^th respondents and the 10^th respondent regarding, among other things, the 1^st applicant’s proposal to pay the Sum into court.  No consensus was reached.

11.  In July 2018, the 1^st applicant issued the originating summons.

12.  Materially for present purposes, before issuing the originating summons, the 1^st applicant wrote to Messrs Lennon & Lawyers (“Lennon”), acting for the 1^st to 9^th respondents, and Messrs Mayer Brown JSM (“Mayer Brown”), who acted at that time for the 10^th respondent on a related matter, attaching a draft originating summons and a draft supporting affirmation and seeking all the respondents’ consent for the Sum to be paid into court pursuant to section 62 of the Trustee Ordinance.

13.  While Lennon wrote to confirm that the 1^st to 9^th respondents would agree to the intended application, Mayer Brown replied to the 1^st applicant by letter dated 30 May 2018 as follows:

“We do not have instructions to [your letters seeking consent] and we see no basis for you to assume that our client has no objection to your intended application.” (italics added)

14.  One should note that in the letter Mayer Brown referred to the 10^th respondent as “our client”.

15.  In light of the letter, the 1^st applicant proceeded to commence the present proceedings. 

16.  The 1^st applicant tried to serve the originating summons and the supporting affirmation on the 10^th respondent via Mayer Brown.  But Mayer Brown wrote back on 26 July 2018 stating that they were still unable to obtain instructions and returning the documents.  They also stated that they would inform the 1^st applicant when they had instructions on the matter.

17.  Given that reply, the 1^st applicant proceeded to take steps to serve the proceedings on the 10^th respondent out of jurisdiction at an address in Toronto, Canada.  Those steps included seeking leave to serve out from master and engaging Toronto lawyers and a Toronto private investigator to effect service.

18.  Eventually, the originating summons was served on the 10^th respondent in Toronto on 19 June 2019.  That would be almost one year after it was issued.

19.  On the last day before the deadline, Mayer Brown lodged an acknowledgment of service on behalf of the 10^th respondent contesting the application. 

20.  Subsequently, the 10^th respondent filed an affirmation opposing the payment in application.  He stated his ground as follows:

“All the Respondents are contactable and are legally represented. The Applicant should continue to hold the Sum pending the instructions from the Respondents. … there are other procedures available to resolve any disagreement among the Respondents and an application under s. 62 of the Trustee Ordinance is unnecessary. There is no justification for the Applicant to make the application.”

21.  Subsequently, the 1^st applicant ceased practice as a law firm and the 2^nd applicant took over the Sum.  Leave was granted in December 2019 to add the 2^nd applicant as a party.  Other amendments were incorporated, including an alternative relief that the applicants do pay the Sum to the respondents in joint names or otherwise as the court may direct.

22.  In the end, in July 2020, all parties signed a consent summons agreeing that the applicants would pay the Sum into court and the issue as to whether the 1^st to 9^th respondents on the one hand and the 10^th respondent on the other should be entitled to the Sum be adjourned for substantive argument.  Further, parties agreed that upon the payment in, the applicants would be excused from further participating in the proceedings.  An order was made in terms of the consent summons on 10 July 2020.

23.  The payment in was made by the applicants. Their costs now form the subject-matter of this paper application.

Discussion

24.  In my view, the applicants’ application for leave to pay the Sum into court has been properly made.  At the conclusion of the action in HCA 821/2008 in 2009, the 1^st applicant should have paid the Sum to the respondents.  It was only due to the fact that the latter could not give unanimous instruction that the 1^st applicant held on to the Sum.  In the circumstances, it was reasonable and legitimate for the 1^st applicant to make the application so as to extricate itself from the dispute among the respondents, which has nothing to do with it and which has remained unresolved all these years.  The 10^th respondent’s reason for opposing the payment in as stated in his affirmation is not a good one.

25.  In his written submissions, the 10^th respondent contends that before the 1^st applicant received the Sum, it was fully aware that there would be dispute between the respondents on its entitlement.  The applicants have not explained why the 1^st applicant was minded to propose to pay in the Sum in 2016.  It follows, the 10^th respondent contends, that the applicants should hold the Sum on trust until the issue of entitlement is resolved. 

26.  I do not accept that argument.  The 1^st applicant only came to hold the Sum because there was a dispute between the respondents (which is still ongoing).  There is nothing in the evidence to suggest that the 1^st applicant had agreed to hold on to the Sum until the dispute is resolved, no matter what and however long the resolution would take.  There is also nothing in the evidence to suggest that it would be fair to compel the applicants to continue to hold the Sum until the dispute is resolved. 

27.  The proposed payment in is a suitable mechanism to invoke to resolve the impasse experienced by the 1^st applicant since 2016. 

28.  In the end, the 10^th respondent agreed to the payment in.  If he had taken this stance earlier when being approached by the 1^st applicant in 2018, the 1^st applicant would not have had to spend time and costs in these originating summons proceedings to obtain the payment in order which was eventually agreed by the 10^th respondent two years later.  The costs incurred by the applicants in the meantime should be borne by the 10^th respondent because of the latter’s unreasonable and unco-operative behaviour.

29.  As an alternative position, the 10^th respondent argues that the applicants’ costs should be paid out from the Sum.  By the order which I made on 25 January 2021, the Sum (and related interest) was paid to Lennon, solicitors for the 9^th respondent, subject to the 1^st to 9^th respondents’ undertaking that the Sum shall not be dealt with or disposed of pending the outcome in related proceedings.  The 10^th respondent further asks that the costs so paid to the applicants shall be recoverable as costs in the cause of those related proceedings.  The effect of the proposal is that the applicants’ costs should ultimately be borne by the unsuccessful claimant to the Sum.

30.  I do not consider that to be an appropriate order to make as between the 1^st to 9^th respondents and the 10^th respondent.

31.  I have found that the 10^th respondent had acted unreasonably in relation to the payment in application.  On the contrary, since 2018 and before the originating summons was issued, the 9^th respondent had acted reasonably in consenting to the payment in application.  In the circumstances, all the costs incurred by the applicants in these proceedings have effectively been caused by the stance of the 10^th respondent, not the 1^st to 9^th respondents. 

32.  The payment in application is a straightforward application. It should have been dealt with and disposed of speedily and with minimal time and costs.  On the contrary, much time and costs had been spent on it because of the stance of the 10^th respondent.  The main battleground among the respondents is in the related proceedings and has nothing to do with the applicants.  It is proper for me to order that the 10^th respondent should now bear the costs which the applicants had been forced to incur here.

33.  For the above reasons, I exercise my discretion to make the costs order stated in paras 2 and 3 above. 

The applicants’ costs on service out

34.  I should add that when leave was granted to the 1^st applicant to serve out of jurisdiction, master already ordered that the applicants’ costs for service out be costs in the cause. 

35.  Here, the applicants have succeeded in obtaining the payment in order.  Furthermore, the service out order was made as between the 1^st applicant and the 10^th respondent.  It would follow from the master’s order that the 10^th respondent should bear such costs.

36.  In any event, I should add that the 10^th respondent had apparently acted in an obstructive manner by refusing to give instruction to Mayer Brown to accept service in July 2018 but eventually instructed the same firm to acknowledge service one year later in July 2019 after service out was effected.  (And the same firm has been acting for him throughout these proceedings up to this day.)  The applicants had been forced to spend time and incur costs to effect service out which apparently could have been avoided. 

37.  The 10^th respondent has so far remained silent as to why he failed to instruct Mayer Brown to accept service in the first place.  It is only proper for him to bear the resulting costs. That would have been the order which I would make if master had not made the “costs in the cause” order when he granted leave.