H.K.F.S. FUND LTD v. 羅芷澄 AND OTHERS

DCCJ 3030/2023

[2026] HKDC 507

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 3030 OF 2023

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DECISION

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1.  The plaintiff appeals against a Decision on Costs by Master K.W. Yan dated 26 September 2025 (“Decision on Costs”), whereby it was ordered that:

a.     Costs of this action (including the costs of the Summons dated 21 July 2023) before 14 August 2023 be paid by the plaintiff to the 1^st to 4^th defendants on a party and party basis;

b.     Costs of this action (including the costs of the Summons dated 14 August 2023 and submissions on costs) from 14 August 2023 be paid by the plaintiff to the 1^st to 4^th defendants on indemnity basis; and

c.     All costs above are to be taxed if not agreed, with certificate for counsel.

2.  By way of the appeal, the plaintiff seeks for an order that:

a.     There be no order as to costs in this action (including the costs of the Summons dated 23 July 2023) before 14 August 2023;

b.     There be no order as to costs (including the costs of the Summons dated 14 August 2023 and submissions on costs) from 14 August 2023; and

c.     Costs of this appeal be paid by the 1^st, 2^nd, 3^rd and 4^th defendants to the plaintiff with certificate for counsel.

Background

3.  The plaintiff, under the previous name “Hong Kong Student Travel Bureau Limited”, was a company established 1977 to organise overseas exchange trips and hosting academic activities for university students in Hong Kong. It changed to its current name in 1994 and its nature was to provide funds to university students to host events.

4.  The plaintiff’s Articles of Association from 1993 required that its Board of Directors would be composed of 6 student representatives Directors (“Student Directors”) (4 elected under certain criteria through the Hong Kong Federation of Students (“HKFS”), and 2 appointed under certain criteria by the so elected Student Directors) and 6 honorary directors who were permanent (“Honorary Directors”).

5.  One of the Honorary Directors is Mr. Li Nai Yiu (“Mr. Li”).

6.  The plaintiff also holds 3 properties: 2 of which were used as office of the plaintiff and HKFS, and the third was rented out for rental income.

7.  It is of note that HKFS is a society registered under the Societies Ordinance, Cap. 151 (“the SO”) with registration no. 11797. It is not a distinct legal person and thus not capable of being sued as a distinct party and is represented by its office bearers.

The background as provided by the plaintiff

8.  According to the plaintiff (paragraphs 14 to 24, Affirmation of Li Nai Yiu, Hearing Bundle p.156-159), the plaintiff was informed in 2016 that its bank account has to be closed due to administrative reasons by the bank, thus Mr. Li and an ex-Student Director (who was still the signatory for the bank account) arranged to close the account and withdraw the balance of some HK$1,718,554.43.

9.  It was arranged that this sum be paid into the HSBC bank account held by HKFS (“HKFS bank account”) and eventually there was a written agreement dated 2 October 2018 signed by Mr. Li and the then Chairman of the Standing Committee of HKFS (the “Trust Agreement”, Hearing Bundle p. 319-320) stating, inter alia, that:

a.     HKFS agreed to hold the plaintiff’s funds on trust, and collect investment and rental income on behalf of the plaintiff;

b.     HKFS could only deal with the plaintiff’s funds according to the plaintiff’s directions, upon receiving written authorisation from an authorised representative of the plaintiff;

c.     HKFS agreed to provide all necessary assistance to the plaintiff in complying with the relevant laws and regulations, including complying with requests from the plaintiff’s auditor.

10.  According to Mr. Li (paragraphs 25 to 74, Affirmation of Li Nai Yiu, Hearing Bundle p. 159-170), since 2022, there were a series of suspicious and dubious activities detected by Mr. Li and other Honorary Directors which included:

a.     Removal of all the Honorary Directors as registered directors at the plaintiff’s records at the Company Registry;

b.     Dubious appointments Student Directors by HKFS

c.     Dubious appointment of a new auditor for the plaintiff

11.  I need not go into the details of all such suspicious circumstances but suffice to say that all these were done without knowledge or approval of the Honorary Directors, who has appointed Messrs. Paul W. Tse, Solicitors (“PWT”) to investigate and deal with such matters.

12.  The Honorary Director’s attempt to investigate did not go far: HKFS, via its solicitors, Messrs Kenneth Lam, Solicitors (“KL”), resisted such by asserting that the Honorary Directors had no right or authority to verify or examine the eligibility of the Student Directors by HKFS.

13.  In any case, on 29 October 2022, a Meeting of the Board of Directors of the plaintiff resolved, amongst others, that the funds held by HKFS on trust for the plaintiff should be retrieved from HKFS or whoever acting on its behalf.

14.  On 7 November 2022, a further Meeting of the Board of Directors of the plaintiff resolved to amend the Articles of Association such that HKFS would no longer play any role in appointing Student Directors for the plaintiff.

15.  In April 2023, Mr. Li learned from the out-going auditor (appointment of which was never approved by the Honorary Directors in the first place) that it had only obtained an oral confirmation every year from a (purported) Student Director that the HKFS bank account still held the plaintiff’s funds.

16.  According to Mr. Li (paragraphs 77 - 83 of the Affirmation of Li Nai Yiu, Hearing Bundle p. 171-172), investigation by the plaintiff at this time showed that D1 to D3 were the current registered members / office bearers of HKFS and D4 was an authorised signatory of the HKFS bank account.

17.  Thus, PWT issued letters of demand (“the Demand Letters”) for return of the plaintiff funds held on trust (being HK$2,470,727) by HKFS to D1 to D4 in May and June 2023. (There was a minor typo as the amount should in fact be HK$2,470,627.)

18.  There was no response so in June 2023, the plaintiff’s solicitors issued final reminders to D1 to D3 and also a similar demand letter to HKFS at its registered address.

19.  There was again no response.

The history of the current action

20.  On 20 July 2023, the plaintiff issued the current action by way of a generally endorsed Writ of Summons whilst, at the same time, filed an ex-parte Summons seeking a Mareva Injunction against D1 to D4 freezing the HKFS bank account up to the sum of HK$2,470,627. The injunction was granted (with some later variation).

21.  D3 filed an Affirmation in Opposition dated 27 July 2023 and raised that:

“I was only a student of Lingnan University…from September 2018 to August 2022…I have also ceased to be a member (let alone an office bearer) of the HKFS…” (paragraph 5(2) of the Affirmation of Chan Wing Yan, Hearing Bundle p.214).

22.  D3 also admits that she has not replied to the demand letters:

“…because I simply have no control of the sum and was no longer a member or office bearer of HKFS…” (paragraph 10 of the Affirmation of Chan Wing Yan, Hearing Bundle p.216)

23.  In the same paragraph, D3 asserted that:

“…the plain fact is that there is and was simply no evidence that the sum has been dissipated by anyone, whether myself or any other defendant. For myself, I can confirm that I have not dealt with, and have not in a position to deal with, the sum claimed by the Company…or any other property of the HKFS.”

24.  As a passing comment, I find the drafting rather ambiguous. I note that D3 did not claim as “the plain fact” that the sum has not been dissipated but just that there was “no evidence” of such, and further that, for herself, she has not dealt with the trust funds.

25.  I wonder what sort of comfort that would afford the plaintiff which was clearly suspecting that the trust funds has been embezzled by HKFS.

26.  In any case, the plaintiff’s solicitors, on receiving D3’s Affirmation, wrote to the Licensing Office of the Hong Kong Police the very next day (28 July 2023, and then again on 31 July 2023) seeking relevant records held under the SO (“Licensing Records”).

27.  The Licensing Office replied on 1 August 2023 (Hearing Bundle p. 464-465) stating that the Licensing Records showed that the office bearers of HKFS were:

a.     From 1 August 2022 to 19 July 2023: D1, D2 and D3;

b.     From 20 July 2023 onwards: D2, Mr. Hong Cheuk In (“Mr. Hong”) and Mr. Lai Cheuk Yin (“Mr. Lai”); and

c.     From 1 April 2021 to 29 September 2021: D4

28.  As such, it would appear that the Licensing Records confirmed that D1 to D3 were the office bearers of HKFS on record at the time the Demand Letters were released.

29.  In D3’s 2nd Affirmation, she claimed, in support of her claim that she was no longer the official bearer of HKFS, along the line of argument that the HKFS membership requirement was that the applicant must also a member of a member student unions and as such, since she has graduated, she has ceased to be a member of HKSF and thus an office bearer of the same.

30.  Further, D3 raised the argument that according to Section 10 of the SO, it was the duty of the society to inform the Societies Office to “update the record within 1 month of any change” so she “was not in a position to update” because she had already ceased to be a member or office bearer of HKFS (paragraphs 9-11 of the 2^nd Affirmation of Chan Wing Yan, Hearing Bundle p. 223-227).

31.  In any case, in view of the Licensing Records showing Mr. Hong and Mr. Lai as two of the current office bearers, the plaintiff took out a joinder application dated 14 August 2023 (“the Joinder Summons”) for, amongst others:

a.     Leave for the plaintiff to join Mr. Hong and Mr Lai as the Intended 5^th defendant (“D5”) and Intended 6^th defendant (“D6”);

b.     The defendants be appointed to represent all the current and/or previous office bearers of HKFS since 1 January 2022 until present, as may be the case at the material time.

32.  D3 filed a 3^rd Affirmation on 20 February 2024 to oppose the Joinder Summons, stating much the same regarding having graduated and no longer an office bearer and thus no “same interest” shared to be a representative of all the current and/or previous office bearers.

33.  D1 filed an Affirmation in Opposition on 20 February 2024 on much similar grounds: that she had ceased to be an office bearer on 31 March 2022 and had resigned her membership of the Lingnan University Student Union on 1 August 2023, and that it was “not my position to update” the Licensing Records according to the SO etc. (paragraphs 5 to 7 of the Affirmation of Law Tsz Ching, Hearing Bundle p. 243-249).

34.  D4 filed an Affidavit in Opposition on 21 February 2024 also on much similar grounds: he ceased being an authorised signatory of HKFS around 15 May 2021, ceased being office bearer of HKFS since 31 March 2021, having graduated around July 2021 so no longer a member of HKFS, and that it was “not my position to update” the Licensing Records according to the SO etc. (paragraphs 6-9, Affidavit of Suen Ho Yin Anthony, Hearing Bundle p. 262 - 269).

35.  In the meantime, the Mareva Injunction (as varied) was continued until further order of the court.

36.  Before the Joinder Summons was heard, on 2 September 2024, KL wrote to PWT on a “without prejudice sane as to costs” basis, offer to settle the action by, inter alia, payment of the subject trust funds of HK$2,470,627 (Hearing Bundle p. 711-732).

37.  There were further correspondence between the parties because they could not agree on costs: the plaintiff sought for “no order as to costs” but D1 to D4 sought costs to be paid by the plaintiff.

38.  In the circumstances, the plaintiff accepted the settlement and on 3 October 2024, the court granted leave for the plaintiff to discontinue the action against D1 to D4 with costs to be reserved to be dealt with by way of paper disposal (Hearing Bundle p. 135-136).

39.  D2 filed an Affirmation on 21 February 2025 in support of the costs order sought and claiming along a similar line of argument of HKFS membership requirement and stated that he had ceased to be an office bearer of HKFS on 31 March 2022, ceased to be a member of HKFS since 9 August 2022 and has already left Hong Kong on 2 September 2021 (paragraphs 18 and 24 of the Affirmation of Kwok Wai, Hearing Bundle p. 291, 297).

40.  Master K.W. Yan made the above mentioned Decision on Costs by way of paper disposal.

Legal Principles

Appeal against a Master’s decision on costs

41.  It is not in dispute that an appeal against a Master’s decision on costs only is an appeal against the discretion of the Master. Thus, it carries a high threshold in that:

“…such application should not be allowed unless it can be shown that the order made by the Master was unreasonable or erred in law, i.e. if he either failed to take into account proper matters or took into account matters that should not have been taken into account.” (Paul Y-ITC Construction Ltd v Kin Shing Co. Ltd [1999] 1 HKC 511)

42.  It is not for the court to decide to allow the appeal on the basis that the Master should have exercised his discretion differently, but that the Master’s decision is either “wrong in principle” or “plainly wrong” (Lam Wai Kong v Lam Ying Kit [2025] 2 HKC 247).

43.  Further, it is trite that such an appeal “would not be dealt with by an actual rehearing of the matter” (Li Dianxiao v Capital Century Textile Co. Ltd [2025] HKCFI 1508). 

The Decision on Costs

44.  In summary, the Learned Master’s consideration (Hearing Bundle 144-148) ran like this:

a.     The general position is that “a discontinuing plaintiff should pay costs unless it can demonstrate, without the need to go to trial, that his case is so strong that he is bound to win had it gone to trial and therefore he was justified in commencing the action in the first place” (paragraph 4 of the Decision on Costs)

b.     The Learned Master noted that the payment of the sum held on trust was settled by HKFS and the settlement involved D1 to D4, the Intended D5 and D6 as well as HKFS on a without admission of liability basis. Therefore, the Learned Master cannot draw any inference that the plaintiff would bound to win against D1 to D4 “but for the settlement” (paragraph 5)

c.     The Statement of Claim pleaded that D1 to D4 were registered office bearers at various times but none of the relief sought in this action related to the D1 to D4 in their own capacity (paragraph 6)

d.     From the evidence by D1 to D4, the Learned Master was satisfied that “none of them were the office bearers of HKFS at the time when the action commenced, i.e. 20 July 2023” (paragraph 7).

e.     The burden of selecting the correct defendants rest upon the plaintiff. There is no explanation why the plaintiff did not sue HKFS or at least name it as one of the defendants, or in addition make enquiries with HKFS (paragraph 9).

f.     D1 to D4 has no obligation to assist the plaintiff regarding replying to the Demand Letters, and also has no obligation to update the Licensing Records (paragraph 10).

g.     Upon receiving the Licensing Records on 1 August 2023, the plaintiff should not have maintained action against D1, D3 and D4 and worst, took out the Joinder Summons (paragraph 12).

h.     Further, the affirmation from D3 should raise a “red flag” that the Licensing Records were not accurate, and the Plaintiff should have carried out more investigation (paragraph 14).

i.     As for D2’s position, the Master finds that the plaintiff was supplied with documents on 18 August 2023 showing that D2 was no longer the office bearer of HKFS by 1 October 2022 and thus should have taken steps to investigate further (paragraph 15).

j.     As for D4, the plaintiff failed to show evidence to support his belief that D4 was the authorised signatory at the time of commencing the action (paragraph 16).

k.     There is no evidence to support D1 to D4 has any interest in HKFS in support of the Joinder Summons (paragraph 17)

l.     Thus, the conduct of the plaintiff was “utterly bad” in taking out the Joinder Summons and maintaining the action against D1 to D4 (paragraph 18)

m.   The Learned Master accept that the challenge of the plaintiff as to D2’s involvement in this action may have merit, but it would be a matter of taxation (paragraph 19)

Consideration

The legal ground

45.  The plaintiff argued that the Master erred in law in applying the “general position” without considering that this should be displaced in the current case because the plaintiff was the “effective winner”.

46.  First of all, one should revisit the first principle that “costs should follow the event except when it appears to the Court that in the circumstances some other order should be made…” (Order 62 Rule3(2) The Rule of the District Court, Cap. 336H), and that the party seeking to displace this first principle bears the burden to show such circumstances (Mariner International Hotels Ltd v Atlas Ltd (No. 2) [2007] HKCU 669).

47.  A party applying to discontinue an action or withdraw an application he commenced would be one of such “events”.

48.  This is akin to someone starting a war but withdrew his army from the field before the battle. The general presumption must be that he is admitting defeat before the battle (perhaps after seeing the strength of the opposing army) and, having started the war in the first place, there is no reason why he should not be asked to pay for the costs, in this hypothetical scenario, of the other side raising his army. If he claims that he is withdrawing his army for some other reasons other than an admission of defeat, then he must show that he is “bound to win” but for those reasons for withdrawal.

49.  Thus, the “general position” that “a discontinuing plaintiff should pay costs unless it can demonstrate, without the need to go to trial, that his case is so strong that he is bound to win had it gone to trial and therefore he was justified in commencing the action in the first place” is just a reiteration of this first principle that “costs should follow the event”.

50.  However, there is another scenario when a party withdraws his army before the battle.

51.  In this alternative scenario, if someone started a war fighting for the kingdom, and the opposing army, raised by the current king, simply gave up and handed over his crown before the battle. Then the party would also withdraw his army from the field: he has already substantially won what he intends to fight for so there was no need to go into battle. Of course, he should not be asked to pay for the costs of the (now disposed) king’s army. Instead, he might even be entitled to ask for his own costs as the effective victor without a fight.

52.  This is the “effective winner” scenario. This should not be a unique legal principle: it is only another reiteration of the first principle that “costs should follow the event”.

53.  There should not be any confusion between the two scenarios: although both involves withdrawal of an army before the battle, “withdrawal” alone does not constitute the entire circumstances of the “event”: the former “event” is “withdrawal presumably as an admission of defeat” and the latter “event” is “withdrawal as a victor without the need for a fight”.

54.  Therefore, there should not be a blanket application of this “need to demonstrate bound to win” position to all cases without first identifying what constitutes the circumstances of the “event” for the application of the first principle of “costs should follow the event”.

55.  Thus, if the “event” is when the plaintiff applies to withdraw after accepting a substantial offer for settlement and could be considered the “effective winner” without a fight, then the “need to demonstrate bound to win” position is not applicable: the fact that he got what he has asked for must displace the presumption that he withdrew as an admission of defeat.

56.  In other words, the winner needs not demonstrate that he is “bound to win”.

57.  Instead, it is arguable that the presumption of admission of defeat may be reversed in a settlement scenario, that the defendant offers settlement because he perceives that he is “bound to lose”.

58.  This line of argument that the first principle that “costs shall follow the event” is the applicable principle in such “events” are clearly supported:

“…In my view, discontinuation, withdrawal or settlement of proceedings, where merits of the underlying claim have not been substantially determined, potentially give rise to similar considerations on costs. Further, as Mr. Fung has pointed out., in Perrine Chamonix and Pang Chun Kwong, which involved respectively discontinuation and withdrawal, the effective winner principle was applied.

…

It appears to me that the main reason why Mr. Ng embarks upon that analysis is to support his proposition that P has failed to demonstrate certainty of success so as to demonstrate the General Rule. I have explained why in my view whether P was the effective winner is the correct question to ask.” (China Shanshui Cement Group Limited (中國山水水泥集團有限公司) v Ng Sau Man Clifford (伍守文), unrep, HCA 2518/2027)

“…Re Lucky Ford Industrial Ltd…established that as a general rule where an applicant obtains, by agreement prior to a hearing of an application, substantially what by the application he sought, costs will follow the event…” (Re Jessop & Baird (Hong Kong) Limited, unrep, HCCW 352/2016)

“…The court looks into the substance and merit of an application. If, but for a plaintiff’s…application, he…would not have obtained the relief he…seeks…, then he…is the effective the substantive winner of the case. The fact that a defendant consents to the claims by a plaintiff…which renders it unnecessary for the plaintiff…to continue the action…should not be a reason for denying the plaintiff…his…costs. This approach was also adopted by the Court of Appeal in Re Chinese United Establishment Ltd unreported, CACV 214/1995…” (Perrine Chamonix Ltd v Star League Ltd, unrep, HCA 1139/2017

59.  In this case, the plaintiff has obtained the return of the entire trust funds, down to the last dollar. I see no reason why it should not be seen as the “effective winner”.

60.  I cannot see any difference in this line of reasoning even if the defendants claim that the source of funding of the settlement is from some third party and not from the defendants.

61.  The plaintiff has been offered the settlement sum and he accepted it, why would he be bothered with the source of this sum? It would be illogical and unreasonable if the plaintiff, after receiving the settlement sum, still finds himself liable for costs unless he expends more costs in investigating the source of this sum so he can “demonstrate that he is bound to win” against the named defendants. It should make no difference in the plaintiff’s position whether the settlement sum is sourced by the defendants, any intended defendants to be joined or, indeed, any third parties not yet joined but who are concerned with the implications should the action continues further. This is another reason why the “general position” should not apply when a party is the “effective winner”.

62.  Further, as the plaintiff argues, the Intended D5 and D6 has not been joined as a party to this action, and so lacks the locus standi settle the claim.

63.  As such, even if the sum was paid by HKFS as claimed by KL (paragraph 3(b) of KL’s letter dated 2 September 2024, Hearing Bundle p.712) and this payment was “for and on behalf of themselves (D1-D4, the Intended D5 and Intended D6) and HKFS” (presumably whoever the current office bearers of HKFS may be) as found by the Learned Master, the payment can only be a settlement made on behalf of the existing defendants in this action, i.e. D1 to D4. If non-parties wish that they should benefit from the settlement, it would be a matter of them seeking a separate undertaking from the plaintiff which is outside the scope of this action.

64.  Thus, in cases when the plaintiff discontinues because of accepting an offer for settlement, the following principles regarding costs should apply:

“There is no dispute that even if a case is settled except as to costs, the Court still has power to determine which party should be liable for costs. There is no tradition for there to be “no order as to costs” in such a scenario. I am guided by the following principles in deciding costs:

(i)      The Court is to decide if the party seeking costs has substantially obtained the reliefs sought in the litigation…

…

(ii)      The Court will first consider if it is in a position to say what the likely outcome after the trial would have been. If it is not in a position to do so, the order may well be no order as to costs…

…

(v)      A broad brush can be taken by referring to all matters already laid before the Court…

(vi)    The objective is to do justice between the parties without incurring unnecessary Court time and consequently additional cost..”

(Famous Marvel Co. Ltd v Conversant Group Ltd, unrep., HCA 2153/2009)

65.  Similar principles are followed in Glory Empire Global Ltd v Bateson Investment Ltd (HCA 866/2017, [2017] HKEC 1760) and Shih Hua Investment Co. Ltd v Zhang Aidong (No.2) [2025] 3 HKLRD 505.

66.  As such, I am of the view that the Learned Master has erred in law in failing to apply to correct legal principle in this case, in that the “general position” is displaced by the “effective winner” finding.

The factual ground

67.  The Learned Master’s logic ran as such:

a.     The remedy sought in the Statement of Claim was against HKFS;

b.     But the factual finding was that “none of D1 to D4 was the offence bearers of HKFS at the time the action was commenced, i.e. 20 July 2023”;

c.     Thus, the Plaintiff “could not demonstrate that he is bound to win” against D1 to D4 should the case proceed to trial because they were not the current office bearers.

68.  Notwithstanding that, as above, I find the “general position” of “need to demonstrate bound to win” legal principle not applicable in the current case, I also found that it is not reasonable for the Learned Master to find that “none of D1 to D4 was the offence bearers of HKFS at the time the action was commenced, i.e. 20 July 2023”.

69.  From various affirmation, the evidence before the Court are as follow:

a.     D1 claimed that she ceased to be an office bearer since 31 March 2022;

b.     D2 claimed that he ceased to be an office bearer since 9 August 2022;

c.     D3 claimed that she ceased to be an office bearer since 31 March 2021;

d.     D4 claimed that he ceased to be an office bearer since 31 March 2021 and ceased to be an authorised signatory on or around 15 May 2021;

e.     the Licensing Records, the office bearers on record are D1 to D3 from 1 August 2022 to 19 July 2023, and D2, the Intended D5 and Intended D6 since 20 July 2023 etc. (see paragraph 27 above).

70.  To come to a conclusion that “none of D1 to D4 was the offence bearers of HKFS at the time the action was commenced, i.e. 20 July 2023”, the Learned Master must have considered that, since all such evidence appeared to agree that (at least) D1, D3 and D4 were not office bearers either by their own evidence or by Licensing Records since 20 July 2023, he could draw the conclusion that none could be the office bearers by 20 July 2023.

71.  I am of the view that this line of argument is flawed. It is an attempt to conduct a “mini-trial by affidavit”.

72.  The Learned Master failed to consider that, in fact, there is no agreement on the evidence regarding the “cease to act” dates for each defendant with the Licensing Records, and there are no evidence or reasonable explanations of such discrepancies.

73.  If the Learned Master accepted the “not my responsibility to update the records” excuses, then the next question would be: what were reasons that those responsible failed to update the records? The court has no evidence on such.

74.  At the very least, D2 appeared to be still on record as a current office bearer (i.e. after 20 July 2023) despite his evidence otherwise. Why was his name still on the Licensing Records despite the fact that they were updated by the current office bearers (presumably the Intended D5 and Intended D6) on 20 July 2023? Again, the court has no evidence on such.

75.  Indeed, this may mean that the evidence from the defendants are unreliable, or that the Licensing Records are unreliable, or, importantly, that both are unreliable.

76.  It is of note this action is at such an early stage. No defence has yet been filed and served. So pleadings has not closed, let alone the completion of discovery of documents, exchange of witness statements and cross-examination of witness at trial.

77.  Thus, at this stage, it is unreasonable to attempt to “pick and choose” from the available affidavit evidence to draw a conclusion.

78.  Indeed, I find many unanswered questions which may show that the matter before the court at this stage is far from being satisfactory to enable any such conclusion to be drawn.

79.  For example, the defendants claimed that certain HKFS membership requirement meant that they could not hold office after graduation or resignation from their own university student unions. However, up until discovery or even trial, the court may be not in a position to find whether such requirements had been strictly followed, especially given the evidence from Mr. Li as to how HKFS appeared to be flaunting various requirements. Indeed, even the defendants’ own evidence, if to be believed, show that HKFS had not been diligently following the requirement of Section 10 of SO.

80.  Although a purported constitution of HKFS was exhibited by D3, the court simply has no evidence on how HKFS was being run at all the material times which might help determine the roles and liabilities, if any, of the defendants.

81.  Of course, the Learned Master is clearly wrong when he state:

“There is no explanation why the plaintiff did not sue “HKFS” instead, or at least name it as one of the defendants.” (paragraph 9 of the Decision on Costs).

82.  It goes without saying that HKFS is not a legal entity so cannot be sued.

83.  More importantly, when seen from the plaintiff’s point of view, when the Demand Letters were released, the office bearers were D1 to D3 (as the Licensing Records appeared to confirm).

84.  After the action has commenced, upon receiving D3’s affidavit, the plaintiff had acted immediately to investigate with the police, and upon seeing the names of the Intended D5 and Intended D6 as the current office bearers on record, applied to join them in the action in the Joinder Summons.

85.  To me, this seems the proper and reasonable action to take.

86.  As such, I think it unreasonable for the Learned Master criticised the conduct of the plaintiff “utterly bad” in taking out the Joinder Summons.

87.  To hold such a view, the Learned Master is effectively holding the plaintiff responsible for not immediately discontinuing action against D1 to D4.

88.  I am of the view that, at this very early stage of proceedings, it is not unreasonable for the plaintiff to remain sceptical and not to take on face-value all the evidence from the defendants, especially given the evidence of Mr. Li in past dealings with HKFS.

89.  Certainly, one can argue that the plaintiff could have investigated further as to the identities of the current office bearers of HKFS, but this may properly be done by applications of specific discoveries against the Intended D5 and Intended D6 after the Joinder Summons.

90.  In any case, there was no need to incur further time and costs because, seen objectively, whatever the plaintiff has or has not done, it has clearly worked to bring the defendants (and whoever behind them) to offer settlement.

91.  It is interesting to note that despite arguing that the defendants have no obligation to assist the plaintiff when it came to replying the Demand Letters, they (or whoever behind them) obviously saw it quite differently when it came to assisting the plaintiff’s demand for the return of the trust funds.

92.  Indeed, one might question that if KL has always been acting for HKFS (or whoever the current office bearers are) and if HKFS has always been holding the trust funds, why would they not co-operate earlier to return the trust funds instead of dragging the case out for 15 months? As mentioned above, a demand letter was sent to the registered address of HKFS as early as June 2023 and the without prejudice offer was only made on 2 September 2024. There is no evidence that HKFS (and whoever the current office bearers are) and KL have not been aware of this demand.

93.  In order to warrant an order costs on indemnity basis, the Court needs to be satisfied that:

“…either the case is one of a type already recognised in the practice of the court as warranting a taxation on that basis (such as, for example, the contempt cases…) or that there is some feature in the case even more special or unusual than one which would justify a taxation on the common fund basis...the proceedings were…prosecuted…in a manner which constitute…an abuse of process of the court…where the proceedings were scandalous or vexatious, or had been…prosecuted maliciously, or for an ulterior motive, or in an oppressive manner…as to constitute an affront to the court…” (Choy Yee Chun (The Representative of the estate of Chan Pui Yiu) v Bond Star Development Ltd [1997] HKLRD 1327)

94.  Clearly, the above list is not meant to be exhaustive, but given my findings regarding the plaintiff’s conduct in the application of the Joinder Summons, the order for taxation of costs on an indemnity basis is clearly unreasonable and not justifiable.

Conclusion

95.  In conclusion, I am of the view that if the correct legal approach is adopted and if all the matters are properly taken into account, the Learned Master should have found himself not in a position, on existing materials before the court at this very early stage, to say what the likely outcome would be against D1 to D4.

96.  Needless to say, it was the defendants (or whoever behind them) who offered settlement at this very early stage before the Joinder Summons was heard, and so the case was discontinued before the roles and liabilities of D1 to D4 and Intended D5 to Intended D6 could be investigated further.

97.  Therefore, in conclusion, as a broad-brush approach when considering the circumstances of the case, I am of the view that it is just and fair to all the parties that a no order as to costs should be made for the action including the Joinder Summons.

Order

98.  I would therefore allow this appeal and granted the following:

a.     There be no order as to costs in this action (including the costs of the Summons dated 21 July 2023) before 14 August 2023; and

b.     There be no orders as to costs (including the costs of the Summons dated 14 August 2023 and submissions on costs) from 14 August 2023.

99.  There be a cost order nisi that the costs of this appeal be paid by the 1^st, 2^nd, 3^rd and 4^th Defendants to the Plaintiff to be taxed if not agreed, with certificate granted to one Counsel. The costs order be made absolute if no application to vary the same be taken out within 14 days of this Decision, in which case the plaintiff shall lodge and serve a summary bill of costs within 28 days thereafter and the 1^st, 2^nd, 3^rd and 4^th Defendants shall lodge and serve their summary lists of objections 28 days thereafter. The court will proceed to assess costs summarily by way of paper disposal.