TO PUI KUI, the Administratrix of the estate of NG PO SUM, deceased v. NG OI CHE AND OTHERS

HCA 522/2008

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 522 OF 2008

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DECISION ON COSTS

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Background

1.  On 3 March 2014, I handed down judgment dismissing the plaintiff’s claim in this action, giving leave to the parties to file submissions on costs.  On 27 March 2014, pursuant to an application by the 1^st and 3^rd defendants (“1^st defendant and 3^rd defendant”), Ng Kwok Tai, Andrew (“Andrew Ng”), the youngest son of the plaintiff who gave evidence in support of the plaintiff’s case, was joined as a third party for the purpose of costs.  After a contested hearing on 23 June 2014, I made an order that Andrew Ng was to be made jointly and severally liable with the plaintiff for the costs of the 1^st and 3^rd defendants in this action.

2.  A hearing took place on 26 September 2014 where substantive arguments on the costs issues between those parties were advanced.  At the hearing, I also disposed of an issue arising out of the Consent Summons dated 25 July 2014 dealing with costs as between the plaintiff and the 2^nd defendant.  I granted an Order by consent for the costs of the 2^nd defendant in this action to be paid by the plaintiff on a party‑and‑party basis.

3.  I now give my decision on costs as between the plaintiff on the one hand and 1^st defendant and 3^rd defendant on the other.

Issues to be determined

4.  The issues before me are as follows:

(1) Whether the costs of 1^st defendant and 3^rd defendant should be awarded on an indemnity basis.  1^st defendant and 3^rd defendant maintained that it should be on an indemnity basis.  The plaintiff and Andrew disagreed and submit that it should be on a party‑and-party basis.

(2) Whether the plaintiff as administratrix is entitled to be indemnified by the estate of Ng Po Sum (“the Estate”) in respect of:

(i) the costs of the action payable to 1^st defendant and 3^rd defendant by the plaintiff personally; and

(ii) the bill of costs in this action as between the plaintiff’s solicitors and the plaintiff.

5.  The parties confirmed at the hearing that there was no dispute that 1^st defendant and 3^rd defendant should be entitled to a certificate for two counsel.

Indemnity costs

6.  It is well accepted that the court has a wide and unfettered discretion in ordering indemnity costs.  I remind myself of the same principles that I have referred to in paragraph 15 of the judgment of Jackson Xu Zhao Ze & Ano v Tsai Tim Yuen and Ano, HCA 902/2011, 30 August, 2013 in awarding indemnity costs in ordinary hostile litigation.

7.  I am also guided by the principles enunciated by the Court of Final Appeal in Town Planning Board v Society for Protection of the Harbour Ltd (No 2) [2004)] 7 HKCFAR 115, that the discretion was not to be fettered beyond the requirement that indemnity costs must be “appropriate”, that the attributes of the parties and the character of the proceedings are relevant to the exercise of discretion, and that the grounds for making such an order must be connected with the case and might extend to any matter relating to the litigation and the parties in it, and also to the circumstances leading to the litigation, but no further.

8.  I also bear in mind the principles set out by the Court of Appeal in Choy Yee Chun (The Representative of the estate of Chan Fai Yui) v Bond Star Development Ltd [1997] HKLRD 1327, as summarized in Hong Kong Civil Procedure Volume 1 Part A 62/App/12.

9.  In supporting a claim for indemnity costs, Mr Wong, Leading Counsel for 1^st defendant and 3^rd defendant, relied on the evidence led by or on behalf of the plaintiff on the following points, which are set out in the following paragraphs of my judgment in the action:

(1)     §25, that the main reason for bringing the suit was because she believed at the commencement of the action through to the trial that Stephanie had pocketed the money transferred out of the Deceased’s accounts into the HEL accounts, despite she considered it a “small” and “trivial” sum of money disproportionate to the legal costs involved;

(2)     §§ 26 & 30, that the plaintiff admitted she would not have sued had she known that the money was used to defray the funeral expenses of the Deceased and to purchase the car for Andrew;

(3)     §§ 30 & 32 that Andrew Ng readily accepted that Stephanie did not pocket the money, and that the documentary evidence supported that conclusion, but insisted the money was transferred out of the two accounts by Stephanie “by illegal means”; and

(4)     §§ 27 & 29, that the plaintiff was not clear about what the safe deposit box contained.  In an earlier deposition made for proceedings in Canada, she testified the items in the safe deposit box were minor items not worth suing for.

10.  Neither the plaintiff nor her witness Andrew Ng was able to say what real loss was suffered by the Estate.  They advanced no positive case on the precise wrong committed on the Estate, nor any facts or propositions in answer to the documentary evidence relied on by 1^st defendant and 3^rd defendant, let alone to prove any loss suffered.  I was therefore driven by the admissions made by the plaintiff and Andrew Ng as her witness, and the evidence given of the dealings amongst the siblings in the family, to come to the view that the action was far from a true exercise of right to recover any genuine loss suffered by the Estate, nor an action commenced genuinely for the benefit of the estate, but was motivated by revenge, with Andrew manipulating the aged plaintiff.

11.  The above characterization of these proceedings are factors I am entitled to take into account, as are the attributes of the parties.  The ulterior motive or improper purpose in launching this action can readily be inferred from the acrimonious background of the proceedings, with multiple actions having been commenced by the two camps in the family after a major fallout between 2006 and 2007 over the control of family assets, as highlighted by Leading Counsel for the plaintiff, Mr Aiken.  The absence of any real complaint of any identifiable and tangible loss to the Estate makes the proceedings vexatious from the start.

12.  The fact that the aged plaintiff was kept laboring under the mistake of Stephanie having embezzled the funds only further enhances the sense of indignation that the court should feel about the maintenance of these proceedings.  The plaintiff’s ex poste facto attempt to justify the proceedings on the ground of improper procedure does nothing to mitigate its impropriety.

13.  On the other hand, Mr Aiken for the plaintiff urged upon me that the only question of fact was whether the withdrawals from the accounts and from the safe deposit box were authorized by the plaintiff, and the success of these causes of action did not depend on proving any loss suffered by the Estate.  However, I fail to see how the proposition advanced is supported by the case cited (Target Holdings v Redferns [1996] 1 AC 421) or the article in Law Quarterly Review (Equity’s Place in the Law of Commerce by Millett LJ (1998) 114 LQR 214) that discusses its effects: see pp 226-227.  The case cited discusses principles on the liability of a trustee to restore trust funds used to make unauthorized distribution or investment, and how the quantum of the compensatable loss should be fixed.  Its application to a case where no compensatable loss has been suffered or could be found is opaque to me.

14.  Mr Aiken further urges upon me that the case is no more than a piece of ordinary hostile litigation that failed on the basis that the plaintiff was disbelieved on the single issue of fact, ie whether the aforesaid withdrawals were authorized.  I am unable to agree with Mr Aiken on this submission.  There was overwhelming and largely unchallenged documentary evidence showing the withdrawn money went straight into a family account, and to the knowledge of Andrew Ng if not the plaintiff, the amount was used up for the funeral of the Deceased and on purchasing the car used by none other than the plaintiff and Andrew Ng.  On the other hand, the plaintiff and Andrew were unable to advance any positive case on where else the funds required for these purposes could have come from if not from the transferred funds, not to mention prove it to the satisfaction of the court.  Further, the complaint with regard to the loss of the contents of the safe deposit box was admitted to be trivial and not justifying any court action.  In the light of these features alone, I find it impossible to characterize the action or its failure the same way Mr Aiken invited me to.

15.  At the hearing, Mr Aiken stressed the tragic nature of the family dispute between two opposing camps.  He submitted that the basis of taxation of costs in this action should be the same as that ordered in HCA 523 of 2008 (“Action 523”), one of the six actions between the same camps that went to trial in October 2013 before Deputy Judge Seagroatt, with judgment issued on 30 November 2013.  The plaintiff in this action was the successful plaintiff in Action 523, but the judge declined to order a higher basis of taxation of costs than party‑and-party basis.  Mr Aiken’s submission was that Action 523 was also decided on the credibility of the witnesses: just that the result was reversed as the judge rejected the evidence of Philip’s camp instead.  On that basis, it was urged upon me that the costs order in this action should therefore mirror that made by Deputy Judge Seagroatt.

16.  Mr Wong was quick to point out that in fact the Court of Appeal heard the two appeals against Deputy Judge Seagroatt’s judgment earlier and came to a decision in August 2014 reversing the result arrived at by the trial judge.  As it transpired, the Court of Appeal allowed the appeal by the defendants (CACV 281 of 2012) on the issue they lost at trial, namely, validity of the transfer of the shares, and dismissed the appeal by the plaintiff (CACV 1 of 2013) on the issue of forgery that she failed to win at trial.  Mr Aiken considered the success of the defendants in the appeals took nothing away from his argument, as the appeals were won and lost on points of law, and the findings on the credibility of the witnesses were not touched.

17.  I must confess I have huge difficulties with the logic of Mr Aiken’s argument, which was not forewarned in the plaintiff’s skeleton submissions filed.  Despite my misgivings on the relevance of the decisions of Deputy Judge Seagroatt in Action 523 to the issues before me, I find it prudent for me to peruse and consider the relevant judgments in the court below and in the Court of Appeal, copies of which were provided to me after the hearing as agreed.

18.  Having carefully considered Deputy Judge Seagroatt’s judgment dated 30 November 2013, his decision on costs dated 14 May 2014 (the latter of which in fact did not make reference to his decision on the basis of taxation), and the judgment of the Court of Appeal dated 21 August 2014, I am convinced that the decision on the basis of taxation of costs made by the trial judge was of no relevance to my exercise of discretion in the costs issues before me.  The issues in Action 523 were wholly different from those before me, as was the nature of the evidence led and tested.  None of the unusual features indentified in §§9‑12 above was present.  I feel obliged according to established principles to exercise my discretion independently of matters (eg the circumstances of the signing of the share transfer documents) which were not related to this action beyond being part of the general factual background to the parties’ relationship and their disputes.

19.  On behalf of Andrew Ng, counsel Mr Jeffrey Tam adopted the submissions of Mr Aiken, including the point that the case turned on credibility of the witnesses, which I have dealt with above .  In addition, he submitted that the basis of taxation ought not to be a higher basis because the plaintiff’s case is said to be “not without merits”.  In support of the last proposition, he relied on paragraphs in my judgment which set out certain points of inconsistencies in the evidence of 1^st defendant.

20.  It is plain in my judgment that the nature and extent of the inconsistencies identified did not affect my decision on the issues between the parties, less still did it provide any merits to the plaintiff’s claim where none existed.

21.  It was also submitted by Mr Tam on behalf of Andrew Ng that as a witness, he should not be penalized by a higher basis of costs over and above having been ordered to jointly and severally share the plaintiff’s liability in costs.  With respect, penalty was not the nature of the order joining Andrew Ng as a third party and making him liable together with the plaintiff.  It is what justice demands in the special circumstances of this case.  If I were to consider the indemnity basis appropriate, it would also be because it is appropriate in the interest of doing justice between the parties rather than a desire to punish the third party.

22.  In the circumstances, I take the view that an order for the costs of 1^st defendant and 3^rd defendant to be taxed on an indemnity basis is appropriate, and is consistent with the findings of fact that I made and the view that I took of the nature of the action.

Plaintiff disallowed to claim Indemnity from the estate

23.  The plaintiff did not apply for a Beddoe Order before she commenced this action, but that alone, it is accepted, is not an automatic bar to her claim for indemnity from the Estate.  The plaintiff submits that indemnity is the default position under Order 62, rule 6(2).  The question is whether the costs of bringing the action was properly incurred, and whether a judge hearing a Beddoe application would have authorised the claim under the prevailing circumstances: HKCP Vol 1 85/2/2.  I note that the plaintiff has advanced no particular reason as to why no Beddoe application was made.

24.  Mr Wong reminded me that a Beddoe application was to be made ex parte, and the applicant as adminstratrix would have come under a duty of full and frank disclosure in making such an application.  I must therefore consider what the plaintiff would have been required to disclose to the judge while discharging such a duty.  It is insufficient even if the trustee is acting in good faith: Ip Cheung Kwok v Ip Siu Bun & Ors, unreported CACV 79/1988, 28 November 1990.

25.  In my view, she would have been under a duty to disclose a number of matters to the Beddoe judge upon due and diligent enquiries she should have made, including with Andrew Ng and from the documentary evidence such as bank documents and the accounts of the relevant companies to which Andrew and the plaintiff would have had access.  These include the fact that the contents of the safe deposit box were not of any real value, and the fact that the money transferred from the two accounts were not pocketed by Stephanie but spent on the Deceased’s funeral and on a new car for the use of the plaintiff and Andrew.  She would also have been required to disclose to the judge that there was no other cash available in the accounts of the Deceased, HEL or NSMAL to fund the funeral, or to make the purchase of the car to replace an old car.  She would also have been required to inform the court that Andrew Ng, who was expected to act as her witness, knew the above facts, or such facts were apparent from the relevant company accounts and bank documents within the access of Andrew.

26.  If the above matters were laid before the judge by way of full and frank disclosure, I had no doubt that the Beddoe judge would not have granted leave to commence an action against the defendants.  The prospect of recovering any property of real value was elusive, and the risk of substantial loss to the Estate by way of costs to the other side and its own legal expenses was simply too real.  If the principles in Gordon Chan v Lee Wai Hing (No2) [2011] 2 HKLRD 1029 were applied correctly upon a full picture being presented to the judge, it is inconceivable that the Beddoe judge would have approved launching a court action to track the path of the removed funds and contents of the safety deposit box at the risk of the substantial legal costs it was likely to incur.  The judge would most unlikely consider it reasonable to do so, or consider it was for the benefit of the Estate.  The strengths and weaknesses of the respective parties’ case would have been apparent from the documents disclosed.

27.  In the circumstances, it is appropriate to disallow the plaintiff from seeking indemnity from the Estate of the costs payable by her to 1^st defendant and 3^rd defendant, as well as any costs payable by her to her solicitors in this action.

Orders

28.  I make the following orders:

(1)     An order that the costs to be paid by the plaintiff to the 1^st and 3^rd defendants be taxed on an indemnity basis if not agreed, with certificate for 2 counsel;

(2)     An order that the plaintiff shall be disentitled from being indemnified by the Estate of Ng Po Sum in respect of the costs payable in this action to the 1^st and 3^rd defendants and to the plaintiff’s own solicitors; and

(3)     An order nisi that the costs of the hearing on 26 September 2014 be paid by the plaintiff to the 1^st and 3^rd defendants to be taxed on a party‑and‑party basis if not agreed, with certificate for two counsel.

29.  Under my previous order of 23 June 2014, the third party Andrew Ng is to be jointly and severally liable for the costs payable by the plaintiff to the 1^st and 3^rd defendants in this action.

Concluding remarks

30.  I do sincerely hope that the orders of costs I made will cause the parties to reflect deeply on how best to avoid yet further unnecessary legal expenses on further battles that could only result in deeper hurt and alienation amongst members of a family.  Legal battles are never the right instrument for expressing strong sentiment, and will rarely achieve the just result where they are exploited as such.

31.  It remains for me to thank counsel for their able assistance.