SAM SIEN SAN ALBERT, Executor of the Estate of WONG LAI CHEE, deceased and Executor of the Estate of SAM TIN, deceased v. SAM MO YEE, Executrix of the Estate of WONG LAI CHEE, deceased and Executrix of the Estate of SAM TIN, deceased

HCMP 1203/2016

[2019] HKCFI 1188

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 1203 OF 2016

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DECISION ON COSTS

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1.  In paragraph 59 of my Judgment dated 22 March 2019, I made a costs order nisi that each party shall bear its own costs of these legal proceedings, and that Sien San’s own costs be taxed in accordance with the Legal Aid Regulations.

2.  By summons dated 28 March 2019, Mo Yee applies to vary the costs order nisi as follows:

“ Each party shall bear its own costs of these proceedings up to 28 February 2019, and after such date the costs of and occasioned by these proceedings be to the defendant to be taxed and paid, if not agreed, on a common fund basis.”

3.  Mo Yee’s application is supported by an affidavit of her solicitor, Mr Gordon Chan, filed on 28 March 2019.  Both parties have also filed written skeleton arguments.  In line with the direction set out in paragraph 59 of my Judgment, I shall deal with Mo Yee’s application on paper.

4.  Mo Yee’s application is based on a Calderbank offer made expressly “without prejudice save to costs” dated 13 February 2019 from her solicitors to Sien San’s solicitors (“the Offer”).  In short, Mo Yee proposed a full and final settlement on the following terms:

 (a) Sien San’s claim be withdrawn with each party pays his/her own costs;

 (b) Sien San’s own costs be taxed in accordance with the Legal Aid Regulations;

 (c) Mo Yee’s counterclaim be withdrawn with no order as to costs;

 (d) Mo Yee do pay to the estate of the Parents within 28 days HK$35,784.06 (regarding the Mother’s Citibank Accounts), HK$83,200.00 (regarding the Car Park), and HK$476,833.78(regarding the dividends distributed by the Taiwan Company);

 (e) Expenses in the sums of CAD 211.65 and HK$129,683.68 be reimbursed to Sien San; and

 (f) Expenses in the sum of HK$110,459.00 be reimbursed to Mo Yee.

5.  By another Calderbank letter dated 19 February 2019, Mo Yee’s solicitors stated that, if they did not hear from Sien San’s solicitors before 28 February 2019, they would take it that Sien San elected to proceed the matter to trial; in such event Mo Yee would seek wasted costs on indemnity basis by reason of Sien San’s neglect of the underlying objective set out in Order 1A, rule 1 of the Rules of the High Court, the parties’ conduct and any offer made.

6.  By letter dated 25 February 2019, Sien San’s solicitors made a number of observations on the Offer.  First, they reminded Mo Yee’s solicitors of section 16C(1)(b)(ii) of the Legal Aid Ordinance.  Second, they raised some disagreements and queries concerning the net amount that Mo Yee intended to pay regarding the dividends distributed by the Taiwan Company. Third, they acknowledged that the amount of expenses that Mo Yee intended to be reimbursed to herself was in line with Sien San’s calculation.  They further stated that Sien San was then in Canada and wasexpected to return to Hong Kong in early March before the trial began; andwhen he was back, counsel would have a meeting with Sien San to discussthe Offer in detail.  Hence, they concluded by saying that they would needmore time before giving Mo Yee a substantive reply, and that they believed it was good for both parties to negotiate from time to time for an amicable settlement before the trial.

7.  By letter dated 27 February 2019, Mo Yee’s solicitors wrote a short letter stating their responses to the disagreements and queries raised by Sien San.  They also regretted that Sien San was merely repeating his previous stance.

8.  There was no further correspondence between the parties concerning the Offer.  The trial commenced on 12 March 2019.

9.  Order 62, rule 5(1)(aa), (d) and (e) of the Rules of the High Court (Cap 4A) provide that:

“ The Court in exercising its discretion as to costs shall, to such extent, if any, as may be appropriate in the circumstances, take into account—

(aa) the underlying objectives set out in Order 1A, rule 1;

…

(d) any written offer which is expressed to be ‘without prejudice save as to costs’ and which relates to any issue in the proceedings, but the Court may not take the offer into account if, at the time it is made, the party making it could have protected his position as to costs by means of asanctioned payment or a sanctioned offer under Order 22;

(e) the conduct of all the parties; ….”

10.  In the recent decision of the Court of Appeal in LLC v LMWA and LELP [2019] HKCA 347, the Court of Appeal reaffirmed that, since the CJR, all parties to litigation are under a duty to assist the court in the promotion of the underlying objectives in Order 1A, rule 1, including a dutyto co-operate in a process facilitating settlement; the courts expect litigants to explore settlement in good faith; the conduct of a party in adopting an uncooperative stance can, and very often will, be taken into account underOrder 62, rule 5(2); and there is a need to engage in constructive negotiations even in face of an unacceptable sanctioned offer (see §§51 – 53).

11.  Mo Yee’s main submission is that Sien San failed to do better than the Offer and that his conduct was unreasonable and uncooperative in the course of settlement negotiations.

12.  I shall first compare my findings with the Offer in respect of each issue one by one to ascertain whether, in fact, Sien San failed to do better than the Offer.

13.  In respect of Sien San’s claim regarding the dividends distributed by the Taiwan Company, I made a declaration that Mo Yee received the sum of HK$1,172,158 as the beneficial owner thereof.  In comparison, Mo Mee had offered to pay HK$476,833.78 out of the dividends distributed by the Taiwan Company to the estate of the Parents if Sien San withdrew his claim in this respect with no order as to costs.  I agree that Sien San failed to do better, and had in fact done worse, than Mo Yee’s offer in respect of this claim.

14.  In respect of Mo Yee’s counterclaim concerning the balance in the HSBC Joint Accounts, I made a declaration that Sien San is the beneficial owner of all the balance in the HSBC Joint Accounts upon the Mother’s death.  In comparison, Mo Yee had offered to withdraw her counterclaim in this respect with no order as to costs.  I agree that Sien San failed to do better than Mo Yee’s offer in this respect because what I had ordered is the same as what Mo Yee had offered.

15.  In respect of Sien San’s application to remove Mo Yee as executrix of their Parents’ estates, I dismissed his application.  In comparison, Mo Yee proposed that Sien San’s application be withdrawn with no order as to costs.  I agree that Sien San failed to do better than Mo Yee’s offer in this respect because what I had ordered is, in substance, the same as what Mo Yee had offered.

16.  In respect of Sien San’s claim regarding the monies withdrawnfrom the Mother’s Citibank Accounts, I ordered that Mo Yee shall pay back a sum of HK$35,784.06 to the Mother’s estate.  In comparison, Mo Yee had offered to pay within 28 days HK$35,784.06 to the Parents’ estates.  I agree that Sien San failed to do better than Mo Yee’s offer in this respect because what I had ordered is, in substance, the same as what Mo Yee had offered.

17.  In respect of Sien San’s claim regarding the Car Park rental, etc, I ordered that Mo Yee is entitled to receive a net sum of HK$27,259 from the Father’s estate.  In comparison, Mo Yee proposed that she should pay within 28 days HK$83,200 to the Parents’ estates but HK$110,459 should be reimbursed to her as expenses incurred (ie she would receive a net sum of HK$27,259).  I agree that Sien San failed to do better than Mo Yee’s offer in this respect because what I had ordered is, in substance, the same as what Mo Yee had offered.

18.  Looking at the matter in totality, I have no doubt that Sien San failed to do better, and had indeed done worse, than the Offer.  This is because he clearly did worse in relation to the claim concerning the dividends distributed by the Taiwan Company, and my orders regarding the other claims are in substance the same as the offers made by Mo Yee.

19.  I also agree that, contrary to the spirit of the CJR, Sien San has failed to adopt a cooperative attitude, and engage in constructive and meaningful negotiations in response to the Offer.  In particular, Sien San had not given any substantive reply, including any counter offer, in spite of his solicitors’ promise to do so.  I do not accept that the fact that he was not in Hong Kong at the material time constitutes a reasonable explanation for his said failure.

20.  Sien San submits that the Court should exercise the discretion as to costs in the light of his role as a personal representative of the estate of the Parents.  Indeed, both parties are acting as executors of their Parents’estates in these proceedings.  But they are also the two main beneficiaries oftheir Parents’ estates (the third beneficiary is Sien San’s son).  In substance,this litigation is no different from a usual civil litigation where the parties are fighting mainly for their own interests.  Sien San furthers submits that,at the time the Offer was made, it was reasonable for him to anticipate a more favourable term of costs order than “no order as to costs”or “each party to pay its own costs”.  He claims that this is important because he is entitled to claim costs from the fund of the Parents’ estates insofar they are not recovered or paid by any other person pursuant to Order 62, rule 6(2).  To begin with, Order 62, rule 6(2) is subject to the discretion of the Court.  Second and more importantly, Sien San is legally aided; and I have difficulties in understanding his concern in this respect.  Third, bearing in mind that the Offer was made on a without prejudice basis intending to resolve numerous claims between the parties, adopting a broad brush approach, Mo Yee’s offer that each party should bear its own costs appearedto be sensible and reasonable.  Lastly, the contemporaneous correspondence does not show that this was, in fact, the reason, or one of the reasons, why Sien San did not accept or respond constructively to the Offer.

21.  Sien San also submits that the Offer contained terms which went beyond the scope of this litigation.  This is correct.  Apparently, Mo Yee was eager to resolve all disputes in one go.  But the important point is that there was nothing to stop Sien San from accepting the offers made by Mo Yee in respect to the claims/counterclaims falling within the scope of this litigation.  Further, the contemporaneous correspondence does not show that Sien San decided not to accept the Offer because it had gone beyond the scope of this litigation.

22.  Sien San submits that there were drastic changes in Mo Yee’s evidence which were inconsistent with her affirmations, and such changes significantly hampered his assessment of the litigation at the material time. While I agree that Mo Yee had clarified what she said in her affirmations in the witness box, and some of her clarifications appear to be different fromwhat she said in her affirmations, she had not changed her stance on variousclaims/counterclaims in any fundamental manner.  I am not convinced that Sien San’s submission on this point provides a good explanation for his failure to respond to the Offer in any substantive and constructive manner.

23.  Sien San submits that any adverse costs order against any partyat this stage is extremely likely to widen the mistrust and hostility between the parties, but the parties still need to negotiate further on the remaining disputes about the expenses incurred for administering their Parents’ estates,etc.  This is a rather unattractive submission.  In principle, the Court must not be deterred from exercising its unfettered discretion on costs in a particular manner as it sees fit merely because one of the parties threatens that this may aggravate the relationship between the parties.  Second, as theparties will still need to negotiate to resolve the outstanding disagreements concerning the administration of their Parents’ estates, there is more the reason why the Court needs to impress on them the paramount importanceof negotiating in good faith in a constructive manner, as well as the adverse consequences they may face if they fail do to so.

24.  For these reasons, I reject all the points made on behalf of SienSan.  Accordingly, I agree with Mo Yee that Sien San should pay the costs of these proceedings after 28 February 2019.  I note that Mo Yee stated in the Offer that she would seek costs on an indemnity basis but she only asks for costs on a common fund basis in her summons.  As Deputy Judge Saunders held in Leung Lai Kwan v Lo Kai Wing [2015] 3 HKLRD 152 at 159, §27, “A party who is in receipt of an offer which is reasonable and who goes to trial having rejected that offer is always liable to a higher level of costs if they do not do better than the offer that has been rejected.”  I accept that costs after 28 February 2019 should be taxed on a higher scale, namely, the common fund basis.

25.  In conclusion, I shall vary the costs order nisi as follows:

 (a) each party shall bear its own costs of these legal proceedings up to 28 February 2019;

 (b) the plaintiff shall pay to the defendant the costs of these proceedings after 28 February 2019 to be taxed on a common fund basis if not agreed; and

 (c) the plaintiff’s own costs shall be taxed in accordance with the Legal Aid Regulations.

26.  I also order that the plaintiff shall pay the costs of the defendant’s present summons to be taxed on a party and party basis if not agreed; and that the plaintiff’s own costs be taxed in accordance with the Legal Aid Regulations.