FOK CHUN YUE BENJAMIN v. FOK CHUN WAN IAN AND OTHERS

HCA 2155/2011

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 2155 OF 2011

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D E C I S I O N   O N   C O S T S

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INTRODUCTION

1.  I will adopt the same abbreviations and nomenclature used in the Decision handed down on 3 January 2014 (“the Decision”).

2.  By the Decision, I allowed the Stay Applications and ordered that the present action and the Order 14 Application be stayed save and except for the purpose of perfecting and implementing the Settlement Agreement in full as expeditiously as possible.  I left the question of costs of the Stay Applications open for the parties to resolve.  But they are unable to do so.  Pursuant to my directions, they have filed and exchanged their submissions on costs for my consideration and disposal.

3.  I now hand down my decision on costs of the Stay Applications.

MAIN ISSUES

4.  I do not propose to deal with all the points raised by the parties in their written submissions, although I have already considered them in full.  For present purposes, it will be sufficient to focus on the following main issues arising from the parties’ written submissions.

5.  The first issue is whether Clause 49 of the Settlement Agreement applies to the costs of the Stay Applications?  (Issue 1) If it does, then all the parties’ costs incurred for the Stay Applications would be paid out of the Estate, irrespective of their stance on and outcome of the Stay Applications.

6.  If Clause 49 does not apply, then the principles governing costs derived from Re Buckton [1907] 2 Ch 406 would apply. The issue is : applying those principles, should the costs of the Stay Applications follow the event as in the case of ordinary hostile litigation? (Issue 2)

7.  Based on the answer to Issue 2 :

(1) Should Ben be liable for the costs incurred by Ian and the Aunt, the proponents of the Stay Applications, and Tim, the Mother and the members of the Second and Third Families, who all supported the Stay Applications?  If yes, what is the basis of Ben’s liability as to costs?  (Issues 3 and 4)

(2) Should Pat, who adopted a neutral position on the Stay Applications, be liable for the costs incurred by Ian, the Aunt, Tim, the Mother and the members of the Second and Third Families?  If yes, what is the basis of Pat’s liability as to costs?  (Issues 5 and 6)

(3) Should Nora, who supported Ben’s position in opposing the Stay Applications, be liable for the costs incurred by Ian, the Aunt, Tim, the Mother and the members of the Second and Third Families?  If yes, what is the basis of Nora’s liability as to costs?  (Issues 7 and 8)

ISSUE 1 – APPLICABILITY OF CLAUSE 49

8.  Clause 49 provides :

“All parties’ costs incurred in relation to the administration of the Estate and the Family Companies including their costs and disbursements incurred in relation to the Proceedings and intended proceedings, and all matters incidental thereto, and such costs and disbursements in respect of the negotiation, entering into and implementation of this Agreement, shall be paid out of the Estate as a priority over any other payments envisaged in this Agreement, to be taxed on a full indemnity basis, if not agreed.”

9.  In my view, Clause 49 must be read in the context of the entire Settlement Agreement.  In the Decision, I outlined the Settlement Agreement at paras 55 to 59, which I do not repeat here.  I then observed :

“60. There can be no doubt whatsoever that the Settlement Agreement is a global settlement of the disputes in the Proceedings including specifically the present action and the Order 14 Application, the disputes arising from the administration of the Estate and other matters beyond the scope of the Proceedings and administration of the Estate….”

10.  Clause 49 deals with costs incurred by the contracting parties as part and parcel of the global settlement of all their disputes covered by the Settlement Agreement.  Properly read, it covers three categories of costs :

(1) The first category is costs and disbursements in respect of the negotiation, entering into and implementation of the Settlement Agreement.  This is self-evident.

(2) The second category is costs already incurred as at the date of the Settlement Agreement in relation to the administration of the Estate and the Family Companies including the costs and disbursements incurred in relation to the Proceedings, and all matters incidental thereto.  This is also self-evident.

(3) The third category is costs to be incurred after the Settlement Agreement in relation to the administration of the Estate and the Family Companies including the costs and disbursements incurred in relation to the Proceedings and intended proceedings and all matters incidental thereto.

11.  Under the third category, three components of costs that might be incurred in the future are envisaged :

(1) Future costs in relation to the administration of the Estate and the Family Companies and all matters incidental thereto (“Component A”);

(2) Future costs in the Proceedings and all matters incidental thereto (“Component B”);

(3) Future costs incurred in intended proceedings and all matters incidental thereto (“Component C”).

12.  Plainly, costs of the Stay Applications do not fall within Component A.  They do not fall within Component C either.  The term “intended proceedings” must mean proceedings which had not been taken as at the date of the Settlement Agreement.  It does not include the Proceedings, which were already in existence at the time of the Settlement Agreement.  Since the term “all matters incidental thereto” refers to the matters incidental to the intended proceedings, it does not include steps to be taken in the Proceedings.  As the Stay Applications were steps taken in the Proceedings, they are not matters incidental to “intended proceedings”.  So the costs of the Stay Applications fall outside of Component C.

13.  The crucial question is : do the costs of the Stay Applications fall within Component B?

14.  In my view, for the purpose of Component B, future costs incurred in the Proceedings do not cover the costs incurred in any future step taken in the Proceedings since the Settlement Agreement.  The reason is this.  Since all the disputes arising from the Proceedings had been fully and finally settled by virtue of the Settlement Agreement, it is clearly not the parties’ contractual intention to take any further step to pursue the disputes arising in the Proceedings after the Settlement Agreement.  Instead, they must implement the Settlement Agreement.  In this connection, they must refrain from taking any action which is inconsistent with the overall spirit and intent of the Settlement Agreement or which might prejudice the parties’ ability to give full effect to it (Clause 60).  They would further use their best endeavours in good faith to implement the Settlement Agreement in full (Clause 61).  In the course of implementing the Settlement Agreement, issues pertaining to implementation may arise, which may require the court’s intervention.  Thus under Clause 48, where such issues arise, the parties agree that they may apply to the court in the present action and HCA 569/2012 for necessary orders and directions.  Further, the Proceedings need to be disposed of after the Settlement Agreement is fully implemented.  So Clause 48 further provides that upon the full implementation of the Settlement Agreement, applications would be made to the court to dispose of the Proceedings in the manner as agreed.  In short, the future steps envisaged to be taken in the Proceedings after the Settlement Agreement are applications for (a) orders and directions on implementation of the Settlement Agreement or (b) disposal of the Proceedings upon the full implementation of the Settlement Agreement.  That being the case, Component B should be confined to the costs of those steps and no more.

15.  The Stay Applications were taken in response to Ben’s application to restore the Order 14 Application.  Although they were motivated by Ian’s and the Aunt’s wish, shared by the Mother and members of the 2^nd and 3^rd Families, to hold Ben to the Settlement Agreement, they are not applications for its implementation as such.  The costs of the Stay Applications are not covered by Component B.

16.  I would answer Issue 1 in the negative.

ISSUE 2 – COSTS TO FOLLOW THE EVENT

17.  The liability as to costs for the Stay Applications is to be determined by the principles derived from Re Buckton, supra.  In that case, the principles underlying the trustees’ entitlement to costs out of the trust fund and the extension of these principles to other parties are set out by way of a three-fold classification :

(1) The first category is proceedings brought by trustees to have the guidance of the court as to the construction of the trust instrument or some other question arising in the course of administration.  In such cases, the costs of all parties are normally treated as incurred for the benefit of the trust and ordered to be paid out of the trust fund.

(2) Second, there are cases in which the application is made by someone other than the trustees, but raising the same kind of point as in category (1) and would have justified a claim brought by the trustees. That is treated in the same way as category (1).

(3) Third, there are cases in which a beneficiary is making a hostile claim against the trustees or another beneficiary.  In such cases, the unsuccessful party will usually be ordered to pay the costs of the successful party, as in ordinary litigation.

See the summary in Underhill and Hayton, Law of Trusts and Trustees, 18^th Edition, paras 85.31 – 85.34 at pp. 1099 – 1100.

18.  The nature of the Stay Applications is plainly hostile in nature.  They fall within the third category.  Thus, the usual rule of costs following the event applies to determine the parties’ entitlement and liability on the costs of the Stay Applications.

ISSUES 3 AND 4 – BEN’S COSTS LIABILITY

19.  Ben strenuously opposed the Stay Applications. Having lost the legal battle, he must bear the costs of the winning parties, Ian and the Aunt, and their supporters, the Mother and members of the 2^nd and 3^rd Families.

20.  Further, as I have explained in the Decision, the grounds raised by Ben in opposing the Stay Applications are plainly untenable.  This is particularly so in respect of the Aunt’s Stay Application. Trying to re-open the Order 14 Application in defiance of the Settlement Agreement is, in my view, deplorable litigation conduct.  Ben should be visited with indemnity costs.

ISSUES 5 AND 6 – PAT’S COSTS LIABILITY

21.  As said, Pat adopted a neutral stance on the Stay Applications.  She should not be visited with costs vis-à-vis other parties.  No order of costs is made against her.

ISSUES 7 AND 8 – NORA’S COSTS LIABILITY

22.  Nora supported Ben’s opposition to the Stay Applications. Like Ben’s case, her arguments are plainly untenable.  And she had also acted in defiance of the Settlement Agreement.  Likewise, she should bear the costs consequences vis-à-vis Ian, the Aunt, the Mother and members of the 2^nd and 3^rd Families and should be visited with indemnity costs.

COUNSEL’S CERTIFICATE

23.  In light of the complexity of the matter and size of the Estate, I would allow a certificate for 2 senior counsel and one junior counsel for Ian, a certificate of two counsel for Tim and members of the 2^nd and 3^rd Families.

ORDERS

24.  For the above reasons, I make the following orders on the costs of the Stay Applications :

(1) Ben and Nora are to pay, jointly and severally, Ian, the Aunt, the Mother and members of the 2^nd and 3^rd Families costs of the Stay Applications on an indemnity basis, to be taxed if not agreed;

(2) There be no order as to costs between Pat and all other parties;

(3) There be a certificate for 2 senior counsel and one junior counsel for Ian, a certificate of two counsel for Tim and members of the 2^nd and 3^rd Families.