KCMA v. ABC AND OTHERS

HCMC 1/2019

[2021] HKCFI 357

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MATRIMONIAL CAUSES NO. 1 OF 2019

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DECISION

(On Costs)

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INTRODUCTION

1.  W issued a summons for litigation funding on 24 August 2020 (“Summons”), essentially seeking a sum of HKD 1,300,000 upon the same basis and in the same manner as in this Court’s order of 21 May 2020 (“21.05.20 Order”). 

EVENTS LEADING TO THE ISSUE OF THE SUMMONS

2.  The 21.05.20 Order was made upon an earlier summons taken out by W on 12 August 2019 for litigation funding.  This Court was then of the view that a sum of HKD 1,500,000 each would be appropriate for their respective costs, up to and including the conclusion of the FDR stage including any mediator’s fees for attendance at the FDR hearing.  The Court then adjourned that summons upon the following undertakings, and the summons was to be dismissed upon each receiving a sum of HKD 1,500,000 from the Trustee:

(1)  Upon the parties undertaking and agreeing to make a joint request to the 2^nd Respondent/Trustee of the Family Trust (“Trustee”) within 14 days for a distribution of HKD 1,500,000 each, and

(2)  Upon the parties undertaking and agreeing that the distribution of HKD 1,500,000 each be paid by the Trustee direct to their respective solicitors firm, and

(3)  Upon the parties undertaking and agreeing to their respective solicitors to apply any part of the sum of HKD 1,500,000 towards billed and unpaid costs and/or to meet any costs orders and hold any excess over and above such payment on account of the parties’ respective costs and disbursements, and

(4)  Upon the Trustee agreeing to make a distribution of a total sum of HKD 3,000,000 out of the assets and/or income of the Family Trusts and to pay a sum of HKD 1,500,000 each respectively to H’s solicitors firm and to W’s solicitors firm, and

(5)  Upon the parties agreeing and acknowledging that the distribution of HKD 1,500,000 for each of them from the assets and/or income of the Family Trust is without prejudice to their respective rights and respective positions concerning the US Trusts and/or all and any other matters arising from W’s 1^st s17 Application, Injunction Application and/or Disclosure Application.

3.  The parties have since each received a sum of HKD 1,500,000.  It would appear that such was not sufficient to cover the costs up to the FDR, and that led to W issuing the Summons herein, seeking a further HKD 1,300,000.  The Summons was fixed for hearing on 11 September 2020.

4.  It would further appear that the parties were then able to agree to the release by the Trustee of a sum of HKD 1,300,000 to each and a consent summons was lodged, and a consent order was made on 10 September 2020 to this effect (“Consent Order”).  However, subsequent thereto, no funds were received by W, as a result of which on 28 September 2020, she sought leave to restore the Summons. 

5.  Leave was granted and the Summons was then fixed for a 2 hour substantive hearing on 5 January 2021 (“Hearing”).

6.  According to W, she did not receive through her solicitors the funds pursuant to the Consent Order until 15 December 2020.  On 17 December 2020, W then sent a draft consent summons to H, seeking to dismiss the Summons, with the issue of costs to be dealt with at the AR trial, and to vacate the Hearing.

7.  Suffice to say, notwithstanding several rounds of exchange of correspondence, no consent summons was signed, as a result thereof parties attended the Hearing before this Court.

8.  It was not until the day before the Hearing that the parties filed their respective “Notes” for the Hearing.  Neither party even complied with Practice Direction 5.4 in submitting proper skeleton arguments. Even if the only outstanding matter was costs, there was no reason why the practice directions were not complied with, given that parties’ respective solicitors are experienced practitioners in this field. 

9.  W’s solicitors lodged their “Note” the day before the Hearing, ie 4 January 2021 and H’s solicitors only faxed in theirs at 17:42 on 4 January 2021.  The Court was not expected to read “Notes” submitted at last minute when the Hearing was fixed for 2 hours.  As said by this Court at the Hearing, there was no reason why it was necessary for the parties to have to even attend the Hearing physically, which was a waste of parties’ costs and this Court’s time, as the dispute could easily be dealt with on papers.  It was under such circumstances that this Court declined to read those “Notes” submitted late, and adjourned the matter to be dealt with on papers.

THE DISPUTE

H’s case

10.  As seen in H’s Note, after the 21.05.20 Order, the Trustee sent the sum of HKD 1.5m directly to the respective personal bank accounts of H and W, and not the bank accounts of their respective solicitors, as the Trustee took the view that as the parties’ respective solicitors were not beneficiaries, distributions could not be made directly to the solicitors’ firms.

11.  Thus, similarly, the sum of HKD 1.3m was sent by the Trustees through Intero into W’s personal bank account at HSBC on 7 December 2020.  However, it would appear that W then instructed her bank personnel to transfer the sum of HKD 1.3m back to the sender as according to W, “the deposit came from an individual with the surname, “Kim” in Singapore”.

12.  Based on W’s representation, the Trustee then sent a further HKD 1.3m to W’s solicitors’ account on 15 December 2020, which receipt was confirmed by W’s solicitors.

13.  However, by 30 December 2020, the Trustee still had not yet received the return of the 1^st sum of HKD 1.3m from W. H’s solicitors then wrote to W’s solicitors to try and resolve the matter by proposing that W to give an undertaking from her that she had received a sum of HKD 1.3m in her personal HSBC account from Intero and that she had returned the sum to Intero.

14.  H’s request for the undertaking was however refused by W who considered that it was not necessary as she had provided a confirmation for a debit transaction of HKD 1.3m from her bank account (“Debit Confirmation”).

15.  The Debit Confirmation showed that the transaction was only made on 24 December 2020 and further the Debit Confirmation did not provide any details as to which bank account the HKD 1.3m was sent.  H thus found the Debit Confirmation unacceptable.

16.  As a result of the above, by 4 January 2021, the Hearing had not yet been vacated.  H said the delay was caused by W and her lack of disclosure.  H thus sought costs of the Summons on a fixed costs basis of HKD 1,040, and for the Hearing to be vacated.

17.  This was not accepted by W, which resulted in the parties’ respective solicitors having to attend the Hearing and further costs were incurred.

W’s case 

18.  W’s case was despite the Consent Order, no funds were received by her leading to her having to seek leave to restore the Summons on 28 September 2020.

19.  Funds were only received by W on 15 December 2020, and as said earlier, her solicitors then sent a consent summons to H’s solicitors on 17 December with a draft consent summons, seeking to dismiss the Summons and for the issue of costs to be dealt with at the AR Trial and for the hearing to be vacated.

20.  It was W’s case that H intended to make use of the Hearing to deal with what he considered to be issues that warranted the Hearing to stand, and that H sought to ensure the funds previously sent to W directly had been returned.  According to W, she had returned the funds and how long it took to reach the sender was not within her control.  In any event, costs could be dealt with at the AR Trial and there was no need to attend the Hearing.

21.  In the above circumstances, it is submitted on behalf of W that H should pay for the costs of the attendance at the Hearing.

DISCUSSION

22.  First, as indicated at the Hearing and earlier, this dispute could have and should been done by way of paper disposal.  The parties’ solicitors should be aware that there have been various announcements from the Judiciary for enhancing social distancing measures in light of the Covid-19 pandemic.  As seen in the announcement on 1 December 2020, for civil proceedings, there will be greater use of alternative means where appropriate including remote hearings and/or paper disposal, in lieu of physical attendance.  Even though there were no directions made by this Court, as this Court was sent letters indicating that that the Hearing could be vacated on undertakings and the Court was anticipating the filing of a consent summons, if the parties were unable to comply with PD 5.4 and there was no settlement, they should have written to the Court to seek a direction for paper disposal.  In any event, there was no reason as to why a 2 hour hearing should continue to remain in the Court’s diary.

23.  Secondly, I find it rather odd that the beneficiaries of a trust could not have authorised the Trustee to pay any distribution to them into an account designated by them, particularly if it were their legal representatives’ account.  Even if this were Trustee’s legal position (presumably upon US legal advice), there was no reason why H and W could not have been advised to provide an undertaking that any distributions paid into their respective personal accounts by the Trustee for the purpose of litigation funding should be paid by them into their respective solicitors’ account forthwith upon receipt.  This, one would have thought, would be a more practical way of dealing with the distributions for litigation funding, rather than incurring further legal costs and time arguing about the matter and/or reversing the funds and incurring further administrative costs and causing delay.

24.  In light of the above said, I find W’s attitude in rejecting the 1^st transfer on 7 December 2020 and instructing her bank HSBC to reverse the credit, by reason of it being credited into her personal bank account and, according to her, by reason of it being from source unknown or from an unknown sender “Kim”, did not seem to make sense and showed a rather inflexible attitude of W.  One would have thought, W, who had been waiting for the distribution of a sum of HKD 1.3m, could have asked the Trustee or H to explain and/or to clarify whether the said sum was the distribution from Intero through instructions of the Trustee for the litigation funding, rather than simply to ask HSBC to reverse the credit to the sender.  There had been no evidence that she had sought any clarification from the Trustee and/or H prior to her giving instructions to HSBC for reversing the credit.  There had also been no documentary evidence to show what exactly her instructions to HSBC were.  As she herself had said, HSBC had to investigate the matter.  No doubt an instruction/request to reverse a credit would lead to a bank to investigate and this would certainly have caused delay in the process.  As said, W’s actions did not make any practical sense.

25.  Thirdly, it is clear that H and W have a complete distrust of each other.  It was thus not surprising for H to seek evidence, or as described by his solicitors, “disclosure” as to the receipt of the sum of HKD 1.3m and the transfer out, when by 23 December 2020, two sums of HKD 1.3m had been transferred to W or for her benefit by the Trustee for litigation funding, and the 1^st sum had not yet been received back by the Trustee[1].

26.  W’s solicitors however replied only on 29 December 2020[2], stating that the funds were returned to Intero as the sender, and that as HSBC was investigating the matter, the return of funds was delayed.  W’s solicitors further said this matter was irrelevant.

27.  W’s solicitors’ letter of 29 December 2020 seemed to indicate that W did know that the sender was Intero.  Further, since the sum was said to have been reversed upon receipt on 7 December 2020, the fact that by 23 December 2020, Intero had not yet received the sum, while the 2^nd sum had been received by W, one would have thought there would be concern and suspicion on H’s part as to what had happened to the 1^st sum of HKD 1.3m.

28.  In their reply on 30 December 2020, it was stated that Intero had still not received the funds, and H’s solicitors then pointed out there was no mention or reference on the bank transfer confirmation from Intero to W (“Transfer Confirmation”) of the 1^st sum of HKD 1.3m was sent by anyone called “Kim” as alleged by W.  H’s solicitors then requested a copy of W’s bank statement or any documentary evidence which showed the actual receipt of the 1^st sum of HKD 1.3m and the subsequent transfer out.  Further, to resolve the matter, H’s solicitors then proposed an undertaking from W in the draft consent summons to vacate the Hearing, as mentioned earlier.

29.  So far as H was concerned, up until 31 December 2020, W had received 2 sums of HKD 1.3m, one in her personal account and one in her solicitors’ clients’ account.

30.  It was not under 31 December 2020 that W’s solicitors finally sent the Debit Confirmation from HSBC regarding the debit of HKD 1.3m on 24 December 2020 from W’s personal account[3]. 

31.  1 January 2021 was a Friday and a public holiday.  H’s solicitors were not able to respond until 4 January 2021 and they pointed out that: (i) notwithstanding W stating earlier that she had already instructed her bank to reverse the credit of the 1^st sum of HKD 1.3m, as seen in the Debit Confirmation it was not until 24 December 2020 that the sum was debited from her account; (ii) The transferor’s name on the Transfer Confirmation was clearly stated to be Intero and not “Kim” as alleged by W; (iii) the Debit Confirmation did not state to which account the HKD 1.3m had been re-transferred to.  Thus, H’s solicitors sent a revised consent summons seeking an undertaking from W for her to provide a copy of her bank statement for the period 1 to 31 December 2020 or alternatively a copy of the MT 103 / the wire being sent back to Intero (which was referred to in emails from Intero’s bank, ie Deutsche Bank Singapore, to H).

32.  I do not agree that H was seeking to use the Hearing for other purposes as submitted on behalf of W.  He was simply seeking evidence from W to support what she herself had said. 

CONCLUSION

33.  Having considered the various correspondence and also the parties’ respective submissions, I have come to the conclusion that W has not been reasonable in this matter. 

34.  However, having said this, there was delay in the Trustee paying the sum of HKD 1.3m which had led to W applying for the Summons to be restored, but by 7 December 2020, as she had received the 1^st sum of HKD 1.3m, and in my view, the matter should have been resolved at that time.  I am therefore of the view that she should pay H’s costs incurred from 7 December 2020 onwards, save for H’s costs of the attendance at the Hearing.  As I have said earlier, attendance at the Hearing could have been avoided and was not necessary.

35.  H’s costs are to be summarily assessed, if not agreed, and paid within 14 days of assessment.  H to submit a statement of costs within 14 days, and W to submit her list of objections within 7 days thereafter.

36.  Further, the Consent Order has already provided that the Summons shall be dismissed upon W’s solicitors’ receipt of the sum of HKD 1.3m.  As this sum has been received, the Summons should have already been dismissed under the Consent Order.  In my view, there is no need for any further dismissal order.