NG, ROSE KAI CHING AND OTHERS v. LIANG LOK HO LING, the person appointed to represent the estate of LIANG YUM SHING HOWARD (in his personal capacity and as the executor and trustee of the estate of LIANG TING SEN THOMAS, deceased) AND ANOTHER

HCMP 2013/2018

[2024] HKCFI 3692

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 2013 OF 2018

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DECISION
(On Costs)

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A.  INTRODUCTION

1.  On 18 July 2023, I handed down a judgment after a 9 day trial herein (“Judgment”). I concluded that Ps did agree to the Plan as found by the Court, and ordered that Howard be removed as the executor and trustee of the Estate upon an independent professional administrator being appointed in his place, and amongst other things, I directed parties to submit proposed directions as to such appointment and for further administration of the Estate, and failing agreement, a directions hearing to be fixed, and that costs of the action to be heard at the directions hearing (“Order”).

2.  Save as stated herein, I shall continue to adopt the nomenclature and definitions in the Judgment,

3.  The matter of costs was eventually directed to be dealt with by me on papers.

4.  Howard has since the Judgement passed away and his estate is now represented by his widow and executrix Mrs Liang Lok Ho Ling.

B.  PARTIES’ RESPECTIVE PROPOSALS REGARDING COSTS

5.  Ps issued a summons on 27 May 2024, seeking amongst other things, an order that Howard (or his estate “D1”) to pay Ps’ costs of these proceedings with certificate for 2 counsel, to be taxed on an indemnity basis if not agreed, forthwith, or such other order as to costs as the Court thinks fit. In addition, in Ps’ submissions of 21 November 2024, Ps seek the following orders, amongst other things:

(1)  That Howard’s own costs shall be borne by Howard personally and without being indemnified for those costs out of the Estate;

(2)  D1 do disclose to the Court and Ps by way of affirmation within 14 days from any order to be made whether any of Howard’s own costs have been drawn from the Estate (including the 5 Companies) and if so, the amount of such costs (“Disclosure  Order”). In the event that any of Howard’s own costs have been so drawn, Howard do personally repay the independent administrator of the Estate within 7 days thereafter;

(3)  D1 do pay P’s costs of the Costs Issue (as defined in Ps’ submissions), with certificate for 2 counsel, to be taxed if not agreed, forthwith.

6.  It is D1’s submission that there should be no order as to costs.

C.  DISCUSSIONS AND CONCLUSION

7.  In brief, Ps submit that these proceedings fall within the 3^rd category of Re Buckton [1907] 2 Ch 406, and that Ps’ application was, in substance if not in form, an adverse claim in hostile litigation, and as in a hostile litigation, costs normally follow the event, and the unsuccessful party should thus be responsible for the cost of these proceedings personally. Ps further submit that as Howard’s conduct was far beyond the usual case of mere dilatoriness or incompetence, indemnity costs should be ordered.

8.  Although Ps issued the originating summons as an administrative action essentially to remove Howard as executor and to seek an inventory and accounts of the Estate, it was clear that they were not satisfied as to the way that the Estate had been administered and in particular, they did not accept Howard’s case that the administration of the Estate/Residuary Estate had been completed. There were clearly serious disputes of facts and that was the reason why the originating summons was directed to continue as if commenced by a writ, and that the action proceeded as a hostile litigation. I agree that the proceedings fall within the 3^rd category of Re Buckton, and that costs normally should follow the event.

9.  As set out in paragraphs 50 and 51 of the Judgment, there were a total of 7 agreed disputed issues, and that the key issue in this case was whether there was the alleged Plan and whether Ps had agreed to it, and that Issues (2) and (5) concerned the alleged Plan and the 2013 Transfers and those issues were considered first by this Court, followed by Issues (3) and (4) on Howard’s alleged breach of duties, and then Issues (1), (6) and (7) concerned administration of the Estate.

10.  On Issue (2) concerning the alleged Plan, as set out paragraphs 80 and 82, I found Howard’s own evidence unsatisfactory, and that the Plan put forward by him to Ps at the August 2010 Lunch Gathering was essentially only one of a corporate structure, namely only for a holding company in BVI called Mega Best to be formed with the Residuary Beneficiaries as shareholders in their Entitled Proportions, to hold Father’s shareholdings in the companies, and that there was no sufficient evidence that Ps were to abandon all their rights and entitlements under the Will in return for their respective shareholdings in Mega Best. In short, Howard alleged the Plan which was allegedly agreed by all Residuary Beneficiaries consisted of mainly 2 parts, namely (i) to set out a holding company with the Residuary Beneficiaries as shareholders in their respective Entitled Proportions to hold Father’s various shareholdings, and (ii) to abandon all their rights and entitlements under the Will in return for their respective shareholdings in the holding company, ie Mega Best. In paragraph 100, I found that Ps did agree to (i) but there was no sufficient evidence that they had agreed to (ii).

11.  As regards Issue (5) in relation to the 2013 Transfers, I rejected Ps’ respective evidence on this issue. I find that Ps should be aware that the documents they signed were in relation to a “buy-out” by Howard, namely they were transferring to Howard a portion of their respective shares in Mega Best at a consideration, but whether the consideration was a true and fair value of the valuations of the 5 Companies and whether the deductions made by Howard were justified, this would be another matter.

12.  On Issue (3), I rejected Howard’s case that by his implementation of the Plan, namely by forming Mega Best to hold the shares of the Residuary Estate, he had completed the administration of the Estate and thus Ps were not estopped from asserting that Howard had breached his duty towards Ps as executor of the Estate,

13.  Then on Issue (4), although I find Howard was on the face of it in breach of the self-dealing rule, there had been delay on the part of Ps in raising queries about the transfers, and that the transactions should not be voidable ex debito justitiae, even if Howard did fall foul of the self-dealing rule and/or section 55 of Cap 10. I have found that there was no “informed consent” and to the alleged Plan, and that Howard had fallen foul of the fair dealing rule and his fiduciary duties towards Ps.

14.  Under the remaining Issues on administration, to summarise, I have found that there was no full disclosure by Howard of all the assets of the Estate even in the Inventory, and that Ps were entitled to apply for further reliefs relating to accounts. However, I did not make any finding in the Judgment that there had been dissipation by Howard of the assets of the Estate. Essentially, Howard was removed due to his breach of the fair dealing rule and other fiduciary duties including failure to provide a proper inventory and to make distributions, and breach in duty to avoid personal benefit and conflict.

15.  Although I have found Howard’s evidence was confusing and unsatisfactory at times, Ps’ own evidence was also unsatisfactory at times, and as mentioned above, parts of which were clearly rejected by this Court and their evidence on Issues (2) and (5) did in my view lengthen the trial, and that this should be reflected in the costs order. Even though Ps ultimately succeeded in removing Howard as executor, they did not succeed on all their grounds.

16.  Having considered all the submissions, and the circumstances of this case, I have come to the view that, save for those costs orders already made, D1 should pay Ps 85% of their remaining costs of this action (up to and including the trial), including any reserved costs, with certificate for 2 counsel, and I so order. As pointed out on behalf of Howard/D1, there was no finding of dishonesty or any underhand or ulterior motive against Howard. I am not satisfied that this is a case where D1 should pay costs on indemnity basis. The costs ordered shall be taxed on party and party basis, if not agreed. Howard’s own costs of this action shall be borne by him/D1 personally and the Estate shall be reimbursed by D1 for any costs paid on Howard’s behalf.

17.  As for the Disclosure Order sought by Ps, any amounts paid by the Estate on behalf of Howard for these proceedings should be reflected in the inventory and account of the Estate, which was already ordered by DHCJ KC Chan on 24 October 2024. I do not see the need to make the Disclosure Order as sought. I order that D1 shall reimburse the Estate within 7 days for any amounts found to have been paid by the Estate on behalf of Howard for his own costs in these proceedings.

18.  As for costs of this costs submissions, as neither side has succeeded entirely, I make no order as to costs.

19.  For avoidance of doubt, there should be no order as to costs as between Ps and the 2^nd defendant (Mother)/her estate.