XCHRX NATALIE W CHEN v. WONG SIU LING AND ANOTHER

HCMP 3943/1997

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 3943 OF 1997

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D E C I S I O N

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1. On 7 November 2000 I handed down judgment in these actions in which I gave the plaintiff the declaration she sought in the High Court action, albeit without any of the other relief claimed, and, while upholding part of her contentions in the other proceedings, declined to make the order sought for the reasons given. I also made an order nisi that the plaintiff have her costs of both proceedings against the defendants. The defendants now seek a variation of that order nisi as to costs, and ask the Court to replace it with an order that in the High Court action 75% of both parties' costs are met from the Wong Wan Chan Settlement, with no order as to the balance, and that the plaintiff pay the defendants' costs in the MP action.

2. Mr Shieh for the defendants says that the two actions must be considered in isolation and the outcome of each taken into account in deciding the matter of costs. On that basis, the only success for the plaintiff in the High Court action was the finding as to the nature of the trust, which should have been a simple "trust dispute" in which the trustees could have remained neutral, and the resolution of the dispute being for the benefit of the trust as a whole, the costs should come from the trust. The fact that allegations were made against the trustees, and other relief sought from them, made it necessary for them to defend the action as hostile proceedings, but the trust should still be responsible for the costs relating to the construction issue. As to the balance of the costs of that action, Mr Shieh says that, although there is an argument that the plaintiff should pay their costs, having been unsuccessful, the defendants are prepared to propose no order being made.

3. In respect of the other proceedings, Mr Shieh's argument is simply that, as the plaintiff failed to secure the relief claimed, namely the removal of the trustees, she is the unsuccessful party and should pay the defendants' costs.

4. On behalf of the plaintiff, Mr Smith points out that this is not a realistic way to look at the two actions and the way that they have proceeded. The Miscellaneous Proceedings were commenced alleging two main breaches of duty by the trustees: failure to deal with the matter of estate duty, and improperly using trust assets for the purpose of redevelopment of Barker Road. It was only in the course of those proceedings that the memorandum of wishes came to light, and the plaintiff's legal advisers considered that the question of the nature of the trust should now also be included. This could have been done by amending the first proceedings, but the plaintiff's advisers took the view that such an action should properly be commenced by writ. There was at one stage a suggestion that the second action should be tried first, but this was withdrawn in the light of the fact that a large amount of evidence relating to the conduct of the trustees would be similar in both actions, and to have two hearings would increase the costs and cause delay. They were accordingly, and sensibly, heard together.

5. That being so, I agree with Mr Smith that it would be artificial to now look at these actions in isolation with regard to costs. There is one set of circumstances relating to both, and the findings in one inevitably impact on both the findings, and the relief granted, in the other. In the High Court action, the defendants might have had a stronger argument had they remained neutral on the question of the construction of the trust, although I accept that they were entitled to defend themselves against allegations of wrongdoing. But they chose not to do so, and have proceeded throughout on the basis that they were right to consider it a discretionary trust, and in effect entered into hostile litigation on the point. Having failed, they are not now in a position to seek an indemnity from the trust. It was clear that the construction point was the main issue in those proceedings, and I do not consider that fact that I saw no necessity for giving the plaintiff further relief, where a number were prayed for, a reason for either depriving her of any part of her costs, or making the trust pay. She is a successful party in hostile litigation who is entitled to the costs which follow the event. As I said in my judgment, any order for payment from the trust would penalize those beneficiaries who have taken no part in this, by reducing the funds available for distribution to them, through no fault of their own.

6. As to the other proceedings, the plaintiff relied on the two alleged breaches of duty mentioned above. Mr Shieh says that, not only did she not obtain the relief claimed, but failed to persuade the Court at all in respect of one of the allegations, namely that relating to estate duty.

7. This again is to ignore the reality of the case as a whole. I have already given my reasons for not removing the trustees in my judgment and I do not need to repeat them here. But it is relevant that some of them, in particular the intention expressed by the defendants to make immediate distribution, and the imminent completion of Barker Road, only became apparent in the course of the hearing. Further, the finding in the High Court action that it was a fixed rather than a discretionary settlement, making immediate distribution mandatory, and only requiring the administration of that distribution rather than continued management of the trust, made the replacement of the trustees an unnecessary expense, where I had no reason to believe that they would not deal with that matter properly. Had there been other circumstances, I might well have considered an order for removal.

8. To determine the question of costs of that action one should look at the findings of the issues raised by the plaintiff. I found that her contentions as to Barker Road were well founded and that the defendants were in breach of their duties. As to the matter of estate duty, although I was of the opinion that they had acted to the best of their ability in the interest of the trust, I cannot ignore that fact that their lack of frankness with the plaintiff and her advisers, and their reluctance to cooperate in the provision of information before proceedings were contemplated, were to a great extent responsible for the situation they found themselves in. While not conclusive, it is interesting that they were unable to interest the other beneficiaries, or potential beneficiaries if it had been a discretionary trust, to be added as parties and take part in opposing the plaintiff's view.

9. As I have already said in my judgment, the plaintiff has, in my view, been substantially successful in her contentions in these proceedings, and I can see no reason to deprive her of her costs. Neither can I see any reason for the trust funds to bear any part of the parties' costs. I accordingly confirm my order as to costs given in my judgment.

10. There will also be an order that the defendants pay the plaintiff's costs of this application to be taxed.