HCA 765/2021
[2024] HKCFI 2058
IN THE HIGH COURT OF THE
HONG KONG SPECIAL ADMINISTRATIVE REGION
COURT OF FIRST INSTANCE
ACTION NO 765 OF 2021
_______________________
BETWEEN
TANG WAI CHUN (鄧惠珍), the administratrix of the
Plaintiff
and
MAN KOK WAI (文國偉)
1st Defendant
MAN KAI CHEONG (文啟昌)
2nd Defendant
________________________
Before:
Deputy High Court Judge Le Pichon in Chambers
Date of Hearing:
6 August 2024
Date of Decision:
6 August 2024
Date of Reasons for Decision:
7 August 2024
________________________
REASONS FOR DECISION
________________________
Introduction
1. This is the Plaintiff’s appeal against the order of Master Patrick Siu made on 25 April 2024 (“the Order”) dismissing (1) the Plaintiff’s summons dated 2 April 2024 (“the Summons”) for leave to file the 4th affirmation of Wong Chor Wan; and (2) ordering the Plaintiff to give security for the 2nd Defendant’s costs in this action (up to and inclusive of the trial of this action) in the sum of $1.4 million within 28 days; failing which (3) the action be dismissed.
2. At the conclusion of the hearing, the Court dismissed the appeal against the Order (a) dismissing the Summons and (b) ordering the Plaintiff to give security within 28 days for the 2nd Defendant’s costs in this action, but varied the quantum of security to $1.2 million to be payable within 28 days of the Decision, with costs in favour of the 2nd Defendant. My reasons appear below.
Relevant background
3. The Plaintiff (Madam Tang) is the administratrix of the estate of her late husband (“the deceased”) who passed away in 1997. She commenced the present action as the administratrix of the deceased’s estate. She claims that under Chinese customary law the deceased was entitled to 0.6665 shek of land entitlement in a “Wui” in Fan Tin Tsuen, San Tin, Yuen Long which the 1st Defendant holds as trustee and the 2nd Defendant used to hold as trustee.
4. On 12 December 2023, the 2nd Defendant took out a summons (“the Security Summons”) seeking a sum of $1.9 million as security for costs up to the trial of the action.
5. By a consent order dated 15 December 2023, directions were given, inter alia , for the Plaintiff to file an affirmation in opposition to the Security Summons and for the 2nd Defendant to file a reply after which no further evidence could be filed and served without the Court’s leave.
6. The 2nd Defendant filed his reply affirmation on 6 February 2024. Notwithstanding the terms of the consent order, the Plaintiff took out the Summons 3 ½ months later, on 2 April 2024, less than 3 weeks before the hearing that culminated in the Order.
7. It is common ground that (a) the Plaintiff is ordinarily resident out of the jurisdiction and has no substantial assets in Hong Kong; and (b) the deceased is the registered owner of an undivided half share in several lots of land in DD 102 (“the DD 102 lots”).
8. It is the Plaintiff’s case that apart from the deceased’s interest in the DD 102 lots, under Chinese customary law, the deceased (as a male descendant) also has a 1/6th interest in 2 lots in DD 100 (“the DD 100 lots”) in respect of which the deceased’s grandfather was one of the 3 registered owners.
Legal principles
9. Under RHC O. 23 r. 1, where a plaintiff is ordinarily resident out of the jurisdiction, the Court has a discretion to order the plaintiff to give security “having regard to all the circumstances of the case, the Court thinks it just to do so”.
10. It is common ground that there is no inflexible rule that security will be ordered where the plaintiff is resident out of the jurisdiction. The Court has a real discretion in the matter having regard to all the circumstances.
11. The rationale for ordering security for costs is to ensure that a successful defendant will have a source of funds within the jurisdiction of the Court against which he can enforce the judgment for costs. The plaintiff bears the burden to show that there should be no risk of the defendant not getting its costs: see Eric Hotung v Ho Yuen Ku , unrep., HCA 857/2011, 13 December 2013 at §§25-27.
12. The purpose of the security for costs jurisdiction is clear: it is to enable a defendant to recover costs subsequently awarded to it without delay or other difficulty: see Sunni International Limited v Kao Wai Ho Francis [2021] 1 HKLRD 841 at §30, citing from Progas Energy v Pakistan [2018] 1 CLC 126 at [37].
The Plaintiff’s case
13. Mr Ernest Koo and Rex Yam, counsel for the Plaintiff accept that Madam Tang would have personal liability with respect to any costs order made against the Plaintiff. Nevertheless, they submitted that when considering whether to exercise its discretion, the Court should not disregard the fact that the Plaintiff brought the action on behalf of the deceased’s estate. As (according to the Plaintiff) the deceased’s estate has sufficient permanent assets within the jurisdiction, there would be no risk of the 2nd Defendant not getting his costs.
14. The premise of the submission is that because the action is taken out by the Plaintiff as administratrix of the deceased’s estate, the 2nd Defendant could go after the estate’s assets within the jurisdiction in respect of any unpaid costs.
15. In Lee Shuk Yee v Edwin Kwok Wing Yun , HCB 10541/2004 unrep., 2 November 2005 Barma J (as he then was) held (at §10) that as a matter of authority and of principle:
“where … the proceedings in question are commenced by a personal representative, that personal representative is personally liable to the other party for any costs to which the other party is entitled, in the absence of some special order directing otherwise.”
16. In so holding, Barma J rejected the plaintiff’s submissions[1] that as the costs order was made against her in her capacity as administratrix of the estate, it gave rise to no personal liability on her part but only a liability for such costs on the part of the estate, the general principle being that the estate should bear the expenses incidental to the proper performance of her duties as the personal representative and in any event she was entitled to an indemnity out of the estate for all proper expenses incurred in relation to it, including any actions relating to the estate which were brought or defended with the leave of the court or which it was proper to bring or defend even though no prior leave had been given.
17. After citing with approval a passage from the judgment of Oliver J in In re Wilson Lovatt & Sons Limited [1977] 1 All ER 274 at 285e-f, Barma J concluded (at §13) that:
“where … a personal representative chooses to bring proceedings against a third party, it is and should be no concern of the third party whether or not such personal representative has an indemnity against the estate which he is administering, and if so, whether such an indemnity is worth anything. So far as the third party who has been sued is concerned, he is entitled, if he chooses to, to enforce any costs order in his favour against the personal representative, leaving it to the personal representative to take steps to recoup himself out of the estate if he is authorised to do so, and there are funds out of which this can be done.”
18. On appeal (CACV 366/2005, 4 May 2006), the Court of Appeal (at §§9-10) upheld those principles as set out above.
19. Mr Koo submitted that the phrase “if he chooses to” in the passage from the judgement set out in §16 above meant that the defendant had a choice: he could pursue the plaintiff personally or, alternatively, the estate. His submission is that as the value of the deceased’s estate far exceeds the amount of security sought, there is no risk of the 2nd Defendant not recovering his costs.
20. In the present case, the Plaintiff submitted that there are unusual features and the 2nd Defendant has no ‘justification’ not to enforce any costs order against the deceased’s estate. It was submitted that Court should have regard to the fact that the 2nd Defendant is the owner of the other undivided half share in the DD 102 lots. As such, in order to recover any costs awarded to him, it was suggested that the 2nd Defendant could initiate proceedings to partition the DD 102 lots and to enforce a sale of the half share belonging to the deceased’s estate.
21. The deceased passed away intestate in 1997, over a quarter century ago. The deceased’s estate remains under administration. The value of the deceased’s undivided share in the DD 102 lots is disputed. The evidence shows that in the last 30 years there have been no more than about 10 transactions of land in the area most of which were inter family transactions. If (as the Plaintiff appears to maintain) there is a ready market and its value well exceeds the amount of security sought, one might wonder why those assets have not already been realised.
22. Mr Eugene Kwan, counsel for the 2nd Defendant, submitted that the key issue is whether the 2nd Defendant can have recourse against the assets of the deceased’s estate under the costs order. Although the Plaintiff’s stance is that the 2nd Defendant has a choice, in fact, such a choice does not exist.
23. The Court was referred to the Court of Appeal’s judgment in To Pui Kui (Administratrix) v Ng Kwok Piu & Ors [2015] 2 HKC 115. In that case, the plaintiff administratrix was ordered nisi to pay the costs of the successful defendants. Following that, the successful defendants asked for costs below and that all costs be paid by the plaintiff personally and the plaintiff asked for an order that she be indemnified by the estate in respect of all costs awarded against her and incurred by her. Lam VP (as he then was) held (at §6) as follows:
“Re Lee Shuk Yee [citations omitted] stands as authority for the proposition that irrespective of the question of indemnity, the costs order should be made against the plaintiff personally. In other words, even if there were to be an indemnity, the plaintiff bears the risk of the estate not having enough assets to pay for such costs liability.”
24. The statements of principle are clear and consistent with the position under English law. As stated in Williams, Mortimer and Sunnucks on Executors, Administrators and Probate (22nd edition) at §59-01:
“ In hostile litigation with outsiders, whether brought by representatives as claimants or brought against them as defendants, the representative will be in the position of any other litigants. The costs will be in the discretion of the court, but the general rule is that the unsuccessful party will be ordered to pay the costs of the successful party. The representatives will be personally liable to the other party for any costs order made against them, and liability will not be limited to the assets of the estate even if their liability on the rest of the judgment debt is limited to the assets. The judge making such a costs order will not be concerned as to whether the representative will be entitled to be indemnified against that order out of the estate, and will have no jurisdiction to decide that question, because the persons interested in the estate are not parties to the proceedings. The question of whether or not the representatives are entitled to be indemnified out of the estate is one that will have to be decided, if there is any dispute about it, in administration proceedings.”
25. Where a personal representative brings an action against a 3rd party but is unsuccessful, the practice of the court is to make an award of costs against the personal representative personally and not the estate for the reasons explained above.
26. It should be mentioned that in her written submissions, the Plaintiff placed reliance on O. 15 r. 6A. The purpose of that rule is explained in the 1st paragraph of the annotation at §15/6A/1 of Hong Kong Civil Procedure 2024 and has nothing to do with rendering the estate directly liable for costs orders made in proceedings commenced by the personal representative.
27. For those reasons, this appeal is hopeless irrespective of the value of the estate. Whether its value exceeds the amount of security sought is therefore irrelevant.
28. It follows that it is strictly unnecessary to consider whether leave should be granted to admit the 4th affirmation of Wong Chor Wan into evidence since that evidence pertains to valuations of the deceased’s interests in various properties situated in Hong Kong. Were it necessary to do so, this Court would not grant leave.
29. The issue as to whether the deceased’s interest in the various lots of land has any significant value and its marketability was raised when the 2nd Defendant filed his Security Summons on 12 December 2023 together with the 1st affirmation of Man Shuet Mui in support. The consent order was made 3 days later.
30. The Plaintiff should have but did not file any valuation evidence when she filed evidence in opposition to the Security Summons on 15 January 2024. The 2nd Defendant’s reply affirmation was filed on 6 February 2024.
31. Given the terms of the consent order, leave would not be granted to admit further evidence in the absence of exceptional circumstances. In the present case, there is clearly none.
Quantum
32. Mr Koo submitted that the 2nd Defendant’s skeleton bill of $1.9 million should not have included costs of and incidental to the Security Summons of approximately $233,000. He further submitted that the appropriate amount of security should be no more than $800,000.
33. Mr Kwan accepted that the costs of the Security Summons should be excluded. It is common ground that the trial involves 8 witnesses and is estimated to take 7 days. In the circumstances, the amount of security to be ordered should be varied to $1.2 million, such a sum to be payable within 28 days.
Costs
34. Costs should follow the event. Accordingly, it is ordered nisi that the Plaintiff do pay the costs of the 2nd Defendant, such costs to be summarily assessed and payable forthwith.
(Doreen Le Pichon)
Deputy High Court Judge
Ernest Koo and Rex Yam, instructed by Christine M. Koo & Ip, Solicitors & Notaries LLP for the Plaintiff
Eugene Kwan, instructed by Kenneth Poon & Co., for the 2nd Defendant
[1] They are summarized in §9 of his judgment.