WLK by MYW her next friend v. CCIW AND OTHERS

FCMP176/2019

[2025] HKFC 104

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

FAMILY COURT

MISCELLANEOUS PROCEEDINGS NO 176 OF 2019

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JUDGMENT
( Variation of Cost Order Nisi )
(Paper Disposal)

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1.  After a 5-day trial in August and September 2023, I handed down the Judgment on this Cap 481 application on 16 August 2024 (the “Judgment”)  in favour of the Applicant, and made the Order that the Applicant shall be entitled to 50% of the net estate, to be set off by the interim financial provision payments previously made to her.  I also made the Costs Order against three of the Respondents, who are the three sons of the Applicant who opposed her application.  The Costs Order reads as follows:

“All cost of and arising from this application, including all costs reserved be to the Applicant, it is to be borne by R1, R2 and R7, to be taxed if not agreed.”

2.  The Applicant seeks to vary this Costs Order Nisi by her Summons dated 30 August 2024 (“Variation Summons”), and asks for her costs either from 28 October 2022 or alternatively 23 August 2023 be paid by R1, R2 and R7 on an indemnity basis.

3.  Adopting the nomenclature from the Judgment, R1, R2 and R7 shall be referred to as the Opponents herein.

4.  References will be made to the paragraphs in the Judgment (§).

History of negotiation between the parties

5.  The FDR was conducted on 21 September 2022, and failed.

6.  Following the FDR, the Opponents submitted an Open offer dated 21 October 2022 which proposed that HK$180,000 be paid either as a lump sum or as a monthly payment of $3,000 (over a course of 60 months)  to the Applicant.

7.  The Applicant’s Open Offer dated 28 October 2022 proposed 50% of the estate be paid to her, and the balance to be divided among her 10 children.

8.  The Opponents’ “Without Prejudice Save as to Costs” letter dated 19 April 2023, asked for the Applicant’s claim to be “dismissed”, and 50% of their costs to be borne by the Applicant, her next friend, R3 to 6, and R8 to 10 jointly and severally.

9.  The Applicant’s “Without Prejudice Save as to Costs” letter dated 23 August 2023 proposed 35% of the estate be paid to her, and to allow for interim maintenance payment already made to be set off.

10.  The Opponents’ “Without Prejudice Save as to Costs” letter 24 August 2023 in response offered 20% of the estate to be paid to the Applicant.

11.  During the course of the trial, parties were warned of the costs consequence of the trial and the relative size of the net estate, and were sent out to negotiation at least twice.  The Opponents’ offer was 20% of the estate to the Applicant on the first occasion and on the second occasion, offered to give her 25% of the estate, or they (the Opponents)  walk away with $1.7M lump sum from the estate.

Service of this Summons

12.  The Opponents’ lawyers applied to cease to act on 16 September 2024, the order was made by me in terms of the Cease to Act Summons on the return day of this Variation Summons on 27 September 2024.

13.  Hence, the Opponents were no longer represented at this hearing nor did they make an appearance.  I made the Orders for the Opponents to file affidavits in opposition 35 days from date of affirmation of service, and the Applicant to file their reply 21 days thereafter.  As all of the Opponents live in the US, the Applicant’s legal representation then applied for Service of the Variation Summons out of jurisdiction, and the Order for this was made on 30 October, 2024.

14.  There is an Affirmation of Service by a US agent dated 10 February 2025 describing the various attempts to serve the court documents on the Opponents.  R2 and R 7 were served personally; while it was the agent’s evidence that R1 was probably evading service, hence the court documents were left at his door and also sent via post.  On 14 March 2025, Master Yeung made the Order that the manner in which R1 was served was deemed good and sufficient service on him.

Applicable Legal Principles

15.  The principle is trite that the Court has full discretion on the issue of costs.  While the usual order to be made is that costs should follow the event, other approach can be considered.  Order 62 RDC Rule 3(2)  states as follows:

“If the Court in the exercise of its discretion sees fit to make any order as to the costs of or incidental to any proceedings (other than interlocutory proceedings), the Court shall, subject to this Order, order the costs to follow the event, except when it appears to the Court that in the circumstances of the case some other order should be made as to the whole or any part of the costs.”

16.  I shall also have regard to Order 62 Rule 5(1)  and (2),

“(1)  The Court in exercising its discretion as to costs shall, to such extent, if any, as may be appropriate in the circumstances, take into account—

(aa)  the underlying objectives set out in Order 1A, rule 1;

(a)  any such offer of contribution as is mentioned in Order 16, rule 10, which is brought to its attention in pursuance of a reserved right to do so;

(b)  any payment of money into court and the amount of such payment;

(c)  any written offer made under Order 33, rule 4A(2);

(d)  any written offer which is expressed to be “without prejudice save as to costs” and which relates to any issue in the proceedings, but the Court may not take the offer into account if, at the time it is made, the party making it could have protected his position as to costs by means of a sanctioned payment or a sanctioned offer under Order 22;

(e)  the conduct of all the parties;

(f)  whether a party has succeeded on part of his case, even if he has not been wholly successful; and

(g)  any admissible offer to settle made by a party, which is drawn to the Court’s attention.

(2)  For the purpose of paragraph (1)  (e), the conduct of the parties include

(a)  whether it was reasonable for a party to raise, pursue or contest a particular allegation or issue;

(b)  the manner in which a party has pursued or defended his case or a particular allegation or issue;

(c)  whether a claimant who has succeeded in his claim, in whole or in part, exaggerated his claim; and

(d)  conduct before, as well as during, the proceedings

17.  The Court is therefore to have regard to whether parties have made reasonable efforts to settle disputes, Order 1A r1 of RDC refers.  Furthermore, an offer made “without prejudice save as to costs”, and which one party unreasonably refuses to accept may be considered in the exercise of the Court’s discretion.

“It has been said on numerous occasions that, in the course of matrimonial litigation, when an offer has been made, if the party to whom it has been made rejects that offer and at trial receives no more than what was contained in the offer, the party is at risk of an adverse order as to costs. Litigants cannot ignore sensible and rational offers of compromise in the comfortable knowledge that they can do so with impunity.” HK v BD [2010] HKCA 357, CACV 252/2009 (15 October 2010)  at §94.

18.  With regard to the claim for Indemnity Costs, I cite the following often quoted authority from the case of LYE v CSS and HWL, FCMC 14787 OF 2002, 6 May 2005, a decision from HHJ B Chu (as she then was)  at §§5 to 8:

“5. Order 62 Rule 28(3)  in both R.D.C. and in R.H.C. provides that the Court in awarding costs payable to one party by another may in any case in which it thinks fit to do so order or direct that the costs shall be taxed on the common fund basis or on the indemnity basis.

6. Any order for costs is in the discretion of the Court. (see Headnote of Re Engindata* Ltd (No. 2) 1993 1 All ER 232).

7. Section 53 of District Court Ordinance Cap. 336 (equivalent to Section 52A of High Court Ordinance Cap. 4)  provides that the Court shall have full power to determine by whom and to what extent the costs are to be paid. See also Hong Kong Civil Procedure, 62/2/5 : -

“The Court of Appeal in Choy Yee Chun (The Representative of the state of Chan Pui Yiu)  v. Bond Star Development Ltd [1997] H.K.L.R.D. 1327, CA reviewed the cases and summarised the law as follows. A taxation of the successful party’s costs on an indemnity basis could properly be ordered where the proceedings were scandalous or vexatious, or had been initiated or prosecuted maliciously, or for an ulterior motive, or in an oppressive manner. Any proceedings instituted or prosecuted in such circumstances as to constitute an affront to the court could properly be the subject of a direction for the taxation of the successful party’s cost on the indemnity basis. However, the circumstances in which an indemnity award might properly be made were not restricted to circumstances beyond the requirement that taxation on an indemnity basis must be “appropriate”. The principle for the award of an order of costs on an indemnity basis applied equally to those who not only instituted proceedings but who defended them. If a plaintiff had been forced to institute proceedings by a defendant whose conduct had been not only hostile in the normal litigious sense, but oppressive and with base ulterior motive, and if the pursuit of a defence constituted conduct which was part of an oppressive game plan, then invocation of the power to award costs on an indemnity basis might well be justified”.

8. I have been referred by the Petitioner’s solicitor, Mr. Ko, to the case of Re Tang Hong Yeun Andy HCB 19585 OF 2003 (at paragraph 18)  quoting Choy Yee Chun (The Representative of the estate of Chan Pui Yiu)  v Bond Star Development Ltd. [1997] H.K.L.R.D. 1327 CA, where it was held that the discretion was not to be fettered or circumscribed beyond the requirement that taxation on an indemnity basis must be “appropriate”. See also Hong Kong Civil Procedure, 62/App/12.

  * should read “Elgindata”

19.  Another leading authority in this subject is the judgment of the Court of Final Appeal in Town Planning Board v Society for Protection of the Harbour Limited (2004)  7 HKCFAR 114 where the Court of Final Appeal stated some of the principles:-

(1)   The Court had a broad discretion to determine how costs should be paid and whether indemnity costs should be ordered.

(2)   The successful party would usually recover more of his costs under an indemnity award than under a party and party award, and in that sense the former might be perceived as achieving a fairer result for the successful party in circumstances such as the present. 

(3)   However, the Judge rightly considered that the existence of such difference between the two types of award was not on its own a sufficient basis for awarding indemnity costs and that the successful should show that the case had special or unusual features for such an order to be made.

(4)   An award of indemnity costs was not confined to cases brought with an ulterior motive, for an improper purpose, or where there was some deception or underhand conduct on the part of the losing party.  It was undesirable to attempt to define the circumstances in which such order would be made, and the discretion was not to be fettered beyond the requirement that indemnity costs much be “appropriate”.

(5)   The attributes of the parties and the character of the proceedings were not irrelevant to the exercise of the discretion to award indemnity costs.  The grounds for making such an order must be connected with the case and might extend to any matter relating to the litigation and the parties’ conduct in it, and also to the circumstances leading to the litigation, but no further.

20.  I would also draw reference from the more recent case of KJ v KMLM and KCK [2014] HKCU 1409 at paragraphs §§21 to 24, the Court of First Instance stated:

“21.  The principles applicable to indemnity costs are well settled. The starting point for taxation in hostile litigation is that costs should be taxed between party to party: See Town Planning Board v Society for protection of Harbour Ltd. (No.2)  and Overseas Trust Bank Ltd v Coopers & Lybrand (a firm). To qualify for costs on an indemnity basis, the successful party should show some special or unusual feature in the case. The proceedings must be instituted or prosecuted in circumstances as to constitute an affront to the court. Usually there must be something disgraceful in the conduct of the losing party or his legal representatives such as to cause the court to feel a proper sense of indignation. Normal litigious hostility would not suffice: See Town Planning Board v Society for protection of Harbour Ltd. (No.2); Overseas Trust Bank Ltd v Coopers & Lybrand (a firm)  and Man Fong Hang v Man Ping Nam. In exercising its discretion as to costs, the court must take into account the conduct of both the successful and losing parties before, as well as during the proceedings: See Order 1A, rule 1(1)  and Order 62, rule 5 of the Rules of the High Court (“RHC”).

22.  If unreasonable conduct is relied on, the losing party’s conduct would need to be unreasonable to a high degree. In this context “unreasonableness” does not mean merely wrong or misguided in hindsight: See Kiam v MGN Ltd (No.2). Advancing a case which is difficult, unlikely to succeed or which in fact fails, or without any foundation in law or fact, or devoid of merits, is not necessarily in itself a sufficient reason for an award of indemnity costs: See Overseas Trust Bank; Shaina Investment Corporation v Standard Bank London Ltd; Golden Sand Marble Ltd v Hsin Chong Construction Co Ltd; Kao, Lee & Yip (a firm)  v Midland Realty International Limited. The court’s finding that the claim or the ground of defence is plainly and obviously incredible on the fact, or that the evidence has been deliberately untruthful will not necessarily in itself warrant an order of indemnity costs. The conduct of the losing party must be of a more venal kind and the conduct of the litigation has in some sense been wicked: Choy Yee Chun v Band Star Development Ltd; and Kao. Lee & Yip.

23.  The court may also mark its disapproval of the conduct pertaining to part only of a party’s case by ordering costs of that part only to be assessed on an indemnity basis, with the rest assessed on party-and-party basis: see Man Fong Hang.

24.  Ms Yip, counsel for the Husband, referred to the uniqueness of family cases which usually involve highly sensitive and emotional matters such carving up of assets as result of breakdown of a marriage. She argued that making a costs order would effectively be pouring salt on the wound, and worse still with indemnity costs. Her argument is based on the English Family Procedure Rules 2010 which are inapplicable to Hong Kong. That part, if the conduct of the losing party is of a more venal kind and the conduct of the litigation has in some sense been wicked, the rules, even if applicable, could provide no answer to an award of indemnity costs. An indemnity costs order is necessary to mark the court’s disapproval of such venal and wicked conduct and to provide consolation to the injured party”.

21.  Pulling the threads together, the summary of the principles drawn from the above authorities for awarding indemnity costs could be the consideration of one or more of the factors below:

a.  the discretion to award indemnity costs was not to be fettered or circumscribed beyond the requirement that taxation on an indemnity basis must be “appropriate”; 

b.  where the proceedings were scandalous or vexatious, or had been initiated or prosecuted maliciously, or for an ulterior motive or improper purpose, or in an oppressive manner, or where there was some deception or underhand conduct on the part of the losing party;

c.  where the pursuit of a defence constituted conduct which was part of an oppressive game plan;

d.  where any proceedings were instituted or prosecuted in such circumstances as to constitute an affront to the court.  Usually with something disgraceful in the conduct of the losing party or his legal representatives such as to cause the court to feel a proper sense of indignation;

e.  the successful party should show some special or unusual feature in the case;

f.  if unreasonable conduct is relied on, the losing party’s conduct would need to be unreasonable to a high degree;

g.  the attributes of the parties and the character of the proceedings could be relevant; 

h.  the conduct of the losing party must be of a more venal kind and the conduct of the litigation has in some sense been wicked.

The Applicant’s Case

22.  Submitted on the Applicant’s behalf, are two speaking notes dated 25 and 26 September 2024 respectively.

23.  The Applicant submits that legal costs of approximately $959,000 has been incurred, and the Opponents legal costs amount to $850,000 from the end of the FDR to the end of the trial.

24.  The Applicant’s counsel relies on three factors in his first speaking note:

a.  Failure to Mediate

b.  Affirmation of Mr Man

c.  Disingenuous offer

Failure to Mediate

25.  The Applicant says that the Opponents took an unreasonable position in discussing the approach to mediation:

a.  The Applicant says that the Opponents had been slow in engaging in mediation, and took over three months after a Court hearing in January 2022 (at which they indicated their intention to mediate), to nominate a name for mediation.

b.  The Applicant also says that the Opponent’s insistence on discovering the whereabouts of the Applicant before agreeing to mediate is irrelevant.

c.  The Opponents at a following court hearing in June 2022 placed a condition that mediation would not take place without information to be provided as to the Applicant.

d.  As a result, no mediation took place and the Applicant submits that the Opponents were being unreasonable, and only meant to delay further progress of the proceedings, probably with the intention that the Applicant (at age 86-87 then and quite ill at hospital)  would pass away prematurely and hence put an end to her claim. 

Mr Man’s Affirmation

26.  Opponents’ attempt to produce the affirmation of their friend Mr Man who attempted to visit the Applicant at hospital, was said by the Applicant’s counsel to be made in apparent disregard of the Applicant’s health (as it was during covid19)  and privacy (as it was in the middle of this litigation).  The Opponents’ attempt to incorporate Mr Man’s affirmation into R1’s narrative affirmation was criticized as a backdoor attempt to introduce previously disallowed evidence. 

Disingenuous offer

27.  The Opponents various offers were disingenuous:

a.  The Applicant says that the first open proposal of a $180,000 lump sum was less than 3% of the estate.  The alternate suggestion to pay $3,000 per month from this $180,000 would mean 5 years of payment up to the time when the Applicant would be around 91-92 years of age.

b.  The Applicant also says that the first WP offer is even worst as it asked the Applicant to drop her claim in its entirety and pay 50% of the Opponent’s costs.  It is said that this proposal takes the parties away from any further potential settlement.

28.  In the Applicant’s second speaking note, reference was made to Order 1A to remind this Court to take into regard the Opponents’ attitude to the reasonable settlement offers that had been made.

29.  Further, it was said that the whole of the case advanced on behalf of the Opponents had been dismissed by me as being unmeritorious issues.

The Opponents’ case

30.  None of the Opponents file any evidence in opposition to this Variation Summons.  No submission was given.

Applying the Principles to this Case

31.  I am not of the view that the mode of the Opponents’ participation in mediation, nor the allegation involving Mr Man’s affirmation by itself or together would give rise to an indemnity costs order.

32.  However, I have found in favour of the Applicant, and indeed dismissed all the arguments put forward by the Opponents. The following are the gist of my findings with regard to the Opponents’ case.

a.  The Opponents accused their mother of not taking care of her children.  I disagreed with the Opponents’ case (§54), and also found that this was contradicted by R3 and R4, whom I found to be credible witnesses.

b.  The Opponents accused their mother of squandering money and went out to gamble when the deceased was incarcerated.  Not only were there no proof as to what exactly was given to the Applicant for her to squander away, there was no evidence to support the Opponents’ allegations except their mere say so (§56).

c.  The Opponents accused their mother of having an extramarital affair when the deceased was incarcerated.  I said in the Judgment that the evidence from the Opponents on this matter was ambiguous and there was nothing to support their contention (§53).  I also take the view that they may be fabricating this extramarital affair as their reason to say that their parents’ relationship had broken down due to this affair; but it was my finding that their relationship had not broken down.

d.  I also concluded that the relationship between the Applicant and the deceased had not broken down due to evidence from the Opponents’ other siblings and the Applicant’s granddaughter, whom I found to be credible; and also from a number of photos put into evidence.  When shown the photos of their parents taken together well into 2016, one of the Opponents said that they were trying to salvage their relationship but did not succeed (§62).

e.  Overall, I found that the allegation of a broken down relationship to be unsupported (§§79-81).

f.  I found that there were good reasons that the Applicant and the deceased were not living together all the time (§§71 to 78).

g.  The Opponents, relying on only something that R7 allegedly heard from the deceased, said that the deceased had given $1M to R4 for the Applicant’s use.  There was no paper trail, nor corroboration; and the alleged recipient R4 denied ever receiving this amount.  It is also implausible that an important payout like this could have been made in this surreptitious fashion (§90).

h.  I found it quite incredible that the Opponents could run a broken down relationship argument when R1 was asked by the deceased to purchase a burial plot for himself and the Applicant, no explanation was given as to why the deceased wanted to purchase a joint burial plot when his relationship with the Applicant was alleged to be so bad.  I found the evidence given by R1 in this regard to be suspicious (§106d), I continue to maintain a strong view that this incident lies diametrically opposite to the Opponents’ case that their parents’ relationship had broken down.

i.  With regard to the Opponents’ case that the testamentary intention of the deceased should be taken into consideration, R1’s role is in particular worthy of mention.  R1 was the person who accompanied the deceased to make his will; R3 who was also present, described in evidence the deceased’s intention to have all the children support their mother from their respective share of the estate; R1 denied this.  I accepted R3’s version of what transpired, and this had placed R1’s evidence in a continuously suspicious light (§§95 and 96). 

j.  I found that where the Opponents were speaking to events in HK, it could only be very much limited to their brief visits here; but the rest are mostly from hearsay, and mostly among the three of them (§106b).

k.  I found the Opponent’s oral evidence to vary in degree of evasiveness and defensiveness (§106c).

l.  I also found the Opponents case to be presumptuous; and that they had given evidence on matters they could not have known, changed their evidence, and made unsubstantiated statements (§107-109).

33.  In re-looking at the case in the context of this application, I give further consideration on the evidence as to what could have been the ulterior motive of the Opponents.  I have concluded in the Judgement that none of the Opponents have a good relationship with the Applicant.  It would appear that they want the money from the estate distributed first and left it to whoever of the other siblings who are “able and willing” to use their own resources to look after the Applicant to do so, but it is clear that they have no intention to chip in.  They want to keep mother in a nursing home in the US to take advantage of the medical benefits she has as a US citizen and so that US can cover her medical costs.  They complained about the siblings who want to have their mother cared for in HK; R2 even said that this decision is “irrational”; and he also said that when the Applicant dies, they need to spend a lot of money to bring her body back for burial (§99).  It is not beyond imagination, that their driver could be financially oriented. 

34.  The Opponents, being 3 sons of the Applicant, are probably more focused on their own monetary interests, instead of considering what is best for their mother’s needs.  At a time when the Applicant is bedridden in hospital, and not expected to return home, they had concocted their case which is unsubstantiated and uncorroborated, to serve only their personal interest.  The conclusion to be drawn from the above, is that the Opponents were speaking from a parallel universe of their own creation. Their credibility was questionable, their conduct disgraceful and unreasonable; and had left this court with a serious sense of indignation.

Offer from the Applicant

35.  During the 5-day trial, the Court had attempted to ask them twice to consider their respective cases, taking into account the costs so far incurred, the costs and stress of continuing to be in trial, and how these relate to the value of the estate.  Nothing came out of the two opportunities to discuss this.

36.  Looking at the Open offer of the Applicant’s case asking for 50% of the estate, this is in line with the divorce standard crosscheck to be applied in a case of this nature.  It is quite clear that should the Opponents’ case fail to come up to proof, as it had, that this would be the result they everyone would be looking at.  The subsequent “Without Prejudice Save as to Costs” offer dated 23 August 2023, just before the trial commenced, made an offer of 35% of the estate.  None of these reasonable or more than reasonable offers were taken up by the Opponents, they had stoically maintained their positions, taking it all the way to a full fledge trial.  Both these offers equate to and subsequently “beat” the final decision of the court.  This alone could be the basis of a higher costs order to be made against the party rejecting these offers; and is a factor that I will be taking into account.

37.  I also agree with the Applicant’s submission that the Opponents’ offers were disingenuous.  This in brief repetition, consists of the Opponent’s proposal of giving the Applicant only $3,000 per month, or asking her to “dismiss” her application and pay for 50% of their costs, or asking to be given $1.7M from the estate so they could walk away.  This last offer, in particular, made little sense when it was clear that the estate, which then held a yet-to-be-sold property, could be valued as low as $6.42M (§147).

Conclusion

38.  The circumstance around this case makes for woeful reading of a series of unreasonable conduct on the part of the Opponents, reflected in the number of accusations against their own mother.  It is a case which was ill conceived from the beginning with practically no proper evidence in support.  For the Opponents to have pursued this to the bitter end left the Court with a strong feeling of affront by the unsubstantiated allegations that were made, the quality of the evidence given, and the time and cost of all parties concerned; this is clearly a case for the Court to mark its disapproval by making an order that costs be taxed on an indemnity basis.

39.  I therefore grant the Applicant’s Summons to vary the Costs Order, which shall be as follows :

All the costs of and arising from this application, including all costs reserved be to the Applicant, to be borne by R1, R2 and R7 on a party to party basis up to 28 October 2022; and then from 29 October 2022 and thereafter on an indemnity basis, to be taxed if not agreed. 

40.  Costs of this application be to the Applicant, to be borne by R1, R2 and R7 on a party to party basis, to be taxed if not agreed. There shall be certificate for counsel.