CHOY YUEN ON DAVID v. SOKA GAKKAI INTERNATIONAL OF HONG KONG LTD

HCA 2804/2018

[2024] HKCFI 696

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 2804 OF 2018

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BETWEEN

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REASONS FOR DECISION ON COSTS

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1.  I will continue to adopt the nomenclatures used in the Judgment herein dated 12 December 2023 (“the Judgment”).

2.  By the Judgment, I upheld Choy’s claim based on a Quistclose trust, but not based on his contract claim, and ordered HKSGI to return the HK$2,000,000 Choy paid to it on 20 July 1999. On 23 January 2024, this Court handed down its Decision on Interest.

3.  In §70 of the Judgment, I ordered on nisi basis that HKSGI do pay Choy’s costs of this action, including all costs reserved, to be taxed if not agreed.

4.  By summons taken out on 2 January 2024, HKSGI asks to vary the costs order nisi to that of no order as to costs.

5.  At the conclusion of the hearing, I dismissed HKSGI’s summons with costs to Choy and with written reasons to be provided, which I now do.

6.  Mr Yin, counsel for HKSGI, advocating as much as he could on behalf of HKSGI, referred to the following 7 matters in his written submissions in support of the variation :

“2.1 First, P’s claim was primarily based on the breach of an Oral Agreement, which was rejected by the court; even though P succeeded on his fallback position based on the existence of a Quistclose trust.

2.2 Second, as pointed out by the Court in paragraphs 23 to 28 of the Judgment, a comparison of P’s case as pleaded in the Statement of Claim with what is set out in his witness statement would readily reveal that they are very different in certain material respects; and the relevant conversations in 1999 between P and Kajiura was not either recorded in any contemporaneous documentary evidence (save arguably the receipt and the Agenda) or witnessed by any third party.

2.3 Third, there was the inaction on P’s part for almost 15 years to follow up as to whether the Donation had been used for the Specific Purpose for which the explanation provided by P was found to be “somewhat weak”. (notwithstanding the Court accepted on the totality of the evidence that the Donation made in 1999 was for a Specific Purpose and proceeded to allow P’s claim on that basis).

2.4 Fourth, D is a charity, who owes by fiduciary duties akin to those of a trustee of a charitable trust, and as such, D cannot simply return the Donation to P on the strength of an undocumented and uncorroborated claim bought after a lengthy period of inaction based on P’s bare assertion alone, especially in light of the discrepancies between P’s pleaded case and his witness statement.

2.5 Fifth, D has made it clear (both by its Defence and its Opening) that it was not setting up any positive case in opposition to P’s claim. Rather, D merely insisted on P’s claim being proved and that D intended only to cross-examine P as the witness produced to support his claim.

2.6 Sixth, D has also made it clear that whilst it was not prepared to conceive liability in light of the paucity of evidence in support of P’s claim, D has taken reasonable steps to settle the claim by offering to donate an amount representing the Donation together with interest accrued thereon to any charitable purpose specified by P, but that was not accepted by P.

2.7 Seventh, by a letter through his solicitor dated 5th of February 2021, P had made clear that he would not settle for anything less than the original sum of the Donation plus interest at prime plus 1% from the date of payment, when as the Court has found in the Decision on interest dated 23 January 2024 that even though the Donation should carry interest at prime plus 1% such interest should only start to run 3 months after the date of payment.”

(original italics and underline)

7.  For ease of reference, I will refer to these matters by abbreviating them respectively as “the First Matter”, “the Second Matter” and so on.

8.  On the First Matter, I do not accept Mr Yin’s characterization that the contract claim was the “primary” claim and the Quistclose trust, the “fallback” claim. Rather, they were alternative claims.

9.  The Second and Third Matters refer to the analyses and observations in the Judgment as to certain weaknesses or inadequacies in Choy’s case or evidence, which are now singled out by HKSGI. Evidently and as is trite, the mere fact that the winning party’s case or evidence was not perfect in all their respects but had certain weaknesses is not a good or sufficient reason to deprive the winning party of his costs.

10.  At the hearing, the Fourth Matter was elaborated. In gist, it was said that in the circumstances HKSGI “could not simply return” the Donation without testing Choy’s claim. I do not accept that was so. A trustee administering a charitable trust is under as much a duty as anyone else to decide whether one is entitled in law to retain or to use certain sum one receives under a particular set of circumstances. One difference is that a trustee is accountable not to himself, but to the beneficiary, or in this case, the charitable purpose. However, there is before this Court simply no evidence as to what HKSGI has done after having received the Donation, as to whether at any time it had made any enquiry (with Choy or anyone else), or as to whether it had sought any advice regarding the Donation, or even sought any direction from the Court concerning whether to contest Choy’s claim. In my view, all or some of these HKSGI as a trustee of a charitable trust ought to have done when faced with the difficulties it now said it faced, but it had not. Thus, it is not unreasonable to hold HKSGI to the usual costs consequence following from its unsuccessful “testing” of Choy’s claim.

11.  HKSGI is now also saying that it found itself difficult to decide (therefore reasonable to contest) as, particularly, there were discrepancies between Choy’s pleaded case and his witness statement. But that discrepancy only existed in respect of Choy’s contract claim and not his Quistclose claim, which was stated in the Statement of Claim as an alternative claim and Choy’s evidence thereon was all along consistent.

12.  By the Judgment, I adjudicated that HKSGI was obligated to return the Donation to Choy and HKSGI was not at liberty to apply it in any other way, and that would include not at liberty to force Choy to donate it to other institutions or purposes, charitable those other institutions or purposes may be. I therefore find that the offer by HKSGI as mentioned in the Sixth Matter not reasonable.

13.  Regarding the Fifth Matter, it was only in the middle of the trial after Choy has closed his case that HKSGI informed Choy and the Court that it would not be setting up a positive factual case by calling any factual witness. Moreover, HKSGI all along since the beginning had remained vigorous in its attack on Choy’s factual case and in raising various legal contentions in opposition to Choy’s claim, be it under contract or Quistclose. As a matter affecting the court’s exercise of discretion on costs, the Fifth Matter has no merits.

14.  I do not see how the position Choy adopted over the dispute as to the amount of interest could or should affect this Court’s discretion on the general costs of this action. As mentioned, the parties’ dispute on interest, including the costs of the parties’ submissions on the question of interest, has been adjudged in the said Decision on Interest.

15.  I also accept Mr Chong’s submission, as was evident, that Choy’s contract claim and Quistclose trust claim were both based on the same set of factual background, circumstances and communications; and weaker though the contract claim was (which ultimately failed), I do not hold that pursuing the contract claim as an alternative was unreasonable or improper.

16.  Therefore, I am unable to accept HKSGI’s submission that, for the purpose of costs, the contract claim should be separate out as an independent matter and Choy should be ordered to pay HKSGI its costs thereon to be set off as against the costs HKSGI is to pay Choy under the Quistclose claim, such that it would lead to an overall outcome not very different from no order on costs for the entire proceedings.

17.  In the premises, I dismissed HKSGI’s summons with costs to Choy, and made absolute the costs order nisi in the Judgment.