CHINACHEM CHARITABLE FOUNDATION LTD v. CHAN WAI TONG CHRISTOPHER AND OTHERS

CACV 268/2021

[2022] HKCA 1907

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 268 OF 2021

(ON APPEAL FROM HCCL NO 6 OF 2020)

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REASONS FOR JUDGMENT
AND
DECISION ON COSTS

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Hon Kwan VP (giving the Reasons for Judgment and Decision on Costs of the Court):

1.  This is the appeal of the plaintiff, Chinachem Charitable Foundation Ltd (“the Foundation”) against the decision of G Lam J (as he then was) on 4 May 2021[1] ordering the Foundation’s claim (“the Payments Claim”)[2] relating to alleged wrongful payments from the estate of the late Nina Kung (“Mrs Wang”) by the joint and several administrators of PricewaterhouseCoopers (the 1^st to 3^rd defendants; “PwC JAs”) to Lau Chi Pong Howard (the 4^th defendant; “Mr Lau”) be struck out and the Foundation’s summons to adduce further evidence be dismissed, with costs to be paid by the Foundation to the defendants on an indemnity basis.

2.  The Payments Claim was ordered to be struck out as it was found by the judge that (1) such claim amounts to serious allegations of wrongdoing and dishonesty against professionals without any foundation[3]; and (2) there is no factual basis or any evidence to allege that the PwC JAs had inflated their fees by 10% to pay Mr Lau, and such allegation is based on nothing but speculation[4].

3.  We dismissed this appeal at the conclusion of the hearing. These are the reasons for judgment of the court and our decision on costs.

Background

4.  The relevant background matters are as summarised in §§2 to 14, 16 and 20 of the Decision which we set out below. We adopt also the terms and expressions used by the judge in the Decision.

“2. In 2007, after the death of Mrs Nina Wang, the plaintiff herein, Chinachem Charitable Foundation Ltd (‘Foundation’), commenced a probate action (HCAP 8/2007) against, among others, Mr Chan Chun Chuen (aka Tony Chan). In that action the Foundation sought to propound a will of Mrs Wang made in 2002 which, the Foundation said, named it as beneficiary, while Mr Chan counterclaimed to propound a purported will of Mrs Wang made in 2006, which named him as the sole beneficiary. Within that action, in December 2007, the court appointed two partners of Deloitte Touche Tohmatsu as joint and several administrators pendente lite (‘Deloitte administrators’) of Mrs Wang’s estate (‘Estate’).

3. In February 2010, the Court of First Instance pronounced in solemn form for the 2002 will. The Court of Appeal dismissed Mr Chan’s appeal in February 2011, and on 24 October 2011 the Appeal Committee of the Court of Final Appeal refused leave for a further appeal.

4. At that time, it was the Foundation’s belief upon advice that the effect of the 2002 will was to bequeath the Estate to it as beneficial owner. The Secretary for Justice, representing the interests of charity for the public benefit, took a different view and commenced proceedings in May 2012 against, among others, the Foundation, seeking the court’s construction of the will. In February 2013, the Court of First Instance held that the Estate was not bequeathed to the Foundation beneficially, but to the Foundation to be held on trust upon the provisions of the 2002 will for charitable objects. The Foundation’s appeal was dismissed by the Court of Appeal in April 2014, and again by the Court of Final Appeal in May 2015.

The alleged ‘Under‑The‑Table Agreement’

5. Meanwhile, according to the Foundation, in about 2011, it had concerns that the Deloitte administrators were over‑charging fees to the Estate. There were also disputes between the Foundation and the Deloitte administrators as to how the Estate, which comprised a very large property development group, the Chinachem Group, should be managed. These led to the Foundation’s decision to seek to have the Deloitte administrators replaced.

6. The Foundation says that while it was trying to identify potential candidates to replace the Deloitte administrators, a close acquaintance of Dr Kung Yan‑sum (‘Dr Kung’), a governor of the Foundation, introduced to him Mr Howard Lau (‘Mr Lau’), the 4^th defendant herein, who was a former partner at Ernst & Young in Macau. Mr Lau represented to Dr Kung that (i) he had a very strong and extensive business network; (ii) he was very closely acquainted with Mr Silas Yang (‘Mr Yang’), the then Senior Partner and Chairman of PricewaterhouseCoopers Hong Kong (‘PwC’); and (iii) he could secure representatives from PwC to act as replacement administrators for the Estate.

7. The Foundation alleges that, to address its concerns about potential disputes with the future administrators from PwC (‘PwC administrators’), Mr Lau proposed certain conditions in return for the Foundation’s support and application to have the Deloitte administrators replaced by the PwC administrators. These conditions were, as pleaded in paragraph 18(c) of the statement of claim and named ‘Under‑The‑Table Agreement’, as follows:

‘(i) Notwithstanding the successful appointment of the PwC Replacement Administrators:

(1) Dr Kong would only have to deal with Howard Lau alone for the administration of the Estate.

(2) Howard Lau would ensure that the PwC Replacement Administrators would comply with and give effect to the instructions given by the Foundation through Dr Kong as to how the Estate was to be administered.

(ii) In order to give effect sub‑paragraph (i) above, Howard Lau would and in fact did enter into a written agreement (“the Private Written Agreement”) with the then Chairman of PwC Hong Kong (representing PwC) confirming that Howard Lau would have full power and authority to represent the PwC Replacement Administrators in dealing with Dr Kung for and on behalf of the Foundation and would ensure the full compliance with and the giving effect to the instructions given by Dr Kung for and on behalf of the Foundation. In this connection, there was a lunch occasion in or about late 2011 amongst, inter alios, Dr Kung, Mr Silas Yang and Howard Lau at the Chinese restaurant of the Jockey Club at Shan Kwong Road, Hong Kong on which Mr Silas Yang did orally confirm to Dr Kung personally about the Under‑The‑Table Agreement.’

8. It is said in paragraph 19 of the pleading that solely in reliance upon the Under‑The‑Table Agreement and the Private Written Agreement, the Foundation proceeded to apply for the replacement of the Deloitte administrators with the PwC administrators.

Replacement of administrators

9. With the conclusion of the litigation between the Foundation and Mr Tony Chan on 24 October 2011, the office of the administrators pendente lite of the Estate ceased. This was confirmed by the order of Chu JA (sitting as an additional judge of the Court of First Instance) on 26 March 2012, which however also confirmed that the Deloitte administrators continued to be vested with the Estate pursuant to section 36 of the Probate and Administration Ordinance (Cap 10). The court also made an order appointing Mr Rainier Lam and Mr Jong Yat Kit (the 3^rd defendant herein), both of PwC, as additional administrators of the Estate pursuant to section 36, with provisions for them to call upon the Deloitte administrators to resign after the grant of representation had been formally amended and for Mr Yu Sai Hung, also of PwC, to be appointed as an additional administrator upon their removal. It appears that the Deloitte administrators were eventually removed on 5 July 2012, and that Mr Yu was appointed on 2 August 2012. The PwC administrators at that point were therefore Mr Rainier Lam, Mr Jong Yat Kit and Mr Yu Sai Hung.

10. On 26 June 2014, Mr Rainier Lam and Mr Yu Sai Hung were replaced by Mr Christopher Chan and Mr Alvin Wong (the 1^st and 2^nd defendants herein), both also of PwC, as joint and several administrators of the Estate. The 1^st to 3^rd defendants have since acted as such administrators. They are referred to as the ‘JAs’ in the statement of claim.

Alleged implementation of the Under‑The‑Table Agreement and the Private Written Agreement

11. In paragraph 20(a) of the statement of claim, the Foundation alleges that pursuant to the Under‑The‑Table Agreement and the Private Written Agreement, from about March 2012 to late 2015 (after Mr Yang’s retirement as Senior Partner and Chairman of PwC):

(1) Dr Kung and Mr Lau met regularly one or two days before the monthly executive committee meetings of the Chinachem Group.

(2) At these regular meetings, Mr Lau would prepare an agenda for all relevant matters for determination at the forthcoming monthly executive committee meetings and seek the Foundation’s instructions and decisions.

(3) Mr Lau then caused and procured the PwC administrators formally to give effect to the Foundation’s instructions and decisions at the monthly executive committee meetings.

Alleged receipt of money by Mr Lau

12. Paragraph 20(b) of the statement of claim then sets out the critical allegation central to the claim which I quote in full below:

‘It is not possible for Howard Lau, who was not part of PwC, to carry out substantial work for the Estate for free and he must have received remuneration from some entity. Subject to discovery and/or the administration of interrogatories, it is averred that:

(i) Based upon the private arrangements between PwC and Howard Lau, PwC was to remunerate Howard Lau with about 10% of the fees charged by PwC for successfully securing the appointment of the PwC Administrators and his continuous participation acting for and on behalf of PwC Administrators in dealing with the Foundation in accordance with the Under‑The‑Table Agreement.

(ii) The sums paid to Howard Lau were subsumed in the JAs’ fees, which were inflated from the work actually carried out by the JAs to create the additional 10% to be paid to Howard Lau. As a result, the JAs wish to avoid providing any detailed contemporaneous records of time spent on work in administering the Estate as pleaded in paragraphs 15 and 16 above.’

13. In paragraph 21 of the statement of claim, the Foundation concludes:

‘By reason of the matters pleaded above and subject to discovery and/or the administration of interrogatories, it is averred that Howard Lau received significant sums from the Estate through the JAs’ inflation of fees pursuant to the Under‑The‑Table Agreement. As a result:

(a) The JAs acted in breach of their fiduciary duties pleaded in paragraph 4 above.

(b) Howard Lau is liable for knowing receipt as (i) he received such sums from the Estate from the JAs’ breaches of fiduciary duties and (ii) his state of knowledge through his personal involvement in the Under‑The‑Table Agreement makes it unconscionable for him to retain the benefit of such sums.

(c) The JAs and/or Howard Lau are liable to account to the Estate for such sums and/or their traceable fruits or proceeds (if any).

(d) The Estate has suffered loss and damage and the JAs and/or Howard Lau are liable to compensate the Estate for the same in the amount of the sums received by Howard Lau.’

14. Paragraphs (6) to (9) of the prayer for relief relate to the above allegations and seek, inter alia, orders for account and payment.

…

16. The statement of claim contains another claim by the Foundation against the 1^st to 3^rd defendants, alleging that they, as administrators of the Estate, had failed to maintain proper and contemporaneous records of their charges, and seeking an order to set aside the Foundation’s previous approvals of the periodic bills rendered by the JAs[5]. This claim is not the subject of attack under the present application.

…

20. In their affidavit evidence, the defendants categorically deny that there was any such inflation of fees. They say that in around September 2011, it was agreed that Mr Lau would become Senior Adviser to PwC for the Greater China Region; that this was formalised on 6 October 2011 when Mr Lau, through his personal company, entered into a Consultancy Agreement with PwC agreeing to provide consultancy services; that the only remuneration paid to Mr Lau in connection with these services was the fixed annual sum paid in 12 monthly instalments as set out in the Consultancy Agreement; and that neither the JAs nor PwC paid any remuneration to Mr Lau linked or calculated by reference to the fees charged by the PwC administrators to the Estate.”

5.  As stated by the judge, the gravamen of the Payments Claim is that the PwC JAs inflated their fees to be paid out of the Estate by secretly adding fictional hours of work into their bills to create an additional 10% which was paid to Mr Lau[6]. As a result, the PwC JAs were in breach of their fiduciary duties and Mr Lau was a knowing recipient of the funds paid to him in breach of fiduciary duties. Hence, the allegation of inflation of fees is “critical” and “central” to the Payments Claim[7].

The legal principles

6.  The relevant legal principles for striking out a claim where fraud or serious dishonest conduct is alleged without any factual basis are not in dispute. They have been discussed in the Decision[8] and may be summarised as follows:

(1)  The court’s power to strike out a pleading can be exercised where it is plain and obvious that the case pleaded “simply has no factual basis”[9], or “has not a solid basis capable of proof, but that the story told in the pleadings is a myth, … and has no substantial foundation”[10], or presents “a tissue of improbabilities which ought not to be sent to proof”[11]. If a plaintiff pleads as a fact something which can clearly be shown to be incontrovertibly false, on an application to strike out on this basis the court is not bound to accept the allegation as true and to proceed on a fictional basis[12].

(2)  This power is to be exercised “with the greatest care”, lest the plaintiff be wrongly deprived of his right to a trial[13]. “[It] is a jurisdiction which ought to be very sparingly exercised, and only in very exceptional cases. Its exercise is not justified merely because the story is highly improbable, and one which it is difficult to believe could be proved.”[14]

(3)  Where fraud or serious misconduct is being alleged, the court will not allow allegations of such nature to be made without proper evidence and if they were made irresponsibly, it will exercise its inherent jurisdiction to strike out the same[15]. A barrister is prohibited by the Code of Conduct from alleging fraud in a court document (be it a pleading, affidavit, witness statement, notice of appeal or other document) unless he has clear instructions to make such allegation and has before him “reasonably credible material which, as it stands, establishes a prima facie case of fraud”[16]. No lower standards are expected of solicitors when they sign pleadings, they must not allow themselves to be the instrument of their clients to settle a pleading containing groundless allegations of this sort[17].

The Decision

7.  The Foundation relies on three matters to substantiate the Payments Claim.

8.  First, Dr Kung has deposed as follows in §31 of his 1^st affirmation:

“ … As I recall, during one or two of those social occasions in about 2012, Mr Lau was teased and jeered by our common acquaintances to have made a huge fortune by securing the instructions for PwC enabling them to have become the administrators pending suit for the Estate; and in response, Mr Lau only modestly conceded to have earned the usual introduction fees. When he was confronted by our common acquaintances he earned at least 10% of the relevant fees as earned by PwC as the introduction fees according to the industry practice, Mr Lau did not deny so.”

9.  It was contended that Mr Lau’s failure to deny was “tacit admission” suggesting that he earned at least 10% of the relevant fees earned by PwC.

10.  Second, Mr Lau had carried out “substantial work” pursuant to the Under-The-Table Agreement (as pleaded in §20(a) of the statement of claim), and it is not possible that he carried out such work for free (as pleaded in §20(b)(i) of the statement of claim).

11.  Third, the PwC JAs avoided to provide any detailed contemporaneous records of time spent on work in administering the Estate despite the requests of the Foundation’s solicitors since around April 2020 (as pleaded in §§9 to 12, 15 to 16, 20(b)(ii) of the statement of claim). It is to be inferred this was because the sums paid to Mr Lau were subsumed in the fees of PwC JAs, which were inflated to create the additional 10% to pay Mr Lau.

12.  The judge regarded the Foundation’s plea of the Payments Claim “problematic in many respects”, as explained in §28 of the Decision:

“… First, it is not explained by the Foundation anywhere whether the alleged 10% for Mr Lau extends to all the fees charged by PwC for so long as PwC partners are administrators of the Estate (and thus even to this date), despite its reliance on the evidence concerning ‘introduction fees’. Nor has the Foundation explained why the 1^st to 3^rd defendants who are the current administrators are being sued when the ‘introduction fees’ might well have been paid before June 2014 at a time when the 1^st and 2^nd defendants were not yet in office. On behalf of the defendants, Mr Shieh SC further points out that it is inexplicable that neither the Foundation nor Dr Kung did anything about it despite their knowledge in 2012, on their own case, of Mr Lau’s secret remuneration. There was also an elaborate mechanism for the assessment of the PwC administrators’ bills under the order for their appointment, so that any inflation of fees by PwC would risk being challenged and exposed by the stakeholders including the Secretary for Justice.”

13.  As for the three matters relied on by the Foundation in support of this claim, the judge came to the view in §29 of the Decision that these matters, whether singly or in combination, are “incapable of supporting the crucial plea” and there is “simply not an iota of evidence tending to show that the JAs dishonestly inflated their bills in order to pay 10% to Mr Lau”, even if (1) one takes §31 of Dr Kung’s affirmation at face value and “assumes that such social banter is evidence that Mr Lau received from PwC a substantial introduction fee specifically for this engagement”; (2) “assumes that Mr Lau did a considerable amount of work pursuant to the Under‑The‑Table Agreement as alleged, for which he would reasonably expect to be remunerated and was actually remunerated beyond the fixed fees under the Consultancy Agreement”; and (3) “takes into account the assumed fact that the JAs had failed or refused to provide detailed breakdown of their fees requested by the Foundation since around April 2020 in the context of the assessment mechanism under the court order appointing the administrators”.

This appeal

14.  Mr Alan Kwong, who appeared for the Foundation on appeal, challenged the judge’s decision on these broad grounds[18]:

(1)  the judge was wrong to have embarked on a protracted exercise to examine the parties’ dispute based on incomplete affidavit evidence, purporting to try the Payments Claim which involves issues of law and disputed fact; he failed to conclude that the defendants did not meet the high threshold for striking out, namely, that it must be impossible, not just improbable, for the claim to succeed[19];

(2)  the four matters mentioned in §28 of the Decision do not show that the Foundation’s pleaded case is false, not to mention “incontrovertibly” false; and

(3)  it is arguable that the three matters relied on by the Foundation and considered in §29 of the Decision do support the Payments Claim as pleaded and this claim is not doomed to failure.

15.  Mr Kwong went through each of the four matters considered by the judge in §28 of the Decision. He submitted that the first two matters (whether the 10% arrangement extends to all the fees charged by PwC; why the 1^st to 3^rd defendants are sued when the “introduction fees” might well have been paid before the 1^st and 2^nd defendants took office in June 2014) are not relevant to the merits of the Payments Claim. Besides, if there were any ambiguity in the pleading, the defendants could have sought further and better particulars. As for suing the 1^st and 2^nd defendants, he asserted that they were “privy to and responsible for” the ongoing 10% arrangement after they were appointed as administrators in June 2014.

16.  In respect of the third matter (that neither the Foundation nor Dr Kung took any action until 2020 despite their knowledge in 2012 of Mr Lau’s secret remuneration), Mr Kwong submitted that the delay was not inexplicable as the judge had thought, as it is Dr Kung’s evidence it was only in late 2018 that he was tipped off by key staff of the financial department of the Chinachem Group that the 1^st to 3^rd defendants had caused “dubious substantial payments” out of the Group to be transferred to an entity associated with Mr Lau[20]. Further, the relationship between the Foundation and the PwC JAs did not break down irretrievably until July 2019[21].

17.  For the fourth matter (that any inflation of fees would risk being challenged and exposed by the stakeholders including the Secretary for Justice in view of the elaborate mechanism for the assessment of bills), Mr Kwong contended it cannot be concluded at this stage it is implausible that PwC would seek to inflate their bills due to such risk.

18.  In support of his contention that the three matters relied on by the Foundation would at least arguably support its case and that the hotly contested factual disputes cannot be resolved on affidavits, Mr Kwong argued along these lines:

(1)  Mr Lau had made “tacit admission” he earned at least 10% of the relevant fees earned by PwC. There was no affirmation in reply from Mr Lau to the 1^st affirmation of Dr Kung. It cannot be concluded there is nothing to be tried.

(2)  The defendants alleged that Mr Lau only received fixed remuneration as set out in the Consultancy Agreement for the consultancy services he provided pursuant to that agreement but have not adduced any documentary evidence to support their case. The work carried out by Mr Lau for Dr Kung clearly went beyond his duties under the Consultancy Agreement. There is no explanation why Mr Lau would act beyond his duties persistently over a three-year period for Dr Kung who was merely an acquaintance. And even if Mr Lau did receive fixed remuneration under the Consultancy Agreement, it did not follow that he did not receive the 10% secret payments in addition.

(3)  In a letter dated 24 October 2011 from PwC’s chairman Mr Yang to Dr Kung (“the Yang Letter”), it was confirmed that Mr Lau “will be in charge of all [PwC’s] services as described in our previous 2 proposals of the same date”. This shows that Mr Lau was expected to play a pivotal role in the dealing between the Foundation and PwC.

(4)  There is an adverse inference arising from the defendants’ refusal since April 2020 to provide detailed breakdown of their fees, in that the secret payments would have been revealed had such information been provided. Whether the defendants had credible reasons to justify their refusal could only be meaningfully explored at trial.

Discussion

19.  Despite Mr Kwong’s arguments, we are not persuaded that the judge had made any error of law or principle in his decision. The mere fact that disputes of fact are raised does not mean there are triable issues. The court is not bound to accept an allegation which is based on nothing but speculation.

20.  The crucial point is whether there is any evidence at all to support the allegation that the fees of the PwC JAs were inflated by 10% in order to pay Mr Lau. The three matters relied on by the Foundation simply do not support that allegation, whether taken individually or cumulatively, and even if certain assumptions were made in the Foundation’s favour as the judge had done in §29 of the Decision. We are satisfied they do not raise issues which ought to be sent to proof.

21.  As rightly submitted by Mr Paul Shieh, SC for the defendants[22], the bantering and teasing on one or two social occasions in 2012, even if they did occur, cannot possibly provide any basis for the allegations that Mr Lau was to be paid 10% of PwC’s fees and that PwC’s fees should be illicitly inflated by 10% to pay Mr Lau. Even assuming that substantial work was done by Mr Lau for the Estate pursuant to the Under-The-Table Agreement, and assuming further that he had received remuneration in addition to the fixed sum provided under the Consultancy Agreement, it is a quantum leap to suggest that the additional remuneration must have come from an illicit inflation of PwC’s fees. As for the adverse inference sought to be drawn from the refusal of the JAs since April 2020 to provide detailed breakdown of their fees, the alleged inflation would be in the form of fictional hours added to the bills[23], and would not have revealed secret payments to Mr Lau as contended by Mr Kwong.

22.  The Yang Letter was the subject of the Foundation’s summons lodged a few days before the hearing for leave to adduce further evidence before the judge and was considered by him on a de bene esse basis[24]. The letter referred to two earlier proposals which related to the possibility of PwC providing services as “advisor” to the new administrator of the Estate if the Foundation or Dr Kung was to be appointed as the new administrator. It is not in dispute that neither the Foundation nor Dr Kung had ever been appointed and that professionals from PwC were appointed, initially as additional administrators to the Deloitte administrators and in time they became the only joint and several administrators of the Estate, on the basis of their proposal to act as such dated 29 September 2021. As rightly held by the judge, being an advisor to the administrator and being the administrator are very different capacities with very different responsibilities. The Yang Letter could have no relevance to the actual situation and does not assist the Foundation’s case. The judge is right to dismiss the application to adduce the Yang Letter.

23.  The four problems identified by the judge in §28 of the Decision should be considered in conjunction with the judge’s reasoning in §29, as part of his overall evaluation of the Payments Claim. The judge plainly did not consider the problems in §28 in isolation as self-standing grounds for striking out.

24.  In any event, we agree with Mr Shieh that the problems so identified are valid and relevant to the inherent improbability and illogicality of the Foundation’s case. In particular, we find it inexplicable that the Foundation took no action against the defendants until 2020 notwithstanding Dr Kung had knowledge in 2012 of Mr Lau’s secret remuneration. We do not think the delay could be explained by Dr Kung receiving a tip off only in late 2018. Mr Lau’s remuneration was allegedly provided by the PwC JAs out of the 10% inflated fees, it is not apparent how the tip off regarding dubious substantial payments out of the Chinachem Group to an entity associated with Mr Lau could have alerted Dr Kung to secret payments from the PwC JAs. Further, as pleaded in §20 of the statement of claim, Mr Lau had ceased to carry out work for the Estate after late 2015, which would have been in breach of the Under-The-Table Agreement, and yet there was not one word of complaint from the Foundation or Dr Kung.

25.  It is plain and obvious this is not a claim that is improbable to succeed but is impossible to succeed. The plea of inflated fees to pay Mr Lau in secret involves dishonesty and probably an accusation of criminal conduct and should not be permitted to be made without factual basis. The judge is clearly right in his analysis, and this should be the end of the matter.

26.  For the above reasons, we dismissed the Foundation’s appeal.

27.  The judge did not find it necessary to deal with Mr Shieh’s argument that the Foundation lacks legal standing to pursue the Payments Claim because it is neither a beneficiary nor a trustee of the Estate, in light of his conclusion on the lack of substantive merits of this claim. For the same reason, we do not find it necessary to deal with this point raised in the respondent’s notice.

Costs

28.  There is no dispute that costs should follow the event with the dismissal of the appeal.

29.  Mr Shieh seeks costs of the appeal on an indemnity basis, the same as the order made by the judge. This is resisted by Mr Kwong who submitted there are no exceptional circumstances to warrant a departure from the usual party and party basis of taxation. He also submitted there should not be a certificate for two senior counsel for the defendants, although he would not oppose a certificate for a senior counsel and a junior counsel.

30.  We consider it justifiable for the judge to award indemnity costs, to mark the court’s censure of the Foundation’s irresponsible behaviour of making very serious allegation against professional men without any factual basis. As indemnity costs in the court below are justified, there is no good reason why costs should not be awarded against the Foundation on the same basis in this unsuccessful appeal. Further, as Mr Shieh has reminded us, serious allegations were made in the grounds of appeal (not settled by Mr Kwong) regarding the manner in which judge conducted the hearing. These allegations were only abandoned when the skeleton arguments of Mr Kwong were served four weeks before the hearing of the appeal.

31.  In all the circumstances, it would be appropriate to award costs of the appeal to the defendants on an indemnity basis with certificate for two counsel and we so order. For the avoidance of doubt, we would mention that the certificate would cover two senior counsel. We note Ms Tong’s involvement in this matter for some time before her appointment as senior counsel and it is justified for her to be engaged in addition to Mr Shieh.

32.  As a payment into court has been made to provide security for costs of the appeal, we order that the taxed costs of the appeal are to be paid out of the amount of security.