KWAN KWAI LIN AND ANOTHER v. YEUNG TING KWAN previously known as YEUNG ON KI

HCA 3013/2015

[2026] HKCFI 5108

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 3013 OF 2015

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DECISION

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A.   INTRODUCTION

1.  By a Judgment handed down on 8 June 2026 (“the Judgment”)[1], this Court made the following orders:

(1)  A Declaration that the 2^nd plaintiff, in his capacity as the administrator of the Deceased, at all material times was and is the sole beneficial owner of the Property;

(2)  A Declaration that the Property at all material times was and is held by the defendant on constructive trust for the 2^nd plaintiff absolutely;

(3)  The defendant do transfer the legal title of the Property to the 2^nd plaintiff free from encumbrance within 3 months from the date of the Judgment;

(4)  The defendant do, at or prior to the transfer of legal title pursuant to paragraph (3) above, discharge all outstanding indebtedness secured by the 2015 Mortgage (under Memorial No.15061800310172) and procure the release of the 2015 Mortgage;

(5)  An Order for accounts and inquiries as to what has happened to the sum of HK$2,310,000.00 (as a result of the defendant’s breach of trust by taking out the 2015 Mortgage), as to what profit(s) (if any) has been made from the use of such sum of HK$2,310,000.00, and/or as to what is due to the 2^nd plaintiff be conducted by a Master (and for the avoidance of doubt, these accounts and inquiries shall take into account the money paid by the defendant to discharge the existing mortgage in obtaining the 2015 Mortgage);

(6)  An Order that the defendant shall pay the profits from the use of such sum of HK$2,310,000.00 to the 2^nd plaintiff, if any, upon taking the said accounts and inquiries;

(7)  A Declaration that the defendant was and is holding such sum of HK$2,310,000.00 (including its traceable proceeds and/or any other income and/or profits as derived therefrom) as constructive trustee for the 2^nd plaintiff;

(8)  The defendant do pay mesne profits at the agreed rate of HK$9,000 per month since 15 February 2023 up to the date of the Judgment, with interest thereon at judgment rate from the date of the Judgment until full payment.

2.  In the Judgment, this Court also made an order nisi that the defendant shall bear 85% of the plaintiffs’ costs (including all costs reserved and the costs of the First Trial), to be taxed if not agreed (“the Costs Order Nisi”).

3.  On 18 June 2026, the plaintiffs applied by summons to vary the Costs Order Nisi (“the plaintiffs’ Variation Summons”), and asked that, inter alia, the following orders be made[2]:

(1)  The defendant shall bear the 1^st and 2^nd plaintiffs’ costs (including all costs reserved and all costs of and occasioned by the First Trial) up to and including 28 February 2020 on party-and-party basis, and thereafter (i.e. from 1 March 2020, being the expiry date of the plaintiffs’ Without Prejudice Save as to Costs Settlement Proposal dated 19 January 2020) on indemnity basis, and all such costs to be taxed if not agreed, and the 1^st and 2^nd plaintiffs’ own costs to be taxed in accordance with Legal Aid Regulations;

(2)  Further or alternatively, any appropriate costs order that the Court may deem fit.

4.  Pausing here, it is noted that, in the plaintiffs’ written submissions, it was further suggested, as an alternative, that the Court do order the defendant to bear 100% of the plaintiffs’ costs (including all costs reserved and all costs of and occasioned by the First Trial).  In my view, it is not permissible for the plaintiffs to add an alternative claim in such a way.  Indeed, I do not understand why, if the plaintiffs were minded to put forward such an alternative proposed order in their variation application, why that could not be expressly inserted in the plaintiffs’ Variation Summons.  I would therefore refuse to consider such an alternative application.  I should also make it clear that, the “any appropriate costs order” sought in the plaintiffs’ Variation Summons cannot savage the plaintiffs’ case in this regard.  This phrase is not a licence for the plaintiffs to put in whatever alternative orders they like at the stage of submissions.

5.  By a summons filed on 22 June 2026 (“the defendant’s Variation Summons”), the defendant also applied to vary the Costs Order Nisi.  The proposed terms are as follows:

(1)  The defendant shall bear 50% of the costs of the plaintiffs (including all costs reserved and the costs of the First Trial), to be taxed if not agreed; and

(2)  the plaintiffs’ own costs shall be taxed in accordance with Legal Aid Regulations.

B.   THE DEFENDANT’S VARIATION APPLICATION

6.  As a matter of convenience, I would deal with the defendants’ application first.

7.  The defendant argued that she should only be responsible for 50% rather than 85% of the plaintiffs’ costs because the plaintiffs have made 2 “hopeless arguments” at the Retrial, namely:

(1)  Argument on the basis of the Alleged Tripartite Agreement;

(2)  Argument on an injunctive relief.

8.  Relying on the authority of Huge Dragon Corporation Limited v The Incorporated Owners of Lung Mun Oasis [2014] 3 HKLRD 286, it was argued that since the aforementioned arguments were hopeless, a greater discount should be given by this Court when deciding on the defendant’s liability to bear the plaintiffs’ costs.

9.  While I accept the fact that a party has raised arguments which have been rejected is a matter which the Court may take into account when deciding on costs, with respect, I do not think Huge Dragon Corporation Limited (supra) is an authority which is directly on point in the circumstances of the defendant’s application.  This is because the ratio in that case is that where the proceedings in question should never have been brought or defended but the party nevertheless unreasonably and unjustifiably persisted, he may well be visited with indemnity costs.

10.  A more apposite authority seems to me to be 廈門新景地集團有限公司v Eton Properties Limited & Others [2025] HKCA 1119, in which it has been held at [84] that:

“The court may depart from the general rule that costs should follow the event where the successful party raises issues or makes allegations on which he fails, and that has caused significant increase in the length or costs of the proceedings, and deprive the successful party of the whole or part of his costs.”

(emphasis added)

11.  In the present case, it is undeniable that the plaintiffs’ counsel had referred to the Alleged Tripartite Agreement in his written opening submissions as part of the plaintiffs’ pleaded case.  It was indeed puzzling for him to do so, since such a pleaded case had already been dismissed by the Court of Appeal in the CA Judgment. 

12.  Having said that, it is clear that he was not running the plaintiffs’ case as if the Alleged Tripartite Agreement was still a live issue at the Retrial, which can be demonstrated by the absence thereof in the Agreed List of Issues. 

13.  Further, while the plaintiffs’ counsel and this Court did have some exchanges on the Alleged Tripartite Agreement during his oral opening submissions (arising from the inclusion thereof in his written opening submissions), such exchanges were very short, and the parties’ oral opening submissions only lasted for no more than 28 minutes altogether[3].

14.  In other words, it is inaccurate for the defendant to assert that the plaintiffs have pursued the point on the Alleged Tripartite Agreement until the first day of the Retrial.  In any event, the time spent on such a matter cannot at any rate be described as “significant”.  It was negligible rather.

15.  As far as the plaintiffs’ claim for injunction is concerned, while I agree that it is totally unmeritorious (it was in fact abandoned by the plaintiffs’ counsel during his oral closing submissions), the time which had been spent on this relief was so minimal that I do not think the Court should apply a further discount to the plaintiffs’ entitlement to their costs, not to mention a further 35% discount as suggested by the defendant.

16.  The defendant’s variation application should therefore be rejected.

C.   THE PLAINTIFFS’ VARIATION SUMMONS

17.  The plaintiffs’ variation application was made on the basis of, inter alia, a Calderbank letter dated 19 January 2020 (“the Calderbank Letter”) sent by the plaintiffs’ solicitors.  It reads:

“[…]

We are instructed to propose the following settlement terms:-

1. Our client shall pay your client a sum of HK$136,000 (mortgage repayment made by your client on our client’s behalf for $4,000 per month during the period from July 2013 to October 2018, i.e. 63 months, $4,000 x 64 = $256,000, less $120,000 being the amount your client had withdrawn from the joint name account);

2. Your client shall pay all legal costs and disbursements incurred by our client, to be taxed if not agreed;

3. Your client shall transfer all her legal and beneficial interests in the subject property to our client free from any encumbrances (i.e. with all debts secured by the property duly repaid and any mortgage discharged); and

4. Upon satisfaction of the above, our respective clients shall wholly discontinue their respective claims in the captioned action.

[…]”

(“the Calderbank Offer”)

18.  The plaintiffs submitted that, after the Retrial, they have achieved a result which is more advantageous than the above settlement proposal.

19.  Reliance has been placed on the authority of Bright Gold Ltd v. Mega Well Development Ltd [2019] 3 HKLRD 868, [2019] HKCFI 1907, in which Anthony Chan J (as he then was) had the following to say:

“12. It follows that this court’s discretionary power to award indemnity costs can be triggered.  Such a costs order should not be regarded as a penalty but a means of achieving a fairer result for the payee: see Grant Williams v Jeffries Hong Kong Ltd, HCA 320/2011, unrep, 12 July 2013, §5 citing Petrograde Inc v Texaco Ltd [2002] 1 WLR 947, §§63-64; and TPB v Society for Protection of Harbour Ltd (No 2) (2004) 7 HKCFAR 114, §§16-17.

13. It is reasonably well-established that the failure to beat a favourable settlement offer can attract an award of indemnity costs: see Sam Sien San v Sam Mo Yee [2019] HKCFI 1188, §24; and Euro Search (Hong Kong) Ltd v Snow Lake Capital (HK) Ltd [2018] HKCFI 2292, §10.

14. In this case, it would have been advisable for Mega Well to accept certainly the 2^nd Offer.  Given the merits analysis set out under the 1^st Offer, it was unreasonable for Mega Well to have failed to engage in any negotiation with WKLL to put an end to this part of its case (see Codent Ltd v Lyson Ltd [2007] 2 Costs LR 185, §§29-30; and LCC v LMWA [2019] 2 HKLRD 529, §§51-52).

15.  It is consonant with the underlying objectives enshrined in O 1A, r 1 for the court to encourage dispute settlement, and therefore failure to respond constructively to a reasonable Calderbank offer, coupled with the subsequent failure to beat the offer, should weigh heavily against the offeree on costs.”

20.  It is trite that while in the circumstances where a party has failed to do better than an offer which he has rejected may justify the court awarding costs against such a party on a higher scale, it does not mean that the Court is bound to make such an order.  After all, the Court has a wide discretion on costs, and the existence of a settlement offer is just one of the factors that the court can take into account in the exercise of its discretion on costs pursuant to Order 62 rule 5 of the Rules of the High Court (Cap.4A, Laws of Hong Kong) (“the RHC”).

21.  In the present case, the defendant suggested that there are various reasons why indemnity costs should not be ordered against her.

22.  Firstly, she argued that the Calderbank Offer was not better than the result of the Retrial, as the 1^st plaintiff did not obtain any interest in the Property at the end of the day.

23.  Related to this point, the defendant further argued that the Calderbank Offer was ambiguous on the identities of the offerors, because of the use of the words “our client” by the plaintiffs’ solicitors in the Calderbank Letter.

24.  With greatest respect, the defendant’s argument must be rejected.  I do not agree that, when this Court exercises its discretion on costs in the present case, it should lay too much emphasis on the technicalities, like what the defendant did, particularly when the 2 plaintiffs had engaged the same legal team.  Further, if the “identity of the offeror” was such an important matter to the defendant, I wonder why, and there was no explanation as to why, the defendant did not instruct her solicitors to seek clarification from the plaintiffs’ solicitors.

25.  Moreover, if the adoption of such a technical approach is really justified, there is no reason why the Court of Appeal would order that the costs of the First Trial should be in the cause of the Retrial, given the 1^st plaintiff had no more claim in the Retrial after such a claim had been dismissed by the Court of Appeal.  On this matter, it should be borne in mind that even the defendant herself accepted the costs of the First Trial should be in the cause of the Retrial[4].

26.  In my view, the undeniable reality is that the defendant had lost in the Retrial and hence the Property altogether.  She had also been ordered to, inter alia, account for and pay the profits from the use of the sum of HK$2,310,000.00 (as a result of her breach of trust by taking out the 2015 Mortgage).  She had obviously failed to beat the Calderbank Offer.

27.  Secondly, the defendant submitted that “settlement proposals in a family dispute shall not be evaluated in the same manner as a business dispute, as it would be unrealistic to expect that family members would always conduct themselves according to strict logic and without being affected by family dynamics as well as their close relationships”[5].

28.  With greatest respect, this suggestion is unmeritorious and must be rejected.  Indeed, even the defendant’s counsel accepted that all parties to litigation, including those who are involved in family disputes, are under a duty to assist the Court in the promotion of the underlying objectives under Order 1A of the RHC.  In such circumstances, I cannot see why parties in family disputes should somehow be treated more leniently on the question of costs.  The defendant’s reliance on paragraph 28 of the Judgment (in which it was said that it would be unrealistic to expect that family members would always conduct themselves according to strict logic and without being affected by family dynamics as well as their close relationships) is totally misconceived.

29.  The defendant also suggested that it was not unreasonable for her not to accept the Calderbank Offer given it was the Deceased’s instructions to her that the Property must not fall into the hands of Husband. I do not accept this argument, for I do not think this instruction should warrant the defendant to conduct this litigation irrationally.  She should have accepted the reasonable Calderbank Offer.

30.  Thirdly, the defendant alleged that she had not acted unreasonably to pursue these proceedings until the end, as she objectively had reasonable prospects of success in her defence and counterclaims against the plaintiffs. 

31.  With respect, I do not agree.  As I have found in the Judgment[6], the defendant knew full well that she was not the sole beneficial owner of the Property but just a legal owner thereof, and that she was only holding the same on trust for the Deceased.  Persisting in refusing to settle despite the Calderbank Offer is thus in my view unreasonable.  If she decided to try her luck and see whether the Court would somehow find in favour of her, she should be visited with the appropriate costs consequence.

32.  Fourthly, the defendant urged this Court to take into account the fact that she had demonstrated willingness to settle disputes wherever feasible in the circumstances.  She gave an example which related to the money in the account maintained with Citibank (Hong Kong) Limited, in respect of which a settlement was reached between the parties in the course of the First Trial. 

33.  I am afraid such a settlement is totally beside the point, because the focus here is that the dispute on the beneficial ownership of the Property was not settled despite the reasonable Calderbank Offer.

34.  Fifthly, the defendant submitted that this Court should also take into account the fact that the Retrial was caused by judicial copying in relation to the First Trial through no fault on the part of the defendant, and that the Retrial was rendered necessary not because of any erroneous findings of fact or law urged upon by the defendant.

35.  With respect, the above assertion is not entirely correct as a matter of fact.  As Chow JA pointed out in [8] of the Decision on the costs of the appeal ([2025] HKCA 446):

“In the present case, the judicial copying ground was not dealt with as a stand-alone issue. All 8 substantive grounds of appeal in the Plaintiffs’ Amended Supplementary Notice of Appeal were argued by the parties at the hearing of the present appeal before this Court. As it was, the Court accepted the judicial copying ground, and considered how the success of that ground impacted on the rest of the grounds of appeal. The Court also considered the state of the evidence before the Judge […] the 2^nd Plaintiff was successful in having the claims based on inferred common intention constructive trust and/or resulting trust and breach of trust remitted to the Court of First Instance for a re-trial, notwithstanding the Defendant’s resistance to those claims. […]”

36.  Hence, I do not think it is fair for the defendant to blame the Court for having to go through the Re-Trial.

37.  To conclude, I hold the view that the defendant ought reasonably to have accepted the Calderbank Offer.  Her failure to do so had rendered it necessary for this case to go through the First Trial and then the Retrial, which could have been avoided but for her unreasonable rejection of the said offer.  In my view, it would only be fair if the defendant is ordered to be liable for a higher level of costs now that she had failed to do better than the said offer.

D.  ORDER

38.  I therefore make the following orders:

(1)  The defendant’s Variation Summons be dismissed.

(2)  The Costs Order Nisi be varied, such that the defendant shall bear the plaintiffs’ costs (including all costs reserved and all costs of and occasioned by the First Trial) up to and including 28 February 2020 on party-and-party basis, and thereafter (i.e. from 1 March 2020 onwards) on indemnity basis, and all such costs to be taxed if not agreed, and the plaintiffs’ own costs to be taxed in accordance with Legal Aid Regulations.

E.   COSTS

39.  I make a costs order nisi that the costs of and occasioned by the plaintiffs’ Variation Summons be to the plaintiffs, to be taxed on indemnity basis if not agreed.

40.  The plaintiffs’ own costs shall be taxed in accordance with Legal Aid Regulations.

41.  The above order nisi shall become absolute in the absence of application to vary (which, if any, will be disposed of on paper) within 14 days hereof.

[1]  Unless otherwise stated, the definitions used in the Judgment will be adopted herein

[2]  In the plaintiffs’ Variation Summons, the plaintiffs also asked the Court to order that “the defendant shall pay interest on the 1^st and 2^nd plaintiffs’ costs at the enhanced rate not exceeding 10% above judgment rate to be determined by the Court from 1 March 2020 (or any other enhanced rate above judgment rate as the Court may deem fit) since the date of Judgment until full payment”.  However, this part of the application was abandoned by virtue of the plaintiffs’ written submissions dated 30 July 2026

[3]  According to the court record

[4]  She did not seek to vary the costs order nisi made by the Court of Appeal: See [2025] HKCA 446 at [3(1)]

[5]  Paragraph 21.1 of the defendant’s written submissions dated 6 August 2026

[6]  At [221]