LILY CHEUNG v. CHEUNG WAI KWOK AND ANOTHER

HCAP 3/2008

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

PROBATE ACTION NO. 3 OF 2008

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JUDGMENT ON COSTS

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1.  The parties contested for the prior right to administration of the estate of late Madam Luk Kim Ying, deceased (“the Deceased”), which hinged upon the establishing of their respective alleged relationship with the Deceased. The plaintiff (“Lily”) and the 2^nd defendant (“Luk”) claimed to be the daughters adopted by the Deceased in Hong Kong and the Mainland respectively at different times. The 1^st defendant (“Cheung”) claimed to be the surviving lawful husband of the Deceased.

2.  There were the following major questions for determination:

(1) whether Lily is an adopted daughter of the Deceased within the meaning of section 2(2)(c) of the Intestates’ Estates Ordinance, Cap 73 (“IEO”);

(2) whether Cheung is the Deceased’s surviving lawful husband within the meaning of section 3(d) of the IEO;

(3) whether Luk is an adopted daughter of the Deceased within the meaning of section 17(1) of the Adoption Ordinance, Cap 290 and section 2(2)(a) of the IEO;

(4) if Cheung is found to be the surviving lawful husband, whether the court should defer granting letters of administration on the ground that Cheung is suffering from mental incapacity.

3.  After trial, I handed down judgment on 3 June 2015.  I found against Lily in respect of question (1).  I found against Cheung in respect of question (2), and question (4) became academic.  I found for Luk in respect of question (3).  I therefore dismissed the claim of Lily and the counterclaim of Cheung.  I allowed Luk’s counterclaim and granted the declaration of her status as sought.

4.  I deferred judgment on costs pending written submissions by the parties upon the above outcome.  The following submissions have since been lodged:

(1) submission on behalf of the parties respectively all dated 30 June 2015;

(2) reply submission on behalf of the parties respectively all dated 14 July 2015;

(3) further submission on behalf of Lily dated 30 July 2015; and

(4) further submission in reply to (3) above on behalf of Cheung and Luk dated 7 August 2015.

COSTS ORDER SOUGHT BY THE PARTIES

5.  Lily submits that Cheung should pay her costs of defending his counterclaim; such costs should be borne by Luk or alternatively, jointly and severally by Cheung and Luk (without prejudice to the right of Luk to seek indemnity from Cheung for such portion of costs as further determined between themselves), and in any event on an indemnity basis with certificate for 2 counsel.

6.  By the further submission dated 30 July 2015, Lily asks that part of Luk’s costs arising out of the filing of the statement of Hai[1] and the calling of her to testify should be disallowed.  The ground is that such evidence has significantly increased the length of the proceedings and costs.

7.  Cheung and Luk seek (i) no order as to the costs between Lily and Cheung; and (ii) that Lily shall pay Luk’s costs of defending the former’s claim and those of the latter’s counterclaim on indemnity basis.  Luk also contests that as the guardian ad litem of Cheung, she should be made to bear his costs liability to Lily.

Costs between Lily and Cheung

8.  Lily claimed to be the lawful adopted daughter while Cheung claimed to be the surviving lawful husband of the Deceased.  They both failed in their claims, or they succeeded in defending the other’s claim.  Whilst she submits that she is entitled to her costs of defending Cheung’s counterclaim, Lily somehow makes no mention of Cheung’s entitlement to his costs of defending her claim.  I accept the submission on behalf of Cheung that in view of the inevitable set-off between cross costs orders, it will be just to make no order as to costs between Lily and Cheung in the circumstances.

9.  It follows that there is no basis for considering Lily’s argument that Cheung’s costs liability should be discharged by Luk or alternatively Cheung and Luk jointly and severally.  I would nevertheless briefly set out my views on the various points raised in this respect in the submissions.

10.  Essentially it is argued that Luk funded and controlled the conduct of Cheung’s case with a view to her personal benefit, which contradicted her duty as the guardian ad litem and was an abuse of process.  Luk, Lily argues, should be personally responsible for Cheung’s costs liability.

11.  The history of the matter was set out in the judgment.  The dispute first arose out of the competing applications for grant of administration of the estate of the Deceased by Cheung and Lily in 2007.  In March 2008, Lily commenced the present action against Cheung, putting in issue his alleged marriage and husband relationship to the Deceased.  Through his solicitors, he put in his defence, and asserted his right as the surviving lawful husband of the Deceased.

12.  Luk was not joined until 2009 to enable her to put forward her claim to entitlement to the estate of the Deceased on the basis of her adopted daughter status.  The rights of Cheung and Luk to the estate of the Deceased were asserted on the basis of their respective relationship with the Deceased, which did not conflict with each other.

13.  Cheung put in his witness statements in January 2010 and October 2013.  He would have been expected to attend the trial.  Any suggestion that he had all along been mentally incapacitated, or that Luk sort of anticipated such condition of Cheung when she was joined, would have been bold without factual basis.  That fact was that Luk’s application to be appointed as the guardian ad litem of Cheung came only after the certification of his mental condition, and it was 2 weeks before the commencement of trial in February 2014.

14.  The effect of Luk’s application to be appointed as the guardian ad litem was to enable Cheung’s case to continue to proceed.  For such application, I considered and concluded that their positions in this action were not in conflict[2]. Luk, as his guardian, also cared to apply for leave to adduce her supplemental statement with a view to preserving the evidence of Cheung contained in his own statements, which he became unable to verify in court due to his recently certified mental condition.  I also allowed that, subject to weight.

15.  It was only natural to expect Luk to give instructions for the conduct of the defence and counterclaim for herself as well as Cheung since her appointment as his guardian.  That did not suggest conflict of interest between them.  Nothing in the trial suggested that Luk, in her capacity as the guardian of Cheung, and their legal representatives acted otherwise than advancing the case of Cheung as far as the evidence permitted.

16.  Somehow, at the same time, Lily argues that by advancing the case of Cheung, Luk was not acting in conflict but pursuing her own interest.  What Lily refers to is the relief Luk sought in the event that the court held that Cheung succeeded in establishing his entitlement as the surviving lawful husband of the Deceased, and thus his prior right to the grant, but was incapable of managing his affairs by reason of his mental incapacity.  Cheung claimed such relief in her capacity as the adopted daughter of the Deceased and Cheung.

17.  The claim for such relief was introduced only consequential upon Luk’s appointment as the guardian of Cheung just before the trial.  Further, putting aside the validity of its statutory basis[3], which I did not have to decide eventually, I do not think that that would have been a matter concerning Lily, if her claim had failed.  Had Luk failed in her claim, I wonder if she would still have been in a position to seek the relief as if she was the adopted daughter of Cheung.  Had all the parties’ claims based on their respective capacities been established, both Lily and Luk, as the beneficiaries to the estate, would have had their say as to how to go about the prior entitlement of Cheung to the grant.  In the circumstances, I do not see how Cheung’s claim should be viewed as the alternative way for Luk to benefit herself from the estate of the Deceased.

Costs between Lily and Luk

18.  Again no mention is made in the submission on behalf of Lily about Luk’s prima facie entitlement to her costs of her counterclaim and of defending Lily’s claim.  The question Luk raises is whether such costs should be awarded on indemnity basis.  It is argued that Lily ought not to have pursued her claim.  Her credibility and reliance on Hai’s declarations in support, which were not accepted by the court, are also criticized.  Hence basis for ordering indemnity costs against Lily.

19.  An award of indemnity costs is a more generous basis, and in that sense is perceived as achieving a fairer result for the successful party, because it avoids the successful party having to pay part of his costs out of his own pocket.  However, the successful party must show that the case has some special or unusual feature before warranting the consideration of costs on the indemnity basis instead of the usual party and party basis.

20.  The appropriateness of such an order depends on all the circumstances of the case. The attributes of the parties and the character of the proceedings are not irrelevant.  The court’s discretion may be exercised in relation to, but not limited to, cases brought with an ulterior motive or for an improper purpose or where there is some deception or underhand conduct on the part of the losing party.  However such improper conduct generally relates to the conduct of the litigation rather than conduct which constituted the cause or matter giving rise to the litigation.

21.  In the present case, all the parties had some forms of dealings between them and the Deceased at different points of time.  The dispute lied in whether they managed to establish their alleged respective relationship with the Deceased and thus legal status for their alleged rights to the Deceased’s estate as pleaded.  Observations about credibility and reliability of their evidence[4] were made, but I do not consider that to be differing significantly from any other case where the losing party’s account of what happened was not preferred or the court was not satisfied that the claim is proved on the evidence as a whole.  I am not inclined to order costs to be taxed on the high basis in the circumstances.

Costs in connection with Hai

22.  The starting point is that costs should follow the event.  The starting point does not cease to apply simply because the successful party raises issues or makes allegations on which he fails, though, in appropriate cases, he may be deprived of any costs increased significantly because of such failing issues.

23.  Now O.62, r.3(2) of the Rules of the High Court, Cap 4A expressly provides that the court shall (subject to the rules) order costs to follow 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 part of the costs.  The special matters to be taken into account are set out in O.62, r.5, of which the following would be relevant to the parties’ arguments:

“(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-

……

(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;

……

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

(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.”

24.  It is the burden of the losing party to show there is good reason to depart from the general rule and to deprive a successful party of costs because of his failure on a discrete issue which has significantly increased the costs.

25.  Essentially Lily’s argument is that Cheung and Luk called Hai as a witness but her evidence was considered unreliable.  That was a failure on their part, which has significantly increased the length and costs of the proceedings.

26.  The argument on behalf of Lily is not an accurate reflection of the position.  It was in the first place Lily’s reliance on the 2004 declarations made by Hai as evidence. Throughout the trial, Lily maintained that.  Hai made her 2013 declaration to overturn what she stated in her previous declarations. Hence her being called to testify.  That part of the trial, and thus the time and costs, was necessitated not entirely by Cheung or Luk.  I concluded in the circumstances that it would be dangerous to place any weight on any of Hai’s declarations.  In that sense, it cannot be said that the purpose of Cheung and Luk was not effectively served.

27.  The time and costs incurred in this respect cannot be said to have been improper or unnecessary.  The basis for considering the deprivation of that part of the costs of Cheung and Luk in defending Lily’s claim, according to the rules of court and the established principles, is not there.

CONCLUSION

28.  Between Lily and Cheung, I make no order as to costs.  Between Lily and Luk, the former shall pay the latter’s costs, including her costs of defending the claim and those of her counterclaim as well as any costs reserved between them.

ORDER AS TO COSTS

29.  I make an order as to costs of this action as aforesaid.  Such costs shall be taxed, if not agreed, with certificate for 2 counsel.

30.  I thank counsel for their assistance.