FOK CHUN YUE BENJAMIN v. FOK CHUN WAN IAN AND OTHERS

HCA 2155/2011

[2022] HKCFI 3434

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 2155 OF 2011

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DECISION ON COSTS

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1.  This is the paper application on the issue of costs. There is no dispute between the parties that the claim in this action should be dismissed. I also approved the draft orders agreed by the parties in some other related actions including HCA 389/2016, HCMP 2777/2013, HCMP 2778/2013, HCA 569/2012 and HCMP 2621/2011.

2.  The background of the dispute within the family of the late Mr Fok Ying Tung Henry (“the Deceased”)  has been briefly mentioned in the Reasons for Judgment and Decision on Costs handed down by me on 6 July 2022 in HCA 275/2016[1]. For the purpose of this Decision on Costs, I will adopt the same abbreviations that I used in the said Reasons and Decision.

The relevant procedural history

3.  The present action is about the earlier stage of the dispute within the family which resulted in the making of the Settlement Agreement.

4.  On 19 December 2011, Ben commenced this action against his co-executors and all the beneficiaries of the estate of the Deceased (“the Estate”), seeking to remove Ian and the Aunt as executors of the Estate.

5.  On 14 March 2012, Ben applied for summary judgment.

6.  On 3 August 2012, the Settlement Agreement was entered into.

7.  On 3 August 2012, in view of the Settlement Agreement, Poon J (as he then was)  adjourned the O 14 summons to a date to be fixed in not more than 6 months’ time for a hearing solely for the purpose of perfecting and implementing the terms in the Settlement Agreement.

8.  On 9 April 2013, at the return hearing before Poon J, there was serious dispute between the two camps of the 1^st Family about the Yau Wing Option and Ben applied to restore the O 14 summons.

9.  On 3 July 2013 and 9 July 2013, two of the executors of the Estate, Ian and the Aunt, respectively applied for an order to stay the action or alternatively to stay the O 14 summons (“the Stay Applications”).

10.  On 3 January 2014, Poon J ordered, inter alia, that the Stay Applications be allowed and the action be stayed save and except for the purpose of perfecting and implementing the Settlement Agreement, and directed the parties to try to agree on costs in respect of the Stay Applications, failing which the parties shall lodge their respective submissions on costs (“Poon J’s Order”).

11.  The parties were unable to reach an agreement on costs in respect of the Stay Applications and subsequently lodged written submissions for the court’s determination.

12.  On 3 June 2014, Poon J ordered, inter alia, Ben and Nora to jointly and severally pay Ian, the Aunt, Tim and Fok Lui Yin Nei (the 14^th Defendant, referred to as “the Late Mother”)  and the 2^nd and 3^rd Families (the 6^th to 13^th, 15^th and 16^th Defendants)  costs of the Stay Applications on an indemnity basis, to be taxed if not agreed (“Poon J’s Costs Order”).

13.  On 12 February 2015, Poon J’s Order on the Stay Applications was set aside by the Court of Appeal in CACV 13, 16 & 17/2014 (“the CA Decision”)[2]. The Court of Appeal ordered that this action be stayed pending the determination of the legal proceedings by Ben, Nora and Pat to be filed concerning the Settlement Agreement.

14.  On 20 January 2016, the Court of Appeal made, inter alia, the following costs order (“the CA Costs Order”):

(i)  Ian and Tim shall jointly and severally pay the costs of Ben, Nora and Pat in the appeal, to be taxed on a party to party basis if not agreed, with certificates for 2 counsel;

(ii)  Ian and Tim shall jointly and severally pay the costs of the Late Mother and the 2^nd and 3^rd Families in the appeal, such costs are to be taxed on indemnity basis if not agreed;

(iii)  Ian, Tim, Ben and Nora shall each bear their own costs incurred in the court below; and

(iv)  Ian, Tim, Ben and Nora shall jointly and severally bear the costs of the Late Mother and the 2^nd and 3^rd Families incurred in the court below and such costs are to be taxed on indemnity basis if not agreed, with certificate for 2 counsel for the 2^nd and 3^rd Families.

Positions of the parties on costs

15.  Save for the 2^nd and 3^rd Families, all the parties basically agree for the following costs be taxed on an indemnity basis and be paid by and out of the Estate:

(i)  their costs up to 3 August 2012 and in relation to the consent summons filed on 7 February 2012; and

(ii)  their costs between 3 August 2012 and 3 July 2013 in relation to the reporting to the court on the implementation of the Settlement Agreement.

16.  According to them, such costs order is to give effect to Clause 49 of the Settlement Agreement which provides that:

“All the parties’ costs incurred in relation to the administration of the Estate and the Family Companies including their costs and disbursements incurred in relation to the Proceedings and intended proceedings, and all matters incidental thereto, and such costs and disbursements in respect of the negotiation, entering into and implementation of this Agreement, shall be paid out of the Estate as a priority over any other payments envisaged in this Agreement, to be taxed on a full indemnity basis, if not agreed.”

17.  Under the Settlement Agreement, the “Proceedings” is defined to include this action and two other related actions (“the Proceedings”).

18.  On the part of the 2^nd and 3^rd Families, they argue that the parties are bound by the CA Costs Order and any costs order to be made by this court should not deviate from or contravene the terms of the CA Costs Order.  In other words, their costs in this action should be paid by the siblings of the 1^st Family.

19.  Further, Mr Wong, counsel for the 2^nd and 3^rd Families, has drawn my attention to Clause 48 of the Settlement Agreement which stipulates that:

“The Parties shall have the liberty to apply for the necessary orders and directions in HCA 2155 of 2011 and HCA 569 of 2012 in the event that issues arise as to the implementation of any of the terms of this Agreement. Once all the terms of this Agreement, save as to Clause 17(b)  [for Kwu Tung Land and the STS Shares], have been fully implemented and perfected and the distributions under Clause have taken place, the parties to the Proceedings will agree to the dismissal of HCA 2155 of 2011 and HCMP 2621 of 2011 with costs thereof to be provided for in accordance with Clause 49 below. Upon the HFE Completion and the Property Acquisition Completion Date, the Parties to the Proceedings will agree to the dismissal of HCA 569 of 2012 with costs thereof to be provided for in accordance with Clause 49 … … …”

20.  Mr Wong seems to suggest that, since not all the terms of the Settlement Agreement have been fully implemented including distribution to all the beneficiaries, the agreed costs provision in Clause 49 is not applicable in determining the issue of costs here.

Discussions

21.  I agree with the submissions of the siblings of the 1^st Family that Mr Wong’s argument is wholly untenable.  It is clear that Poon J’s Costs Order and the CA’s Costs Order only dealt with the costs incurred in relation to the Stay Applications and the related appeal.  This must be the case because the Court of Appeal and Poon J were only dealing with the Stay Applications as opposed to the entire action in HCA 2155/2011.

22.  Whilst costs are ultimately in the discretion of the court, it is trite that the parties’ agreement as to costs is a highly relevant factor, and the court will normally give effect to such agreements.[3]

23.  The effect of Clause 49 had been thoroughly analysed by Poon J in his decision leading to the making of Poon J’s Costs Order (“Poon J’s Costs Decision”)[4]:

(i)  Poon J held that Clause 49 of the Settlement Agreement covers the following categories of costs:

(a)  The first category is costs and disbursements in respect of the negotiation, entering into and implementation of the Settlement Agreement.[5]

(b)  The second category is costs already incurred as at the date of the Settlement Agreement (i.e. 3 August 2012)  in relation to the administration of the Estate and the family companies, including the costs and disbursements incurred in relation to the Proceedings and all matters incidental thereto.[6]

(c)  The third category is costs to be incurred after the Settlement Agreement in relation to the administration of the Estate and the family companies including the costs and disbursements incurred in relation to the Proceedings and intended proceedings and all matters incidental thereto.[7]  This includes the costs to be incurred in the present action.[8]

(ii)  Poon J held that since all the disputes arising from this action had been fully and finally settled by the Settlement Agreement, it is not the parties’ contractual intention to take any further step to pursue the disputes arising in these proceedings after the Settlement Agreement.  The third category of costs only covers future steps envisaged to be taken in the Proceedings after the Settlement Agreement, which are applications for (a)  orders and directions on implementation of the Settlement Agreement or (b)  disposal of the Proceedings upon the full implementation of the Settlement Agreement.[9]

(iii)  Poon J further held that the costs of the Stay Applications were not covered by Clause 49, and he therefore made the order for costs in respect of the Stay Applications.

24.  I agree with the analysis of Poon J regarding the effect of Clause 49.  As the parties have in principle agreed on the costs covering the aforesaid matters, I agree with the siblings of the 1^st Family that their costs and the costs of the siblings of the 2^nd and 3^rd Family in this action up to 3 August 2012 (i.e. the date of the Settlement Agreement)  shall be taxed on an indemnity basis (if not agreed)  and be paid by and out of the Estate.  This is covered by the second category of costs as referred to in Poon J’s Costs Decision.

25.  I also agree that the costs of the aforesaid parties between 3 August 2012 and 3 July 2013 in relation to the reporting to the court on the implementation of the Settlement Agreement shall likewise be taxed on an indemnity basis (if not agreed)  and be paid by and out of the Estate.  This is covered by the third category of costs as referred to in Poon J’s Costs Decision.

26.  It is true that the Court of Appeal did make some comments about the 2^nd and 3^rd Families being innocently dragged into “this dispute” between the two camps of the 1^st Family.[10] However, it is clear that the Court of Appeal’s reference to “this dispute” was a reference to the dispute concerning the Stay Applications.  This can be seen from:

(i)  the references to Poon J’s Costs Order in §§8-9 of the Decision of the Court of Appeal on Costs[11], which was only concerned with the costs of the Stay Applications; and

(ii)  the fact that Ian and Tim were ordered to pay the costs of the 2^nd and 3^rd Families on the appeal, because Ian and Tim were the only effective losers in respect of the Stay Applications.

27.  I agree with Mr Chan, counsel for Nora, that it would be unthinkable that the Court of Appeal had dealt with the three categories of costs in the CA’s Costs Order.  As mentioned above, the Court of Appeal had only dealt with the costs of the Stay Applications.

28.  Neither can Clause 48 assist Mr Wong’s argument.  Even if the distribution to the beneficiaries has not been completed, the parties have agreed for the dismissal of the claim in this action which is the main event triggering the application of the agreed costs provision in Clause 49.  The dismissal of the action is part of the settlement between the parties to resolve their dispute in respect of the claim in this particular action.  I do not see how the subsequent dispute relating to the Yau Wing Option would affect the prior agreed arrangements between the parties.  In any event, if the 2^nd and 3^rd Families felt aggrieved for being dragged into the subsequent dispute, they should have asked for provisions for their costs in the subsequent proceedings.

29.  There is no dispute that the costs of the 2^nd and 14^th Defendants in this action be reserved, and so provision to such effect should be included in the final order.

30.  There may also be issues as to whether some of the costs in the period between 9 April 2013 and 3 July 2013 were incurred for the implementation of the Settlement Agreement.  I leave the matter for determination by the taxing master.

31.  The remaining issue is the costs of this paper application.  Though the 2^nd and 3^rd Families have failed to convince the court to accept their position on costs, I take the view that these arguments were very much necessitated by the subsequent dispute between the two rival camps of the 1^st Family in relation to the Yau Wing Option.  I also have doubt as to whether these costs are covered by Clause 49. In my judgment, the most appropriate costs order for this application is one of no order as to costs.  I therefore so order.