ERIC EDWARD HOTUNG AND ANOTHER v. HO YUEN KI AND OTHERS

HCA 857/2011

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

HIGH COURT ACTION NO 857 OF 2011

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DECISION

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INTRODUCTION

1.  On 7 September 2016, I handed down a written judgment after a contested trial dismissing the plaintiffs’ action against the 1^st, 2^nd and 3^rd defendants. I also made (inter alia) the following orders:-

(1) the plaintiffs were to pay the 1^st defendant’s costs of the action (including the expenses incurred in relation to live note for the hearing on 26, 27, 30 and 31 May 2016), to be taxed if not agreed;

(2) on a nisi basis, there be no order as to costs as between the plaintiffs and the 2^nd and 3^rd defendants (“the Costs Order Nisi”); and

(3) there be no order as to the costs of and incidental to the three summonses taken out by the 1^st, 2^nd and 3^rd defendants all dated 24 May 2016 seeking security for costs against the plaintiffs.

2.  I have now before me the following 4 summonses:-

(1) The 3^rd defendant’s summons dated 20 September 2016 seeking a variation of the Costs Order Nisi such that the plaintiffs shall pay the 3^rd defendant’s costs of the action or a portion of such costs as the court shall see fit.

(2) The 2^nd defendant’s summons dated 21 September 2016 seeking a variation of the Costs Order Nisi such that the plaintiffs shall pay the 2^nd defendant’s costs of the action or a portion of such costs as the court shall see fit.

(3) The plaintiffs’ summons dated 21 September 2016 seeking leave to appeal against the orders made, or said to have been made, on 7 September 2016, such that –

(a) there shall be no order as to the costs of the action as between the plaintiffs on the one part and the 1^st defendant on the other part;

(b) the 1^st and 3^rd defendants do jointly and severally or otherwise pay the plaintiffs’ costs of and incidental to the two summonses dated 24 May 2016 relating to security for costs; and

(c) the 1^st and 3^rd defendants do jointly and severally or otherwise pay the plaintiffs’ costs of and incidental to the appeal brought by the plaintiffs against the order of Master M Wong dated 5 April 2016, if the same has not been dealt with.

(4) The plaintiffs’ summons dated 3 April 2017 seeking a stay of execution of the Judgment and Order dated 7 September 2016 (including any taxation proceedings) pending the final determination of the plaintiffs’ application to “vary the costs order nisi” and the plaintiffs’ appeal in CACV 198/2016.

THE 2^ND AND 3^RD DEFENDANTS’ APPLICATIONS FOR VARIATION OF THE COSTS ORDER NISI

3.  I shall first deal with the 2^nd and 3^rd defendants’ respective summonses seeking to vary the Costs Order Nisi.

4.  Both Mr Patrick Siu (for the 2^nd and 3^rd defendants) and Mr Barrie Barlow SC (for the plaintiffs) have referred me to the decision of Deputy High Court Judge Stone QC in 廈門新景地集團有限公司v Eton Properties Limited and Others, HCCL 13/2011 (20 November 2012), in which the following was stated by the learned judge:-

“10 Mr Barlow suggested that the fact that the plaintiff had chosen to sue 11 related defendants did not ‘necessitate’ 4 teams of lawyers, and drew the attention of the court to the words of Lindley MR in Bagshaw v Pimm [1900] P 148 at 151 that ‘it does not at all follow that the Court would allow the costs of appearing separately, however many defendants there might be…’; whilst more recently the English Court of Appeal in SEB Trygg Liv Holding Aktiebolag v Manches and others, [2005] EWCA 1237 had reaffirmed the proposition that ‘Whilst [P&J] had the right to separate representation that did not mean that, if successful, it would necessarily be entirely at [AMB’s] expense.’

23 Mr Barlow was correct in making the broad argument that the courts carefully scrutinize costs’ orders in order to ensure that apparent ‘profligacy’ of representation is not necessarily to be subvented by an unsuccessful plaintiff. Divers judicial observations readily illustrate that the courts are concerned with weighing, in the exercise of an unfettered discretion, where costs should, or should not, appropriately lie upon resolution of an action.

24 There has been debate between counsel as to the appropriate benchmark to be adopted when considering the issue of the representation of multiple defendants: is it, as Mr Barlow says, one of ‘necessity’ or, as Mr Shieh argues, a matter of ‘reasonableness’?

28 … Litigation is often opaque at the outset, in stark contrast to the position pertaining once a trial has taken place, when any conclusion as to the ‘necessity’ of particular representation has the inestimable benefit of hindsight, which always provides 20/20 vision; to take one of Mr Barlow’s examples, the fact that no cut‑throat defence actually was run in this case (which it was not) is not, I think, dispositive of the point now in issue.

29 Accordingly if, as Mr Barlow strongly pressed, ‘necessity’ indeed is the appropriate benchmark when considering the separate representation of multiple defendants, then it seems to me that this must be qualified in terms of the ‘necessity’ of such separate representation being reasonably apparent when viewed through the factual prism existing at the time of the retention of such representation, and not simply as a post‑facto conclusion based upon that which did, or did not, occur at trial.

30 In the present case therefore, at the time of retention of the representation in question – and as we know in this case eventually there were four ‘cluster’s of defendants and four legal teams – was it reasonable or unreasonable to have taken the view that separate representation was ‘necessary’ in order to guard against the possibility of conflicts of interest arising between the multiple defendants?”

5.  It would appear that the learned judge considered the applicable test to be whether it was reasonably necessary for two (or more) legal teams to be engaged for a number of defendants when viewed at the time of retention of such representation, and not as a matter of hindsight.

6.  On behalf of the 2^nd and 3^rd defendants, Mr Siu argues that:-

(1) At the time when the 2^nd and 3^rd defendants retained lawyers, it was not reasonably apparent that they should join force with the 1^st defendant and should retain only one legal team.

(2) When the 3^rd defendant first applied for security for costs against the plaintiffs on 9 August 2013, Mr Registrar Lung granted the application on 13 December 2013.  There was no argument at that time that the 3^rd defendant should not be separately represented from the 1^st and/or 2^nd defendants.

(3) The same comment applies to the plaintiffs’ subsequent consent to give security for costs of the 1^st and 2^nd defendants in February and March 2014 respectively.

(4) The 1^st, 2^nd and 3^rd defendants’ applications for further security for costs made on 16 December 2015 were granted by Master M Wong, who rejected the plaintiffs’ argument that the 2^nd and 3^rd defendants should not be separately represented.

(5) There was a divergence of interest between the 1^st and 2^nd defendants, in that the 1^st defendant’s interest was to protect her shareholding in STDM, whereas the 2^nd defendant’s interest was to protect its shareholding in STS.

(6) The 2^nd defendant is an entity completely separate from the 1^st defendant.

(7) The 1^st and 2^nd defendants did not represent the interest of the 3^rd defendant, who did not hold any of the alleged trust property in his name.

(8) The 3^rd defendant advanced a line of defence which was completely separate from that of the 1^st and 2^nd defendants, namely, that the plaintiffs could not establish a case of trusteeship de son tort against him.

7.  I do not accept Mr Siu’s principal argument that, at the time when the 2^nd and 3^rd defendants retained lawyers, it was not reasonably apparent that they should join force with the 1^st defendant and should retain only one legal team.  It is clear, from the pleadings and the course of the trial, that the principal defence run by all three defendants in this action has always been that the trust alleged by the 1^st plaintiff did not exist as a matter of fact.  This common factual defence was effectively run by Mr Edward Chan SC who, understandably, took the leading role at the trial on the side of the defendants.  Although Mr Chan ran that defence on behalf of the 1^st defendant only, his cross examination of the 1^st plaintiff was adopted by Mr Issac Chan (for the 2^nd defendant) and Mr Siu (for the 3^rd defendant).  I accept that the matter is not to be looked at with hindsight.  I consider, however, that what happened at the trial demonstrates, or throws light on, what has been the position throughout, namely, that the main or principal issue in this case is the existence of the alleged trust arrangement.

8.  I should add that I consider the assistance given by Mr Issac Chan and Mr Patrick Siu at the trial to be helpful.  I have no doubt, however, that I would have reached the same conclusion on the issue of the existence of the alleged trust with or without their participation at the trial.  I should also make it clear that this is not a matter I take into account when considering the 2^nd and 3^rd defendants’ respective applications for variation of the Costs Order Nisi because, as earlier mentioned, the matter should not be viewed with hindsight.

9.  On the other hand, the fact that the 2^nd and 3^rd defendants filed a joint defence is relevant to show, at least, that they could have been represented by one team of lawyers at the trial.

10.  Also relevant is the fact that the 2^nd defendant only filed one witness statement for the purpose of the trial, namely, that of the 1^st defendant dated 17 February 2014, who was in fact not called to give evidence due to her poor health conditions.  That statement is a short one, consisting of 3 pages with 9 paragraphs only, effectively adopting her principal witness statement also dated 16 February 2014 filed in her capacity as the 1^st defendant in this action.

11.  I do not consider the original orders for security for costs made by Mr Registrar Lung or by consent to have much significance, because it does not appear that the issue of the reasonableness of the defendants being separately represented was raised or determined.

12.  In relation to the rejection by Master M Wong of the argument that the 2^nd and 3^rd defendants should not be separately represented, I am not bound by his decision and, with respect, do not agree with it.

13.  I accept that the 2^nd defendant is an entity separate from the 1^st defendant, that the 1^st and 2^nd defendants did not represent the interest of the 3^rd defendant, and that the 3^rd defendant advanced a line of defence which was separate from that of the 1^st and 2^nd defendants.  It does not follow, however, from any or all of those facts or matters that the 1^st, 2^nd and 3^rd defendants could not, or should not, be represented by one team of lawyers in this action.

14.  Overall, I consider that there was no reasonable necessity for the 2^nd and 3^rd defendants to be separately represented.  I consider that all three defendants could reasonably have been represented by one team of lawyers in this action.

15.  It is a separate question whether some extra costs would have to be incurred on their behalf had they been represented by the 1^st defendant’s team of lawyers in this action.

16.  Had the 2^nd defendant been represented by the same team of lawyers who represented the 1^st defendant, I do not see that substantial extra costs would have been incurred on behalf of the 2^nd defendant, although I accept that some minor additional costs might have to be incurred.

17.  I accept that some more costs would have been incurred on behalf of the 3^rd defendant had he been represented by the same team of lawyers who represented the 1^st defendant, in view of the additional line of defence advanced by him relating to the issue of trusteeship de son tort.

18.  Neither the 2^nd nor 3^rd defendant has produced any figure or given any estimate of the extra costs which might have to be incurred had they been represented by the 1^st defendant’s team of lawyers.  Mr Siu submits that the court should approach the matter on a broad brush basis.  I agree that is the only practical way to proceed in the circumstances.  On a broad brush basis, I would vary the Costs Order Nisi such that the plaintiffs are to pay 10% of the 2^nd defendant’s costs, and 25% of the 3^rd defendant’s costs.

19.  In passing, I should mention that Mr Barlow argues that, in view of the 2^nd and 3^rd defendants’ application to vary the Costs Order Nisi, it would be open to the plaintiffs to apply to vary the order made in relation to the 1^st, 2^nd and 3^rd defendants’ three summonses dated 24 May 2016 seeking security for costs, namely, that there be no order as to the costs of and incidental to the three summonses.  As I see it, the order that I made in paragraph 74 of my written judgment in relation to those three summonses was an order absolute and not an order nisi.  It can only be challenged by an appeal, but not by an application to vary.

THE PLAINTIFFS’ APPLICATION SEEKING A STAY OF EXECUTION OF THE JUDGMENT AND ORDER DATED 7 SEPTEMBER 2016 (INCLUDING ANY TAXATION PROCEEDINGS)

20.  In so far as the stay of execution is sought pending “the final determination of the Plaintiffs’ application to vary the costs order nisi”, since the plaintiffs have not, as a matter of fact, made any application to vary the Costs Order Nisi, plainly no stay of execution can be granted on such basis.

21.  In so far as the stay of execution is sought pending the final determination of the plaintiffs’ appeal in CACV 198/2016, I have looked at the plaintiffs’ notice of appeal dated 5 October 2016.  I do not propose to examine the grounds of appeal in detail in this decision.  As I see it, I dismissed the plaintiffs’ action against the defendants because I did not accept the 1^st plaintiff’s evidence regarding the basis on which he paid the sum of HK$2 million to the 1^st defendant in around 1961, or the nature of the transaction between them in respect of that payment.  This is a finding of fact.  The various grounds raised by the plaintiffs in the notice of appeal seek to challenge that finding in the Court of Appeal.  The plaintiffs are of course entitled to do so.  All that I would say is that I am not satisfied that the plaintiffs’ appeal is reasonably arguable.

22.  In any event, I do not see any good reason for a stay of execution.  The only matter to be stayed would be the taxation proceedings.  The financial ability of the 1^st defendant to repay any costs which the plaintiffs may have to pay to the 1^st defendant upon taxation of her costs is not in issue.  I do not accept that without a stay, the plaintiffs’ appeal may be rendered nugatory.  The plaintiffs’ alleged poor financial position, while relevant to an application for security for costs of the appeal, cannot, in my view, justify a stay of execution.

23.  Mr Barlow also argues that, in view of the 1^st defendant’s incapacity and her consequent probable inability to give instructions to her solicitors, it must have been her son, the 3^rd defendant, who is giving instructions to the 1^st defendant’s solicitors to seek costs against the plaintiffs.  It is further said that the 1^st plaintiff is convinced that were it not for her incapacity, the 1^st defendant would have instructed her solicitors not to seek costs against him, since her entire costs have been or will be paid out of the Fund that the 1^st plaintiff originally provided.  I am not satisfied that there is sufficient evidence before me to conclude that the 1^st defendant’s current health conditions are such that she is unable to give instructions to her solicitors to pursue the taxation proceedings against the plaintiffs.  It is primarily a matter for Messrs C K Mok & Co, who are currently solicitors on the record for the 1^st defendant, to decide whether they have received proper instructions from the 1^st defendant to act in this action.  In the absence of clear evidence pointing otherwise, I do not consider that I ought to look behind the 1^st defendant’s representation.

24.  In all, I am not prepared to grant any stay of execution of the Judgment and Order pending the determination of the plaintiffs’ appeal in CACV 198/2016.

THE PLAINTIFFS’ APPLICATION SEEKING LEAVE TO APPEAL

25.  At the hearing, Mr Barlow informed the court that his clients would not pursue the summons dated 21 September 2016.

DISPOSITION

26.  In respect of the 2^nd and 3^rd defendants’ summonses dated 21 and 20 September 2016 respectively, I vary the Costs Order Nisi such that the plaintiffs shall pay 10% of the 2^nd defendant’s costs and 25% of the 3^rd defendant’s costs of the action, to be taxed if not agreed, with certificate for counsel. The plaintiffs shall also pay them their costs of those summonses, to be taxed if not agreed, with certificate for counsel.

27.  I grant leave to the plaintiffs to withdraw the summons 21 September 2016, with costs to the 1^st and 3^rd defendants, to be taxed if not agreed, with certificate for counsel.

28.  I dismiss the plaintiffs’ summons dated 3 April 2017, with costs to the 1^st defendant, to be taxed on a party and party basis if not agreed, with certificate for counsel.  Mr Yin asks for those costs to be taxed on an indemnity basis. I do not consider the circumstances to be such as would justify taxation on an indemnity basis.