HILLHEAD LTD v. SEAN ERIC MCLEAN HOTUNG AND OTHERS

HCMP 2757/2005

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 2757 OF 2005

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R U L I N G

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1.  The plaintiff commenced these proceedings by Originating Summons in order to obtain orders to divest itself of the certain trusts and to allow it to transfer the assets, which consist of shares in the 5^th and 6^th defendants, to the beneficiaries or to pay them into court.  By a consent order dated 18 August 2006, Mr Recorder A Chan SC ordered that the shares in the 5^th defendant be transferred to the beneficiaries, with consequential orders as to registration and the like, and that the application in respect of the shares in the 6^th defendant be adjourned sine die with liberty to restore.

2.  The learned Recorder recused himself from dealing with the costs of the action, which were reserved.  I am now concerned with the costs relating to the order for transfer of the shares in the 5^th defendant; those relating to the transfer of the shares in the 6^th defendant remain reserved. 

Background

3.  This matter is closely connected with highly-publicised litigation between Mr Eric Edward Hotung (“EEH”) and his children, in particular High Court Action No. 571 of 2003 (“HCA 571”).  This was tried by Tang JA, sitting as an additional judge of the Court of First Instance, and I have taken some of the background from the findings in his judgment, delivered on 4 March 2005, as well as from the affidavit evidence.

4.  The 1^st to the 4^th defendants are all children of EEH.  Sean was born in 1965; Sheridan in 1973; Gabrielle in 1972; and Anthony in 1966.  There was another son named Eric, born in 1963, and a daughter named Mara who was born in 1967.  There are other children, but they are not concerned here.

5.  In about 1979-1980 EEH appointed one Y K Ho as trustee of certain trusts in favour of his sons Michael,  Sean and Anthony (“The Ho Trusts”), and appointed the plaintiff (“Hillhead”)  as trustee of certain trusts (“the Hillhead Trusts”) in favour of his daughters, Mara, Gabrielle and Sheridan.  We are only concerned here with the Hillhead Trusts.

6.  In 2002, Mara renounced her interest in the trusts in favour of Sheridan, and later Sheridan appointed Sean as trustee of that interest.  After that, Sheridan appointed Sean as the trustee of her interest in the trusts, and later on she renounced her interest in favour of Sean.  Sean is now the beneficial owner of 6,668 HEL shares and 2 HICL shares. 

7.  The beneficial interest in the remaining 3,334 HEL shares and 1 HICL share is held either by Gabrielle or Anthony.  Gabrielle executed a deed of appointment and assignment of her shares in favour of Sean, but she later revoked it.  However Anthony claims ownership of Gabrielle’s interest pursuant to a loan and legal financing agreement.  That is why he is joined in these proceedings.

8.  The assets of the Hillhead Trusts are 10,002 shares in the 5^th defendant (“HEL”) and 3 shares in the 6^th Defendant, (“HICL”).  It is not disputed that the shares are now worthless.

9.  Hillhead was a service company used by the accountants, Arthur Young & Co., of which EEC’s nephew, Ronald Ho, was a principal, as were Mr Alan Hann and Mr James, the directors of Hillhead.  The firm later became part of Ernst & Young.  In January 2002, Ernst & Young sold its company secretarial services, share registration services and business services to one Tricor Holdings Ltd, a consortium led by the Bank of East Asia.  The original directors of Hillhead are long gone, and it now has corporate directors and a corporate secretary.  In 2001, Hillhead was declared a dormant company pursuant to section 344A of the Companies Ordinance.  Hillhead planned to commence a members’ voluntary liquidation in July 2002, but it cannot be wound up until it disposes of the HEL and HICL shares.

10.  When the Hillhead Trusts were set up, the beneficiaries were minors.  It appears that EEH indicated that Hillhead’s directors need not be concerned with the management of HEL and HICL, and indeed they did not concern themselves with it.  Also, EEH kept the Hillhead Trusts secret from his daughters and retained the original trust deeds.  It appears that they only learnt of the trusts in April 1998.

The dispute between EEH and the beneficiaries

11.  This started in 2002.  In effect, the beneficiaries, led by Sean made efforts to gain control of the Hillhead Trusts and the Ho Trusts.  To this end, various proceedings were instituted, and they are set out in detail in the judgment of Tang JA at paragraphs 62-69.

12.  In August 2002, EEH asserted that when he had transferred his shares in HCL and HICL Hillhead, he made it a condition that Hillhead should only transfer the legal interest in those shares in the beneficiaries upon his death.  He questioned the validity of the Hillhead Trusts which did not contain any such provision.

13.  Later, EEC asserted through solicitors that both the Trusts were irrevocable, that the trustees were given full discretion to deal with any income derived from the shares by distributing the same amongst EEH, his wife and his children or by accumulating the same, and that the trustees were not be concerned with and were relieved of all duties regarding the management of HEL or HICL.

14.  On 18 December 2002, Hillhead issued a Beddoe application in HCMP 5250/2002 against Sean, Eric, Mara, Sheridan and Gabrielle.  It sought directions on the validity of the Hillhead Trusts, the identity of the current beneficiaries, and an order that Hillhead transfer its legal interest in HEL and HICL to those beneficiaries, or alternatively retire as trustee of the Hillhead Trusts in favour of some other trustee to be appointed in its place.

15.  Before the substantive hearing of the Beddoe application, EEC issued HCA 571 on 13 February 2003 against Hillhead, Y K Ho, Gabrielle, Sheridan, Anthony and Sean.  On 10 April 2003, the Court ordered the consolidation of earlier actions with HCA 571, and that Hillhead should take a neutral stance in the action.  It was however required to file a Defence and give discovery, to take such steps as the court might direct and to agree to be bound by the court’s judgment in the consolidated action.

HCA 571 of 2003

16.  As appears from the judgment of Tang JA, in HCA 571 EEC’s case was that the trusts that he intended to set up in favour of his children were subject to conditions.  These conditions as pleaded in the plaintiff’s Re-re-amended Statement of Claim in relation to the Ho Trusts were:

(a)     that the trusts would be subject to a power of revocation exercisable by EEC during his lifetime and that the trustee would only be entitled to distribute the shares to the sons in equal shares after his death;

(b)    that during EEC’s lifetime, the trustee was to hold and to deal with any income that may be derived from the shares, in the trustee’s absolute discretion, by distributing the same to EEC, his wife and the sons including his other two sons Robert and Eric (or any of them), or to accumulate the same; and

(c)     that the trustee was not to be concerned with and would be relieved of all duties regarding the management of the company to which the shares related.

17.  It was EEC’s case in relation to the Hillhead Trusts that similar conditions were imposed save that the distribution of income was confined to the plaintiff, his wife and the daughters or any of them. 

18.  Tang JA delivered his main judgment on 4 March 2005.  He found that he was not satisfied that EEC had proved the first condition or that the second condition ever existed.  As for the third condition, His Lordship was prepared to accept that probably it had been made known to Alan Hann and Ronald Ho that they were not to interfere with the management of the companies.  Tang JA was also satisfied that the plaintiff insisted on secrecy.

19.  In a subsequent judgment on 17 June 2005 Tang JA declined to make an order that the Hillhead Trusts were subject to the condition that Hillhead was not to and was not permitted to interfere in or with the affairs and management of HEL and HICL.

Events following the judgment

20.  After the judgments had been delivered, according to the evidence of Ms Wanda Tong, solicitor for Hillhead, it became clear that the beneficial interest in the HEL and HICL shares was vested in the beneficiaries of the Hillhead Trusts.  Hillhead therefore sought to assign the beneficial interest but met with further problems because of various assignments and renunciations as between beneficiaries.  Correspondence ensued and on 17 August 2005 Hillhead’s solicitors wrote to solicitors acting for the other parties indicating that Hillhead was prepared to transfer the legal title in the HCL and HICL shares to Gabrielle, Sean and Sheridan subject to various conditions, including that they be responsible for the costs of the transfer and that they should each provide appropriate waivers, releases and indemnities to Hillhead and its former and current directors and shareholders in relation to all matters relating to the Hillhead Trusts.

21.  Neither Sean nor Sheridan responded, though Gabrielle indicated that she would like to see the audited accounts of HEL and HICL and information regarding the value of the trust property.  Hillhead’s solicitors then sought and obtained audited accounts from HEL and HICL which showed that there had been a substantial diminution in the value of the shares since 2000.

22.  This was followed by correspondence from Sean alleging that Hillhead had failed to preserve the assets of HEL and HICL and threatening to sue Hillhead for breach of trust.  He later alleged that Hillhead should be responsible for all the missing monies from the Hillhead Trusts.  He then directed Hillhead to requisition the directors of HEL to convene an extraordinary general meeting to pass special resolutions intended, in effect, to find out why the shares had diminished in value.  Gabrielle, it appears, endorsed this direction.

Hillhead’s position on the Originating Summons

23.  According to Ms Wanda Tong, Hillhead does not enjoy the trust of confidence of the beneficiaries.  They have threatened substantial claims against it as trustee for breach of duty particularly in failing to protect or preserve the trust assets.  This creates a conflict of interest and it is inappropriate for Hillhead to continue as trustee.

24.  Further, it is said, Hillhead only holds half of the HEL and HICL shares; Y K Ho holds the other half.  Her co-operation in investigating the affairs of the companies is regarded as unlikely.

25.  The most important point, however, is that this matter is costing a lot of money Ms Tong says that

(i)      since 2002, the costs incurred in dealing with the Hillhead Trusts and dealing with the inquiries and requests from the beneficiaries have already exceeded $500,000;

(ii)     the costs incurred by Hillhead in HCA 571 amount to over $4 million, although pursuant to the various orders, a substantial part should be recoverable from EEH; and

(iii)    Hillhead has already incurred legal costs of over $500,000 to investigate the threatened claims of the beneficiaries.

26.  Hillhead accordingly wishes to transfer the legal title in the shares to the beneficiaries.  In this connection, it has sought advice from Mr Mark Herbert QC, a trust law specialist in London and it is on the basis of Mr Herbert’s opinion that Hillhead has commenced these proceedings.

Conduct of these proceedings

27.  The Originating Summons was filed on 17 December 2005.  There was, it appears, no further letter before action after that sent by Hillhead’s solicitors on 17 August 2005, calling for transfer to the beneficiaries but subject to their indemnities.  The Originating Summons was supported by the first affirmation of Ms Wanda Tong, to which was exhibited inter alia Mr Herbert’s opinion.  Sean and Gabrielle filed notices indicating their intention to defend.  Anthony filed a notice indicating that he would not defend.

28.  Ultimately, as we know, the parties came to an agreement at the door of the court, and the learned Recorder made a consent order.  However, before the parties got that far, they had spent a good deal of time and money on affidavit evidence.

29.  On 1 February 2006, Sean filed his first affidavit in response to that of Ms Tong.  Most of it was concerned with arguing over specific points in Ms Tong’s affirmation.  Sean does not say directly why he will not agree to the transfers sought.  However, he indicates that it is unacceptable that the beneficiaries should provide indemnities and he considers that he has sufficient evidence to mount a case against Hillhead and various individuals for breach of trust, and he wishes to preserve his rights in this respect.  He also says that Hillhead, instead of complying with his requests for an extraordinary general meeting, and working with the beneficiaries to recover of what is rightfully theirs, is anxiously not trying to relinquish its role as trustee, possibly so that it can then proceed to voluntary liquidation and perhaps try to defeat the claims of the beneficiaries in this way.  So the tenor of his affidavit is that he objects to the proposed transfers and considers that Hillhead should remain as trustee.

30.  On 15 June 2006, Sean filed a further affidavit, which he said was intended to clarify his position.  In it he said that Hillhead had permitted EEH to act in the role of constructive trustee in respect of the assets of the Hillhead Trusts, and the Gabrielle had colluded with EEH to the detriment of the beneficiaries.  He said that Gabrielle’s shares should be paid into court pending the determination of the issue of whether her beneficial interest should be stopped or impounded in respect of the losses suffered by the Hillhead Trusts as a result of her collusion with EEH.

31.  On 15 August 2006, Sean filed a further affidavit, in response to the latest positions disclosed in respect of Gabrielle and HEL (the latter in Ms Tong’s 3^rd affirmation).  He said that he agreed in principle that the shares should be paid into court or transferred to the beneficiaries, but it was EC’s responsibility as trustees to sort out “any difficulties posed by the current attitude being displayed by the fifth defendant”.  He also said that Gabrielle’s share, over which Anthony is disputing, should be impounded.  He said that whether the court ordered the EEC to hold the disputed share, or it should be paid into court, was not a matter of contention for him, but alternatively, if the court ordered Hillhead to hold all the shares and to actively adhere to its fiduciary duties and protect the interest of the beneficiaries he would also agree with this position.

32.  Anthony filed an affirmation on 11 February 2006.  He stated that although he had indicated that he would not defend, he did so only on the basis that the shares should be paid into court.  He then went on to “underscore” the existence of the dispute between himself and Gabrielle over her shares.  These had been the subject of arbitration proceedings and a High Court action, and HCCT76 2004.  He wanted the shares to be paid into court pending the resolution of this matter.

33.  On 31 March 2006, Anthony wrote (without prejudice) to Hillhead indicating that he had no objection to the application.  He proffered a consent summons proposing a transfer of the shares to the beneficiaries.

34.  Anthony filed a second affirmation on 17 August 2006, specifically in reply to the third affirmation of Ms Tong.  He took objection to what he said was her suggestion that he had been uncooperative, and clear, unresponsive or in any way responsible for pushing to litigate the issue of who owns the shares disputed as between himself and Gabrielle, or any other substantive issue in the proceedings.  However he reiterated that he did not intend to litigate in this action any issue in relation to those shares, and did not contest the relief sought by the plaintiff.

35.  Gabrielle, having filed an acknowledgement of service indicating that she intended to contest the proceedings, nevertheless indicated through solicitors on 16 January 2006 that she would not oppose the orders sought.  However, she filed her first affidavit on 27 February 2006.  The object of this affidavit seems to have been to dispute Anthony’s claims to her shares.  Then on 10 August 2006, she filed a further affidavit in response to Sean’s second affidavit objecting to his proposal that her shares be paid into court pending an inquiry into his allegation of her collusion in breach of trust.

36.  Ms Tong had filed a second affirmation on 3 January 2006, in dealing with the service on parties who were out of the jurisdiction.  She also filed a third affirmation on 15 August 2006 which was in response to the affidavit evidence by which the other defendants, including Sheridan had filed prior to that date.

Hillhead’s position on costs

37.  Hillhead says that it, having ultimately succeeded, should have its costs in respect of the HEL shares in such a way as to reflect when, as Mr Man, Hillhead’s counsel puts it, the different parties came into line.  It says that the costs should be borne jointly and severally by Gabrielle, Anthony and Sean up to 16 January 2006, by Anthony and Sean jointly and severally from that date the 31 March 2006, and by Sean from 31 March 2006 onwards.

38.  Any costs not recovered as above should be borne severally by Sean as to two thirds and Gabrielle as to one third, Hillhead’s rights to the costs being secured by a charge over the HEL shares.

Sean’s position

39.  Put simply, Sean takes the position that the costs should all be borne by Hillhead, or alternatively there should be no order as to costs.

Gabrielle’s position

40.  Gabrielle says that she is blameless and was not responsible for the need to incur costs.  She therefore says that the costs of and occasioned by Sean’s affidavits dated 12 June and 15 August 2006 should be paid by Sean (who has agreed to this by letter dated 16 February 2007); the costs of and occasioned by Anthony’s affidavit of 10 February 2006 should be paid by Anthony; and all her other costs should be paid jointly and severally by Hillhead, Sean and Anthony.

Anthony’s position

41.  Anthony says that he also took the position from the outset that he would not contest Hillhead’s application.  He did not withdraw his Acknowledgment of Service pursuant to Order 21 Rule 1 of the Rules of the High Court.  His first affirmation was filed for clarification purposes, and his second was filed because he felt that other parties were seeking to blame him for the litigation, with possible costs implications for him.  So his position is that the losing party, whoever it be, should pay all his costs.  He also says that Hillhead’s own position is dubious at best and that if Hillhead had not sought indemnities in its letter of 17 August 2005, the action would not have been necessary.

Principles

42.  This is an application by a trustee under O.85 R.2 of the Rules of the High Court.  O.62 R.6(2) provides:

“Where a person is or has been a party to any proceedings in the capacity of trustee, personal representative or mortgagee, he shall, unless the Court otherwise orders, be entitled to the costs of those proceedings, in so far as they are not recovered from or paid by any other person, out of the fund held by the trustee or personal representative or the mortgaged property, as the case may be; and the Court may otherwise order only on the ground that the trustee, personal representative or mortgagee has acted unreasonably or, in the case of a trustee or personal representative, has in substance acted for his own benefit rather than for the benefit of the fund.”

In the normal way, of course, costs follow the event, subject to the court’s overriding discretion.

Should Hillhead have costs out of the trust fund?

43.  I think this is the first question though its resolution may be pointless, if the fund is now worth nothing.  Suppose that the defendants had not defended; could Hillhead have its costs out of the fund? Mr Man for Hillhead argues that it should so long as the steps it took were part of the proper administration of the trust.

44.  I take the import of the above-quoted paragraph of Rule 6 to be that “acted unreasonably” and “acted for his own benefit” refers to the trustee’s actions in respect of the application, rather than its actions throughout the life of this trust.

45.  It was for this reason, and well as for the reason that I was told that an action for breach of trust was pending by Sean against Hillhead, that I indicated that I was not prepared to enter into an inquiry in respect of all the allegations against Hillhead since the beginning, which are, in substance, that it breached the trust by allowing EEH to run down the trust fund, or as Mr Egan, for Anthony, picturesquely puts it, to “rape and pillage” HEL and HICL.  If there is to be such an inquiry, this is not the proper place for it.

46.  I also note Mr Thomson’s arguments that Hillhead should have transferred the shares long ago; the youngest beneficiary, Mara, would have been 21 in 1988.  There was no need to keep the shares from the beneficiaries once they reached majority.  Further, it was wrong of Hillhead to become dormant in 2001; it should preserve the assets.  However, I do not think this helps.  I accept that if Hillhead had tried to make the transfer earlier, it would just have brought the disputes forward in time.

Did Hillhead act unreasonably?

47.  It seems to me that Hillhead was not wrong to take steps to transfer the shares to the beneficiaries once the issues in HCA 751 were resolved and it had obtained the advice of leading counsel.  The point on which it can be faulted, and I think this is grudgingly accepted, is for having demanded indemnities as the price of doing so.  It is true that no one actually came back and said to Hillhead, before the action, that it might have a consent order if it withdrew that demand.  But Sean in his first affidavit said that it was unacceptable, which it must have been, given the beneficiaries’ dissatisfaction, long expressed.  I consider that Hillhead acted unreasonably in demanding indemnities and this caused Sean, at any rate, to defend, instead of accepting what, apparently, he had been seeking since before EEC made the assertions which gave rise to HCA 571.

Did Hillhead act for its own benefit rather than for the benefit of the fund?

48.  I note that in HCA 571 EEC gave evidence that he had established the Trusts for the protection of his children and because he wanted a rapid deployment fund.  Tang JA accepted that the concept of a rapid deployment fund was an important reason for the establishment of the Trusts.  It also appears that EEC wanted total control of the trust funds of both the Hillhead and the Ho Trusts.  He kept them secret from the beneficiaries.  He managed HEL and HICL and, before Tang JA on the question of costs, his counsel accepted that he must have done so as a fiduciary.  It is difficult to see how Hillhead could, in these circumstances, be regarded as doing anything for the benefit of the fund or the beneficiaries.  It just kept out of the way.

49.  As to whether Hillhead acted for its own benefit in this application, it obviously did.  It clearly wanted to be out of the picture, in order to save costs.  However, the fund is now worth nothing, and if Hillhead stayed in position, having regard to the opinion it received from leading counsel, it could not as a bare trustee have been compelled to comply with any directions other than directions relating to the conveyance of the trust property or the manner of voting in general meetings; and the beneficiaries could not require it to incur expenditure or liabilities on its own account or to pursue litigation against a third party, on behalf of one or more of them.  If Hillhead had remained trustee, it is certainly arguable that there would have been no benefit to the fund in any event; so it may be said that it did not act to its own benefit “rather than” to the benefit of the fund.

50.  Nevertheless, considering Hillhead’s position throughout as a trustee who simply kept out of the way, and its unreasonable approach in demanding indemnities, I do not see that it should have any costs out of the fund. 

Costs as between Hillhead and Sean

51.  The simple fact is that, at the end of the day, Sean capitulated at the door of the court.  He could have done that sooner instead of trying to litigate, in these proceedings, what should be litigated, and apparently is being litigated elsewhere.  On the other hand, if Hillhead had not taken an unreasonable approach, perhaps he would not have wasted time and costs.  I think both parties are at fault.  I do not see that either should have costs against the other up to and including the hearing on 18 August 2006.

Costs as between Hillhead and Anthony

52.  It is true that Anthony filed an Acknowledgment of Service saying that he would not defend, but in my view, notwithstanding Mr Egan’s insistence that he never sought leave to withdraw that, he cannot say that he did not defend.  What he said was:

“Although I have filed an acknowledgment of service indicating I do not intend to contest the proceedings that is on the basis that the plaintiff shall pay into court ...”

which means that he objected to one of the alternative remedies sought.  He cannot say, as he does in his second affirmation, that he “expressed no view” as to the first alternative.  He objected to it.

53.  That said, Anthony followed up his first affirmation by withdrawing his objection on 31 March 2006.  Unfortunately, that was not good enough for Hillhead; through solicitors they insisted that he no longer contended that he had a beneficial interest in the disputed shares, otherwise they would carry on and seek costs.  This was answered by Anthony’s solicitors on 19 April 2006 in a letter “without prejudice as to costs” confirming that Anthony did not oppose the transfer of the disputed shares or their payment into court.  Also unfortunately, it provoked Gabrielle to file an affidavit in response.  I will deal with this below.

54.  Then Anthony filed his second affirmation at the last minute, on 17 August 2006.  He says that he filed this specifically in reply to the third affirmation of Ms Tong, which in fact deals with him in only one paragraph.  Then he goes into a general complaint about the conduct of Hillhead and its lawyers but says that he has nothing to argue except for the issue of costs, which he says have needlessly arisen because of Hillhead’s failure to act with common sense.

55.  Through counsel, Anthony now says that his second affirmation was in places “an intemperately worded document” and he agrees to withdraw each of the references to Ms Tong where they appear in paragraphs 3, 10 and 11.  Unfortunately this comes rather late, because it appears that the complaints against Ms Tong are what prompted the learned Recorder to recuse himself from dealing with costs, which in turn led to the two-day hearing on costs before me.  It was also pointless.  If he was not contesting the reliefs sought, as he says he was not after 31 March 2006, there was no point in involving himself further.

56.  For the same reason I gave in respect of Sean, I do not see that Hillhead should have any costs against Anthony up to 31 March 2006.  I do not see that it can have any costs thereafter; it could have accepted that there was no need to demand that he no longer contended that he had no beneficial interest in the disputed shares.  This was in any event a matter for arbitration elsewhere.  At the same time, Anthony could quite simply have kept quiet after 31 March.  If he incurred costs thereafter he was the author of his own misfortune.

57.  I would, therefore, order no costs as between Hillhead and Anthony up to and including the hearing on 18 August 2006.

Hillhead and Gabrielle

58.  Hillhead acted unreasonably in demanding indemnities.  Gabrielle, it appears, was never asked unconditionally before these proceedings began whether or not she would agree to the transfer.  Once Gabrielle was served with these proceedings, she agreed not to contest them.  She is blameless as between herself and Hillhead who should have no costs against her.  She, on the other hand, should have costs against Hillhead, up to and including the hearing on 18^th August 2006.

Costs between Sean, Anthony and Gabrielle

59.  Gabrielle was provoked into filing affidavits by Sean and Anthony.  Ultimately, they abandoned their objections to the transfer of shares to her, so she succeeded against them.  I would allow Gabrielle the costs of and occasioned by Sean’s affidavits dated 12 June and 15 August, to be taxed if not agreed; and she should have the costs of and occasioned by Anthony’s affirmation dated 10 February 2006, to be taxed if not agreed.  Any other costs incurred by Gabrielle up to that date are to be paid by Hillhead, Sean and Anthony jointly and severally, to be taxed if not agreed.

Costs subsequent to 18 August 2006

60.  As I have indicated, the Recorder recused himself because of the admittedly intemperate complaints against Ms Tong.  This meant that the costs hearing had to be adjourned to a different judge.  What had been set down for a half-day hearing escalated into a two-day hearing with lengthy submissions and an attempted inquiry into the history of the trusts back to 1979.  But for Anthony’s second affirmation, this would not have been necessary.  However, if Hillhead had sensibly accepted what appears in Anthony’s solicitors’ letter “without prejudice save as to costs dated 19 April 2006” and had let Anthony out, he would not have been provoked to make that affirmation.

61.  It seems to me that the costs of Hillhead, Sean and Gabrielle incurred after 18 August 2006 should be paid as to one third by Hillhead and two thirds by Anthony, to be taxed if not agreed.  This order is nisi and will itself no doubt provoke further argument and costs.

Indemnities

62.  Hillhead sought personal indemnities from the beneficiaries to be secured by a charge over the transferred shares.  Hillhead is not awarded costs against Sean or Gabrielle so there is no need to consider this matter further.

Recapitulation

63.  Costs up to and including the hearing on 18 August 2006

(1)     As between Hillhead and Sean, no order as to costs.

(2)     As between Hillhead and Anthony, no order as to costs.

(3)     As between Hillhead and Gabrielle, Hillhead pay Gabrielle’s costs.

(4)     As between Sean, Gabrielle and Anthony,  Gabrielle is awarded against Sean the costs of and occasioned by Sean’s affidavits dated 12 June and 15 August, and against Anthony the costs of and occasioned by Anthony’s affirmation dated 10 February 2006, to be taxed if not agreed.  Any other costs incurred by Gabrielle up to that date are to be paid by Hillhead, Sean and Anthony jointly and severally, to be taxed if not agreed.

Subsequent costs

64.  The costs of Hillhead, Sean and Gabrielle incurred after 18 August 2006 are to be paid as to one third by Hillhead and two thirds by Anthony, to be taxed if not agreed.