CLEMENCIA MANANSALA GALLAGHER v. MARK EDWARD KIRKHAM

HCMP1850/2009

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 1850 OF 2009

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JUDGMENT ON COSTS

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1.  The facts of this case have already been stated in my Reasons for Judgment handed down on 19 August 2010. I shall not repeat them here. Suffice it for me to say that I have concluded that the plaintiff is entitled to the whole estate of her husband. That is against all the submissions by the 2^nd defendant that the estate should be transferred to the said Minotaur Trust under which the 2^nd defendant is the trustee and it has the discretion to distribute the income of the trust to the plaintiff for her life only.

2.  The plaintiff asked for costs of the whole proceedings from the 2^nd defendant on indemnity basis.  The 2^nd defendant asked for costs to be paid to all parties including itself from the estate.  The 1^st defendant, being the Executor of the Estate, remained neutral throughout the proceedings but, being the executor, he has the duty to protect the assets of the estate from unnecessary depredations.  Hence he submitted that costs should follow the event in this case in the usual way and he shared the same stance as the plaintiff’s.

3.  It is common ground between the parties that in respect of a trustee, under Order 62, rule 6(2), the general rule is that the trustee shall, in the ordinary course of event, be entitled to be paid out of the fund held by the trustee unless the court otherwise orders on the ground that he has acted unreasonably or has in substance acted for his own benefit rather than for the benefit of the fund. 

4.  The 2^nd defendant has never sought advance protection in defending these proceedings either by seeking the beneficiary’s consent or a Beddoe order under Order 85. Both the plaintiff and the 1^st defendant submitted that the 2^nd defendant’s conduct before and after the commencement of these proceedings is unreasonable and the 2^nd defendant was defending the plaintiff’s application for its own benefit.  

5.  Although the 2^nd defendant professed that it was adopting a neutral position, it was as early as 7 October 2009 that it stated that it intended to have the proceedings struck out.  There and then and thereafter it was warned by the plaintiff’s solicitor that it would be at the risk of losing its rights to an indemnity from the Trust.  The 2^nd defendant did not take heed of this warning.

6.  The 2^nd defendant stated that it was motivated out of its obligation towards Mr Gallagher’s wishes.  However those wishes were never documented either formally by Mr Gallagher, or in any contemporaneous file note.  As I have held in my judgment, these supposed wishes were never communicated by the late Mr Gallagher to the 2^nd defendant.

7.  As stated in my previous judgment the construction of the Minotaur Trust is so clear that there is no doubt the plaintiff should be given the whole of the estate of the deceased.  The Secondary Beneficiary would only come into play when the plaintiff predeceased the deceased. 

8.  However, the 2^nd defendant insisted and defended these proceedings by submitting that the plaintiff only had a life interest, which position cannot be supported from the Minotaur Trust which was actually drafted by the 2^nd defendant itself.  

9.  On 29 January 2009 the 2^nd defendant even claimed that the deceased had specifically instructed them that the residuary estate be left to the Second Beneficiary and his brother Martin Gallagher.  However Martin Gallagher was never mentioned in the Minotaur Trust.  In any event Martin Gallagher executed a deed of renunciation and disclaimer on 20 March 2009.  The other 2 named Secondary Beneficiaries, Nora Gallagher and John Hand, also executed the similar deed of renunciation and disclaimer in April 2009.  

10.  Then the 2^nd defendant claimed that the default beneficiary should be Chanel College itself, a position taken well after the Contingent Secondary Beneficiary, John Hand, principal of Chanel College, had disclaimed any personal interest in the Minotaur Trust.  That was 7 July 2009.  This position in any event is in conflict with the provisions of Clause 3.13 in which the International Red Cross is named. 

11.  On 23 June 2009, i.e. three months prior to the commencement of the proceedings, the plaintiff made a “without prejudice offer save as to costs” to the 2^nd defendant, inviting renouncement under the Will and a cash payment in lieu of trustee fees.  Such offer was immediately rejected by the 2^nd defendant on 29 June 2009.  

12.  Then on 28 July 2009 the 2^nd defendant suddenly alleged that the plaintiff’s position appear to have been driven by apparent hostility to her late husband. It then drew attention to provisions of the Minotaur Trust in respect of “hostile beneficiaries”. 

13.  This allegation is unsupported by any foundation.  It was made only to prevent the plaintiff from enforcing the terms of Minotaur Trust since that was the only possible ground of refusing a beneficiary to have her entitlement.  It was groundless and hurtful. 

14.  The 2^nd defendant’s defence was, in the words of counsel for the plaintiff, vexatious and oppressive.  This was echoed by the Gallagher family in Ireland.  This view can be found in a letter from the 1^st defendant’s solicitors dated 3 November 2009:

“Ms Avril Gallagher (‘Ms Gallagher’), Nora’s sister, has communicated with us and, speaking on behalf of the Gallagher family in Ireland and the Revd. Fr. John Hand, Ms Gallagher has requested us to pass on their decision in the following terms:

‘Clemen is Gerard’s widow and it is the wish of Gerard’s family that whatever Gerard has will pass to Clemen in its entirety and that we do not wish further stress, worry and expense being caused to Clemen as a result of any activity or lack of activity by Ms Debbie Annells. You may also point out to Ms Annells that I am absolutely outraged at the manner in which she has behaved to date and that I require her to stop messing about and stop squandering or hoping to squander monies left by Gerard. Clemen is Gerard’s widow, whatever Gerard has goes to Clemen and that is the end of the matter. Hopefully this can all be resolved without ridiculous and ludicrous Court proceedings which are causing enormous concern to Clemen.’

In regard to her late sister, Nora Monica Gallagher, Ms Gallagher stated that Nora’s wish was that whatever money Gerard left would go Clemenica Manasala Gallagher’s way.  This was the wish of Fr. John Hand.  This was the wish of Martin Gallagher and it was Nora Gallgaher’s wish and the wish of the remaining members of the Gallagher family.”

15.  On 4 December 2009 there was a without prejudice meeting trying to resolve the matter.  However the 2^nd defendant’s ongoing fees were listed as agenda item 2 whereas the plaintiff’s needs did not feature on the agenda at all.  There was repeated reference by the 2^nd defendant all along in respect of protecting the prospect of future fees.  Thus I accept the plaintiff’s submission that the 2^nd defendant’s position in maintaining the Minotaur Trust or any resettlement thereof for the duration of the plaintiff’s life was motivated not out of any obligation towards Mr Gallagher’s wishes but by its own benefit of having its interest in the annual fees. 

16.  At the eve of the hearing last time, the 2^nd defendant applied to have the proceedings stayed.  That was in the first place a misconceived application.  The 2^nd defendant being a trustee of the Minotaur Trust should be motivated to have the matter resolved by a construction of the Minotaur Trust and it should maintain a neutral attitude. However the 2^nd defendant adopted a very hostile position and put forward a number of arguments which were groundless and cannot be supported by the wordings of the Minotaur Trust.  This is very prominent in my previous judgment.  Thus the application to stay the proceedings was probably motivated by its interest that there were insufficient assets in the Minotaur Trust beyond the GBP10 settled sum.  In order to recover its fees, the 2^nd defendant wanted to defer any consideration of the issues until such time as the 1^st defendant has collected in a substantial part of the residual estate.

17.  Further after the plaintiff filed and served his submissions on 23 July 2010 as directed by the court, the 2^nd defendant alleged that the plaintiff had disclosed without prejudice a letter and it objected to the court to peruse those submissions.  The court did not know the content of the dispute and therefore at the eve of delivering the previous judgment, informed parties that those submissions would not be read by the court until and unless this dispute is resolved.  The 2^nd defendant was also notified that it should make proper application raising such an issue.  However its contention was withdrawn by the 2^nd defendant shortly before the last hearing.  The quotation of the plaintiff was from without prejudice letter but it stated clearly that it was without prejudice saved as to costs.  The 2^nd defendant on the other hand replied by an open letter.  The allegation of the 2^nd defendant was groundless, unreasonable, and therefore delayed the due process of the law by such an objection which was raised in a carefree manner.  This I must say is deplorable.

18.  Finally the 2^nd defendant, on the eve of the present hearing on 17 November 2010, took out another summons for the stay of the order I made last time.  Mr Pirie, counsel for the 2^nd defendant, explained that since the 2^nd defendant only had GPB10 which is insufficient to pay costs of the 2^nd defendant’s own costs, it wanted a stay so that all the assets of the deceased would be collected and handed over to the Minotaur Trust or in any event sufficient to pay the 2^nd defendant’s own costs from the trust fund.  This is totally misconceived.  The order should not be stayed, the residual estate collected by the 1^st defendant would of course await the decision on costs before the executor started to distribute the estate according to my decision. 

19.  For the aforesaid reasons I came to a firm conclusion that the 2^nd defendant defended proceedings unreasonably and for its own benefit. 

20.  Thus the 2^nd defendant should pay the plaintiff and the 1^st defendant’s costs on indemnity basis, and such costs to be paid by the 2^nd defendant personally and would not recoverable from the trust estate.  Those costs shall include the 2^nd defendant’s 2 aforesaid summonses.