SHALINI NARESH KUMAR BASANT v. STEVENSEC SERVICES LTD

HCMP 57/2024

[2025] HKCFI 3052

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 57 OF 2024

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DECISION
ON COSTS

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A. The application to vary the Costs Order Nisi

1.  I refer to the Decision I handed down on 9 April 2025 (the “Decision”)[1]. I use the same terms and abbreviations as used therein.

2.  At §32 of the Judgment, I made a costs order nisi (the “Costs Order Nisi”) that:

(a)  there be no order as to costs of the Amendment Summons; and

(b)  the costs of the Respondent and Interveners of and occasioned by the Conversion Application be borne by the Applicant and be summarily assessed on an indemnity basis, with certificate for 2 counsel in the case of the Interveners, and be paid by the Applicant personally forthwith.

3.  By summons of 23 April 2025 (the “Costs Summons”, and the “Costs Application”), the Applicant seeks certain variations to the Costs Order Nisi, as follows:

1.  The [Costs Order Nisi] in respect of the [Interveners’ Summons] … be varied as follows:

“The costs of each of the Applicant, the Respondent, the Trustee (if any), and the Interveners of and occasioned by or incidental to the Conversion Application be paid out of the fund of the K.S. Shahani Trust (the “Trust Fund”) on an indemnity basis, with certificate for 2 counsel in the case of the Interveners.” 

2.  Costs of and incidental to this application be likewise paid out of the Trust Fund.

3.  In the alternative to (1) and (2) above, that the Respondent bear its own costs and that there be no order for the costs of and incidental to this application.

4.  To the extent that it is nonetheless ordered that the Applicant bear the costs of the Interveners and/or the Respondent in the Conversion Application, that the costs thereof be on a party-to-party basis, to be taxed if not agreed.

4.  I have since handed down directions with the view of disposing of the application on the papers.

5.  Pursuant to those directions, Mr Mariani for the Applicant has lodged his written submissions in support dated 8 May 2025 (“A/Sub#1”) and in reply dated 30 May 2025 (“A/Sub#2”).  In opposition, Mr Martin Ho for the Respondent, and Ms Bonnie Cheng for the Interveners, have filed their submissions, both dated 22 May 2025 in opposition (“R/Sub” and “Int/Sub” respectively).  I have read all those submissions.

6.  As the interests and perspectives of the Interveners and Respondent are not entirely the same, it is more convenient to consider their submissions separately. 

B.  The Interveners’ position

7.  I consider first of all the Interveners’ position.

8.  2 questions are involved: (i) whether the Applicant should bear the costs of the Conversion Application personally (“Costs Liability”), and (ii) whether indemnity costs should be awarded (“Costs Scale”).

B.1.  Costs Liability

9.  I consider the Costs Liability first.

10.  The Applicant’s stance may be summarised as follows.  Mr Mariani relies on Re Buckton.  He submits that the Applicant makes no claim against the Interveners.  Any mutual hostility between the Applicant and the Interveners is a personal matter.  The purpose of the action was to “secure that [the Trustee] be able to perform the Trust.”  It is not a hostile claim, and does not affect the Interveners’ rights.  The fact that the Interveners feel affronted by the allegations made against them does not make the action a hostile one.

11.  For the following reasons, I accept Ms Cheng’s submissions that the Applicant should personally bear the costs concerned (including her own costs):

(a)  Whether the Applicant seeks any relief against the Interveners is off the point.  The Applicant’s claim and allegations raise factual disputes.  Some are serious.  Some relate to the Interveners.  Those disputes are required to be resolved before the Court can then decide whether to step in.  I repeat paragraph 26, and in particular subparagraphs (h), (q), (u) and (v) thereof;

(b)  In A/Sub#2, Mr Mariani submits that “Whereas the Court granted the Conversion Application, it does not follow simpliciter that it ‘must have been known’ to the Applicant that the Application should have been commenced or continued as a Writ” (original emphasis);

(c)  No one has said that this is a “simpliciter” scenario.  But in the circumstances of the present case, given the nature and seriousness of the factual allegations made, an inference can in my view clearly be drawn that the Applicant must have had that knowledge;

(d)  The contemporaneous inter partes correspondence reinforces the inference:

(i)     By letter dated 27 February 2024, the Interveners’ solicitors said the following to the Applicant’s solicitors:

We put on record at the outset that it is wrong for the Applicant to have commenced these proceedings by originating summons rather than by writ and without naming our clients as parties.  Given the nature of the Applicant’s allegations and the extensive correspondence exchanged among the current parties and our clients before she issued the OS, she ought to have known or been advised that (i) it is inappropriate to use the originating summons procedure where there are clearly factual disputes involved …

and that:

We once again request the Applicant to rectify the said problems. We reserve all our clients’ rights, including to make submissions on these matters and to seek costs against the Applicant to be borne by her personally (and not to come out of the trust assets) on an indemnity basis.

(ii)    In response, the Appellant’s solicitors stated their letter in reply dated 28 February 2024 that:

As you are aware, under O.28, r.8 of the Rules of the High Court, the Court may, if it thinks fit, direct that this application continue as though it had been begun by writ.  Your clients may make such submissions as they are advised to make in that regard at the Directions Hearing.  We remain of the view that it is in all circumstances proper for this action to be continued as an application begun by Originating Summons.

(iii)   By letter of 4 March 2024, the Interveners’ solicitors reiterated their position that the action:

a.  … involve substantial disputes of fact which render the OS procedure wholly inappropriate.  This ought to have been plain to the Applicant from the nature of her own allegations and proposed relief, and the correspondence among the parties and our clients before commencement of the action.  Your view that “it is in all circumstances proper for this action to be continued as an application begun by Originating Summons” is unjustified.

b.  If a plaintiff/applicant ought to have anticipated there would be substantial factual disputes so that the originating summons procedure would be inappropriate, she would be penalised on costs upon the Court making an order under O.28 r.8 (which your letter alludes to).  She would also be ordered to pay costs if she ought to have reasonably consented to an application under O.28 r.8.

…

3.  We have given fair and more than ample opportunity to the Applicant to rectify the fundamental problems in her conduct of this action.  Unless the Applicant provides a constructive response and takes all necessary steps to rectify those problems by 11 March 2024, our clients will take out the appropriate application(s) and seek costs against her personally (and not to come out of the trust assets) on an indemnity basis.

(e)  In respect of Re Buckton, I accept Ms Cheng’s submissions[2] it does not assist the Applicant.  The Applicant’s averred reasons for bringing the action and the mode of originating process she chose to adopt and maintain are 2 distinct matters.  The former, whatever they are, do not mean that her adoption of the originating process and her opposition of the Conversion Application are necessarily proper and reasonable.  On the facts before me, I am of the view that they are not. 

(f)  Further, on the facts of this case, I accept Ms Cheng’s submissions that even if Re Buckton were applicable, it had still not been shown how the adoption and insistence upon the use of the originating process were properly for the benefit of the Trust Funds;

(g)  Given the nature of the Conversion Application, I further accept Ms Cheung’s submissions that it is a discrete application;

(h)  I have also considered Lam Pak Cheung v Lin Zhen Lue [2009] 1 HKLRD 35 at §49, and Industrial and Commercial Bank of China (Asia) Ltd v Tse Ching [2022] 5 HKLRD 284 at §31.  They are consistent with this Court’s exercise of its discretion in ordering personal costs against the Applicant.

B.2.   Costs Scale

12.  Mr Mariani submits[3] that:

As a broad rule and without presuming to fetter the Court’s broad jurisdiction over costs, indemnity costs should only properly be ordered where the proceedings were scandalous or vexatious, or had been initiated or prosecuted maliciously, or for an ulterior motive, or in an oppressive manner …

13.  I do not accept those submissions.  The authority Mr Mariani cites in support is Choy Yee Chun (The Representative of the estate of Chan Pui Yiu) v Bond Star Development Ltd[1997] HKLRD 1327 (CA).  I am surprised that Mr Mariani has decided to cite the 1997 decision of Choy Yee Chun, but not the subsequent authoritative decision from the Court of Final Appeal in Town Planning Board v Society for Protection of the Harbour Ltd (No 2) (2004) 7 HKCFAR 114.  As explained and summarised by the Court of Appeal in Huge Dragon Corp Ltd v Lung Mun Oasis [2014] 3 HKLRD 286 at §§12-13:

12.  As to when the courts may award indemnity costs, Li CJ had this to say in Town Planning Board v Society for Protection of the Harbour Ltd (No 2) …

[16]  The courts have rejected the proposition that an award of indemnity costs will only be made where a case has been 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 ...[4] These decisions and the reasoning on which they were based have been endorsed by the Hong Kong Court of Appeal …

[17] In these and other cases, courts have emphasised the undesirability of attempting to define the circumstances in which orders for indemnity costs are to be made. It has been said that:

“… the discretion is not to be fettered or circumscribed beyond the requirement that taxation on an indemnity basis must be ‘appropriate’.”

…

13.  What constitute appropriate circumstances to award indemnity costs must be fact-sensitive.  As demonstrated by numerous authorities and now enshrined in O.62 r.5(1)(e), Rules of the High Court, the conduct of the party against whom indemnity costs are sought is cogently relevant.  Thus, where the proceedings in question should never have been brought or defended but the party nevertheless unreasonably and unjustifiably persisted, he may well be visited with indemnity costs …

14.  I have considered the submissions made by Mr Mariani at §11 of A/Sub#1.  I reject his submissions that the Trustee Action could have given the Applicant any “reasonable expectation” that the present action may be determined under the originating summons process.  I repeat §26 of my Decision.  I repeat further the contemporaneous inter partes correspondence discussed above.  The fact that the Appointor has not disputed that he had declined to grant Mr Yuen the Necessary Sanctions does not obviate the need to consider the other issues involved.  The Applicant’s averred concern over costs is no justification for the adoption of an inappropriate and unsuitable procedure – and see §26(w) of the Decision.

15.  For the above reasons, I am of the view that the Interveners’ costs should be assessed on an indemnity basis.

C.  The Respondent’s position

16.  I now turn to the Respondent’s position.

17.  Given the position which the Respondent is in (as the Appointor under the Trust), the 2 questions of Costs Liability and Costs Scale may be, as explained below, considered together.

18.  For the following reasons, I accept Mr Ho’s submissions that the Applicant should personally bear the costs concerned (including her own costs).  I accept also his submissions that the Respondent is entitled to have his costs assessed on an indemnity basis:

(a)  In the case of the Respondent, the starting point is that it is entitled to costs on an indemnity from the Trust – see Lewin on Trusts 20th ed. §§48-004 to 48-005, and O.62 r.6(2).  The true question, as submitted by Mr Ho which I accept, is whether the costs should be borne by the Applicant personally, or be paid out of the Trust;

(b)  Mr Mariani principally relies on the alleged “fact that [the Appointer] changed, without prior notice to the Applicant, its position with respect to the Conversion Application itself.”[5] I do not accept that there has been any change as alleged.  I repeat §§26(o) to (q) of the Decision;

(c)  In relation to Mr Mariani’s reliance upon Re Buckton, the discussions above on the same equally apply;

(d)  Even if Re Buckton were applicable, there would be the following further considerations;

(e)  As I have recorded in the Decision, the Applicant has changed the scope of her claim a number of times – see §§8-10, 16 and 26(o) of the Decision. Until the Applicant has dropped the parts of her claims (or at least indicated her intention to do so) for the various Declarations and discharge, the claim was plainly in the nature of a hostile application for breach of trust.  I accept Mr Ho’s submissions in this regard.  As explained in Lewin on Trusts at §48-076:

A beneficiary who unsuccessfully sues trustees for breach of trust will normally be ordered to pay the costs of the trustees.

(f)  I accept Mr Ho’s submissions that the costs incurred prior to and until the amendment should be borne by the Applicant;

(g)  In respect of the balance of the costs, I bear in mind the observations of Lord Scott NPJ in Cheung Pui Yuen v Worldcup Investments Inc (2009) 12 HKCFAR 31 on the nature of the principles explained in Re Buckton.  The learned Non-permanent Judge firstly summarised those principles at §§56 to 57.  He then set out at §58 a further principle, that if it is the deceased who is responsible for the creation of the doubts that have necessitated an application to the court for the doubts to be resolved, it is the deceased’s estate on which the costs of the application should fall.  He then at §59 observed that:

But these principles do not constitute rules.  They provide a guide as to how, in probate or administration proceedings, judicial discretion regarding the costs of litigation should be exercised.  The answer to that may depend not only on the principles referred to but also upon the particular circumstances in which the litigation has been commenced and prosecuted.

(h)  On the overall unreasonable conduct of the Applicant in employing the originating summons process to start with, and in resisting the Conversion Application subsequently, I repeat the discussions above.  I add here also the matters raised by Mr Ho, which include the repeated shifts by the Applicant of the scope of her claim, the making of very serious allegations against the Respondent, the inappropriateness hence of a trial without pleadings (and see 26(v) of the Decision in this regard), and the protracted inability on the Applicant’s part to confirm what she seeks to rely on and what not;

(i)  In my view, in addition to the Respondent’s position as the Appointer, this is clearly an appropriate case for indemnity costs to be ordered.

D.  Overall disposition

19.  For the reasons set out above, I refuse the Costs Application. For the avoidance of doubt:

(a)  I refuse §1 of the Costs Summons;

(b)  I refuse §2 of the Costs Summons, and order that the costs of and incidental to the Cost Application be paid by the Applicant personally on an indemnity basis, to be assessed summarily;

(c)  I refuse the alternative §3;

(d)  I refuse §4;

(e)  I refuse to vary the Costs Order Nisi, which has now become absolute.

20.  For better case management and easier reference, I make the following directions on assessment of costs:

(a)  The Respondent and Interveners may within 7 days re-serve and re-lodge their Statements of Costs, both for the Conversion Application and the Costs Application;

(b)  The Applicant may within 14 days thereafter lodge her Statements of Objections;

(c)  The Respondent and Interveners may within 7 days thereafter lodge their replies;

(d)  Subject to any further directions which the Court may make, the summary assessment will then be conducted on the papers.