WU SHUK CHUN v. KWONG OI LIN AND OTHERS

HCMP 2301/2006

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 2301 of 2006

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D E C I S I O N

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Application

1. This is an application for pre-emptive costs order under Order 85 rule 2 of the Rules of the High Court (“RHC”)

Background

2. Mr. Woo Kin Hang (“the Deceased”) died testate in Hong Kong on 5 December 2001, leaving an estate (“the Estate”) of about $7.3M. The estate mainly consisted of a six-storey building (“the Building”) situated at No. 277 Castle Peak Road, Kowloon, valued at about $7.2M.

3. By his Will dated 28 October 1997, the Deceased appointed his concubine Madam Kwong Oi Lin (“the 1^st Defendant”) and his son Wu Sui Fung (“the 2^nd Defendant”) as executors and trustees (collectively “the Executors”) thereof.

4. The Deceased made specific gifts about the Building under the Will as follows:

(a)	Ground floor: His sons, the 2nd, 3rd and 4th as tenants- in-common in equal shares
(b)	First floor: the 1st Defendant
(c)	Second floor: the 5th Defendant
(d)	Third floor: the 6th Defendant
(e)	Fourth floor: the Plaintiff
(f)	Fifth floor: the 7th Defendant

5. The Deceased further devised his residuary estate into 100 shares and divided them among all parties to these proceedings, including his other children and his grandchildren.

6. On 30 October 2003, a grant of Probate was issued to the 1^st and 2^nd Defendants to administer the Estate. However, administration has not been completed and I understand that the problems are two-fold.

(a)	The Building has been wholly owned by the Deceased and does not have a Deed of Mutual Covenant (“the DMC”). Without the DMC, each of the floors of the Building cannot be assigned separately to each of the beneficiaries according to the Will.>
(b)	Clause 10 of the Will states that:
	“	It is my wish that after the vesting of my interests in the properties known as No. 277 Castle Peak Road to my said concubine and children as detailed in Clauses 4 to 9 hereof, if any of my said concubine and/or children shall be desirous of disposing of the property so vested in him or her, priority shall be given to the other named persons under Clauses 4 to 9 hereof at the price to be agreed by the parties or at the then market price. In case of any disagreement on the market price of such property, an independent surveyor shall be appointed by the parties for the purpose of deciding the market price of the property or properties in issue. In default of agreement on such appointment within 3 months of the indication of the desire of disposing of the property by any of the named persons as aforesaid, any party interested in the transaction shall be entitled to request the President for the time being of the Hong Kong Institute of Surveyors to appoint an independent surveyor to determine the market price and whose decision shall be final and binding on the parties thereto.”
	The Executors took the view that the Deceased wished the Building to be remained in the hands of the family members and tried to give effect to the same.

7. Family meetings were held and Messrs K.B. Chau & Co. (“KBC”) was instructed by the Executors to perform the administration. However, the beneficiaries could not reach any agreement.

8. Anyway, in about July 2005, KBC sent a draft DMC to the Law Society of Hong Kong to apply for waiver of the relevant guidelines. It met with requisitions “difficult to answer”. Then, it was suggested that a limited company could be incorporated to take up the interest of the Building and each of the relevant beneficiaries would hold a percentage of shares thereof. The new suggestion was not agreed.

9. In about August 2006, the Plaintiff turned to her present legal advisor Messrs Anthony Siu & Co. (“ASC”) and demanded for the transfer of her interest in the Estate. ASC then correspond with KBC on the matter, but regrettably could not come to any consensus.

10. The Plaintiff then commenced the present proceedings on 7 November 2006. The Executors and all the beneficiaries were made party to the proceedings. In the prayer of the Originating Summons herein, the Plaintiff asked for:

“	1.	An Order that the Plaintiff as a beneficiary of the last Will          and Testament dated 28th October 1997 of the said WOO Kin Hang alias WU (or WOO) Kin, deceased, may be at liberty to institute in the High Court of Hong Kong and prosecute  an action against the 1st and 2nd Defendants seeking the following reliefs pursuant to Order 85 of the Rules of the High Court (Chapter 4A, Laws of Hong Kong), namely:-
		(1)	An Order that the 1st and 2nd Defendants, the Executors of the last Will and Testament dated 28th October 1997 of the said WOO Kin Hang alias WU (or WOO) Kin, deceased, do forthwith furnish full and proper particulars and accounts of the testator’s Estate (and in particular the testator’s residuary Estate) and the investments thereof to the Plaintiff.
		(2)	An Order that the 1st and 2nd Defendants, the Executors of the last Will and Testament dated 28th October 1997 of the said WOO Kin Hang alias WU (or WOO) Kin, deceased, do forthwith assent to and vest in the Plaintiff the property known as “ Fourth Floor, No. 277 Castle Peak Road”.
		(3)	If and so far as may be necessary, administration of the estate of the said WOO Kin Hang alias WU (or WOO) Kin, deceased.
		(4)	Further and/or other reliefs and/or directions.
		(5)	That provision may be made for the costs of the action.
	2.	That the Plaintiff be indemnified against all costs of and incidental to the said intended action out of the Estate of the said WOO Kin Hang alias WU (or WOO) Kin, deceased.
	3.	If and so far as may be necessary, administration of the Estate of the said WOO Kin Hang alias WU (or WOO) Kin, deceased.
	4.	Further and/or other reliefs and/or directions.
	5.	That provision may be made for the costs of application.

11. The matter was mentioned by me on 24 January 2007 and 11 April 2007. I granted leave for all parties to file and serve affidavit evidence and further ordered, inter alia, that the application for pre-emptive costs order was to be argued first while the other reliefs were to be adjourned sine die with liberty to restore.

12. I heard the substantive argument of the pre-emptive costs order on 17 September 2007. Mr. Kenneth Lam of Counsel represented the Plaintiff. Mr. Vincent Poon of Counsel acted for the 1^st, 2^nd and 3^rd Defendants. All other Defendants were acting in person. They were present, except the 4^th, 9^th and 12^th Defendants. Nonetheless, the 4^th Defendant to 12^th Defendant opposed and took similar stand towards the Plaintiff’s application.

“	1.	同意分配遺產，因為尊重死者意願。
	2.	不贊成分擔訴訟費及任何賠償。
	3.	不贊成遺產用作支付訴訟費。”

Ruling

13. Upon consideration of all the evidence authorities and submissions before me, I have decided to dismiss the Plaintiff’s application. My reasons appear in below.

Law

14. Both Mr. Lam and Mr. Poon agreed that paragraph 85/2/3 of HKCP 2007 at p.1188 contained the applicable principles.

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Pre-emptive costs orders – Exceptionally a beneficiary   plaintiff may obtain an order in advance of the trial that  his costs should be paid out of the estate irrespective of the result of the trail if the case falls within the second class of case described in Re Buckton[1907] 2 Ch. 406 at 414, where although the case is brought not by the trustees (who are defendants) but by some of the beneficiaries, yet is made by reason of some difficulty of construction or administration which would have justified an application by the trustees, and [sic. or] is not made by them only because for some reason of other a different course has been deemed more convenient. But such an order should only be made if it is considered inevitable that the trial judge would order the beneficiaries costs out of the estate ( McDonald v. Horn [1995] 1 All E.R.961). The one important exception to this limitation is cases brought by beneficiaries under pension funds against the trustees. The practice here is similar to that in derivative actions, firstly laid down in Wallersteiner v. Moir (2) [1975] Q.B. 373. The test to be applied in pension fund cases for allowing the beneficiary his costs out of the fund in advance is whether the plaintiffs have shown a sufficient case for further investigation. Once the court is satisfied that there are matters which need to be investigated it should choose the most economical form of investigation, and generally will not authorise any legal process until it has explored the possibility of independent investigation by a person acceptable to both parties. If that does not succeed then it may authorise immediate payment out of the fund of the plaintiffs’ costs down to discovery and review the position at that stage. It may be appropriate then to remove the trustees and appoint judicial trustees rather than to authorize the plaintiff to continue the action against the existing trustees (McDonald v. Horn(above)).

When considering whether to grant a pre-emptive costs order, the following are the relevant considerations: (i) the strength of the party’s case: (ii) the likely order as to costs as trial: it must appeal that the judge at the trial could properly exercise his discretion only by ordering the applicants’ costs be paid out of the trust estate; (iii) the justice of the application; and (iv) any special circumstances. (Re Biddencare Ltd [1994] 2 B.C.L.C 160 applied in HSBC  International Trustee v. Tam Mei Kam, unreported, Lam J, October 11, 2004, CFI) In the above latter Hong Kong authority, i.e. HSBC International Trustee v. Tam Mei Kam, it was held, following Alsop Wilkinson v. Neary [1996] 1 W.L.R. 1220, that in the context of two rival beneficiary claimants fighting for the estate, the executor and trustee should abide by the principle of neutrality.”

15. Both learned Counsel nonetheless differed in their interpretation of the standard of proof required by Re: Buckton. Mr. Poon said that:

“	(v).	The standard of proof is not on the balance of probability but “sufficiently confident that the case is clearly  within the first and second category [of Re: Buckton] ….”. In case in which it is not clear that the judge would be bound to make an order in favour of the applicant, the court is very reluctant to make a prospective order. McDonald and others v. Horn and others [1995] 1 All ER 961 at 971e”
		(paragraph 10 of Mr. Poon’s skeleton)

Mr. Lam argued that it could not be right and submitted that the Plaintiff needed only to achieve the standard of balance of probabilities in civil case.

16. In my view, it is not necessary to resolve the disagreement because the Plaintiff has not been able to satisfy me on the standard proposed by Mr. Lam in any event.

Applications 

17. Applying the above principles to the present case, the Plaintiff fails this Court in the following aspect.

18. First, I am not satisfied the strength of the Plaintiff’s case. Apart from an account, she asked for a transfer of the 4^th Floor of the Building to her and/or replacement of the Executors by her. Given the understanding of the difficulties faced by the Executors and KBC in the DMC matter, I do not believe that the Court would direct the Executors to complete the conveyance if legal formalities had not been completed. Mr. Lam kindly identified 8 areas of problems in drafting the DMC, but not the solutions to resolve them. I am therefore not convinced that the Plaintiff is in a better position than the Executors to administer the Estate.

19. Second, I am also not satisfied that, on balance, the trial judge would order the Plaintiff’s costs should be paid from the Estate.

(a)

As contained in paragraph 18 above, merits do not lie on the Plaintiff.

(b)

Even if the account sought by the Plaintiff is likely to be granted by the Trial Judge, costs should be borne by the Executors as the obligation to account is a basic requirement that they have to comply with.  Such obligation is spelt out clearly on the Grant issued to them by the Court as well as contained in section 56 of the Probate and Administrate Ordinance (Cap. 10). Having said that, costs usually remains a matter within the discretion of the Court to be exercised judicially. In the present case, a number of factors weigh against the Plaintiff in this respect. All other beneficiaries opposed to her application. They did not ask for an account for the Executors. The Plaintiff has already taken control of the 4th Floor of the Building since 2005.

20. Third, justice does not necessarily falls solely on the Plaintiff’s side. On the one hand, I can understand the concern of the Plaintiff. It has taken some 4 years for the Executors to administer the Estate, but not yet completed. On the other, the Executors have not been sitting on the matter without doing anything. The job has been delegated to the solicitors who have tried to resolve the problem, albeit not very successful so far. For the time being, I notice that both the Plaintiff and the Executors have attempted to lay blame on the other side for the delay. I do not believe that I am in a position to resolve the dispute by way of affidavit only. It suffices for me to say that all beneficiaries should put their heads together the soonest possible and discuss with their legal advisors as to how each individual floors of the Building are to be conveyed separately in order to complete the administration. I do not have much evidence before me as to the exact problems faced. Nonetheless, subject to the advice of the parties’ own legal advisors, as a layman in the conveyancing practice, I venture to suggest that drafting a DMC for the Building might be difficult, but cannot be impossible. Probably, advice from conveyancing expert might be necessary. It will cost something, but appears to be indispensable in the circumstances. Subject to the rider that this Court cannot provide legal advice to the parties, they can always come to Court for specific directions under order 85 RHC in appropriate circumstances. If the matter will be dragged on for further, I am sure that there will even be more complications.

21. Finally, it appears to me that there are no special circumstances justifying a pre-emptive costs order in favour of the Plaintiff. In this respect, both Counsel had spent some time arguing on whether the Plaintiff was or was not hostile with the Executors. With respect to Mr. Lam, I agree with Mr. Poon that the Plaintiff was hostile in form and in substance. From the correspondences, affidavit evidence filed and reliefs prayed as per the proceedings herein, I do not consider that the Plaintiff is asking for an amicable procedure for determining speedily and inexpensively a question in the administration of the Estate.

Costs

22. I have not heard from the parties on the question of costs. However, costs usually follow event and I see no reason to depart from it. Hence, there will be an order nisi, which will be made absolute within 14 days from today, that costs of the application, including Certificate for Counsel for hearing on 17 September 2007 together with costs reserved in 11 April 2007 (but not those on 24 January 2007), be borne by the Plaintiff to all the Defendants, to be taxed if not agreed.