Mrs. A By Lpcr Her Next Friend v. The Executors of the Estate of a

FCMC 15415/2009 & FCMC 5060/2011

[2018] HKFC 231

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

FAMILY COURT

MATRIMONIAL CAUSES NO.15415 OF 2009 and

MATRIMONIAL CAUSES NO.5060 OF 2011

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BETWEEN

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RULING
( Paper disposal : Costs )

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Background

1.The Next Friend of Mrs. A (“the Next Friend”) took out a Summons dated 27^th December 2017 (“the Next Friend’s Summons”) to seek leave to use certain documents filed in the ancillary relief proceedings in FCMC 5060 of 2011 and FCMC 15415 of 2009, (namely the Order of the Family Court dated 19^th April 2011 in FCMC 5060/2011 (“the Settlement Order”) and Form E filed by Mrs. A in FCMC 15415/2009) (“Form E”) to be used in the High Court Proceedings (“High Court Proceedings”).

2.By a Ruling dated 7^th November 2018 (“the Ruling”), this Court granted leave to Mrs. A through the Next Friend to disclose, use and adduce Form E and the Settlement Order in the High Court proceedings and any appeal arising therefrom, and released Mrs. A/Next Friend from any applicable confidentiality restrictions or implied undertaking.

3.At the same time, the issue of costs was reserved to be dealt with by paper disposal.

4.At the hearing, the stance of the Executors of the Estate of Mr. A (“the Executors”) is that the Executors do not oppose the Next Friend’s proposed use of Form E in the High Court Proceedings.

5.As for the Settlement Order, the Executors’ stance is that the Court may make an order to grant leave subject to the imposed conditions, namely, the undertakings and conditions referred to in the Executors written submission at paragraph 5.4 (“the Executors’ Proposal”).     

Discussion

6.Parties have dispute over the applicable legal principle on costs in this case.

7.The Next Friend submitted and accepted that in an application for leave to lift confidentiality restrictions or release of implied undertaking, in respect of the costs of the application itself, an applicant (i.e. the Next Friend) should generally pay the costs of third parties (which would include the Executors) who are not involved in the main proceedings in which the documents are sought to be used (i.e. the High Court Proceedings), as the costs would have to be incurred by the Next Friend in any event, and such costs may then be recoverable by the Next Friend in the High Court Proceedings against his adversaries there as part of his costs in the High Court Proceedings.

8.The Next Friend submitted that the said principle only applies to the costs of the application (i.e. the issue of the Next Friend’s Summons), which would have to be incurred in any event, and the position is different for costs incurred after the issue of the application in relation to the Executors’ opposition to the Next Friend’s Summons, and that there is no reason why such costs should not follow the event.

9.The Next Friend submitted that since the Executors did not accept any of the reasonable proposals put forward by the Next Friend, a contested hearing was therefore necessitated, and the Next Friend succeeded in obtaining an order in terms as originally sought in the Next Friend’s Summons. 

10.The Next Friend argued that since the Executors failed entirely on the issues in dispute between the parties after the issue of the said application, and therefore the Executors should bear the costs of their opposition, particularly the Next Friend asked the Court to take into account that the Executors were actively advocating for a position, contrary to the guidance in Re Mong Man Wai [2013] 4 HKC 179.

11.The Next Friend‘s stance on the costs is that :

(a) The Next Friend to pay the Executors’ costs of the Next Friend’s Summons; and

(b) The Executors to pay the Next Friend’s costs of the application from 12^th February 2018 (inclusive of that date), which is the date of the first directions hearing at which the Executors sought directions to file affirmation in opposition.

12.The Executors’ stance on costs is that the Next Friend’s application is analogous to an application for discovery against non-party, and therefore the non-party (i.e. the Executors) is entitled to its costs of dealing with the application.

13.In gist, the Executors submitted that the Executors’ participation in the Next Friend’s Summons, which was to not oppose the granting of leave to the Next Friend and was limited to suggesting ways in which Mr. A’s privacy and confidential could be protected, was entirely reasonable, and there is no reason to depart from the usual rule that in such a situation the Executors ought to be entitled to their costs of the application with certificate for 2 counsel, and it is the Court’s discretion to award on an indemnity basis or a party-and-party basis.

14.The fall back position of the Executors is: since the Next Friend agreed that the starting point is that the applicant (i.e. the Next Friend) should pay the costs of third parties who are not involved in the main proceedings (i.e. the High Court Proceedings) in which the documents are sought to be used, and that such costs may then be recovered by the Next Friend as part of the costs of the High Court Proceedings.

15.If the Court considers that the Executors should only be entitled to their costs up to a certain date, that date should not be 12^th February 2018 (being the first direction hearing).  It should be 5^th October 2018, being the date of the Next Friend’s counter-proposal.

16.The Executors submitted that the Next Friend’s application is analogous to an application for discovery against a non-party. In such case, the non-party is entitled to its costs of dealing with the application. The Executors relied on Ngan In Leng and Chu Yuet Wah (No.1) [2013] HKLRD 717.

17.The Executors argued that as reflected by the costs order made in respect of the non-party discovery application in Ngan In Leng, which was that (a) the plaintiff pay the non-party’s costs in the first instance, and (b) costs as between the plaintiff and the defendant to be dealt with at trial.

18.In reply to the Executors’ argument, the Next Friend submitted that the source of “usual rule” as to costs of non-party discovery applications is statutory, therefore it could not be applied by analogy to the present case.

19.In addition to that, the Next Friend also relied on the following cases, namely Yang Foo Oi v Wai Wai Chen [2013] 3 HKC 131, Anite Telecoms Ltd v World Best Cargo-Link Co Ltd HCA 2560/2013, DJ v LRM FCMC 8507/2013 and Liu Hing Sang v Miramar Travel Ltd DCEC 486/2010 and submitted that in all of these cases, the party resisting the application was not a party to the separate set proceedings in which the documents were sought to be used and the resisting party did not get costs.

20.The Next Friend submitted that these authorities do not support the existence of the rule of the costs order akin to non-party discovery. Therefore, there is no analogy between the non-party discovery application and the present application whether as a matter of principle or authority.

21.It was submitted that since there is a clear distinction between discovery applications against non-party and an application for leave to release confidentiality restrictions, there is no reason why the starting point in the present application should not be the usual starting point in interlocutory application, i.e. costs follow the event.

22.I agree with the observation made by the Next Friend and found that the general legal principles should apply, i.e. no party shall be entitled to recover any costs of or incidental to any proceedings from another party to the proceedings except under an order by the Court and that in general terms, the starting point on costs in civil litigations, remains to be “costs follow the event”: Order 62, rule 3(1) & (2), RHC.

23.It is also trite that the issue of costs is a matter of discretion by the Court.  The discretion is a wide one and of course must be exercised judicially.  Broadly speaking, in the exercise of its discretion, the Court will have to take into account, where appropriate in the circumstances, the special matters set out in Order 62, rule 5 of RHC, namely, the underlying objectives set out in Order 1A, rule 1, any offer of contribution, any payment of money into court and the amount of such payment, any written offer made under Order 33, rule 4A(2), any written “without prejudice save as to costs” offer (Calderbank offer), the conduct of the parties, whether a party has succeeded on part of his case, even if he has not been wholly successful; and any admissible offer to settle made by a party, which is drawn to the Court’s attention:  see Order 62, rule 5(1)(aa) to (g), RHC.

24.In the present case, the Next Friend accepted that in an application for leave to lift confidentiality restrictions or release of implied undertaking, in respect of the costs of the application itself, the Next Friend should generally pay the costs of the Executors.

25.However, the Next Friend argued that the costs incurred after the issue of the application in relation to the Executors’ opposition to the Next Friend’s Summons should be paid by the Executors to the Next Friend. 

26.The Next Friend had pointed out that from the outset the Executors do not dispute the substance of the application, i.e. the documents sought are prima facie relevant and leave should be granted, and the only difference between the Next Friend and the Executors was as to the terms upon which leave should be granted.

27.Since the Executors failed entirely on the issue in dispute between the parties after the issue of the application, the Executors should bear the costs of their opposition. Particularly, the Next Friend asked the Court to take into account the fact that the Executors were actively advocating for a position, contrary to the guidance in Re Mong Man Wai [2013] 4 HKC 179.

28.While I accept that the Executors’ attendance was necessary to represent the interests of Mr. A and should not be just a rubber-stamping exercise, they should not exceed their role and actively advocating for a position.

29.I accept that it is proper and necessary for the Executors to inform the Court and the Next Friend the Executors’ positions and to explore steps with the Next Friend to protect the interest of Mr. A. I also accept that it was proper for the Executors to file an affidavit in response to the Next Friend’s Summons.

30.In Mr. Kwong’s affidavit, the Court was informed of the Executor’s position, i.e. they accepted the documents were apparently relevant, and that their only concerns is the issue of protection of privacy and confidentiality of Mr. A.

31.It was submitted by the Executors that they took a neutral stance on whether the Settlement Order should be disclosed, and only proposed measures to protect the privacy and confidentiality of Mr. A’s private affairs.

32.Regarding the Settlement Order, the Executors invited the Court to make an order to grant leave subject to the imposed conditions, namely, the undertakings and conditions referred to in the Executors written submission at paragraph 5.4 which I had reproduced in my Ruling at paragraph 19.

33.In my Ruling, I found that the Executors’ proposal if granted would defeat the purpose of the Next Friend’s application. Therefore, my view is that the Executors by advocating such stance in effect resisted the Next Friend’s application and went beyond their role of exploring the measure of protecting the privacy and confidentiality of Mr. A after they rejected the counter-proposal of the Next Friend and proceeded with their argument at the hearing.

34.I therefore consider that the Executors should only be entitled to their costs up to 5^th October 2018, being the date of the Next Friend’s counter-proposal.

Order

35.Accordingly, I will make the following order:

(1) Costs of and occasioned by the Next Friend’s Summons be paid by the Next Friend to the Executors up to and inclusive of the date of 5^th October 2018 including all reserved costs to be taxed if not agreed;

(2) The Executors to pay the Next Friend’s costs of the Next Friend’s Summons from 6^th October 2018 thereafter (inclusive of that date) including all reserved costs to be taxed if not agreed, and

(3) There be certificate for 2 counsel for both sides.

55.Lastly, I thank all the counsels for their assistance.

Representation:

Leading Counsel Mr. Bernard Man SC and Mr. Keith Lam instructed by Clifford Chance for the Petitioner (Next Friend of the Petitioner)

Leading Counsel Mr. Paul Shieh SC and Ms. Julian Lam instructed by Reed Smith Richards Bulter for the Respondent (Executors)