李光遠 (Li Kwong Yuen)(As One of the Beneficiaries of the Estate of Li Yiu Lai, The Deceased) v. 李光達 (Li Kwong Tat) (As the Administrator of the Estate of Li Yiu Lai, The Deceased)

HCMP 2183/2018

[2021] HKCFI 1088

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 2183 OF 2018

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D E C I S I O N

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Introduction

1.The parties are brothers. Their father died intestate on 29 January 2016.  The Defendant is the administrator of their father’s estate.  The parties are the only beneficiaries to the estate.

2.The originating summons (filed by the Plaintiff in 2018 whilst acting in person) sought an order for revocation of the grant of letters of administration to the Defendant and to issue a new grant to the Plaintiff.  There was no other claim.

3.The court ordered pleadings to be filed.

4.The statement of claim (filed by the Plaintiff’s current solicitors in 2019) expanded the reliefs to ask additionally for an inventory and account of the estate as verified by affidavit, inspection of documents, delivery up of assets of the estate to the Plaintiff, and damages and/or equitable compensation as a result of the Defendant’s breach of duties, breach of trust and/or negligence.

5.The Defendant claimed that the Plaintiff had taken possession of personal assets from the premises rented by the father in his lifetime.  The Defendant counterclaimed for an inventory and account verified by an affidavit of the Plaintiff and delivery up of assets of the estate to the Defendant.

6.The Plaintiff had, by a Calderbank letter, offered to settle but no agreement was reached on costs.

7.The Plaintiff then took out the summons now before me under Order 22, rule 2 of the Rules of the High Court (“the Summons”) for (a) the Defendant do pay into Court a sum of HK$300,000 from the estate pending resolution of the question of costs; (b) the Defendant do reimburse the Plaintiff for the funeral expenses of the father; and (c) the Defendant do, within 7 days of the court order, effect distribution of the remaining assets of the estate in equal shares to the parties.

8.The Defendant contested the Summons on the ground that it was taken out under a wrong rule.  As there were costs of $470,000 to be paid out of the estate (including costs of the Summons), the Defendant contended that payment in of $300,000 was not sufficient.

9.Meanwhile, the Defendant has provided the estate’s accounts to the Plaintiff.  It was agreed that the sum of HK$1,700,095.25 represented the value of the estate in Hong Kong.

10.As of this hearing, the Plaintiff has been reimbursed for the funeral expenses.  The parties have confirmed that they would not pursue the claim or counterclaim.  Both parties agreed that I should deal with the question of costs of the whole action.  Once that is determined, the net residuary estate could be distributed to the parties in equal shares.

11.The Plaintiff’s stance on costs is as follows:

(1)     The Plaintiff should only be required to pay costs of the Defendant up to 17 April 2020 when the Plaintiff issued the Calderbank letter;

(2)     The Defendant should not have costs out of the estate because:

(a)     There was no application for a Beddoe order;

(b)     The Defendant has not provided accounts until 3 years since the request was first made; and

(c)     Costs of the litigation in PRC should not form part of the present costs order.

12.The Defendant’s stance is that the Plaintiff should bear costs of the action including the Summons on party-and-party basis and the rest of the Defendant’s costs should be borne out of the estate on trustee basis.

Should Plaintiff only be required to pay costs of the Defendant up to 17 April 2020

13.The Calderbank letter was issued on 17 April 2020.  In my view, it was a conditional offer to settle.  The conditions were: the Defendant’s preparation of an inventory and account of the estate within 21 days, provision of an affidavit within 28 days concerning properties and chattels of the father that had come into the hands of the Defendant and equal distribution of the estate thereafter.  The Plaintiff was prepared not to seek an order for removal of the Defendant as an administrator or to revoke the letters of administration.  The Plaintiff asked for costs of the action to be borne by the Defendant, to be taxed if not agreed.

14.On 6 July 2020, the Defendant did the final accounts of the estate, to which the Plaintiff agreed.

15.By a letter dated 3 August 2020, the Plaintiff did not even agree that the Defendant’s own legal fees be paid out of the estate.

16.As no agreement could be reached between the parties on costs, there could hardly be any timetable for distribution of the estate.  The Plaintiff took out the Summons.

17.I can see no reason why the Plaintiff should only bear costs up to 17 April 2020.

(1)     The Calderbank letter left the claim against the Defendant for breach of duties hanging over his head whilst he was to perform the conditions.  Even in the skeleton submission lodged before Master J. Wong at the call over hearing of the Summons on 17 December 2020, the Plaintiff still stated that the ‘issues to be tried’ included whether the Defendant had breached his duty as an administrator.

(2)     The terms imposed for settlement required the Defendant to prepare accounts and an affidavit.  The Defendant should be given costs, at least out of the estate.

(3)     Even if the Defendant should not be given costs out of the estate, there was no reason for the Defendant to pay costs to the Plaintiff as the Plaintiff had abandoned part of his claim.  That part of the claim did not appear to have prospect of success from the start.

18.As for the Summons, it relied on Order 22, rule 2 of RHC, which was entirely irrelevant.  The more pertinent rule was Order 85, rule 2, which empowered the court to make an order requiring the payment into court of money held by the Defendant in his capacity as administrator.  The Court would only order payment into court if it appeared that assets in the hands of the administrator were at risk and only if the assets could not be adequately safeguarded in any other way because of the additional expense and inconvenience it caused.  See Williams, Mortimer and Sunnucks, 21^st ed, §58-08.

19.It appeared to be the Plaintiff’s intention to ‘set aside’ a sum of HK$300,000 pending the Court’s determination on the costs of this action, whilst allowing the rest of the residuary estate to be distributed.  The Plaintiff has not suggested that assets in the hands of the Defendant were at risk.

20.Further, $300,000 to be set aside was insufficient as the sum represented costs claimed by the Defendant only up to November 2020.  In any event, without the costs of this action and this Summons determined, the net residuary estate could not be ascertained and final distribution could not effected.

21.The Summons had no merits and the Plaintiff ought to bear costs thereunder.

22.For the reasons given in paragraphs 17-21, I reject the Plaintiff’s argument that he should only bear costs up to the date of the Calderbank letter.

Should Defendant have costs out of the estate?

23.The Plaintiff has not suggested how a Beddoe order, if sought, would have produced a different result from what had actually happened or that the Defendant had acted unreasonably as an administrator in handling this litigation.

24.The estate accounts were provided within a year of the filing of the statement of claim with supporting documents.  There was no unreasonable delay which the Court should penalize.

25.The Defendant has made clear that the costs now claimed for the estate does not cover the litigation in Mainland China.

26.The Defendant has properly defended the present action as an administrator.  I do not see any basis for making him personally liable for costs.

Conclusion as to liability for costs

27.Given the above analyses, the Plaintiff ought to bear costs of this action, including the Summons on party-and-party basis.  The Defendant’s own costs should be borne out of the estate on trustee basis.

Quantum of costs

28.Mr Hui queried what the Defendant claimed to be the costs incurred by the estate:

(1)     As of April 2020, $160,000 (now adjusted to $180,515);

(2)     As of August 2020, $262,065;

(3)     As of November 2020, $320,000 (now adjusted to $285,965); and

(4)     As of 4 March 2021, $470,000.

29.Costs of $180,515 incurred by the Defendant up to the Calderbank letter was not unreasonable.  From then up to November 2020, the costs increased by $105,460 for preparation of estate accounts and to answer the Plaintiff’s queries.  For an uncomplicated set of accounts, I find such costs to be too high.  The costs statement for the Summons claims costs of $110,000. 

30.The Defendant withdrew his counterclaim.  Costs of the counterclaim should be to the Plaintiff.

31.Overall, I make an order that the Defendant’s costs on trustee basis should be $400,000 (to include the recent letter to the Court dated 13 April 2021), to be borne, in the first instance, out of the estate.  Of that sum, the Plaintiff is to bear costs on party-and-party basis of $200,000. 

Order

32.I order as follows:

(1)     Upon the parties’ withdrawal, the claim and counterclaim are dismissed;

(2)     The Summons is dismissed;

(3)     The Plaintiff shall bear costs of these proceedings, including those of the Summons on party-and-party basis, summarily assessed at $200,000; and

(4)     The Defendant’s own costs of these proceedings on trustee basis, summarily assessed in the amount of $400,000 shall be borne out of the estate.

33.I thank Mr To and Mr Hui for their assistance.

Mr Sammy Hui, instructed by Kelvin Cheung & Co, for the Plaintiff

Mr Ken To, instructed by H Y Leung & Co LLP, for the Defendant