Cheung Lai Mui, The Executrix of the Estate of Cheung Ping Kau and The Administratrix of the Estate of Cheung Ping Fuk (Alias Cheung Bing Fuk) v. Cheung Wai Shing and Others

FACV No. 1 of 2021

[2021] HKCFA 22

IN THE COURT OF FINAL APPEAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

FINAL APPEAL NO. 1 OF 2021 (CIVIL)

(ON APPEAL FROM CACV NO. 107 OF 2017)

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Before: Chief Justice Cheung, Mr Justice Ribeiro PJ, Mr Justice Fok PJ, Mr Justice Bokhary NPJ and Mr Justice Gummow NPJ

Date of Judgment: 13 July 2021

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JUDGMENT ON COSTS

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Mr Justice Ribeiro PJ:

1.This is the Court’s judgment on costs. 

2.Judgment in this appeal[1] was handed down on 27 May 2021.  Pursuant to the Court’s order, the parties have lodged submissions as to costs which are now dealt with on the papers.

3.Two disputes were involved in the appeal. 

(a)  The first concerned a claim and a counterclaim regarding “the Disputed Land”.[2] The claim was brought by the plaintiff/appellant (P) against the three defendants/respondents (D1 to D3) seeking, among other relief, an injunction against D3 and an order for sale of the Disputed Land under the Partition Ordinance.[3]  The counterclaim was lodged by D3 for a declaration and consequential relief on the basis that he is the sole beneficial owner of the Disputed Land and that P is a constructive trustee holding a 2/3 interest therein for him, his case in this Court resting principally on the doctrine of proprietary estoppel.

(b)  The second dispute involved a counterclaim brought by D1 and D2 against P in relation to “House 774”[4] for an account and payment of 1/3 of the rental income from the first and second floors thereof and of 1/3 of mesne profits (or occupation rent) in respect of the ground floor in which P resided.[5]  This counterclaim was brought on the basis that D1 and D2 together held an undivided 1/3 interest in House 774 as tenants in common with P who held an undivided 2/3 interest therein.

4.At first instance,[6] Wilson Chan J dismissed P’s claim regarding the Disputed Land and gave judgment in favour of D3 on his counterclaim for a declaration of beneficial ownership thereof and consequential relief.  His Lordship also held in favour of the counterclaim of D1 and D2 against P for rent regarding House 774. 

5.On appeal, the Court of Appeal[7] set aside the judgment of the trial Judge and remitted a number of issues in relation to each of the two disputes for determination by his Lordship.  On P’s application for leave to appeal to this Court,[8] the Court of Appeal observed that the questions sought to be raised were prima facie reasonably arguable but adjourned the leave application with liberty to the parties to restore it for hearing after determination of the remitted issues. 

6.The Appeal Committee[9] stayed the Court of Appeal’s remitter order and granted leave to appeal on two Questions of law formulated as follows:

Question 1

“Whether there can be proprietary estoppel arising from an oral promise relating to interest in land binding on the estate of the promisor in the absence of any or any reasonable detrimental reliance by the promisee prior to the death of the promisor; and in such case whether detrimental reliance of the promisee only after the death of the promisor can give rise to proprietary estoppel against the estate of the deceased promisor overriding the interest of the successors or beneficiaries to the estate?”

Question 2

“Whether a co-owner in sole occupation of land, in cases other than partition or ouster and in the absence of agreement, should be ordered to account to the other co-owners for occupation rent. Alternatively, whether the proposition of law in Re Pavlou (A Bankrupt) [1993] 1 WLR 1046 at 1050D that ‘a court of equity will order an inquiry and payment of occupation rent even if there is no ouster when it is necessary to do so to do equity between the parties’ should be confined to partition or analogous proceedings?”[10]

7.On appeal, this Court held in D3’s favour on the first dispute (reflected in Question 1), declaring P estopped from denying that D3 is beneficially entitled to the Disputed Land; ordering her to cause the undivided 2/3 share therein to be transferred to D3; and dismissing P’s claim against the three defendants.  On the second dispute (reflected in Question 2), the Court dismissed the claim for rent by D1 and D2 against P.  This judgment addresses the costs orders to be made consequential upon the Court’s aforesaid judgment.

8.Ms Audrey Eu SC[11] submits on P’s behalf that the following costs orders should be made, namely, that :

(a)  “P should be entitled to two-thirds of the costs of the appeal to this Court, save that P should have the costs of the applications to the CA and to the Appeal Committee for leave to appeal, to be taxed if not agreed, with certificate for two counsel [the first order];

(b)  P should be entitled to two-thirds of the costs in the CA, save that the CA’s order dated 3 July 2020 that ‘50% of the costs of the application for variation to the plaintiff’ do stand [the second order]; and

(c)  Ds should have two-thirds of the costs in the Court of First Instance to be taxed if not agreed [the third order].”

9.On behalf of the defendants, Mr William Wong SC[12] submits that the Court should order that in this Court and in the Courts below:

(a)  “P shall pay the entirety of the costs of D3; and

(b)  P shall pay 50% of the costs of D1/D2.”

Costs in relation to the first dispute

10.We begin with the first dispute.  The first order proposed by Ms Eu SC is startling given that P’s claim against all the defendants failed and D3’s counterclaim against her succeeded in this Court.  It is hard to see why P, who lost comprehensively, should be awarded 2/3 of the costs of the appeal in the CFA.  Ms Eu seeks to justify the proposed order by submitting that “as a matter of legal submissions,” this Court accepted P’s submissions and rejected those of the Respondents by holding that no proprietary estoppel would arise where sufficient detrimental reliance was not incurred before the promisor’s death, even though the Court went on to hold that such detrimental reliance had been duly established by D3.  In other words, the suggestion is that P should get 2/3 of the costs because of a doctrinally correct submission even though application of the principle resulted in judgment for D3.  That is an unheard of approach and must be rejected.

11.Ms Eu also submits that the entirety of the costs of the applications for leave to appeal to this Court made in the Court of Appeal and in the Appeal Committee should be awarded to P because a without prejudice letter had been sent to the defendants suggesting possible agreed terms on the grant of leave, including terms similar to those specified in the order for leave eventually made by the Appeal Committee.  That argument is rejected.  Leave is always in the Court’s discretion, and the Appeal Committee will determine for itself whether leave should be granted whatever the parties might have agreed.  This is particularly so in the present case where the outcome in the Court of Appeal was inconclusive.  It is therefore untenable to suggest that the leave hearing was “a huge wastage of time and costs” resulting from refusal of P’s without prejudice offer.

12.The Court’s practice is generally to treat the costs of the leave application as part of the costs of the substantive appeal.  There is no reason to depart from that practice.  Having lost, P should bear the costs of the appeal and the leave applications in respect of the first dispute.  The “issue-based or time-divided approach to costs” may be suitable for first instance cases like Lui Ming Lok v Ng Im Fong Loretta,[13] but is inapplicable in the present context.

13.So far as the costs in the Courts below are concerned, P lost at first instance and, while the Court of Appeal set aside the trial Judge’s order, its outcome was inconclusive and was subject to a remitter which this Court in turn set aside. Those costs should simply follow the event in the light of the outcome of the appeal in this Court.  We do not accept the orders proposed by Ms Eu as her second and third orders.

Costs in relation to the second dispute

14.The outcome on the second dispute is straightforward.  The claims of D1 and D2 were dismissed. 

15.Mr Wong SC seeks to argue that because D1 and D2 were on the winning side in the first dispute which occupied much more time, those costs should not only be set off against P’s entitlement to costs on the second dispute but should result in D1 and D2 being awarded 50% of their costs thereon.  We do not accept that argument.  P had to join D1 and D2 formally as parties since they were the registered owners of an interest in the Disputed Land and had to be bound by the Court’s judgment. However, in substance, the litigation on the first dispute was between P and D3 and any costs incurred separately for D1 and D2 will have been minimal.  Resolution of the first dispute resulted in D3 resisting the claim for an injunction requiring demolition of structures on the site, establishing a proprietary estoppel against P and obtaining an order that P transfer the undivided 2/3 share in the Disputed Land to him.  D1 and D2 did not seek and did not obtain any relief.  Theirs was merely a defensive posture in support of D3’s claim.  There is thus no substantive basis for any setoff, let alone an order in favour of D1 and D2 on the second dispute.  The costs should simply follow the event of the appeal in this Court.

Disposition

16.We accordingly make the following orders, namely, that:

(a)  P should pay all the costs of D3 and, insofar as applicable, the costs of D1 and D2, here and below in respect of the first dispute.

(b)  D1 and D2 should pay all of P’s costs here and below in respect of the second dispute.

(c)  All such costs should be certified fit for two counsel.

Written Submissions by Ms Audrey Eu, SC, Mr Anson Wong Yu Yat and Mr Jason Kung, instructed by Chan & Chan, for the Plaintiff (Appellant)

Written Submissions by Mr William Wong, SC, Mr Alan Kwong and Ms Stephanie Wong, instructed by Tung, Ng, Tse & Lam, for the 1^st to 3^rd Defendants (Respondents)