Anthony Eric Ryan Hotung v. Hotung, Michael Eric a.B. and Others

HCA 1216/2006

[2022] HKCFI 1054

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1216 OF 2006

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DECISION ON COSTS

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1.There are 2 summonses to vary the costs order nisi I made on 9 March 2021:

(i)    the Plaintiff’s summons dated 23 March 2021 (“the Plaintiff’s Summons”) to vary the costs order nisi such that the 1^st Defendant do pay the Plaintiff’s costs up to 3 February 2017 and that the 1^st Defendant do pay to the Plaintiff his costs of and incidental to the Plaintiff’s Summons; and

(ii)   the 1^st Defendant’s summons dated 18 March 2021 (“the 1^st Defendant’s Summons”): (a) to vary the costs order nisi such that the 1^st Defendant’s costs after 3 February 2017 be paid by the Plaintiff on indemnity basis with interest on costs at a rate of not exceeding 10% above judgment rate; and (b) the sum of $1,010,000 paid by Ho into court on 20 January 2017 be released to the 1^st Defendant.

2.The background of this case has been set out in my judgment handed down on 9 March 2021 (“the Judgment”) and I do not want to repeat the same here.  For the purpose of this Decision on Costs, I would adopt the same abbreviations that I used in the Judgment.

3.In the Judgment, I held that the court only had to deal with the Failure to Inform Claim, the Dubious Payments Claim and the Undervalue Sale Claim as pleaded in the pleading.  The court did not have to deal with other unpleaded allegations.  Ultimately, I found that Ho was only liable for the Failure to Inform Claim.  But since Anthony (the Plaintiff) could not prove any damages, I only awarded nominal damage to him.  I also made a costs order nisi that the costs of the action be to the 1^st Defendant who is sued as the executor of the estate of Ho.

The Plaintiff’s Summons

4.I first deal with the Plaintiff’s Summons.  Anthony has filed his 8^th Affidavit (the draft of which was exhibited in the 2^nd Affidavit of Stephen John Peaker with the proper sworn affidavit filed on 20 May 2021) in support of the application.

5.In his affidavit, Anthony recounted the history of his litigations with his father Eric, in particular the Revocation Proceedings as mentioned in §14 of the Judgment.  After trial, Tang JA (as he then was) handed down the judgment on 4 March 2005 holding that Anthony was the one-third beneficiary of the 2 Trusts.  Before the issue of the present proceedings, Anthony made an offer to Eric on 30 May 2006 to settle their dispute in the sum of $12,500,000 (“the 2006 Offer”).  Anthony believed that such offer had been passed to Ho for consideration.  But instead of settling the case with him, Eric spent more than such sum on various proceedings against him.  Eric also paid for the costs of Ho in defending Anthony’s claim.  Despite the award of costs in his favour in the Revocation Proceedings, Eric was trying to obstruct him for recovering his costs.

6.Anthony complains that Ho’s conduct both prior to and after the judgment in the Revocation Proceedings was deliberately obstructive, as she wrongfully relied on the “en-bloc” argument to oppose his request for the transfer of the HEL and HICL shares to him on the basis that unanimous consent of his two brother and Eric was required.

7.Ho also lost in the proceedings issued by him in HCMP 2701/2005 for discovery of documents relating to the administration of the 2 Trusts.

8.In the early stage of this action, Ho sought to strike out Anthony’s claim.  Despite succeeding in the first instance court, the Court of Appeal handed down the judgment on 17 December 2010 refusing to strike out the claim on the ground that, inter alia, Ho had breached her duty as trustee in failing to inform him of his interest in the 2 Trusts when he attained majority in 1987.  Had Ho informed him of his interest, he would have severed his aliquot interests in the 2 Trusts and became registered shareholders of HEL and HICL.  Consequently, Ho would have retired as trustee and there would not have been necessary for him to incur so much costs in the litigations against her.  In the judgment of the Revocation Proceedings, Tang JA also observed that Ho had turned a blind eye to Eric’s wrongdoing in the mismanagement of the affairs of the 2 Trusts, HEL and HICL.

9.It seems from Anthony’s written submissions that he is relying on the following grounds to ask for costs up to the deemed date for the acceptance of the Sanctioned Payment:

(i)    Ho’s refusal to accept the 2006 Offer, in particular the sum of $12,500,000 could be paid by HEL and HICL and not by Ho personally;

(ii)   Ho’s refusal to transfer the shares back to Anthony despite the request made on 3 November 2007; and

(iii)  Ho’s unreasonable conducts in the various proceedings, including taking side with Eric in pursuing the Revocation Proceedings and running the “en-bloc” argument, causing a delay of 11 years before making an attempt to settle the case by way of making the sanctioned payment into court on 20 January 2017 (“the Sanctioned Payment”).

10.I cannot understand how these allegations can assist the Plaintiff’s Summons.  In my judgment, Anthony’s submissions have ignored what is the real cause for the prolongation of the litigations and the nature of the claims in this action.

11.It is clear from the evidence at the trial that it was the dispute between Anthony (and perhaps his siblings) and his father Eric which triggered the various litigations throughout the years.  It is common ground that Eric was a “control freak”, he was a “tyrant” to his family and children and his words were “commands” in the family.[1]  Under such circumstances, it would be too naïve to suggest that Ho could have settled the case with Anthony back in 2006 without the cooperation of Eric, which the parties were unlikely to get before the eventual settlement of the dispute between Eric and Anthony in 2009.  It is clear that there were huge differences between them by that time, and the court has reasons to believe the interactions between Eric and Anthony had substantial role to play regarding the conducts of the litigations throughout the years.  Without knowing the details of these interactions, it would be hard for the court to say that Ho should have done this or that at particular points in time.

12.It is also clear that the 2006 Offer was made to the solicitors acting for Eric and not Ho.  There is simply no basis to support Anthony’s speculation that such offer had been passed to Ho for consideration, in particular the evidence shows that Eric was a dominating person who would do things his own way.

13.For the alleged wrongful positions adopted by Ho in the Revocation Proceedings and HCMP 2701/2005, that had already been taken into account by the courts in deciding the issues of costs in those proceedings. The considerations for costs in this action are certainly different.

14.Anthony claims that, by the time of the making of the Sanctioned Payment, HICL was 99% controlled by Sean as a result of the allotment of shares on 4 November 2011 and HEL was already dissolved on 11 September 2014.  Hence, Anthony could not bring any proceedings when the Sanctioned Payment was made in January 2017, rendering any transfer of the shares nugatory.

15.However, the present action is not a claim about Ho’s refusal to transfer back the shares in HEL and HICL to Anthony in 2007. That was why the court had not carried out any investigation about the consequences of such refusal.  After the handing down of the judgment in the Revocation Proceedings, Anthony’s interest in the 2 Trusts had received judicial confirmation.   Hence, there were legal ways for Anthony to compel the transfer of shares.  Yet, he had done so.  Further, at around the time when Anthony discontinued the claim in this action against Eric in 2009, Ho made an application in HCMP 641/2009 to retire as trustee.  Chu J (as she then was) postponed Ho’s application until the determination of her possible liability for breach of duty as trustee under the 2 Trusts.  Eventually on 8 March 2012, Chung J made an order permitting Ho to retire.  Hence, Ho had no intention to hold on the shares of HEL and HICL after the settlement of the dispute between Eric and Anthony in 2009.

16.Anthony agreed for Sean to obtain his interest in HICL, and he had not taken any action to oppose the dissolution of HEL.  I therefore find it surprising that Anthony still blames Ho for the non-transference of the shares at least after 2009.

17.Further, it is clear from the pleadings that Anthony was not aiming for the transfer of shares in this action.   What he wanted was monetary compensation for the damages allegedly suffered by him as a result of the mismanagement of the affairs of HEL and HICL.

18.Anthony’s claim in this action consists mainly of the Dubious Payments Claim and the Undervalue Sale Claim.  Both of these claims relate to the alleged mismanagement of HEL and HICL back in 1997 to 1999.  Though it was adjudicated that Ho was in breach of her duty in failing to inform Anthony of his interest under the 2 Trusts, which is in line with some of the observations made by the other courts in earlier proceedings, this court found that the situation would have been the same even if Anthony was aware of his interest earlier.  After all, this is a claim for equitable compensation and damages, and the court would have had to assess the situation if Anthony was aware of his right earlier.  In the Judgment, I have fully provided the reasons as to why I say so.[2]

19.Anthony had also failed to establish that the transactions involved in the Dubious Payments Claim were improper or the quantum of the related losses[3], or that the Land was sold at undervalue[4]. As I have indicated in the Judgment, these were the main complaints of Anthony, and I wonder why he had not made proper preparation for these claims by adducing evidence to substantiate his allegations.

20.As Anthony has failed to get any substantial remedy for his claim, he should pay for the costs of the 1^st Defendant in defending the action.  Just like what Anthony had tried to do at the trial, he was introducing a lot of immaterial and unpleaded allegations with a view to muddle the real issues or to show that Ho was somewhat responsible for the saga.  Even in the reply submissions, Anthony complains for the first time that Ho was adopting different positions when she dealt with the settlement discussions with Sean and him in 2006.  This complaint has not been canvassed at the trial (such allegation was not even included in the Schedule of the Judgment which contains a lot of unpleaded allegations against Ho), and so it would be unfair for Anthony to rely on such new allegation now.

21.As I have mentioned above, one has to focus on the substance of Anthony’s claim.  Even if Ho might have adopted wrongful positions in the Revocation Proceedings or other actions such as HCMP 2701/2005, she had been penalized on costs in those proceedings.  In any event, those “wrongful positions” have nothing to with the substance of the claims in this action.

22.For these reasons, I refuse to vary the costs order nisi in the way as suggested in the Plaintiff’s Summons.

The 1^st Defendant’s Summons

23.The 1^st Defendant’s Summons is relatively straightforward, which is one based on Anthony’s refusal to accept the Sanctioned Payment paid by Ho into court on 20 January 2017.

24.In light of the nominal sum awarded to Anthony by the Judgment, he has clearly failed to obtain a judgment better than the Sanctioned Payment.  Under O 22 r 23(5) of the RHC, the court has to make the order prescribed by r 23(4) unless it considers it unjust to do, which puts the onus on Anthony to show that he has been acting reasonably in refusing to accept the Sanctioned Payment.

25.I agree with Mr Yin, counsel for the 1^st Defendant, that, on any view of the matter, the Sanctioned Payment was a generous offer from Ho to settle his claim.  Given that Anthony was not in a position to substantiate the extravagant sums he was demanding from Ho based on the scanty evidence adduced at the trial, it is impossible to see how Anthony could be said to have acted reasonably in refusing to accept the Sanctioned Payment such as to render it unjust to make the order now sought by the 1^st Defendant.  For this reason, I allow the 1^st Defendant’s Summons and vary the costs order nisi to the extent the 1^st Defendant’s costs after 3 February 2017 shall be paid by Anthony on an indemnity basis and there be interest on such costs at the rate of 5% above the judgment rate.

26.Since Anthony has not made any submission on the application for payment out, I also make an order for the release of the Sanctioned Payment to the 1^st Defendant.

27.Costs should follow the event and so the 1^st Defendant would get the costs of both summonses on indemnity basis.