Wong Chong Kwai Yin By Her Next Friend Wong Joanna Ying Mei v. Tsang Hau Ling, The Executrix of Tang Lan Fong, The Deceased and Others

HCA 939/2005

[2022] HKCFI 1367

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 939 OF 2005

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BETWEEN

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Before:  Deputy High Court Judge Douglas Lam SC in Chambers

Dates of Hearing:  22-23 February & 2 March 2021

Date of Decision:  13 May 2022

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DECISION ON COSTS

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I.  Introduction and Background

1.By a judgment dated 9 June 2020, after an 8-day trial of the action, I found in favour of the Plaintiff against the 1^st Defendant and made various orders and declarations as between them (see [2020] HKCFI 1153)  (the “Judgment”). This Decision should be read together with the Judgment, and for convenience, unless otherwise stated, I adopt the abbreviations used in the Judgment in the remainder of this Decision.

2.As to costs, I held on a nisi basis at paragraph 102(1)  of the Judgment that:

“As between Madam Wong and TLF’s estate, as Madam Wong has not been wholly successful in her claims, an appropriate costs order would be that Madam Wong have 85% of her costs, to be taxed on a party and party basis, if not agreed, with certificate for two counsel.”

3.By a Summons dated 22 June 2020 (the “Summons”), Madam Wong applied to vary the costs order nisi as follows:

(1)  Sky Trinity be joined as a party to these proceedings for the purposes of costs only (paragraph 1).

(2)  Madam Yu be joined as a party to these proceedings for the purposes of costs only (paragraph 2).

(3)  The Costs Order nisi be varied and replaced in the following manner:

(a)  The 1^st Defendant and/or Tsang Hau Ling personally do pay Madam Wong 85% of her costs of this action, to be taxed on a party and party basis, if not agreed, with certificate for two counsel.

(paragraph 3.1)

(b)  Sky Trinity be jointly and severally liable for:

(i)  The costs which Madam Tsang in her capacity as the executrix of TLF’s estate and/or personally is liable to pay Madam Wong.

(ii)  Alternatively, such percentage of the costs which Madam Tsang in her capacity as the executrix of TLF’s estate and/or personally is liable to pay Madam Wong as the Court thinks fit.

(paragraph 3.2)

(c)  Madam Yu be jointly and severally for:

(i)  The costs which Madam Tsang in her capacity as the executrix of TLF’s estate and/or personally is liable to pay Madam Wong.

(ii)  Alternatively, such percentage of the costs which Madam Tsang in her capacity as the executrix of TLF’s estate and/or personally is liable to pay Madam Wong as the Court thinks fit.

(paragraph 3.3)

4.Mr Andrew Mak[1], counsel for Madam Wong, had earlier invited the Court in his closing submissions at the trial to make the third-party costs orders now sought in the Summons against Sky Trinity and Madam Yu. At paragraph 103 of the Judgment, I indicated that it was for Madam Wong, having regard to my findings and reasons in the Judgment, to make such applications as she thought appropriate under RHC Order 62 r.6A.

5.At the first adjourned hearing of the Summons on 5 August 2020, in respect of paragraphs 1 and 2 of the Summons, I applied the two-stage process contemplated in RHC Order 62 r.6A and made an order in terms of the paragraphs, having been satisfied that the joinder application was not a plain or obvious abuse of process (see e.g. Sun Focus Investment Ltd v Tang Shing Bor & Anor (No 2)  [2013] 2 HKC 54 at §§12, 19). I was also of the view that this was also not a straightforward application where I would have been able to determine the substantive applications against Sky Trinity and Madam Yu in a rolled-up hearing with the joinder applications (see e.g. my decision in Chu Po Ling v Chung Chun Shing & Anor (unreported)  DCCJ 32/2012, 24 November 2014). I therefore gave directions to Sky Trinity and Madam Yu for the filing of evidence in response to paragraphs 3.2 and 3.3 of the Summons. I also directed on 18 August 2020 that deponents to any affidavits or affirmations filed in respect of paragraphs 3.2 and 3.3 of the Summons should attend the Court for cross-examination, failing which their evidence could not be relied upon.

Paragraph 3.1 of the Summons

6.As to paragraph 3.1 of the Summons, on 18 August 2020, I heard submissions from Mr Albert Chan, counsel for Madam Wong, and Madam Tsang (acting in person).

7.As submitted by Mr Chan, in hostile litigation with outsiders (as in the present case), the starting point is that the representative of an estate is personally liable for costs, whether he or she acts as claimant or defendant. As explained by the authors of Williams Mortimer Sunnucks on Executors, Administrators and Probate (21^st Ed)  at §63-01:

“In hostile litigation with outsiders, whether brought by the representative as claimant or brought against him as defendant, the representative will be in the position of any other litigant. The costs will be in the discretion of the court but the general rule is that the unsuccessful party will be ordered to pay the costs of the successful party. The representative will be personally liable to the other party for any costs order made against him, and his liability will not be limited to the assets of the estate even if his liability on the rest of the judgment debt is limited to the assets. The judge making such a costs order will not be concerned as to whether the representative will be entitled to be indemnified against that order out of the estate...” (emphasis added)

8.Further, in Lewin on Trusts (20^th Ed)  at §48-091:-

“In general, the position is this. A trustee who actively defends proceedings against the trust or the trust property, even if there are reasonable prospects of success, is seriously at personal risk as to costs if his defence is unsuccessful, and cannot count on any right of indemnity which entitles him to defend. Unless arrangements are made which sensibly enable the trustee to take a neutral role in the proceedings, or the trustee is able to meet his costs without recourse to the property claimed in the proceedings, the best available course is for the trustee to make a Beddoe application.” (emphasis added)

9.Mr Chan submits that in the present case, Madam Tsang actively defended Madam Wong’s claim against the said Lots:

(1)  As I had noted in paragraph 39 of the Judgment, after Madam Tsang’s substitution as the 1^st defendant, on 24 August 2016, she amended and “deleted in its entirety” TLF’s Original Defence (which was filed in September 2005)  and advanced a new case against Madam Wong which I described as “a substantial and irreconcilable shift”.

(2)  Madam Tsang also made clear in her affirmation dated 17 March 2016 that, “I shall vigorously challenge the Plaintiff’s claim and allegations without hesitation, should a trial be inevitable in the end.”

10.On the principles above, I accept as a starting point that the proper person liable for 85% of Madam Wong’s costs should be Madam Tsang personally. It is unclear whether Madam Tsang (who was legally advised and represented at the time)  obtained an indemnity from the beneficiaries of TLF’s estate or a Beddoe order from the Court for the costs of this action, either prior to or after she obtained an order from the Court on 5 June 2015 to carry on these proceedings on behalf of the estate (the “Carry On Order”). In any event, these are matters between her and estate’s beneficiaries and not something which I need to be concerned here.

11.In the course of the hearing, I raised with Mr Chan whether it was an immutable rule that, in a case where the action was commenced during the lifetime of the deceased, a personal representative becomes personally liable for the costs of the entire action from inception once he or she decides to adopt the prosecution or defence of an action, or that the Court has a discretion to apportion costs, say, from a particular point in time such as from the time of adoption, leaving the earlier costs to be merely a liability of the estate.

12.Mr Chan’s primary stance was that Madam Tsang should be personally liable for the costs of the entire action. Alternatively, as a fall-back, Mr Chan submits that Madam Tsang should be personally liable for all costs incurred from the dated of the Carry On Order, whilst TLF’s estate should be liable for all costs before that date.

13.As to a personal representative’s liability for costs prior to his or her involvement in any proceedings, the authors of Williams Mortimer Sunnucks (supra)  explained at §59-10:

“An executor who has obtained an order to continue an action, even after judgment, becomes liable for costs from the start (ab initio)  in the same manner as if he had commenced the action, though without prejudice to his having an indemnity out of the estate.” (emphasis added)

citing inter alia Boynton v Boynton (1879)  4 App Cas 733

14.In Boynton, Lady Boynton commenced proceedings to set aside a deed of appointment which disposed of two of her properties in favour of one of her sons, George, on the ground of George’s undue influence. She succeeded at first instance, with the court declaring that George should pay the costs of all parties. Shortly thereafter, Lady Boynton passed away. She had, however, appointed her other son, Charles as the executor of her will, and which Charles proved. George then served a notice of appeal on Charles, as Lady Boynton’s legal representative, and Charles then obtained an order authorising him to continue the suit (in the manner as Lady Boynton might have had she not died)  as the respondent to George’s appeal.

15.The English Court of Appeal reversed the decision at first instance, dismissed the suit and unanimously ordered that Charles personally pay both the costs of the suit and the appeal.

16.James LJ (with Brett and Cotton LJJ concurring)  held in the Court of Appeal’s judgment on costs at 251-252:

“It seems to me that the general principle is this, that if a party to a litigation dies at any stage of it, his legal representative must then consider whether he will or will not adopt the litigation. It does not signify in what stage the litigation is – whether the death takes place before the original hearing or before the rehearing in the Court of Appeal: it is for him to say whether he will or will not further prosecute the matter. If he elects to go on, it is impossible to draw a distinction as to the stage at which the suit has arrived when he elects so to continue it. If he elects to continue it, he must pay the costs like any other litigant, without prejudice to any right which he may have to get his costs out of the estate which he represents... He adopted the suit, in my opinion, as completely as a legal personal representative could do. He has adopted with it all the consequences and must pay the costs.” (emphasis added)

17.The decision of the Court of Appeal both as to the appeal and the issue of costs was upheld by the House of Lords at 735-736:

In this state of things Charles Boynton obtained the order of the 19^th November, 1877, analogous to the old order to revive, and he was thereby ordered, as legal personal representative of Lady Boynton, to be at liberty to carry on and prosecute the suit against the other Defendants in like manner as Lady Boynton might have done if she had not died. This order virtually made him the Plaintiff, and in the title to the order of the Court of Appeal dated the 19h of June, 1878, he was ordered to be at liberty to carry on the suit as the Plaintiff might have done. He thus adopted the suit and adopted it ab initio. Had he been successful on the appeal he would have retained the cancelled deed, and received the costs ordered to be paid to Lady Boynton, together with the costs of the appeal, and as he has failed, he must, according to the well-settled practice of the Court, submit to an order for payment of the costs personally.” (emphasis added)

18.With respect, it is not immediately obvious from the brief reasons of the English Court of Appeal and the House of Lords why, even if a personal representative adopts a suit ab initio, it must follow that he should be necessarily be personally liable for the costs of the action ab initio. It seems to me that there is at least an argument that had the suit not been adopted by the personal representative, the deceased’s case (whether it was a claim or defence)  would likely have failed by default, leaving the opposing party to enforce any costs orders against the estate in the usual manner. The mere fact that a personal representative decided to carry on the action should not necessarily result in a windfall for the opposing party, particularly in a case where the deceased (and thus his or her estate)  was impecunious.

19.Boynton should of course be accorded with the greatest respect, but it is, after all, a 19^th century decision, where the courts then were generally less flexible in the exercise of their discretion as to costs. For instance, the apportionment of costs by issue is a relatively recent practice following Lord Woolf’s Reforms in England towards the end of the last century (see e.g. AEI Rediffusion Music Ltd v Phonographic Performance Ltd [1999] 1 WLR 1507). It seems to me that the modern approach of the Court as to costs, especially after the Civil Justice Reform in Hong Kong, is to abhor any absolute rule or straitjacket on the Court’s exercise of discretion. The Court is entitled to take into account a wide range of circumstances, including the conduct of the parties, to achieve a just and fair result.

20.Further, I note that the Supreme Court in the United Kingdom has more recently taken a similar view on an analogous rule in Gabriel v BPE Solicitors and Anor [2015] AC 1663. The context of that decision was that of a trustee in bankruptcy adopting proceedings previously conducted by the bankrupt, and hence, the statutory background and considerations necessarily differ to some extent. Nonetheless, Lord Sumption’s observations at §15 are illuminating:

“Where an action in progress at the time of the trustee’s appointment is adopted by the trustee, one issue now open for reconsideration is whether there is any reason in principle why the trustee should necessarily be required, simply by virtue of his adoption of the action, to pay the other side’s cost of legal proceedings including those incurred at a time when he was not a party and the action was being conducted by the bankrupt for his own account...I think there can no longer be any absolute rule to that effect. The most that can be said is that it may be appropriate as a matter of discretion to make such an order... Equally, it will be for the court, in the exercise of its discretion to decide whether a non-party order should be made against the bankrupt himself in respect of some part of the costs incurred while he was conducting the litigation before bankruptcy supervened...”

21.Although the above passage was strictly obiter, I respectfully agree with it. I do not see why the hands of the court should be tied in cases such as the present. Mr Chan has not been able to find any reported decision in Hong Kong binding upon me applying the principle in Boynton. In the circumstances, it is open to exercise my discretion without the strict constraints laid down by that principle.

22.That said, given the longstanding history of the principle, it should nonetheless serve as a starting point for the Court’s consideration, and the burden would be on the party seeking to depart from it to justify such a departure. In the absence of legal representation on the part of Madam Tsang, I do not think it right to venture to lay down any definitive guide as to specific factors to be considered by the Court in the exercise of its discretion in such circumstances. I would merely note that the Court has a wide discretion in this regard and each case must turn on its own specific facts.

23.In the present case, however, I do not find any matters to warrant a departure from Boynton.  It appears that Madam Tsang was legally advised when she adopted this action by way of the Carry On Order (see below), or at least shortly thereafter. She would (or at least should have been)  advised as to her potential personal liability for the costs both before and after the Carry On Order, and she should have obtained the necessary indemnities from TLF’s estate and its beneficiaries, or an order from the Court. Of course, any costs order against her personally in this action is without prejudice to her seeking an indemnity out of the estate if she has not done so already.

24.For the reasons above, as to paragraph 3.1 of the Summons, I make an order that Madam Tsang do pay Madam Wong 85% of her costs of this action (without prejudice to her having an indemnity out of TLF’s estate), to be taxed on a party and party basis, if not agreed, with certificate for two counsel.

Paragraphs 3.2 and 3.3 of the Summons

25.As mentioned above, Madam Wong seeks orders that Sky Trinity and Madam Yu be jointly and severally liable for the costs which Madam Tsang is liable to pay Madam Wong. The substantive hearing of these paragraphs of the Summons took place on 22 and 23 February and 2 March 2021. I should mention that in relation to these paragraphs, Madam Tsang elected not to participate as the orders sought by Madam Wong were directed primarily against Sky Trinity and Madam Yu.

26.Madam Yu, on the other hand, appeared as a litigant in person and strongly opposed paragraph 3.3 of the Summons. She was also cross-examined on her evidence by Mr Mak. Joanna also attended the hearing and gave evidence on behalf of Madam Wong, although Madam Yu opted not to cross-examine her.

27.As for Sky Trinity:

(1)  Although Madam Yu was a director and shareholder of Sky Trinity, no leave was obtained by her to represent Sky Trinity as a director pursuant to RHC Order 5 r.6(2)(b). Sky Trinity also did not file any evidence in opposition to paragraph 3.2 of the Summons.

(2)  The Court did, however, receive a letter from one William Pun Nai Kwong (“Mr Pun”)  dated 16 July 2020. In that letter, Mr Pun, who is also a director of Sky Trinity, made it clear that he had not been authorised by Sky Trinity’s board of directors to represent the company in this matter. He explained that he had a financial dispute with two other directors and shareholders of Sky Trinity, namely, one Lo Chi Chuen (“Mr Lo”)  and one Cheung Shing Tai (“Mr ST Cheung”). He also enclosed an earlier letter dated 22 June 2020 he had sent to Madam Wong’s solicitors stating that he had no personal knowledge of this action and its subject matter and that he had no knowledge that Sky Trinity had authorised Madam Yu’s involvement at the trial.

(3)  I shall therefore treat Sky Trinity as opting not to oppose paragraphs 3.2 and 3.3 of the Summons. That said, Madam Wong still has the burden of satisfying me that an order should be made against it.

Background

28.It may be helpful to begin by recapping briefly how Sky Trinity and Madam Yu came to feature in this action:

(1)  It is not in serious dispute Madam Yu has been acquainted with Madam Tsang and TLF for many years, and in around 1992, Madam Yu became TLF’s goddaughter.

(2)  Sky Trinity was incorporated in Hong Kong on 18 March 2013. Madam Yu became a director of Sky Trinity on 30 April 2014 and shortly thereafter became a 20% shareholder of Sky Trinity (at least up to 18 March 2020, being the latest annual return in the evidence).

(3)  The other directors and shareholders of Sky Trinity are (again, up to at least 18 March 2020): Mr Pun, who has been a director since 31 October 2013 and is a 30% shareholder; Mr Lo, who has been a director since 30 April 2014 and is also a 30% shareholder; and Mr ST Cheung, who has been a director since 30 April 2014 and is a 20% shareholder.

(4)  On 5 May 2014, Madam Tsang as executrix of TLF’s estate assigned the estate’s possessory interest in the said Lots under the 1999 Judgment to Sky Trinity for a consideration of HK$2,000,000 (the “2014 Assignment”). The parties do not appear to have entered into a written sale and purchase agreement prior to the assignment.

29.Another entity that featured briefly in the Judgment (see §52 of the Judgment)  and more prominently in this application is San Tong Lee, a company closely connected to Madam Yu:

(1)  Madam Yu was a majority shareholder of San Tong Lee until she transferred her shareholding to her daughter, Song Kai Lan Olivia, and a British Virgin Islands company known as Elite Aspect Holdings Limited, in 2011.

(2)  Madam Yu was also a director since San Tong Lee’s incorporation in Hong Kong on 30 November 2009 until she was replaced by Elite Aspect Holdings Limited in 2011. She was re-appointed a director on 25 May 2020.

(3)  Pursuant to a sale and purchase agreement dated 3 July 2010 (the “STL SPA”), San Tong Lee purchased from Madam Tsang as executrix for TLF’s estate 16 lots for a total consideration of HK$7,000,000 (the “STL Lots”). Possessory title to the STL Lots had, similar to the said Lots, been obtained by TLF by the 1999 Judgment. Madam Tsang assigned the STL Lots to San Tong Lee pursuant to an assignment dated 4 January 2011 (the “STL Assignment”).

(4)  In Clause 22 of the STL SPA, San Tong Lee acknowledged Madam Tsang’s disclosure that the STL Lots were occupied by a third party. San Tong Lee agreed to assume all liability to recover possession of the same, and Madam Tsang agreed to assist San Tong Lee “at the sole costs and expenses of [STL] to recover possession of the [STL Lots]”. On 22 June 2012, San Tong Lee commenced HCA 1081/2012 to recover possession of the STL Lots (the “STL Action”). As far as the Court is aware, there is no reported judgment on the outcome of that action.

30.It will be recalled from the Judgment that up to a few days before the first day of trial, Madam Tsang was legally represented in this action by Messrs Ong & Chung (“O&C”):

(1)  Prior to her death, TLF defended the present action as a litigant in person. After she passed away on 23 November 2006, Madam Tsang was granted probate and appointed as executrix of TLF’s estate on 20 August 2007. She did not, however, take any steps in this action until the Carry On Order on 5 June 2015.

(2)  On 21 September 2015, Madam Tsang formally instructed O&C to act for her in this action, although she appears to have consulted them informally since November 2014.

(3)  There is no dispute that it was Madam Yu who had introduced O&C to Madam Tsang. O&C has had a longstanding relationship with Madam Yu and her associated companies, including, inter alia, acting for San Tong Lee in the STL SPA and the STL Assignment, representing Sang Tong Lee in the STL Action, acting for Sky Trinity in relation to the 2014 Assignment and handling various company secretarial and financial management matters for Sky Trinity and its shareholders.  

Applicable Principles

31.Pursuant to Section 52A(2)  of the High Court Ordinance (Cap 4)  and RHC Order 62 r.6A, the Court has the jurisdiction to award costs against persons who are not parties to the proceedings if it is in the interests of justice to do so. See e.g. Hong Kong Civil Procedure 2022 at §§62/6A/5-6.

32.Significantly, the courts have emphasised that an application for an order under this rule is a summary procedure and is therefore appropriate only in plain and straightforward cases (see e.g. Sun Focus (supra) at §11).

33.In Leung Chung Ching Edwin & Anor v The Estate of Leung On Mei Amy, Deceased [2019] 1 HKLRD 109, the Court of Appeal (following Dymocks Franchise Systems (NSW)  Pty Ltd v. Todd & Ors [2004] 1 WLR 2807)  summarised at §74 the principles for making third party costs orders under this rule:

“(1)  Non-party costs orders are exceptional in the sense that they are outside the ordinary run of cases where parties pursue or defend claims for their own benefit and at their own expense. The ultimate question is whether in all the circumstances it is just to make the order, and it must be recognised that this is inevitably to some extent a fact-specific jurisdiction and there will often be a number of different consideration in play.

(2)  Generally speaking, the discretion will not be exercised against pure funders, meaning those with no personal interest in the litigation, who do not stand to benefit from it, are not funding it as a matter of business and in no way seek to control its course.

(3)  Where the non-party not only funds the proceedings but substantially also controls or at any rate is to benefit from them, justice will ordinarily require that, if the proceedings fail, he will pay the successful party’s costs.

(4)   Generally speaking, where a non-party promotes and funds proceedings by an insolvent company solely or substantially for his own financial benefit, he should be liable for the costs if his claim or defence or appeal fails. This is not to say that orders will invariably be made in such cases, particularly where the non-party is himself a director or liquidator who can realistically be regarded as acting rather in the interests of the company (and more especially its shareholders and creditors)  than in his own interests.”

Discussion

34.In respect of funding, Madam Wong’s case is that Madam Tsang’s costs of instructing O&C to represent her in this action up to the trial must have been funded in whole or in part by Sky Trinity and/or Madam Yu.

35.This was firmly denied by Madam Yu. Madam Yu contended, rather, that Madam Tsang would have been able to utilise the HK$2,000,000 in sale proceeds of the said Lots to instruct O&C to defend the action. This sum of HK$2,000,000 was of course money belonging to Madam Tsang and TLF’s estate even if it had originated from Sky Trinity. If Madam Yu is correct, then it cannot be said that Madam Tsang’s defence was “funded” in the true sense by Sky Trinity (or Madam Yu). Madam Wong therefore needs to show that O&C’s costs were somehow financed by Sky Trinity and/or Madam Yu above and beyond the HK$2,000,000.

36.Mr Mak seeks to cast doubt upon Madam Yu’s assertion that the source of funding was from the sale proceeds of the said Lots. In particular, he submitted that, inter alia:

(1)  It was inherently improbable that Madam Tsang would be motivated to use the purchase money received from Sky Trinity for the said Lots to pay for legal fees to litigate this action, which concerned rights in relation to the said Lots that she had already assigned to Sky Trinity on 5 May 2014. From that point onwards, Madam Tsang no longer had any interest in the said Lots, and the outcome of this action had no bearing on her position.

(2)  On the other hand, Sky Trinity and Madam Yu had a “direct personal financial interest” in the outcome of the action. Indeed, Madam Yu accepted that Sky Trinity purchased the said Lots from Madam Tsang with knowledge of this action and the underlying dispute with Madam Wong.

(3)  As evidenced by Clause 22 of the STL SPA, Madam Tsang was unwilling to be liable for any costs and expenses in relation to the recovery of possession of the STL Lots she had sold to San Tong Lee. Although no sale and purchase agreement appears to have been entered into between Madam Tsang and Sky Trinity for the said Lots, there was no reason why Madam Tsang would have treated the said Lots any differently from the STL Lots.

(4)  As Madam Tsang had received HK$7,000,000 from San Tong Lee following the STL 2011 Assignment, she would have had sufficient funds to consult or engage solicitors to represent her in this action by that time. However, she did not do so and only started consulting O&C nearly 4 years later in November 2014, 6 months after she assigned the said Lots to Sky Trinity on 5 May 2014.

37.Mr Mak therefore invited the Court to infer on a balance of probabilities that O&C’s costs must have been funded by Sky Trinity and/or Madam Yu.

38.Further, Mr Mak relied upon, inter alia, the following matters to contend that Madam Yu and/or Sky Trinity must have exerted significant control over Madam Tsang’s defence of the action:

(1)  As I had explained in §39 of the Judgment, there was “a substantial and irreconcilable shift in the case advanced in TLF’s Original Defence and [that] now advanced by Madam Tsang”. Mr Mak notes that the new case advanced by Madam Tsang in this action was in numerous respects similar to that advanced by San Tong Lee in the STL Action, including in particular the contention that TLF had leased the said Lots to Cheung Hei. The statement of truth in San Tong Lee’s pleadings in the STL Action was signed by Madam Yu.

(2)  As mentioned above, Madam Tsang did not take any steps in this action for a number of years after she was granted probate for TLF’s estate in August 2007. She only obtained the Carry On Order on 5 June 2015, about a year after the 2014 Assignment.

(3)  Madam Tsang’s decision to instruct O&C, with its longstanding connection to Madam Yu and Sky Trinity, to represent her in the action was curious, given TLF and Madam Tsang’s relationship with Messrs Wong Hui (“WH”), another firm of solicitors. WH assisted and represented TLF to obtain the 1999 Judgment, and a solicitor from WH interpreted the contents of the STL SPA and the STL Assignment to Madam Tsang and witnessed her signature.

(4)  The decision to engage Mr Leung as her expert witness at the trial (see §59 of the Judgment)  also suggests possible influence or control by Madam Yu. Mr Leung was previously acquainted with Madam Yu as she had engaged him to prepare a surveyor’s report in respect of the said Lots prior to Sky Trinity’s purchase of the same in 2014.

(5)  Madam Yu was present at the mediation session of this action, and she admitted to liaising with O&C’s paralegal in relation to the mediation. Further, it was Madam Yu that collected the Judgment from the Court. She also admitted to consulting legal advisers and various other individuals on the meaning and effect of the Judgment.

(6)  Finally, Madam Yu’s conduct during the trial of the action, which I had noted in §96(4)  of the Judgment, including repeated attempts to give instructions to Madam Tsang on lines of questioning whilst Madam Tsang was conducting her cross-examination, interrupting witnesses when they were giving evidence and attempting to volunteer answers for Madam Tsang during her cross-examination, suggested control by Madam Yu.

39.Despite Mr Mak’s persuasive submissions, I am not satisfied that this is a sufficiently plain and straightforward case to make the orders he seeks in the context of the summary procedure in RHC Order 62 r.6A.

40.First of all, there is no direct evidence before the Court that O&C’s costs were paid by Sky Trinity or Madam Yu. Similarly, there is no direct evidence that Madam Wong or anyone else at Sky Trinity gave any or any significant directions to O&C on the conduct of Madam Tsang’s defence in the action. As I pointed out to Mr Mak in the course of his submissions, such evidence must, presumably, be available from O&C. However, no attempt has been made by Madam Wong to obtain such evidence, whether from Madam Tsang or by way of third-party discovery against O&C.

41.Whilst I accept that Sky Trinity (and indirectly, Madam Yu)  had a financial interest in the outcome of the action after the 2014 Assignment, it is far from plain and straightforward that Sky Trinity and/or Madam Yu must therefore have funded the defence of the action:

(1)  In contrast to the position in respect of the STL SPA, there is no evidence of any agreement between Sky Trinity and Madam Tsang that Sky Trinity would assume the costs of recovering possession of the said Lots from Madam Wong. The situation between the STL Lots and the said Lots was different in that there was already ongoing litigation in respect of the latter.

(2)  It is at least possible that Madam Tsang’s continued defence of the action may have been reflected in the HK$2,000,000 purchase price. After all, Madam Tsang’s interest in the said Lots would have been completely worthless in the event that her defence to the action failed, which it did.

(3)  Moreover, Madam Wong does not seriously challenge the fact that Madam Yu had a close personal relationship with TLF and Madam Tsang, and therefore, Madam Tsang may have had personal reasons to ensure that she had passed a good possessory title to Sky Trinity. Although I ultimately rejected Madam Tsang’s defence in the action, my impression of her evidence was that she held a genuine belief (even if misguided)  that the said Lots properly belonged to TLF and her family.

42.As to control by Sky Trinity or Madam Yu of Madam Tsang’s conduct of the action, again, I am not prepared to draw the inferences sought by Mr Mak in these summary proceedings:

(1)  The fact that Madam Tsang’s defence in this action bears similarities to San Tong Lee’s case in the STL Action does not necessarily mean that Madam Yu was the one who was exercising control in both actions. Rather, San Tong Lee’s stance in the STL Action may have been based on the knowledge and understanding of Madam Tsang.

(2)  Madam Tsang’s choice of O&C as solicitors in this action also does not mean that Madam Yu or Sky Trinity exerted control of the action through O&C. There may have been a number of reasons why Madam Tsang engaged O&C rather than WH to represent her in this action. This is especially so given that WH was responsible for obtaining the 1999 Judgment for TLF, which was one of the issues in dispute. Indeed, one can foresee potential conflicts of interest on the part of WH in acting for Madam Tsang in this action.

(3)  Given Madam Yu’s close relationship with TLF and Madam Tsang, it would not have been unusual or surprising for Madam Tsang to engage a firm of solicitors with which Madam Yu was familiar.

(4)  Similarly, Madam Tsang’s decision to choose Mr Leung as her expert witness does not necessarily point to Madam Yu or Sky Trinity having control of the action. Given that Mr Leung already had some familiarity with the said Lots due to his preparation of a survey report for Sky Trinity, it would not have been unreasonable for Madam Tsang to engage him.

(5)  Finally, Madam Yu’s interest in the Judgment is understandable given Sky Trinity’s interest in the outcome of this action. However, it does not follow that either she or Sky Trinity exerted any control over its conduct.

43.I do not doubt that Madam Yu provided assistance to Madam Tsang in this action, including during the mediation process and at the trial, or that such assistance was rendered not only because of their personal relationship but also that Madam Yu, through Sky Trinity, had a personal financial interest in its outcome. However, providing assistance is not the same as exerting control. As mentioned above, there is no evidence before the Court of actual control or funding by Madam Yu or Sky Trinity.

44.Whilst Madam Yu had undoubtedly overstepped her role as Madam Tsang’s McKenzie friend at the trial, I do not believe that her conduct, whether by itself or taken together with the other circumstantial evidence relied upon by Mr Mak, is sufficient to evidence any or any sufficient control by Madam Yu (or Sky Trinity)  over Madam Tsang’s conduct of the action such as to warrant a third-party costs order.

45.I should mention here that Mr Mak invited the Court to draw adverse inferences against Madam Yu and Sky Trinity for failing to call Madam Tsang or the handling solicitors from O&C as witnesses in this application, or for failing to adduce as evidence “…bills as to the work done by O&C… to show what was or was not done for Sky Trinity, Madam Yu and/or the other shareholders of Sky Trinity.” I respectfully disagree.

46.First, the burden is firmly on Madam Wong to satisfy the Court in this summary procedure that Madam Yu or Sky Trinity funded or exerted control in the conduct of the action, as alleged by her – it is not for Madam Yu or Sky Trinity to satisfy the Court that they had not done so. The fact that Madam Yu or Sky Trinity had a relationship with O&C or that they had an interest in the outcome of the action is insufficient to shift the evidentiary burden on Madam Yu or Sky Trinity to disprove Madam Wong’s allegations. I also bear in mind here that Madam Yu is a litigant in person.

47.Moreover, O&C were solicitors on the record acting for Madam Tsang. There is nothing to suggest that Madam Yu or Sky Trinity is entitled to any documents relating to Madam Tsang’s retainer with O&C. There is also nothing to suggest that the handling solicitors at O&C would have been willing to give evidence on behalf of Sky Trinity or Madam Yu on this issue. Madam Yu also cannot compel Madam Tsang to give evidence or to provide such documents to her without an order of the Court.

48.For the reasons above, I decline to exercise my discretion to make a third-party costs order against either Madam Yu or Sky Trinity under the summary procedure in RHC Order 62 r.6A. It follows that paragraphs 3.2 and 3.3 of the Summons are dismissed. For the avoidance of doubt, my decision here is without prejudice to any separate proceedings that Madam Wong may wish to bring against Madam Yu or Sky Trinity on the subject matter.

Costs

49.As to the costs of paragraph 3.1 of the Summons, I note that Madam Tsang, who was a litigant in person, adopted a relatively neutral position to the application. In the circumstances, I make an order nisi that there be no orders as to costs of that paragraph.

50.As to the costs of paragraphs 3.2 and 3.3, while costs should normally follow the event, I again make an order nisi that there be no orders as to costs of the application.

51.As mentioned above, Sky Trinity did not participate in the application, and Madam Yu acted as a litigant in person.

52.More importantly, however, the Court must again record its disapproval in the strongest terms of Madam Yu’s rude and disruptive conduct throughout the hearing of the application. On numerous occasions during the hearing, she shouted personal insults and expletives at Madam Wong and her legal representatives, which were wholly unwarranted and unjustified. This was plainly unacceptable, and I issued repeated warnings to Madam Yu on her behaviour. Regrettably, such warnings were not heeded and nearly resulted in an order for her to be forcibly removed from the courtroom. I should also express my gratitude to Mr Mak for his patience and fortitude in the face of such behaviour from Madam Yu.

Mr Andrew Mak and Mr Albert Chan, instructed by Chung & Kwan, for the plaintiff

The 1^st defendant appeared in person (being present on 22-23 February 2021 only)

The 1^st respondent (for costs)  appeared in person

The 2^nd respondent (for costs)  was not represented and did not appear