Ckp v. Ywc, The Administratrix of the Estate of Cth, Deceased and Others

Read the full judgment text of FCMP 73/2022 on BabelCite. This FCMP judgment was delivered on 9 January 2025.

1. On 17 April 2017, CTH, the Deceased , passed away at the age of 79, intestate and with an estate worth of over $151 million. [1] He left behind two families:

Cites 14 cases

Case No.FCMP 73/2022[2025] HKFC 9
Court
FCMP
Date09 Jan 2025
Judge
Case Document
100%Judiciary

FCMP 73 /2022

[2025] HKFC 9

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

FAMILY COURT

MISCELLANEOUS PROCEEDINGS NUMBER 73 OF 2022

----------------------------

  IN THE MATTER of Sections 3 to 7 of the Inheritance (Provision for Family and Dependents) Ordinance, Cap. 481
  and
  IN THE MATTER of the estate of CTH, deceased (“the Deceased”)

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BETWEEN

  CKP Applicant
  and  
  YWC, the Administratrix of the 1st Respondent
  estate of CTH, Deceased  
  YWC 2nd Respondent
  CMY 3rd Respondent
  CMWR 4th Respondent
  CMYE 5th Respondent
  CYK 6th Respondent

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Coram : Her Honour Judge Grace Chan (in chambers) (not open to public)
Date of the applicant’s written submission : 11 July 2024
Date of the 1st to 5th respondents’ written submission : 12 July 2024
Date of the 6th respondent’s written submission : 11 July 2024
Date of the applicant’s written reply submission : 13 July 2024
Date of the 1st to 5th respondents’ written reply submission : 12 July 2024
Date of the 6th respondent’s written reply submission : 15 July 2024
Date of the oral hearing on costs : 19 July 2024
Date of Decision : 9 January 2025

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DECISION ON COSTS
( Claims pursuant to Cap 481 )

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An overview

1.On 17 April 2017, CTH, the Deceased, passed away at the age of 79, intestate and with an estate worth of over $151 million.[1] He left behind two families:

(1)  the 2nd respondent (“Madam Yuen” or “R2”), who is his widow and the administratrix of his estate (“R1”), and their children, being the 3rd to 5th respondents (respectively “R3”, “R4” and “R5”);

(2)  the applicant (“Madam Chung”), who had cohabited with the Deceased since 1970s, and their children, being the 6th respondent (“R6”) and a son whom I shall address him as X. More will be said about X later in this decision.

2.Under the Intestates’ Estates Ordinance, Cap 73 (“Cap 73”), only Madam Yuen, R3 to R6 and X are the beneficiaries of the Deceased’s estate.[2] Madam Chung is not a beneficiary under Cap 73.

3.Letters of Administration of the Deceased’s estate was granted to Madam Yuen on 3 December 2021.

4.In May 2022, Madam Chung filed her claim pursuant to the Inheritance (Provision for Family and Dependents) Ordinance (“Cap 481”), seeking reasonable financial provision to be paid out of the said estate.

5.It is her case that she had been wholly maintained by the Deceased immediately before his death as his de facto second wife, receiving regular maintenance or payments from the Deceased directly or via his businesses which amounted to about $200,000 per month between 2004 to 2017. The Deceased had also gifted her with assets, including a flat with carpark at Tregunter Road, Mid-Levels purchased in her sole name and free from mortgage (“Tregunter Property”), which was, and still is, the residence of her and her 2 sons.

6.The seed money for the purchase of the Tregunter Property came partially from a loan of $23 million raised in 2011 (“2011 Loan”) by one of the Deceased’s companies, HY Development Ltd (“HY Ltd”) and secured by the personal guarantee of the Deceased and the landed properties owned by another company, C Industrial Ltd (“C Ltd”). This loan was booked in the audited accounts of HY Ltd as the director’s loan owed by Madam Chung to HY Ltd, which stood at $33,802,683 in its audited account as at 31 March 2021 (“Alleged Director’s Loan”). Madam Chung disputes this and maintains that it was a gift from the Deceased to her.

7.According to Madam Chung, the regular monthly maintenance paid to her continued even after the death of the Deceased, but was abruptly stopped by mid-2020. Lack of any further maintenance, she had to resort to loans from various financial institutions or friends.

8.Through her counsel’s submission made at different stages of these proceedings, she made various proposals of settlement. But broadly she asks that either a lump sum payment of $15 million be paid to her out of the Deceased’s estate, or that a lesser lump sum payment of $1.8 million be paid if her 10.25% shareholding in C Ltd would be bought by the estate at a consideration of about $23 million within a maximum of 6 years with interest at 3.25% per annum.[3]

9.Needless to say, R6, being the son of Madam Chung, does not seriously dispute this case at all.

10.At the beginning, Madam Yuen disputes that Madam Chung was a dependent of the Deceased before his death. But in the hearing of 11 August 2023, all the respondents gave their concession on this point, and agreed that Madam Chung was the dependent of the Deceased immediately before his death.

11.However, R1 to R5 maintain that Madam Chung has sufficient assets of her own, including her shares in C Ltd which is worth $20,069,500, to take care of her future needs, such that her claim should be dismissed. They say that the Alleged Director’s Loan is a bone fide loan which should be repaid by Madam Chung.

12.After 3 rounds of mediator-assisted financial dispute resolution hearings (“MFDR”) held before HHJ S Lo, the parties were unable to come up with a signed consent summons to settle the matter.

13.In the result, the trial of Madam Chung’s claim commenced before me on 12 March 2024. On the 3rd day of the trial, the parties produced a consent summons dated 14 March 2024 and settled the matter (“Consent Order”), save and except the issue of costs.

14.Essentially, the Consent Order entails that Madam Yuen undertakes to pay Madam Chung a lump sum of $2.4 million within 30 days. She and R1 undertake to procure C Ltd to (i) sell its landed properties within 3 years; and (ii) pay Madam Chung a sum of $50,000 per month as advancement of dividends, commencing from 1 April 2024, which shall be set off against her final entitlement of dividends for her interest in C Ltd. On the other hand, Madam Chung undertakes that she would not apply for winding-up of C Ltd within these 3 years. Details of the various undertakings are reproduced below for easy reference (“Undertakings”):

“(A) Upon the Applicant and all the Respondents herein acknowledging that the provisions referred to herein are accepted in full and final settlement of all claims that the Applicant may have against the estate of CTH, deceased (“Estate”) under the Inheritance (Provision for Family and Dependants) Ordinance (Cap 481) and common law and other statutes

(B) And upon all the parties herein each acknowledging to the Court that each of them is properly advised by their respective Counsel and solicitors

(C) And upon the 2nd Respondent undertaking to the Applicant and to the Court that the 2nd Respondent shall pay the Applicant a lump sum of HK$2,400,000 within 30 days from the date hereof

(D) And upon the 1st Respondent and 2nd Respondent undertaking to the Applicant and to the Court that the 1st Respondent and the 2nd Respondent shall procure [C Industrial Limited (“C Ltd”)] to advance the Applicant HK$50,000 per month as advancement of dividends of the Applicant’s interest in her shareholding in [C Ltd], commencing from 1 April 2024 and thereafter on/before 1st day of each succeeding month until winding up of [C Ltd] and/or [C Ltd]’s sale of all of its landed properties and distributing the net sale proceeds and other assets of [C Ltd] by way of declaring dividends after accounting for [C Ltd]’s liabilities; And upon the agreement and undertaking of the Applicant that such advancement of dividends will be set off against her final entitlement of her dividends for her interest in [C Ltd]

(E) And upon the 1st Respondent and 2nd Respondent undertaking to the Applicant and to the Court that the 1st Respondent and the 2nd Respondent shall provide a copy of board minutes of [C Ltd] to the Court and to the Applicant by way of letter confirming the agreement of [C Ltd] in recital (D) above within 14 days from the date hereof

(F) And upon the 1st Respondent and 2nd Respondent undertaking to the Applicant and to the Court that the 1st Respondent and the 2nd Respondent shall exercise their best endeavors to procure [C Ltd] to complete the sale of all of its landed properties within 3 years, ie by 14 March 2027

(G) And upon the Applicant undertaking to the Court and to the 1st Respondent and the 2nd Respondent that she would not pursue winding up of [C Ltd] within 3 years, ie by 14 March 2027

(H) And upon the understanding of all the parties herein that there may be a potential claim by [HY Ltd] against the Applicant of the [Alleged Director’s Loan] standing at $33,802,683 as at 31 March 2021”

15.Upon the Undertakings, the court made a “no order” in respect of Madam Chung’s claim, with the issue of costs to be argued and determined.

Their latest positions on costs

16.At first, Madam Chung and R6 ask that their respective costs should be paid by the estate of the Deceased. R1 to R5, however, argue that she should bear her own costs, as well as the costs of all the respondents.

17.Towards the end of this argument hearing, R1 to R5 concede that their costs, as well as the costs of R6, should be paid out of the Deceased’s estate on an indemnity basis. However, they maintain that Madam Chung should absorb her own costs.

18.Hence, the remaining costs issue that needs to be determined in this decision is this: who should bear Madam Chung’s costs.

The intended joinder of X

19.Perhaps, at this stage, I should say something about X, in order to explain why he, though being one of the beneficiaries of the estate of the Deceased, is not joined into these proceedings as one of the respondents.

20.X is a mental patient suffering from schizophrenia since 2004. He was originally one of the intended respondents named in the joinder summons taken out by R1 to join all the beneficiaries of the Deceased’s estate into this case so that the court would be able to consider their financial resources and needs.[4]

21.It is indisputable that X is incapable of managing his own affairs, and thus has to be represented by a guardian ad litem. Shortly before the commencement of this case, Madam Chung was made a committee of his estate pursuant to a court order made by the High Court on 15 July 2021.[5] However, when it became clear that there might be a conflict of interest in her role as the applicant of this case and the committee of the estate of X, an application had to be made with the High Court to appoint another person (namely R6) as the new committee of the estate of X.

22.The Official Solicitor was requested by me to attend the hearing of 11 August 2023 to deal with the representation of X. In that hearing, I was told that all the parties were keen to proceed the case to MFDR as soon as possible. However, the question of the appointment of R6 to replace A as the new committee for the estate of X was not yet heard and determined by the High Court.

23.Finally in the same hearing, R2 to R6 decided and agreed unanimously that they shall give an undertaking to the court that any payment to satisfy the claim of Madam Chung in this case, if any, will not be paid out of X’s share of the estate of the Deceased pursuant to Cap 73. This undertaking ensures that the interest of X will be protected from the claim of Madam Chung.

24.The Official Solicitor viewed that the above suggestion was a viable and acceptable route.

25.Relying on such undertakings from R2 to R6 and by the consent of all parties, I made no order to join X into this case.

26.To complete the picture, R6 was appointed as the new committee of the estate of X pursuant to another order of the High Court made on 21 August 2023.

27.Further, all the respondents have, by way of a joint letter dated 20 March 2024, undertaken that any payment to satisfy those costs that are payable by the Deceased’s estate in this case will not be paid out of X’s share of the estate.

Some other basic background

28.The Deceased was born in 1938 and died at the age of 79.

29.Madam Yuen was born in 1944 and is now aged about 80. She married with the Deceased customarily in 1969. They later registered their marriage in 1980. R3 to R5 were born within this wedlock between 1972 and 1981. She is now living with R5, his wife and his children at a property comprising of 2 units at Happy Valley. Unit A of the Happy Valley property is registered in her sole name, and unit B is registered in the sole name of the Deceased. According to her Form E dated 23 May 2023, unit A of the Happy Valley Property is worth of $30.39 million, free from mortgage. She deposes in the same Form E that her total net assets, including landed properties, bank reserves, stock and shareholdings in private companies, are worth over $66 million (excluding her entitlement under Cap 73).

30.Madam Chung was born in 1955 and is now aged about 69. She came to know the Deceased when she worked in a mahjong club operated by the Deceased in Wanchai. They started cohabitation roughly since 1979. Between 1982 and 1984, R6 and X were respectively born. According to her Form E dated 19 May 2023, the value of the Tregunter Property where she is living with her sons is worth about $50 million. She claims in the same Form E that she has outstanding debts owed to friend(s) and finance companies in the total sum of $3.2 million. Hence, her total assets are net to slightly over $49 million (excluding her shareholding in C Ltd).

31.After the Deceased and Madam Yuen got married, they worked together to set up their first business in Sai Ying Pun. Madam Yuen says that she had to sell her jewelleries and wedding gifts in order to raise funds to set up their first business. Starting from the 1970s, they expanded their businesses to operating mahjong club(s) in Wanchai district.

32.In his heyday in the 1980s and 1990s, the Deceased ran and/or managed a number of companies and businesses of mahjong clubs, saunas and restaurants mainly in the Wanchai area, and owned a number of properties via these companies at which some of the businesses were operated. The two major companies were, and still are, HY Ltd and C Ltd.

33.HY Ltd and C Ltd do not run any businesses, but they own a number of properties in the Wanchai district from where the Deceased ran/operated the businesses of SP Sauna and GC Mahjong School,[6] generating income and profits to financially support himself and his 2 families.

34.Before his death, the Deceased was the majority shareholder of HY Ltd and C Ltd. Madam Yuen and Madam Chung were (and still are) the shareholders of C Ltd in the respective holding of 22.58% and 10.25%. However, they are not the shareholders of HY Ltd.

35.For easy reference, I set out the respective shareholding and directorship held by the Deceased, Madam Yuen and Madam Chung in HY Ltd and C Ltd as follows (the other minority shareholders are omitted as they do not feature in this trial):

  HY Ltd
 
C Ltd
 
  shareholding
 
directorship
 
shareholding
 
directorship
 
Deceased
 
55%
 
Yes (up to his death)
 
42.45%
 
Yes (up to his death)
 
Madam Yuen
 
Nil
 
Yes
 
22.58%
 
Yes
 
Madam Chung
 
Nil
 
Yes
 
10.25%
 
No
 

36.According to the valuation report prepared by the single joint expert dated 29 September 2023, the gross market values of the 11 properties owned by HY Ltd and C Ltd were in the sum of $258,400,000.[7]

37.After the death of the Deceased, GC Mahjong School was closed down in 2019. Further, SP Sauna should have ceased its business by May 2023, because the updated land searches of C Ltd’s properties show that C Ltd signed a tenancy agreement on 23 May 2023 with a hotel group to rent out 5 of its properties at a progressively-increased monthly rental. The monthly rental for the first 4 years of the tenancy is $455,000 per month.

38.On the other hand, upon the death of the Deceased, Chong Hing Bank requested other person(s) to act as the new personal guarantor in respect of the 2011 Loan. Madam Yuen requested Madam Chung and R6 to act as the new guarantors, but was refused by them.

39.In October 2020, the directors of C Ltd (and Madam Yuen is one of the directors) resolved that a new loan of $24 million from Chong Hing Bank should be raised by securing its properties (“2020 Loan”).[8] Madam Yuen and R5 became the new guarantors of the 2020 Loan. According to Madam Yuen, the 2020 Loan was utilized:

(1)  to pay off the unpaid balance of the 2011 Loan owed by HY Ltd to Chong Hing Bank, which then stood at about $13.48 million; and

(2)  the balance of roughly $10.52 million to provide “extra working capital”.

40.The current monthly repayment of the 2020 Loan is around $237,846.[9] It should not be of dispute that C Ltd is now paying for such monthly repayments.

41.As at the date of trial, HY Ltd has rented out 2 of its properties at rental income of $181,500 per month. C Ltd is receiving a monthly rental income of $455,000 per month.

Applicable law

42.It is trite to say that the starting point on the legal principles on costs is that costs should follow the event, except when judged by the court “in the circumstances of the case”, some other orders should be made: Order 62 rule 3(2) of the Rules of the District Court. [10]

43.In the exercise of its discretion, the court will take into account, where appropriate in the circumstances, the special matters set out in Order 62 rule 5(1) of the Rules of the District Court, such as the underlying objectives set out in Order 1A rule 1; any written "without prejudice save as to costs" offer; the conduct of all the parties; whether a party has succeeded on part of his case, even if he has not been wholly successful.

44.Order 62 rule 5(2) explains what “conduct of the parties” should be taken into account by the court, such as whether it was reasonable for a party to raise, pursue or contest a particular allegation or issue, or the manner in which a party has pursued or defended his case or a particular allegation or issue.

45.As to the specific matters to consider in determining the costs where the parties settle the case during trial, all the parties refer me either to the judgment of Queeny Au-Yeung J in Famous Marvel Company Limited & Others v Conversant Group Limited & Others, HCA 2153/2009, date of judgment 29/10/2012, or the judgment of this court in CEPK v LKKH [2019] 1 HKLRD 681 citing Famous Marvel (supra). At [22] of her judgment, Queeny Au-Yeung J explained:

“(i) The Court is to decide if the party seeking costs has substantially obtained the reliefs sought in the litigation: Re Chinese United Establishment Ltd, HCCW 291/1994, 5 October 1995, Rogers J (as he then was), approved in CACV 214/1995; Lai Yuet Chun v Super Deluxe International Limited & ors, HCCW 186/2001, 3 June 2003 Kwan J (as she then was).

(ii) At each end of the spectrum there will be cases where it is obvious which side would have won had the substantive issues been fought to a conclusion. In between, the position will, in differing degrees, be less clear. How far the Court will be prepared to look into the previously unresolved substantive issues will depend on the circumstances of the particular case, not least the amount of costs at stake and the conduct of the parties. Brawley v Marcynski (No.1) [2003] 1 WLR 813.

(iii) The Court will first consider if it is in a position to say what the likely outcome after trial would have been. If it is not in a position to do so, the order may well be no order as to costs: Brawley v Marcynski (No.1), at para 18, Longmore LJ; followed in BCT Software Solutions Ltd v C Brewer & Sons Ltd [2004] FSR 150.

(iv) The Court may permit parties to adduce evidence on the question of costs: Ta Tung China & Arts Ltd v Fontana Restaurant Ltd [1999] 1 HKLRD 404; Lai Yuet Chun v Super Deluxe International Limited & ors, at para 12. However, to say that the parties must go to trial in order to resolve any outstanding questions of costs would be contrary to the underlying objectives enshrined in RHC Order 1A rules 1 and 2: Graham M Morley v Kwan Wo Wan & others, HCA 4366/2003, 30 December 2009, Recorder Jat SC.

(v) A broad brush can be taken by referring to all matters already laid before the Court, eg pleadings, correspondence, witness statements, transcripts of evidence and the terms of the settlement order: c.f. BCT Software Solutions Ltd v C Brewer & Sons Ltd, at para 9; Graham M Morley v Kwan Wo Wan & others.

(vi) The objective is to do justice between the parties without incurring unnecessary Court time and consequently additional cost: Brawley v Marcynski (No.1).”

46.However, there is dispute between Mr Ken Chan for R1 to R5, and Mr K M Chong for Madam Chung, as to whether HK v BD, CACV 252/2009 & CACV 71/2010, date of judgment 15/10/2010, is applicable to this case. There in HK v BD, Hartmann JA commented that costs should be assessed by the “overall impression”, but not by “breaking down the litigation into many component…in order to draw up some kind of profit and loss account”. Mr Chong invites this court to adopt this comment of His Lordship in deciding on the costs issue of this case. Mr Chan, however, submits that such remark was given in the contest of divorce proceedings, which should be differentiated from a claim in any probate case or Cap 481 claim. Mr Chan refers me to Wong Yat Wai, administrator of the estate of Wong Ching Yin, Deceased v Lin Fei Zhu, administratrix of the estate of Wong Ching Yin, Deceased [2023] HKCFI 253, in which Deputy High Court Judge MK Liu adopted Famous Marvel (supra).

47.To the above dispute, I have the following points to make.

48.First, it is my view that Order 62 of the Rules of the District Court, in particularly rules 3 and 5 therein, and Famous Marvel (supra) are the starting point for consideration on the costs issue of this case.

49.Second, the aforesaid comment of Hartmann JA in HK v BD is merely to illustrate that the family court enjoys a much wider discretion in determining costs than in general civil court. I do not read the aforesaid comment of His Lordship as expounding any new legal principles on costs. Importantly, His Lordship said at [78] of his judgment that the starting point is still that “costs prima facie follow the event”.

50.That the family court enjoys a wider discretion in determining costs, due to the special dynamics of family litigation, has been repeatedly echoed by the Court of Appeal, such as in L v C, CACV 169/2006, date of judgment 19 March 2008; Z v X and C, CACV 166/2011, CACV 251/2011 & CACV 252/2011, date of judgment 8 March 2013.

51.Third, that the family court enjoys a much wider discretion in determining costs must be correct and equally applicable to “matrimonial” as well as “family” proceedings that come before the family court.[11]

52.It is important to note that historically, a claim under Cap 481 used to be dealt with in the general civil jurisdiction of the District Court, or the High Court (upon the transfer from the District Court). However, in Tam Wai Hung by her next friend, Zhou Dalue v Chow Sin Kim & Anor, [2010] 5 HKLRD 640, Lam PJ (then Lam J) expressed and explained with rationale that in future, such a claim should better be issued out of the family court, rather than the general civil court in the District Court. There, the plaintiff sought relief against the estate of the deceased (who was her husband).

53.Since then, Practice Direction 15.12 dated 11 February 2022 formally provides that a claim under Cap 481 is defined as one of the “family” proceedings to be commenced in the family court.

54.In LWH v YMY and Others [2023] 1 HKLRD 1004, HH Judge Ivan Wong, in considering the costs of a claim under Cap 481 before him, has adopted another but similar comment of Hartmann JA in F v F (No 2) [2003] 3 HKLRD 976, and said these:

“In F v F (No 2) [2003] 3 HKLRD 976 at [22], Hartmann J (as he then was) reminded us of “the long-established principle that costs are determined not by dividing litigation into quantifiable subjects and figures, like a profit and loss account, but rather by way of overall impression.”

Whether Madam Chung was the Deceased’s dependant

55.I shall start by repeating that at the commencement of these proceedings, Madam Yuen did not admit that Madam Chung was the dependent of the Deceased immediately before his death. It was only in the hearing of 11 August 2023 that the issue of her dependency on the Deceased was conceded.

56.In my view, there simply cannot be any dispute that Madam Chung was the dependent of the Deceased immediately before his death. According to Madam Yuen’s own affirmation evidence, the Deceased revealed to her about his relationship with Madam Chung as early as 1981, and that though rather unwillingly, she had to accept this love triangle. She also deposes in her affirmation that R6 and X, the sons of Madam Chung, used to address her as “mother”. From the photographs disclosed to this court in the trial bundles, the two families met together from time to time on various social gatherings, and the children of the two families were on harmonious terms.

57.Further, it is Madam Yuen’s own case that she has been “assisting in the operation, administration and financial management of the businesses of the Deceased” before and after his death, and she is also one of the bank signatories of the Deceased’s businesses and companies.[12] Hence, she would surely know if the Deceased had been paying any maintenance to Madam Chung.

58.As a matter of fact, Madam Chung continued to receive payments from the Deceased’s businesses/companies even after his death until mid-2020.

59.It is thus my conclusion that Madam Yuen should not have disputed the dependency of Madam Chung at any stage of these proceedings. It is clear to me that Madam Chung is the winner on this point.

Madam Chung’s assets & liabilities

60.With the question of dependency conceded by the respondents, the remaining fundamental dispute of the parties boils down to two major issues:

(1)  whether Madam Chung has sufficient assets to cover her needs? R1 to R5 say that she has, because she has total assets of over $80 million, including the Tregunter Property[13] and 10.25% shareholding in C Ltd. According to them, the value of such shareholding is worth $20,069,500. Madam Chung, however, argues that the Tregunter Property is of “nominal” value because it is the home of her and X and thus cannot be sold. She also avers that her shareholding in C Ltd is of nil value, because her shares are not capable of being readily liquidated; and

(2)  what her liabilities are, including whether she owes the Alleged Director’s Loan to HY Ltd in respect of purchase of the Tregunter Property. R1 to R5 maintain that the Alleged Director’s Loan is a bona fide debt owed by Madam Chung to HY Ltd, while Madam Chung insists that it was a gift from the Deceased to her.

61.Both camps are of the view that their camp is the overall winner of this case.

62.On behalf of R1 to R5, Mr Ken Chan of counsel compares the respective parties’ positions at various stages of the proceedings, and concludes that they are the winner of the case, because:

(a)  Madam Chung asks for a stand-alone $15 million, which includes X’s needs for her claim, at the beginning of the 1st MFDR and on Day 1 of the trial, despite the fact that she has net assets worth of $85,587,879, considering her interest in C Ltd at the value of $20,069,500. In the end, she significantly revises downward her position and accepts merely $2.4 million. On the other hand, Madam Yuen, R3 to R5 have been very reasonable throughout and made offers of $1.8 million at the 2nd MFDR and at the beginning of the trial. The settlement sum of $2.4 million is much closer to their offer;

(b)  As to a sum of $50,000 per month as the advancement from C Ltd, Madam Chung asks that she does not need to pay back the advancement, but Madam Yuen, R3 to R5 insist that the advancement should be paid back. The settlement reached is that Madam Chung needs to pay back the advancement.

63.On the other hand, Mr K M Chong submits that this court should look at what has been achieved by Madam Chung in the settlement. He argues that through the settlement, she is able “to retrieve the financial value of her said shares [of C Ltd] by crystalizing the same into monetary terms and to be paid”, which otherwise she has never been able to take the benefits of her shareholdings in C Ltd. On top of this, she is to receive $2.4 million from Madam Yuen. He submits that the question to ask is this: but for this claim, could Madam Chung have achieved the same?

64.For easy reference and discussion, I have summarized the parties’ proposals for settlement at different stages of these proceedings and the final settlement terms in the following table (R6’s position will not be mentioned in the following table, for the obvious reason that he would not object to Madam Chung’s claim):

  Madam Chung
 
R1 to R5
 
At beginning of 1st MFDR
 
The estate shall pay her $15 million, plus costs.
 
Madam Chung should withdraw her claim, with no order as to costs.
 
At the end of 1st MFDR
 
Parties started to explore the possibility of buying out Madam Chung’s shareholding in C Ltd by the estate.
 
2nd MFDR (1)  R1 to R5 shall purchase her shares in C Ltd at around $23 million by 4 instalments. The estate shall pay her a lump sum of $1.8 million, and 50% of her costs.
 
(1)  Agreed to pay a lump sum of $1.8 million to Madam Chung, and to purchase her shares in C Ltd at about $23 million. But the payment shall be by way of monthly instalments of $83,000 initially until they have the financial resources to pay off the balance in one go.
 
(2)  Rejected the offer of R1 to R5 on the amount of monthly instalment and time frame of full payment, because this would mean that the said $23 million would only be paid off within 23 years or so, and at nil interest. Suggested that the said $23 million shall be paid within 3 years with interest at prime rate.
 
(2)  Counter-suggested that the said $23 million shall be paid by 120 monthly instalments (ie within 10 years) ranging from $83,000 to $103,000 per month, with the last 120th instalment in the sum of $11,482,176.99 to be paid in 2034, with no order as to costs.
 
(3)  Counter-offered that R1 to R5 shall buy out her C Ltd’s shares within 3 years at an interest rate of 4% per annum on reduced balance basis.
 
(3)  Insisted to buy out C Ltd’s shares within 10 years. However, upon further facilitation by the FDR judge, counter-proposed 6 years and an interest rate of 2% per annum.
 
(4)  Accepted the suggestion of 6 years, and upon further facilitation of the FDR judge, counter-offered an interest rate of 3.5% per annum. Costs shall be argued before and determined by the trial judge.
 
(4)  Further counter-offered the interest rate of 3%. However, upon further facilitation by the FDR judge, agreed 3.25%. Accepted that costs shall be determined by the trial judge.
 
(5)  Accepted the facilitation of the FDR judge of the interest rate at 3.25%.
 
(5)  Adjourned the MFDR and requested time to draft consent summons.
 
3rd MFDR The price of buying out her shares in C Ltd should be paid within 6 years by equal yearly instalments.
 
The price of Madam Chung’s shares in C Ltd should be paid within 6 years by 72 instalments increased progressively per year from $83,000 per month to $103,000 per month, with the last instalment in the sum of any unpaid amount to be paid in one go.
 
Day 1 of trial (1)  Her 1st open offer is that the estate should either pay her $15 million, or a lump sum of $1.8 million if her shares in C Ltd shall be bought out by the estate. She later revised her open offer to a lump sum of $2,400,000, plus monthly maintenance in the sum of $50,000 until she dies.
 
(1)  Madam Yuen shall pay Madam Chung a lump sum of $1.8 million (which needs not be repaid), and a monthly sum of $50,000 (which needs to be repaid) until the latter receives the sale proceeds of C Ltd’s properties.
 
(2)  Her costs would be provided for and to be determined by this court.
 
(2)  Madam Chung shall bear the costs of R1 to R5.
 
Day 2 of the trial (1)  Madam Yuen shall pay her $2.4 million.
 
(1)  Madam Yuen agreed to pay $2.4 million, which needs not be repaid.
 
(2)  She will receive monthly sum of $50,000 from C Ltd, which should not be deducted from her final entitlement to the sale proceeds of C Ltd’s properties.
 
(2)  The estate and Madam Yuen agreed to procure C Ltd to pay Madam Chung $50,000 per month, but such sums shall be repaid/deducted from her final entitlement to the sale proceeds of C Ltd’s properties.
 
(3)  Her costs would be provided for and to be determined by this court.
 
(3)  Agreed that costs shall be provided for and to be determined by this court.
 
Day 3 of the trial
 
A consent summons was signed by all parties and approved by the court. Details can be seen at [14] to [15] above.
 

65.With respect to Mr Ken Chan, I think his comparison of Madam Chung’s offer of $15 million with the final settlement lump sum of $2.4 million in the Consent Order is over-simplistic. Importantly, ever since the end of the 1st MFDR, as can be shown in the chronology tabulated at [64] above, the parties were negotiating for settlement on the basis that Madam Chung would have her shares in C Ltd to be bought out or realized, plus a lump sum to be paid to her. The parties continued their negotiation on such basis in the 2nd and 3rd MFDRs. However, they were unable to strike a final deal during the MFDRs because they were not able to agree on the time table of when her shares in C Ltd would be bought out, and the amount of each instalment to be paid to her. On Day 1 of the trial, the first open proposal made by Madam Chung is an alternative proposal, namely either (i) a lump sum of $15 million, or (ii) $1.8 million (if her shares in C Ltd were to be bought out or realized). Thereafter, the parties chose to continue their negotiation for settlement along the above option (ii), and finally reached a settlement as per the Consent Order at [14] to [15] above.

66.Hence, the settlement terms in the Consent Order should be viewed as a package, but not by segregating them into different compartments. When that is so viewed, it becomes rather clear that Madam Chung is the substantial winner of issue (1) at [60], because not only is she able to get a lump sum payment from Madam Yuen, but she is also able to secure an undertaking from Madam Yuen and the estate, collectively the majority shareholders of C Ltd holding about 65% of its shares, to procure C Ltd to sell its landed properties within 3 years, such that it would have financial resources to make distribution to its shareholders, including Madam Chung, without which her interest in C Ltd is not readily liquidated.

67.Further, it should not be forgotten that Madam Chung will receive $2.4 million from Madam Yuen under the Consent Order, which is $600,000 more than $1.8 million as discussed in the MFDRs.

68.The settlement term that Madam Chung has to account for the advancement of dividend in the sum of $50,000 per month from C Ltd is, in my view, comparatively a peripheral point and of an insignificant sum. It does not affect my overall assessment that Madam Chung is the substantial winner of the aforesaid issue (1).

69.I now turn to issue (2) of [60], ie the liabilities of Madam Chung, in particularly the Alleged Director’s Loan. I would boldly point out that this issue remains un-resolved. But by acknowledging that HY Ltd may have a potential claim against her for the Alleged Director’s Loan, Madam Chung cannot be said as the winner of this issue. Therefore, she should not have the costs of this issue.

Unreasonable litigation conduct

70.Both camps allege the other camp of unreasonable litigation conduct.

71.Mr Ken Chan, on behalf of R1 to R5, submits that it is unreasonable of Madam Chung:

(1)  to ask for vacation of the trial on the reason that an agreement to settle was reached during the 2nd MFDR, and in doing so, reveal the without-prejudice material to this court;

(2)  to invite the MFDR judge to adjudicate on what happened in the 2nd MFDR;

(3)  to repeatedly use “open letter” to reveal to this court the without-prejudice offer(s) or position of R1 to R5.

72.On the other hand, Mr K M Chong for Madam Chung says that it is unreasonable of R1 to R5:

(1)  to dispute the wholly dependency of Madam Chung;

(2)  to refuse to settle with her during the mediation session of 20 December 2023, despite that her offer there and then was less favourable to the Consent Order;

(3)  to withdraw from their oral agreement of settlement reached with her during the 2nd MFDR;

(4)  to take a technical point that a signed consent summons on settlement was not signed and thus repudiated the oral agreement of settlement.

73.I take into account the overall circumstances of the case and more in particularly, the following matters:

(1)  Although Mr K M Chong for Madam Chung did seek to vacate the trial on the reason that a settlement had been reached at the 2nd MFDR, it remains true that his request was not acceded to by this court. The PTR hearing went ahead as scheduled, and the parties settled the matter during trial. In a word, the milestone dates were not affected;

(2)  I have already considered and discussed Madam Yuen’s initial dispute of Madam Chung’s dependency on the Deceased at [55] to [59], and thus would not repeat here;

(3)  I have reviewed the mediator’s note dated 20 December 2023 and prepared by Ms Maria So, the agreed mediator. It reveals that during the mediation, Madam Chung offered that she should receive $15 million and her costs out of the Deceased’s estate, and that she should bear no liability in respect of the Alleged Director’s Loan. I fail to see how this offer at the mediation session could be said as a less favourable offer than the terms in the Consent Order;

(4)  The handling of the MFDRs, including their offers, by the respective parties is not to be commended. On the part of Madam Chung, it is erroneous of her to ask the MFDR judge to adjudicate on whether a settlement had been reached during the 2nd MFDR, because it is a fact that a consent summons had not been signed during the MFDRs (See: CSFK v HWH [2020] 2 HKLRD 586). R1 to R5, in my view, had made an unrealistic and unattractive offer on the breakdown of instalments of payment of the shareholding of Madam Chung.

74.Upon due consideration, I do not hold the overall view that the conduct alleged by the respective camps is material enough to warrant a costs order be made against the other party. Further or alternatively, each camp has its own blame to take. I thus refuse to make a different costs order based on the allegation of litigation conduct.

Disproportionate legal fees

75.Mr Ken Chan for R1 to R5 says that Madam Chung’s costs have soured up from about $1.38 million (up to the MFDRs) to over $3.74 million (as at the trial), which is disproportionate to the lump sum payment payable to Madam Chung under the Consent Order.

76.Madam Chung’s Form H4 dated 23 January 2024 shows that her total estimate of costs up to and including the trial is $3,742,846, among which $1.75 million is accounted for the brief and refresher for counsel (after MFDRs and up to the conclusion of trial)[14]. By comparison, the estimated counsel’s fee of R1 to R5 is $480,000, and of R6 is $510,000 only.[15]

77.Mr K M Chong points out that Madam Chung has engaged 2 counsel but she would seek a counsel’s certificate for 1 counsel only.

78.In my decision, excessive and/or disproportionate legal costs that is claimed by a substantial winner of a case is a matter for taxation on the quantum of such costs, based on the major criteria of reasonableness and necessity, but not a ground for disallowing a substantial winner to have his costs.

79.Having said so, however, I observe that,

(1)  the respondents conceded to the issue of dependency at a rather early stage of these proceedings, leaving the issue of quantum, if any, to be determined by the court. The complexity of the case is hence reduced to a certain extent;

(2)  the major and substantial affirmation evidence of all the parties, the agreed chronology and various joint tables on assets of the Deceased’s estate were prepared and ready well before the MFDRs. Further affirmations filed after the MFDRs were for updating the parties’ financial situation only (with pages limitation). These further affirmations are comparatively straightforward and simple.

80.It is trite law that the issue of costs is always at the discretion of the court, and that the family court enjoys a very wide discretion on costs. Having taken into account the above observation, and having considered the fairness of proceedings and all circumstances of this case, I will exercise my discretion to grant a certificate for counsel each to Mr Alvin Chong, Mr Ken Chan and Mr Tyrone Tang.

Conclusion

81.There are other minor points of submission on costs advanced by Mr K M Chong and Mr Ken Chan, which I find it unnecessary to address in details in this decision. Suffice it is for me to say that I have considered those points, but they fail to persuade me the otherwise.

82.For all the matters aforesaid, I shall make the following order, but subject to the undertaking given by all the respondents in respect of X’s entitlement to the estate of the Deceased as per [23] and [27]above:

(1)  By consent, the costs of all the respondents in this case, including any costs reserved orders and the costs of this costs argument, shall be paid out of the estate of the Deceased on an indemnity basis, to be taxed if not agreed;

(2)  Two-third of the costs of the applicant in this case, including any costs reserved orders and this costs argument, shall be paid out of the estate of the Deceased on a party-party basis, to be taxed if not agreed;

(3)  Attendance of one counsel be certified as per [80] above;

83.This court order shall be drawn up by the solicitors for Madam Chung, but I expect that the parties would liaise and agree with each other on the exact wording of the draft court order, before the same is lodged for approval.

84.Lastly, I hope that with the conclusion of this case, both Madam Chung and Madam Yuen can put an end to their dispute, in order to save incurring further and/or unnecessary legal costs.

85.I thank counsel of the respective parties for their assistance.

  Grace Chan
District Judge

Mr K M Chong and Mr Alvin Chong instructed by Messrs Samuel Chow Solicitors for the applicant

Mr Ken Chan instructed by Messrs Nixon Peabody CWL for the 1st to 5th respondents

Mr Tyrone Tang instructed by Messrs Rebecca V I Ho & Co for the 6th respondent



[1]  Joint table of assets and liabilities of the Deceased’s estate signed by all parties and dated 17/10/2023.

[2]  Pursuant to section 4(3) of Cap73, R2, as the widow of the Deceased, is entitled to take all his personal chattels and $500,000. The residuary estate will then be distributed among the beneficiaries, with 50% to R2 and the remaining 50% to R3 to R6 and X in equal shares.

[3]  Opening written submission of Madam Chung containing her open offer dated 5/3/2024.

[4]  Section 5(1)(c) of Cap 481.

[5]  Pursuant to para 14 of the Order made in HCMH 11/0000 by the Honourable Madam Justice M Ng, Madam Chung is given the authority to institute and defend on behalf of X for his entitlement to the Deceased’s estate under Cap 73 and Cap 481.

[6]  HY Ltd owns 5 landed properties, some of which were rented out to GC Mahjong School. C Ltd owns 6 landed properties, some of which were rented out to SP Sauna. See also 1st affirmation of R2 [trial bundle (1)/75/§24].

[7]  Subsequently, Flat 10A of Ccccc Mmmmmm was sold by HY Ltd, after which a partial distribution of $2 million was made to R2 to R6 and X according to Cap 73. Madam Yuen received $1 million, and R3 to R6, and X, each received $200,000.

[8]  Facility letter dated 16/10/2020 from Chong Hing Bank [trial bundle (6)/1341-1348] and Board minutes of C Ltd dated 13/11/2020 [trial bundle (6)/1351].

[9]  Repayment schedule from Chong Hing Bank dated 27/8/2022 [trial bundle (6)/1361].

[10]  Under Practice Direction 15.12, a claim pursuant to Cap 481 is defined as one of the “family proceedings”, to which the Rules of the District Court, Cap 336H applies.

[11]  See Practice Direction 15.12 for definition of matrimonial proceedings and family proceedings.

[12]  1st affirmation of R2 [trial bundle (1)/77/§31].

[13]  According to Madam Chung’s Form E dated 19/5/2023, the Tregunter Property (free from mortgage) was worth $50 million.

[14]  Madam Chung has engaged 2 counsel, Mr K M Chong (year of call 1981) and Mr Alvin Chong (year of call 2014).

[15]  Mr Ken Chan for R1 to R5 (year of call 2015); Mr Tyrone Tang for R6 (year of call 2019).