Chinachem Charitable Foundation Ltd v. The Secretary for Justice and Another

HCMP 93/2023

[2026] HKCFI 1129

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCEMISCELLANEOUS PROCEEDINGS NO 93 OF 2023

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J U D G M E N T

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A.  INTRODUCTION

1.This is the hearing of the Originating Summons dated 18 January 2023 (“the OS”), which was brought as an administration action under Order 85 of the Rules of the High Court (Cap. 4A) (“RHC”). However, it is in reality a claim by the Plaintiff (“Foundation”) against the Estate of Nina Kung (“Estate”) for indemnity of costs of past litigation.

2.The Foundation had obtained orders for costs (“the Costs”) in HCAP 8/2007, HCMP 901/2009, CACV 62/2010, CACV 101/2010 and FAMV 20/2011 (“Probate Proceedings”) from Chan Chun Chuen. The Foundation recovered only part of the Costs before Chan Chun Chuen was declared bankrupt on 12 August 2021. The Foundation now seeks an order that the balance of the Costs be indemnified by the Estate on trustee or indemnity basis (the “Reimbursement Application”).

3.The Defendants (“SJ” and “the Administrators”) oppose the Reimbursement Application on grounds of lack of jurisdiction under Order 85, no legal entitlement to seek indemnity, that there is abuse of process and that the Court’s discretion should not be exercised in favour of the Foundation.

B.  BACKGROUND

B1.  The Probate Proceedings

4.The facts are taken from the submission for the Administrators. In 2007, the Foundation commenced HCAP 8/2007 against Chan Chun Chuen to, amongst others, challenge the authenticity of a document purported to be the last will of Nina Wang made on 16 October 2006 (“Purported 2006 Will”), which purportedly left the entire Estate to Chan Chun Chuen.

5.On 2 February 2010, Lam J (as he then was) handed down a judgment in HCAP 8/2007[1] (“Probate Judgment”) finding that the Purported 2006 Will was a forgery and pronounced the force and validity of the last will of Nina Wang dated 28 July 2002 (“2002 Will”). Lam J made a costs order nisi (“Costs Order Nisi”) that Chan Chun Chuen pay the Foundation’s costs of the action: §934.

6.The parties applied for variation of the Costs Order Nisi by way of separate applications. On 16 April 2010, Lam J ordered, amongst others, that (“Costs Order”):

(1)  Subject to certain exceptions, Chan Chun Chuen was to pay the Foundation’s costs of the action on indemnity basis: §4.

(2)  As part of such exceptions, the Foundation’s costs of and incidental to the calling of experts on testamentary capacity be paid out of the Estate: §2.

(3)  Chan Chun Chuen shall pay the Foundation the costs of the application for the appointment of the administrator pendente lite and indemnify the Estate the costs of the administration pendente lite: §§5-6.

(4)  SJ’s costs be borne by the Estate and Chan Chun Chuen shall indemnify the Estate of the same: §7.

7.Chan Chun Chuen appealed against the Probate Judgment (including the Costs Order). The Foundation did not cross appeal on costs.

8.By its judgment dated 14 February 2011 in CACV 62/2010 and CACV 101/2010, the Court of Appeal dismissed the appeal and ordered that Chan Chun Chuen do pay the Foundation’s costs on indemnity basis, and that SJ’s costs be paid out of the Estate.

9.Chan Chun Chuen applied for leave to appeal to the CFA in FAMV 20/2011 but this was refused. By consent, the CFA ordered, on 11 November 2011, that he shall pay the Foundation’s costs of the leave application; and SJ’s costs shall be paid out of the Estate, to be eventually borne by Chan Chun Chuen.

10.On 8 November 2012, the Foundation issued a Summons (“2012 Summons”) seeking directions XXXXXXXXXXXXXXXXXXX XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX XXXXXXXXXXXXXXXX, to specifically include payment of the Foundation’s costs of the Probate Proceedings out of the Estate or, alternatively, an indemnity from the Estate for such costs.

11.The 2012 Summons was originally fixed to be heard on XXXXXXXX 2012. XXXXXXXXXXXXXXXXXXXXXXXXXX XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX XXXXXXXXXXXXXXXXXXXXXXXXX. Accordingly, the 2012 Summons was adjourned sine die with liberty to restore.

B2.  Beddoe Application

12.On XXXXXXX 2020, the Foundation issued a Beddoe application (“Beddoe Application”) in XXXXXXXXXXX seeking an indemnity out of the Estate’s assets for its costs incurred in various legal proceedings to be indemnified by the Estate on trustee basis. XXXXXXXXXXXXXXXXXXXX XXXXXXXXXXXXXXXXXXXXXXX XXXXXXXXXXXXXXXXXXXXXXXXXXXXX XXXXXXXXXXXXXXXXXXXXXXXXXXX XXXXXXXXXXXXXXXXXXXXXXXX XXXXXX XXXXXXXXXXXXXXX XXXXXXXXXXXXXXX XXXXXXXXXXX  XXXXXXXXXX XXXXXXXXXXXXXXX XXXXXXXXXX (“Beddoe Judgment”).

13.The Beddoe Judgment dismissed the Beddoe Application X XXXXXXXXXXX XXXXXXXXXXXXXXX XXXXXXXXXXX XXXX XXXXXXXXXX XXXXXXXXXXXXXXXXX XXXXXXXXXXXXXX XXXXXXXXXXXX XXXXXXXXXXXXXXXXXX XXXXXXXXXXX XXXXXXXXXXXXX XXXXXXXXXXXXXXXX XXXXXXXXXXXX XXXXXXXX. The Foundation appealed against the Beddoe Judgment but has taken no steps to fix the hearing of the appeal.

B3.  Scheme Proceedings and further developments

14.In early May 2012, SJ commenced HCMP 853/2012 (“Scheme Proceedings”), initially to seek the Court’s directions regarding the construction of the 2002 Will. On 18 May 2015, the CFA handed down a judgment holding that, on a true construction of the 2002 Will, the Foundation would be a trustee of the assets rather than a beneficiary, and that there should be a scheme for the purpose of implementing and regulating the charitable trusts under the 2002 Will (the “CFA Judgment”).

15.SJ and the Foundation were unable to resolve their differences regarding the terms of the charitable scheme, SJ thus took out a summons in the Scheme Proceedings on 29 March 2019 seeking the Court’s guidance. SJ, the Foundation and the Administrators each put forward draft charitable schemes for the Court’s consideration: Jong 1^st Aff §§24-26.

16.Following hearings in July 2022, Barma JA handed down a judgment dated 21 October 2022 (“Barma JA’s Judgment”) holding, amongst others, that:

(1)  A trustee other than the Foundation could be appointed as trustee of the Trusts if it was expedient to do so (§§60-61).

(2)  It would be appropriate and expedient to impose a “Solvency Condition” as suggested by SJ and the Administrators (§84) because on the evidence before the Court, there was “sufficient ground for concern as to the Foundation’s financial position” (§71). In particular:

(a)  The Foundation’s audited accounts for the 2018 and 2019 financial years disclosed that the Foundation was balance sheet insolvent in each of those financial years. In the year ended 31 December 2018, the Foundation had a net deficiency of slightly in excess of HK$46 million, while in the year ended 31 December 2019, it had a net deficiency of over HK$50 million (§72).

(b)  The deficits in these accounts did not take account of claims of alleged creditors of the Foundation in then-pending litigation, including the claims of Mr Chan Shu Chun in HCA 832/2014 (“CS Chan Proceedings”), which concerned a HK$50 million payment to the Foundation, and the claims of Lam Yee Hung in HCA764/2015 (“YH Lam Proceedings”), which concerned purported loans to the Foundation in the sum of HK$42.35 million.

(3)  It would also be expedient, appropriate, and necessary to impose a condition that the Foundation and its governors are “fit and proper” persons (“Fit and Proper Condition”) because the available evidence in the proceedings, including that relating to the solvency of the Foundation, disclosed a range of matters which gave rise to concern (§97). In particular:

(a)  The Foundation's then-governors appeared to have been involved in causing the Chinachem Group to engage in a number of questionable transactions since Nina Kung's passing, exposing the Chinachem Group to losses and potential losses that added up to about HK$1.6 billion (§§98-99).

(b)  There were questions as to whether the governors of the Foundation had the appropriate qualifications, experience or expertise that would render them capable of properly overseeing the affairs of the Chinachem Group. In this regard, Barma JA noted that appointments to the Foundation's board of governors had generally been made without an explanation of the reasons and thinking behind those appointments (§100(1)).

(c)  Despite having no standing to do so, the Foundation had announced that it planned to make a donation of HK$10 billion from the trust estate to support the government's efforts in combatting the Covid-19 pandemic, apparently without any consideration or enquiry as to feasibility and what impact that donation would have on the Chinachem Group's business operations and ongoing needs for funding (§100(2)).

(4)  It would be appropriate for the Court to determine whether the Foundation can satisfy the Solvency Condition and the Fit and Proper Condition (collectively “the 2 Conditions”) in the Scheme Proceedings (§104).

17.Pursuant to Barma JA’s Judgment, Barma JA gave directions on 3 November 2022 for, amongst others, the filing of evidence and fixing of a hearing on whether the Solvency Condition could be satisfied by the Foundation (“Barma JA’s Directions”).

18.On 18 January 2023, the Foundation took out the present Reimbursement Application. The timing of this application, viz after Barma JA’s Directions were given, was conspicuous. The Foundation had in fact relied on the Reimbursement Application as a ground for suggesting that it could fulfil the Solvency Condition.

19.Since Barma JA’s Judgment, there have been developments which cast further doubt on the Foundation’s ability to satisfy the Solvency Condition.

20.Firstly, in the YH Lam Proceedings:

(1)  On 31 March 2023, DHCJ Leung entered judgment against the Foundation in the sum of HK$42.85 million with interest at the rate of 48% per annum starting from various drawdown dates in 2009. On the Administrators’ calculation, as of 2 May 2023, the judgment debt and interest were well in excess of HK$300 million.

(2)  After the present hearing, the Court of Appeal handed down a judgment on 7 November 2025 finding that the interest rate on the HK$42.85 million loan to be 60% per annum: Lam Yee Hung v Chinachem Charitable Foundation Limited [2025] HKCA 949 (§61). The CA remitted the matter to Leung J for considering whether the presumption of any extortionate transaction under s.25(3) of the Money Lenders Ordinance, Cap 163, was triggered and whether the loan agreement ought to be reopened.

21.Secondly, in the CS Chan Proceedings, on 18 April 2023, Au-Yeung J handed down judgment: [2023] HKCFI 840. CS Chan’s claims against the Foundation was for repayment of HK$50 million since investments did not proceed but the money was used to fund the Probate Proceedings. The claim was dismissed. Au-Yeung J’s findings reinforced SJ’s concerns regarding whether particular governors of the Foundation and the Foundation as a whole were fit and proper. In particular, she essentially found that Dr Kung masterminded a convoluted arrangement involving the use of sham investment agreements in order to conceal the source or real purpose of the funds provided to the Foundation (e.g. §§136-137).

22.Thirdly, the Foundation has continued to pursue proceedings based on a spurious claim that PwC entered into an under-the-table arrangement pursuant to which PwC fraudulently inflated their fees. The claim was struck out by G Lam J (as he then was) on 11 May 2021 for lack of factual basis to support the serious allegations with indemnity costs. The decision was upheld by the Court of Appeal in a judgment dated 8 December 2022, which held that it was impossible, not improbable, for the Foundation to succeed. The Foundation nevertheless sought leave to appeal to the CFA. This suggested that the Foundation intended to continue to actively litigate, thereby incurring further legal costs and potentially facing adverse costs orders.

23.Fourthly, despite an initial suggestion (from a press article quoting Dr Kung) that the Shaw Foundation would provide financial support to the Foundation, there was no commitment by the Shaw Foundation or the Shaw Group of companies to do so, or to use its assets to support the Foundation.

24.The substantive hearing in relation to the Solvency Condition took place from 4 to 6 July 2023. In seeking to persuade the Court that the Foundation could satisfy the Solvency Condition, the Foundation relied heavily on this Reimbursement Application and the expected recovery of a substantial portion of over HK$170 million there from this Application. See e.g., §§12(2) and 21-30 of the Foundation’s skeleton submissions dated 26 June 2023 (Exh JYK-1).

25.Barma JA did not accept the Foundation’s argument. In an oral judgment at the end of the hearing, his Lordship observed:

“While I think that you have some force in your suggestion that ... you might ordinarily be entitled to some form of reimbursement for your costs, that, I think, is something that is usually dealt with at the -- it does appear from the cases that that is something that is dealt with as part and parcel of the course of the proceedings, at the end of the proceedings…

Therefore I think there is -- I think that I can't be satisfied that there is a sufficiently high prospect or sufficiently strong prospect of your recouping sufficient costs to take you out of the financial difficulties that the Foundation currently finds itself in.” (emphases added) (C/52/1669, lines H to M).

26.On the available evidence (including that set out in §§77-122 of the Administrators’ skeleton submissions dated 26 June 2023), Barma JA held that it was “quite evident... that the Foundation is unable to satisfy the solvency condition, in that it is not solvent on the cash flow basis, it is not solvent on the balance sheet basis, and it is not in a sound financial state...” (C/52/1670, lines C to E). Thus, the Foundation was held not qualified to be appointed as the trustee of the charitable trusts under the 2002 Will (“Disqualification Judgment”). Barma JA has not yet issued a written judgment.

27.The Foundation filed a notice of appeal under CACV 243/2023 against the Disqualification Judgment on 1 August 2023. However, no further steps have been taken to pursue the appeal as of 29 September 2025, despite a lapse of more than two years.

28.Following the Disqualification Judgment:

(1)  The Foundation has been excluded from further participation in the Scheme Proceedings.

(2)  On 8 January 2024, the Administrators issued a Summons in HCAP 8/2007, seeking orders, amongst others, that the Foundation be excluded from further participation in the administration proceedings and all matters relating to the administration of the Estate (“Exclusion Application”).

(3)  On 16 January 2024, the Administration Judge, Chu VP, ordered, amongst others, that the Foundation’s right to participate in the administration of the Estate be suspended pending the final determination of the Exclusion Application.

29.The substantive hearing of the Exclusion Application has not yet been fixed and the Foundation remains excluded from matters related to the administration of the Estate.

30.On 16 May 2024, the final Scheme was approved by Barma JA.

C.  THE FOUNDATION’S CASE ON THE REIMBURSEMENT APPLICATION

31.The Foundation proceeds under Order 85 and relies on various authorities to claim costs against the Estate. Its case is that the Foundation incurred substantial legal costs in disputing the Purported 2006 Will, and successfully obtained judgment which found that it was a forgery. In doing so, the Foundation prevented the Estate from falling into the hands of Chan Chun Chuen and ensured that the Estate would instead be administered according to Nina Kung’s true testamentary wishes.

32.Mr Man SC (leading Mr Justin Lam), counsel for the Foundation, confirm that the cause of action is the one stated in §4 of their written submission, i.e. where a party, typically a legatee under the propounded will, performed the duty of an executor by proving and propounding that will, he is entitled to his costs out of the estate and may apply to the court for such an order (“the Legatee Principle”).

D.  GROUNDS IN OPPOSITION

33.Having considered the submissions of SJ and the Administrators, I have summarized the grounds in opposition as follows:

(1)  On procedure, Order 85 of the RHC does not apply. The Foundation does not have the locus and the claim does not concern internal affairs of the Estate (“Order 85 Issue”);

(2)  There is no legal entitlement to indemnity for costs against the Estate (“No Legal Entitlement Issue”);

(3)  There is Henderson abuse in that the Foundation could and should have asked for a costs order against the Estate in the Probate Proceedings (“Henderson Abuse Issue”);

(4)  Even if the Court has jurisdiction to make an order of indemnity against the Estate, the Court should not exercise its discretion to do so having regard to the fact that the Foundation has not suffered any loss in costs and there may be collateral purposes on the part of the Foundation to use the Costs to pay its creditors (“Discretion Issue”).

E.  ORDER 85 ISSUE

34.I agree with Mr Yin and Mr Francis Chung, counsel for SJ, that there is a fundamental distinction between a court exercising its powers in probate litigation and its power to supervise the administration of an estate.

35.The former is to determine what testamentary papers should be regarded as the deceased’s last will or who is the personal representative. In exercising its power in litigation, the probate court may order costs for or against a party or an estate, in accordance with established principles.

36.The latter is a power exercised through Order 85 of the Rules of the High Court, Cap 4A, whereby the Court may give directions (including authorizing payment out of the estate) for the administration of a deceased’s estate or for the execution of a trust. The procedure can only be invoked by someone accountable in an administration action (trustee, administrator or executor), or someone entitled to call for the account (beneficiary or creditor of the estate). See Williams, Mortimer and Sunnucks on Executors, Administrators and Probate, 22^nd ed, §53-02. It is only intended for directions concerning the internal affairs of the estate, not for an outsider (like the Foundation) to enforce a disputed claim or to seek costs against the estate.

37.The Foundation is not a category of persons entitled to invoke Order 85. In the CFA Judgment, it was held that the Foundation was a trustee of the assets rather than a beneficiary. The Estate was never vested in the Foundation as a trustee, as illustrated by the Beddoe Judgment. As a result of the Disqualification Judgment, it is clear that the Foundation will not become a trustee. The Foundation does not have locus under Order 85.

38.The Reimbursement Application is not an administration action relating to the internal affairs of the Estate but rather an application for indemnity for costs in hostile Probate Proceedings. The Foundation has elided the Court’s supervisory jurisdiction under Order 85 with the jurisdiction of the trial court at the end of the Probate Proceedings.

39.Order 85 simply does not apply to the Reimbursement Application.

F.  NO LEGAL ENTITLEMENT ISSUE

F1.  The general rule on costs in probate proceedings

40.A distinction has to be drawn between “propounding” a will and opposing its validity in probate proceedings.

41.With regard to proceedings to propound a will,

(1)  The propounder has the legal or persuasive burden of satisfying the court, on a balance of probabilities, that it is the will of the deceased: Nina Kung v Wong Din Shin (2005) 8 HKCFAR 387, §§171-173, Ribeiro PJ.

(2)  The Legatee Principle applies, i.e. where a party, typically a legatee under the propounded will, performed the duty of an executor by proving and propounding that will, he is entitled to his costs out of the estate and may apply to the court for such an order: Williams, Mortimer and Sunnucks on Executors, Administrators and Probate, 22^nd ed, §29-14; Theobald on Wills, 19^th ed, §15-013.

42.With regard to proceedings for challenging the validity of a will, while costs are in the discretion of the court, the general rules in contentious probate proceedings are that:

(1)  Costs follow the event, ie the successful party should normally recover costs from the unsuccessful party and not from the estate. Good cause has to be shown before the court will depart from this general rule: Nina Kung v Wang Din Shin (No 2) (2006) 9 HKCFAR 800 at §11 (Ribeiro PJ).

“Litigants who successfully oppose a will, on becoming representatives of the deceased, either on intestacy or under an earlier will, are entitled to recoup their expenses out of the estate and also to proceed against their opponent, provided the latter has been condemned in costs.

But where a will is set aside at the instance of a person who has no title to be constituted legal personal representative, a distinction appears to exist between cases in which the unsuccessful litigant has or has not been condemned in costs. In the latter case the successful litigant may be allowed costs out of the estate, in the former they must rely on the party who has been condemned in the costs for payment.” (italics added)

See Williams, Mortimer and Sunnucks on Executors, Administrators and Probate, 22^nd ed, §29-15, and Theobald on Wills, 19^th ed, §15-014.

(2)  The two established exceptions are:

(a)  where the litigation is caused by the conduct of the testator or the residual beneficiary, in which case the costs may come out of the estate (“the First Exception”); and

(b)  where the circumstances lead reasonably to an investigation of the will’s validity, in which case there may be no order as to costs (“the Second Exception”).

See Nina Kung (No 2) at §12.

(3)  Even where a case may prima facie fall within one of the two Exceptions, the general rule whereby costs follow the event is likely to be applicable if opposition to the will goes beyond putting the proponent to strict proof of its validity and takes the form of hostile litigation: Nina Kung (No 2) at §15.

43.There is no independent cause of action for costs of a successful litigant to be indemnified by the estate in contentious probate cases (save for e.g. Beddoe applications and situations described in Gordan Chan). There is no authority for such a litigant to use the Order 85 procedure to seek indemnity or years after the probate case has closed.

F2.  The Foundation’s claim for costs against the Estate

44.The Foundation does not rely on any of the 2 Exceptions to justify departure from the normal principle of costs following the event but relies on the Legatee Principle. It seeks costs on an indemnity basis: Williams, Mortimer and Sunnucks on Executors, Administrators and Probate, 21^st edition at §33-13 & footnote 90.

45.However, as pointed out by Mr Shieh SC (leading Mr Danny Tang), counsel for the Administrators, the Foundation did not “propound” the 2002 will in the sense explained by Ribeiro PJ in the Nina Kung case.  The authenticity of the 2002 Will was not disputed by Chan Chun Chuen (§§10-11 of the Probate Judgment of Lam J, as he then was). The real dispute was to challenge the authenticity of the Purported 2006 Will. Accordingly, the cases relied on by Mr Man SC relating to costs against estates for “propounding” of wills are not applicable to the Foundation. Rather, the principles in §42 apply.

46.Moreover, a review of the authorities cited by Mr Man SC will also show that they do not support the Foundation’s claim.

(1)  Sutton v Drax (1815) 2 Phil 323 held that, “Where a legatee propounds a paper and establishes it, thereby fulfilling the duty of the executor, the legatee is entitled to have his expenses paid out of the estate of the deceased. This is the rule of the court.”  However, the facts of Sutton v Drax are not known and there is no reasoned judgment in that case.  Anyway, that case is distinguishable from the present as it was about propounding a will.

(2)  Williams v. Goude and Bennet (1828) 1 Hagg. Ecc. 610, at 682, held that, “The substituted residuary legatee, Bennet, having performed the duty of an executor in proving the will, according to the ordinary rules of the Court is entitled to his costs out of the estate.”  As summarized by Mr Shieh, SC, the question there was whether a will dated 1817 or the one dated 1822 should be admitted to probate. The widow of the deceased, Mrs. Goude, questioned the deceased’s capacity to make the 1822 will and sought to propound the 1817 will, but was unsuccessful. Although the court recognised that “possibly in strict justice she ought to be condemned personally in the whole of [the residuary legatee’s] costs”, he declined to order her to pay costs on the ground that costs paid out of the estate would ultimately fall upon her and it was procedurally easier to order costs to be paid by the estate. I agree with Mr Shieh SC that that decision turned on its own facts and did not lay down any general proposition of law.

(3)  Bewsher v. Williams (1861) 3 SW. & TR. 62, Sir C Cresswell held that, “[the applicant] had no interest in propounding the will, but did so for the benefit of an infant, after the executor had declined to propound it; and having succeeded in establishing it, it was only equitable that she should have her costs out of the estate.”  In the subsequent case of Nash v Yelloly (1862) 3 SW& TR 59, 164 ER 1194, Sir C Cresswell further explained that the applicant in Bewsher v Williams had costs out of the estate because there was evidence from which it might be inferred that there was insane delusion. The learned judge could not fairly call on the other party to pay the costs of disputing the will. Plainly, Bewsher v Williams fell within §42(2) above, as no costs order was made against the unsuccessful party. It is distinguishable from the Foundation’s situation.

(4)  In Nash v Yelloly, the will was challenged on the ground of undue influence. The successful defendant asked for an order, not only for the plaintiff to pay costs, but also that any costs which the defendant failed to recover from the plaintiff be paid out of the estate. Sir C Cresswell refused to use Bewsher v Williams as a precedent to extend the practice of ordering costs out of the estate. He held that where a costs order has been made against the unsuccessful party, the successful litigant must rely on the party who has been condemned in costs for payment. This case thus fell within the principles in §42(1) above where costs followed the event in hostile litigation. The defendant’s costs application was brought as part of the contentious proceeding about the will rather than as a separate Order 85 action. The decision is applicable to the Foundation’s situation.

(5)  In Hannah Chung v Leung Leung [2021] HKCFI 630, there was no dispute as to validity of the will propounded (§§20-25). The dispute was who should be appointed as the personal representative. The order for costs of propounding the will to be paid out of the residuary estate of the deceased on an indemnity basis was made by the trial judge at the end of the probate trial, in exercise of the court’s discretion (§§98-99).

(6)  Chow Wai Fong v Chau Chi Keung [2023] HKCFI 2784 at §35, was a case where the executors (Ps) sought a declaration that they were entitled to reimbursement from the estate for costs incurred in two sets of proceedings: (a) the HCMP proceedings initiated by the deceased against D1 during her lifetime, concerning the beneficial ownership of funds in a bank account; and (b) the HCAP proceedings in which the executors (Ps) propounded the deceased’s will by contesting the version of the will put forward by D1. Lisa Wong J granted the application for an indemnity in favour of Ps in respect of their costs in both sets of proceedings, on the basis that they had acted as executors in propounding the true version of the will. The crucial point was that the costs liability of the deceased’s estate was never addressed in either set of proceedings. The HCMP proceedings were discontinued by consent with no order as to costs (§12); but costs were awarded in favour of the executors in the HCAP proceedings against the unsuccessful party, without addressing the costs liability of the estate (§§18-19). By contrast, in the present case, the costs liability of the Estate was expressly addressed in the Costs Order.

(7)  Wong Joaning Oliver v Michael Wong and others, HCAP 14/2006, 14/04/2008, was a case where the plaintiff propounded and proved the validity of a 1983 will and disposed of a 2023 will. A Cheung J (as he then was) awarded the plaintiff his entire costs paid out of the estate, on the basis that he had acted “as an executor proving successfully a will in solemn form” (§18). This case is distinguishable from the Foundation’s situation:

(a)  Nobody in Wong Joaning Oliver had come forward to propound the 2003 will. It was not a case of hostile litigation, unlike the present case.

(b)  There was simply no order for costs against an “unsuccessful party”. It was a case within the Second Exception.

(c)  The costs order was made in tandem with the substantive proceeding on the will.

47.None of the cases in the preceding paragraph contradict the general principles set out in §§41-42 above. None of the above cases held that there was a free-standing cause of action for indemnity of costs from an estate. Where the courts in the above cases have awarded costs against the estate, those orders were made in exercise of the courts’ discretion, at the time or soon after the probate proceedings were over. None of the above cases involved invocation of the Order 85 procedure to seek indemnity of costs from an estate after probate proceedings have concluded.

48.The proper principles to apply to the Foundation are those in §42 above, ie the Foundation should recover costs from the unsuccessful Chan Chun Chuen and not the estate, save to the extent already ordered in the Costs Order.

49.In the light of the analyses in this Section, I am not satisfied that the Foundation has any legal entitlement to costs from the estate.

G.  HENDERSON ABUSE ISSUE

50.The Foundation contends that it initially did not seek an indemnity from the Estate because it wanted to see if its costs could be recovered from Chan Chun Chuen in the first place. With respect, an order nisi may leave the door open to an affected party to make an application for variation, including an application for an extension of time to make the variation application. However, Order 42, r.5B(6) is couched in absolute terms. The order nisi shall become absolute 14 days after the decision on costs is pronounced unless varied. It becomes a final judgment on costs which is binding on the parties to the proceedings. Any disagreement has to be pursued on appeal. See RTX Products Hong Kong Ltd v Li Yiu Fai (unrep., HCA 1777/2009, 12 November 2014) at §7 (Anthony Chan J, as he then was).

51.The Costs Order has expressly addressed the final costs position of the Foundation vis-à-vis Chan Chun Chuen and the Estate. It gave rise to res judicata. The Court is functus officio on the issue of the Foundation’s costs in the Probate Proceedings.

52.Alternatively, the Foundation is barred by the doctrine of Henderson v Henderson from seeking another costs order, even if the Court has jurisdiction to vary the Costs Order or add a costs order.

53.The Henderson doctrine is an issue estoppel principle, which precludes a party from raising in subsequent proceedings matters which that party could and should have raised in earlier proceedings: Ko Hon Yue v Chiu Pik Yuk (2012) 15 HKCFAR 72 at §82 (Ma CJ).

54.The Foundation has had 4 opportunities to seek an indemnity from the Estate to cover any shortfall in costs, namely:

(1)  at the end of the trial in HCAP 8/2007 before any costs order was made;

(2)  when it applied to vary the Costs Order Nisi in HCAP 8/2007;

(3)  on appeal to the Court of Appeal against HCAP 8/2007; and

(4)  under the 2012 Summons, and yet the Foundation did not restore that Summons but issued the Reimbursement Application 10 years later.

55.The Foundation failed to do so. In fact, in its skeleton submission for variation of costs in HCAP 8/2007, the Foundation’s position was that the Estate should not bear the Foundation’s costs of the proceedings.  Compare to SJ, who sought and was granted an indemnity against the Estate. Any power of the probate court to order an indemnity was spent upon the sealing of the Costs Order.

56.To the extent the Foundation seeks to invoke the Court’s power to hear a Beddoe application under Order 85, this should be rejected outright.  The established practice is for a Beddoe application to be made promptly either before the trustee brings proceedings or as soon as proceedings are commenced: XXXXXXXXXXXXXXXXXXXXXXXX  Once the proceedings have advanced beyond that stage, an application for reimbursement should be determined by the trial judge after hearing the action: eg Chan Gordon v Lee Wai Hing (No.2) [2011] 2 HKLRD 1029, §§12-13, DHCJ Queeny Au-Yeung, as she then was. 

57.The Reimbursement Application is not framed as a Beddoe application. In any case, for such a complex piece of litigation, the Foundation (in the claimed capacity of a trustee or legatee) should not have waited till long after the litigation ended to seek indemnity on costs under the Gordan Chan principles. And when the trial judge and 2 other tiers of appeal courts have dealt with the question of indemnity, there is no room to invoke the Beddoe jurisdiction again here.

58.Mr Man SC does not shy away from the question of Henderson abuse. He submits that the important question is whether there will be any abuse to the administration of justice and contends that there is none in this case. This leads to the next Section.

H.  DISCRETION ISSUE

59.Even if the Foundation can re-open the issue of costs in the Probate Proceedings, and even if it has a prima facie right to claim for an indemnity from the Estate, the award of costs in contested probate proceedings is in the Court’s discretion: Nina Kung (No 2) at §10. Such discretion is to be exercised in a principled way with a view to reality and justice: Mimi Kar Kee Wong Hung v Raymond Kin Sang Hung (unrep., FACV 10 & 11/2014, 7 July 2015) at §7 (Ma CJ).

60.There are 3 features of the Foundation’s case which indicate that granting the Reimbursement Application may place the administration of justice at risk – (1) delay; (2) lack of necessity and (3) collateral purposes.

H1.  Delay

61.There has been a delay of more than 12 years between the Costs Order and this Reimbursement Application. This is a very substantial delay. It is well-established that delay is an important consideration which the court should take into account when deciding whether to exercise its discretion to make the order sought. Where there was serious delay as amounting to an abuse of process, the court can dismiss the application outright. It is thus incumbent upon the applicant to explain why there was delay or inaction on its part and why, despite the delay or inaction, the court should exercise its discretion to order costs in his favour. Such requirement is consistent with the public interest that there should be finality to litigation and the notion of fairness: c.f. Billion Well Construction Engineering Co Ltd v Long Faith Engineering Ltd [2025] 1 HKLRD 617 at §§31(3), 31(4), 33 (Linda Chan J), in the context of an application for costs against a non-party order s.52A of the High Court Ordinance, Cap 4.

62.The Foundation’s explanation for the delay was to wait and see if its costs could be recovered from Chan Chun Chuen in the first place. This cannot be a valid explanation because:

(1)  The costs orders against Chan Chun Chuen were made on an indemnity basis, not on a trustee basis. There was always an inevitable difference between the two bases of taxation (see §68 below) which the Foundation could have sought redress for. Moreover, there was always a risk (which eventually materialised) that Chan Chun Chuen would not be able to satisfy the substantial costs orders made against him. Mr Man SC accepts, upon this Court’s query, that he cannot escape from the fact that the Foundation could have asked for a “protective costs order” against the Estate at the time it sought costs against Chan Chun Chuen, but failed to do so.

(2)  Even on the Foundation’s own case, it became clear that costs were not recoverable due to Chan Chun Chuen’s bankruptcy on 12 August 2021. Yet, it only filed the Reimbursement Application some 1 ½ years later, on 18 January 2023.

63.Looking at the chronology of events, I agree with Mr Shieh SC that the Reimbursement Application was an afterthought. Quite plainly, the Foundation was labouring under the hope that it could take the entire Estate as legatee, and hence exercise self-help to the assets for its costs. It was only after the CFA Judgment and Barma JA’s Judgment that the Foundation became aware that it was at risk of not being able to become a trustee under the Scheme Arrangement that it issued the OS.

64.Granting the Foundation’s delayed application will cause serious prejudice to the administration of justice. The court takes a broad view of what constitutes prejudice. It includes prejudice to the court, the administration of justice, and other litigants when the Court’s limited resources are abused: Poosaala Ram Prasad v Cathay Pacific Airways Ltd [2025] HKCFI 416 at §24 (Cheng J); Dimitrov v Lau Tak Ming Dominic [2024] 5 HKLRD 487 at §42 (Cheung JA).

65.If the Reimbursement Application is allowed,

(1)  It would be a serious erosion of the principle that there should be finality to litigation: RTX Products at §11.

(2)  The judges dealing with the Probate Proceedings were in the best position to decide if the Estate should bear any part of the Foundation’s costs. This Court is in a disadvantaged position, having to read very substantial documentation in order to exercise a discretion on costs.

(3)  SJ, who was a party to the Probate Proceedings in his capacity as representative of the parens patriae, will be vexed twice.

(4)  It is wrong for Mr Man SC to suggest that the Estate would have a “windfall” whereas the Foundation is to suffer. There was no windfall on costs that the Estate enjoyed. The fact that the 2002 Will stood could not be said to be a windfall to the Estate either.

(5)  A further taxation exercise may be necessary to determine the extent of the Foundation’s entitlement. The process is bound to be protracted given the very substantial sum claimed.

(6)  It would be manifestly prejudicial to the interests of other litigants for the Court’s resources to be taken up in the above manner when the relevant issues ought to have been resolved more than a decade ago.

66.I find that the serious delay was not supported by good explanations. The Reimbursement Application constituted a serious abuse of process.

H2  No necessity for this application

67.At the call-over hearing, I have queried whether the Foundation could seek indemnity for costs when it had applied donations to fund the legal costs of the Probate Proceedings.

68.The evidence before me now discloses that the Foundation’s total costs incurred in the Probate Proceedings were around HK$170,509,614. Its total out of pocket costs were around HK$114,000,000. The Foundation received donations in the sum of HK$147,800,000 from donors who stated that they were unconditional donations, earmarked for the purpose of paying costs of the Probate Proceedings. The shortfall of HK$22,709,613.96 was settled by other general donations. Separately, the Foundation has recovered around HK$87,000,000 from Chan Chun Chuen, when the taxed costs plus interests were more than HK$101 million as of 18 January 2023.

69.A simple calculation shows that after defraying the full costs of the Probate Proceedings, there is still a surplus of around HK$64.3 million (ie HK$ 147.8m + HK$87m – HK$170.5m). The surplus is even greater, at HK$120.8 million, if one only considers the out of pocket costs (ie HK$147.8m + HK$87m – HK$ 114m). It is thus clear that the Foundation has not in fact suffered any financial detriment which requires the Estate to indemnify it.

70.The Foundation contends that the existence of the donations should not affect its entitlement to seek an indemnity from the Estate. It relies on the dicta of Yuen JA in Lam Lai Wah Susanna v Pacific Century Insurance Co Ltd (unrep., CACV 385/2002, 4 March 2003), §10:

“In determining whether [the winning party] can recover costs against [the losing party], …

(1) The first question to be asked is: did the winning party employ the solicitors in the action? In answering this question, it matters not that the solicitors were chosen or appointed for the winning party by a third party on his behalf, so long as they acted for him with his knowledge and assent.

(2) If the answer is “Yes”, it is presumed that the winning party had a prima facie obligation to remunerate the solicitors because that would be the ordinary basis on which a professional person is employed to represent a party.

(3) It is for the losing party to rebut that presumption. The presumption is not rebutted simply by evidence that a third party had also undertaken to pay the solicitors costs. However, the presumption would be rebutted if there is evidence of an agreement made by the solicitors with the winning party, or with the third party, that under no circumstances would the winning party be liable to them for the costs of the litigation incurred on his behalf.”

71.The specific issue of whether donations would prevent a claim for costs on the indemnity principle was considered in Sir Henry Royce Memorial Foundation v Mark Grefory Hardy [2021] EWHC 817 (Ch) at §§13-17:

(1)  The judge assumed that “the defendant’s argument is that, if the claimant has received monies from third parties to cover its legal costs, it would be a breach of the indemnity principle for the claimant to recover its costs from the defendant. (§13)

(2)  Costs as between party and party are given by the law as an indemnity to the person entitled to: they are not imposed as a punishment on the party who pays them, nor given as a bonus to the party who receives them. (§14)

(3)  In that case, the claimant incurred costs with its solicitors under the contract of engagement which it had entered into. The indemnity principle prevents the claimant recovering more than its liability to the solicitors. (§16)

(4)  The fact that third parties may have made donations with a view to covering this liability, in whole or in part, does not breach the indemnity principle. Those donations simply form part of the funds of the claimant held for the purposes of the charity, which must include discharging its proper liabilities, including those to the solicitors.” (§16)

72.With respect, these principles apply to costs as between the Foundation (winning party) and Chan Chun Chuen (losing party). As against the Estate, the Foundation is someone extraneous to the Estate seeking indemnity from the Estate. The Foundation is a charitable and not profit-making entity. It exists to receive donations and use them on charitable objects. Where its costs are fully covered by unconditional donations, why should it obtain a windfall by seeking indemnity for a non-existent “shortfall” in costs from the Estate? What should it do with the HK$147.8 million donations if it were successful in the Reimbursement Application? The Foundation did not even undertake to return the donations to the donors: cf Lewin on Trust, 20^th ed, §9-046. And if Order 85 is relevant at all, why is it in the best interests of the Estate to provide an indemnity to the Foundation who has not suffered financial detriment?

73.I find that the Reimbursement Application is a total abuse of process. The issue I have raised at the call-over hearing has not been satisfactorily addressed by the Foundation.

H3.  Collateral purposes of the Reimbursement Application

74.When viewed in light of both the significant delay and the fact that the Reimbursement Application (if granted) would give the Foundation a significant surplus of at least HK$64.3 million, it becomes apparent that the Reimbursement Application was not prompted by the Foundation’s belated recognition that its costs could not be recovered from Chan Chun Chuen but, rather, for collateral purposes:

(1)  To bolster the Foundation’s financial position so as to satisfy the Solvency Conditions in the Scheme Proceedings; and

(2)  To benefit YH Lam, the lender of a HK$42.85 million loan with interest found to be at the rate of 60% per annum.

75.With regard to the first collateral purpose, the timing of the Reimbursement Application in the light of the Scheme Proceedings is very telling.

(1)  Barma JA’s Judgment on 21 October 2022 laid down the 2 Conditions.

(2)  Barma JA’s Directions on 3 November 2022 required, amongst others, the filing of evidence in respect of the 2 Conditions. In particular, the parties were directed to file evidence on SJ’s “particulars of concerns and questions that appear to exist on the issue of whether [the Foundation] is in a sound financial state and is solvent on both a balance sheet test and a cash flow test having regard to both present liabilities and any future, prospective and contingent liabilities”.

(3)  On 1 December 2022, SJ filed particulars of his concerns and questions on the issue of whether the Foundation could satisfy the Solvency Condition.

(4)  On 29 December 2022, the Foundation filed its first round of evidence in respect of the Solvency Condition.

(5)  Shortly afterwards, on 18 January 2023, the Reimbursement Application was taken out.

76.Considering timing, it was plain for all to see that the Reimbursement Application was the Foundation’s attempt to boost its financial position after its solvency has been put in issue in the Scheme Proceedings. At the hearing of the Solvency Condition in July 2023, the Foundation in fact placed significant reliance on the Reimbursement Application and the anticipated recovery of substantial sums thereunder as evidence of its financial standing.

77.With regard to the second collateral purpose, given that the Foundation is insolvent, any costs now recovered from the Estate would only serve the interests of its creditors, amongst whom is YH Lam.

78.There was a dispute as to whether the HK$42.85 million from YH Lam was a loan or an unconditional donation. The Court of Appeal held that it was a loan and not donation. The interest rate for the loan was 60% per annum, rather than 48% as previously submitted by the Foundation (§61).

79.I question who, then in control of a charity, would ever have, in his right mind, taken out a loan at such a high interest rate. Granting the Reimbursement Application with the risk of the Estate’s money being used to repay an extortionate loan, would bring the law into disrepute.

80.In any case, the surplus of HK$64.3 million (if not HK$120.8 million) would be sufficient to satisfy the capital of HK$42.85 million plus some interest (if granted by Leung J).

81.In sum, even if I have the jurisdiction to order an indemnity against the Estate, I would decline to do so for the reasons in Section H. The Reimbursement Application is an abuse of process.

I.  CONCLUSION AND COSTS

82.The Foundation does not have locus to invoke Order 85. There is no free-standing cause of action for the Foundation to seek indemnity of costs against the Estate. For contentious probate proceedings, the principle is that costs should follow the event and be borne by the losing party, unless the 2 established Exceptions apply. The Costs Order was a final order. The Foundation has had 4 opportunities to apply for costs against the Estate but failed to do so; instead it took out this Reimbursement Application 12 years after the Costs Order was first made. This Court is functus. This application falls foul of the Henderson v Henderson principle and is a serious abuse of process. Further, due to the Foundation’s serious delay of over 12 years, the lack of necessity due to lack of financial detriment, and its collateral purposes in seeking indemnity from the Estate, the Court would not exercise its discretion (if it does have) to grant the indemnity. I therefore dismiss the Reimbursement Application.

83.The finding in any of Sections E to H would have been sufficient, in itself, to dismiss this abusive application. I therefore order costs, with certificates for 2 counsel and 2 fee earners, against the Foundation on indemnity basis. I summarily assess the costs of SJ at HK$860,779 and of the Administrators at HK$1,500,000. For the avoidance of doubt, such costs of SJ shall first be paid out of the Estate, and the Foundation shall reimburse the Estate accordingly. I make an order nisi accordingly.

84.I thank counsel for their assistance.

Mr Bernard Man SC and Mr Justin Lam, instructed by Chiu, Szeto and Cheng, for the Plaintiff

Mr Michael Yin and Mr Francis Chung, instructed by Department of Justice, for the 1^st Defendant

Mr Paul Shieh SC and Mr Danny Tang, instructed by Gibson, Dunn & Crutcher, for the 2^nd Defendant