Wah Ying Cheong Co Ltd v. Chan Kwok Ping and Others

HCMP003059B/1997

HCMP 3059/1997

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 3059 OF 1997

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Coram: Hon Lam J in Chambers

Date of Hearing: 10 March 2004

Date of Decision On Costs: 17 March 2004

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DECISION ON COSTS

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1.For reasons given in my Decision on 30 January 2004, I dismissed the summons of 13 August 1999 taken out by the Plaintiff. Parties came back on 10 March 2004 to address me on the further conduct of the matter and on question of costs. I gave directions for further conduct at the hearing, the purpose of those directions were to pave the way for proper applications to the Probate Registry for grant of letters of administration in respect of the 2nd, 3rd and 4th Defendants. As I mentioned at the hearing, it is now up to the individual descendants of each of the deceased to decide whether he or she wishes to make such application and if there were more than one applicant, the matter would have to be resolved in the context of the probate applications. These are not matters that could be dealt with in the context of the present proceedings. Once a Grant is made for any one of the three estates, the personal representative so appointed would then be entitled to seek the release of the share of that estate in respect of the sale proceeds of the Property and the Credit Balance pursuant to the order of Rogers J of 19 November 1997. The order of Rogers J already provided for the discharge of the Plaintiff upon such release.

2.The other issue that I have to deal with is costs. As far as costs of the 2nd to 4th Defendants are concerned, there is no controversy. I see no reason why I should not follow the approach of Rogers J on 19 November 1997. I therefore order that the costs of the 2nd to 4th Defendants be paid out of the proceeds of sale, such costs to be taxed pursuant to Order 62 Rule 31. Given the basis of taxation, I do not think the 3rd Defendant needs any certificate for two counsel. There is no suggestion that the engagement of two counsel on two occasions was not in accordance with the duty of the 3rd Defendant as trustee or personal representative.

3.As regards the costs of the Plaintiff, the position is quite different. I recognize that the Plaintiff is in the position of a trustee and as a general rule, a trustee should get his costs out of the trust fund in respect of proper applications concerning the administration of the trust. However, there are situations where a trustee can be ordered to bear his own costs. If a trustee is guilty of unreasonable and improper conduct in commencing and continuing proceedings, the court can order that he should not be entitled to costs out of the trust estate (see Re England's Settlement Trusts [1918] 1 Ch 24). Counsel did not dispute this principle. Both Ms Chan (for the Plaintiff) and Ms Lam (for the 3rd Defendant) referred this court to Paragraph 90.1203 of Halsbury's Laws of Hong Kong, Vol. 5(2) 2000 Reissue. It is suggested in that paragraph that the court may deprive a trustee the benefit of his costs being paid out of the trust fund if he has acted unreasonably or in substance acted for his own benefit. I also find Paras. 800 and 802 of Halsbury's Laws of England 4th Edn. Vol. 48, 2000 Reissue, to be relevant. Paragraph 802 reads,

"A trustee will not be allowed to charge against the trust property the costs of unnecessary proceedings or of elaborate proceedings where he might have obtained his object by a simpler and less expensive procedure. Accordingly, where a trustee incurs or by his conduct occasions excessive or unnecessary costs in respect of the trust estate, he is deprived of his costs and may he held personally liable to pay the costs of the proceedings so far as they are excessive or unnecessary. Counsel's opinion does not always and necessarily justify a trustee in bringing or defending proceedings."

4.I have dismissed the summons on the ground that it was misconceived. Whilst I appreciate that the Plaintiff was trying to discharge its duties regarding the distribution of the sale proceeds, there are features in the prosecution of this summons by the Plaintiff that could justify censure by the court in terms of costs.

5.First, the Plaintiff repeatedly disregarded observations by the court that it might not be moving in the right direction in seeking the relief in the summons. When the summons first came before Le Pichon J (as she then was) on 3 September 1999, Her Ladyship observed that the distribution of the proceeds was a question of probate and administration of the estates and should be governed by the law of succession. The learned judge took the view that the matter had not been carefully thought through by the Plaintiff and adjourned the matter to give the Plaintiff a chance to research into the points raised (see p. 14 of the Transcript of that hearing).

6.The Plaintiff did not proceed with the matter until more than two years later. Representation orders were made by Chu J on 11 April 2002. Then the matter came back to this court on 28 February 2003. I have set out the history of the proceedings as from 28 February 2003 in my Decision of 27 August 2003. It is quite obvious that despite the comments of Le Pichon J, the Plaintiff and those advising it did not give any careful considerations to the implications under the law of probate and administration and the law of succession to the propriety of the relief sought in the summons. This court framed three specific issues for the consideration of the parties at the hearing and it was adjourned.

7.Instead of looking into the right direction, counsel for the Plaintiff tried to argue on 2 April 2003 that Paragraph 3 of the order of Rogers J in effect empowered the Plaintiff to take up the role as personal representative of the three estates. This argument was further pursued on 31 July 2003. Due to a slight ambiguity in Paragraph 3 of the order, I did not decide the point in my Decision of 27 August 2003 in the absence of the transcript of the hearing before Rogers J. I have however highlighted the difficulties faced by the Plaintiff if one were to give proper consideration of the law of probate and administration and the law of succession. Leading counsel for the Plaintiff reckoned the difficulties by suggesting that an unusual meaning should be given to the nomenclature of the 2nd to 4th Defendants. Doubts were expressed by this court as to that contention in the Decision of 27 August 2003.

8.Despite these comments from the bench over several hearings, the Plaintiff still persisted in seeking relief in terms of the summons. At the hearing on 13 January 2004, Ms Chan relied on some plainly unarguable contentions to support the Plaintiff's stance. I have exposed the fallacy of those arguments in my Decision of 30 January 2004. Those contentions fly in the face of the material before the court evidencing the previous positions and conducts of the Plaintiff. One example is the change of stance as to the meaning of the nomenclature of the 2nd to 4th Defendants. The position adopted by the Plaintiff on 13 January 2004 was clearly inconsistent with its earlier Order 15 Rule 6A application.

9.Whilst this court appreciates that it would not be right to sanction a trustee in terms of costs whenever it decides against a trustee, the repeated ignorance by a trustee to obvious difficulties in his application pinpointed by the court must be a relevant consideration in deciding whether the case comes within the exceptions mentioned in Paragraph 3 above.

10.Second, the Plaintiff had been offered alternative solutions. Unfortunately, they were all rejected by the Plaintiff. First of all, this court had explored with the parties the possibility of payment into court. This was rejected by the Plaintiff on the ground that it had a sense of mission to see it through. There is nothing wrong in that. However, it would be wrong to allow this mission to be carried to an extent to impose an unreasonable burden on the trust fund. Excluding the hearing before Chu J (which I accept to be necessary), it took five hearings to deal with the matter. Leading counsel was engaged by the Plaintiff. A lot of evidence had been filed. Hearing bundles were voluminous. The costs incurred must have been substantial. If the whole of the costs were to be shouldered by the trust fund (the balance of the sale proceeds was, according to a letter dated 10 September 2003 from the Plaintiff's solicitors, was $6,048,163.02), it would deplete a significant portion thereof. I have already voiced my concern as to the cost implications at the hearing on 2 April 2003 and repeated the same in Paragraph 20 of my Decision of 27 August 2003.

11.More significantly, after the Decision of 27 August 2003 had been handed down, there was a series of correspondence between the solicitors for the Plaintiff and solicitors for the 3rd Defendant. In a letter dated 5 September 2003, the 3rd Defendant set out his position and proposed a solution to save unnecessary costs. Instead of responding to the same constructively, the Plaintiff's solicitor took an aggressive stance and tried to bring up matters in respect of distribution of dividends in 1990 and 1991. As I see it, those matters have no relevance at all to the issues that emerged from the summons and my Decision of 27 August 2003. The raising of such matters served no constructive purpose. Instead, it led to a chain of lengthy and unhelpful correspondence between the solicitors which only had the effect of escalating costs. I implore solicitors to be more cost sensitive in corresponding with each other. Most of the time, I do not find this sort of correspondence conducive to the resolution of the disputes between parties and at times quite out of proportion, as such not very cost effective.

12.Third, the repeated changes of stance by the Plaintiff in respect of the fundamental issue, viz. who were the beneficiaries under the trust in respect of which the Plaintiff is the trustee, showed that the Plaintiff had not properly considered the point. It is regrettable notwithstanding that the Plaintiff had been given more than four years to deliberate on the matter with the benefit of observations from the bench, it still failed to get it right and obstinately held onto an indefensible position.

13.Ms Chan submitted that the Plaintiff was all along acting with the good intention of procuring a distribution of the proceeds. She also relied on the fact that nobody had taken any step to secure the Grant of Letters of Administration in respect of the three estates and the Defendants initially did not oppose the summons. She urged this court to bear in mind the history and nature of the Plaintiff company. She argued that the Defendants also failed to consider the fundamental issues and they were as confused as the Plaintiff.

14.I take these matters into account but regrettably, I cannot accept these factors as valid reasons for exonerating the Plaintiff from the costs consequences of its unreasonable conduct in the prosecution of the summons which caused unnecessary and excessive costs to be incurred. As the party taking out the summons, the Plaintiff bore the prime responsibility in ensuring that the relief sought was correct. Further, by 2 April 2003, the Defendants agreed that the Plaintiff had no role to play in the distribution to descendants as opposed to the distribution to the proper personal representatives of the estates. The matter dragged on solely because of the stance of the Plaintiff. A lot of costs had been incurred as a result thereof. Hence, even though the Plaintiff might not have issued the summons unreasonably, I am of the view that it has continued with the prosecution of the same unreasonably after 2 April 2003.

15.However, in the light of those matters urged upon this court by Ms Chan, I would not order the Plaintiff to bear the costs of the Defendants. As said, the Defendants shall have their costs out of the trust fund.

16.In relation to the costs of the Plaintiff, I hold that it should bear its own costs incurred after 2 April 2003. For costs incurred prior to that date, the Plaintiff can have its costs out of the trust fund, such costs to be taxed pursuant to Order 62 Rule 31.

17.I propose to release this Decision on Costs for publication and if parties have any comments, they could write to this court within 5 days.

Representation:

Miss Terry S C Chan, instructed by Vincent T K Cheung, Yap & Co., for the Plaintiff

Ms Michelle Lam, instructed by Augustine C Y Tong & Co., for the 1st and 3rd Defendants

Mr Gary Chung, instructed by Leung, Chan & Pang, for the 2nd and 4th Defendants