Li Kwok Po David and Another v. Mong Sien Yee Cynthia and Others

CACV 34/2012

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 34 OF 2012

(ON APPEAL FROM HCMP 2452 OF 2011)

_______________

_______________

_______________

J U D G M E N T

_______________

Hon Poon J (giving judgment of the Court) :

1.This is an appeal by the 3^rd and 4^th defendants (“Madam Wong” and “Perlie”) against the Beddoe Order and the Costs Orders[1] made by Deputy Judge L Chan (as he then was) on 30 January 2012.

A.   BACKGROUND

A1.   The parties

2.The Deceased was a wealthy businessman.  He was the founder of the Shun Hing group of companies, which carried on the business of, inter alia, distributing electrical products under National, Panasonic and other brand names.  The holding company of the Sung Hing group is Shun Hing Holdings Limited (“SHH”).

3.The Deceased had two wives.  His first wife was the 5^th defendant (“Madam Yang”), with whom he had 5 children[2] (“the Children”), including the 1^st defendant (“David”) and the 2^nd defendant (“Cynthia”).  His first marriage was dissolved when a decree absolute was granted on 28 January 2002 in HCMC3/2001. Madam Wong was the Deceased’s second wife, whom he married on 1 August 2005. They first met in 1989.  They soon became lovers and gave birth to Perlie in December 1994.

4.The 6^th defendant (“TCI”) is a Liberian company controlled by Madam Yang and the Children.

5.The Deceased made a will on 13 June 2007 and a codicil on 14 April 2008 (collectively “the Will”).  Under the Will, each of David and Cynthia is given specific legacies, while Madam Wong and Perlie are the residuary beneficiaries.  The Deceased died on 21 July 2010.  On 30 December 2010, probate of the Will was granted to the plaintiffs as executors (“the Executors”).

A2.   The HS Trust

6.By a trust deed dated 20 November 1989 (“the HS Trust Deed”), the Deceased set up the Huge Surplus Trust, a non-exhaustive discretionary trust (“the HS Trust”), to hold his assets including shares in SHH transferred from TCI.  The HS Trust Deed is governed by the laws of the British Virgin Islands.  At the time of the divorce proceedings commenced by Madam Yang, the Trust held 500,000 shares in SHH, that is, 50% of its issued shares.

7.Presently, the Children are the only specified beneficiaries of the HS Trust.  Madam Wong claims that pursuant to the Deceased’s wish as contained in a trustee’s memorandum dated 18 May 2009 (“the Memorandum”), she and Perlie should be added as beneficiaries with 15% and 10% entitlement respectively.

A3.   HCMC3/2001

8.On 16 February 2001, Madam Yang commenced divorce proceedings in the Family Court (FCMC1515/2001).  On 17 April 2001, Madam Wong was joined as a respondent when Madam Yang amended the petition to allege adultery as a further ground for divorce.  The proceedings were subsequently transferred to the Court of First Instance on 13 August 2001 and became HCMC3/2001.

9.In the course of the ancillary relief proceedings, Madam Yang issued a summons dated 7 March 2002 under section 17 of the Matrimonial Proceedings and Property Ordinance,[3] seeking to set aside a resolution of the SHH shareholders to transfer certain shares to the HS Trust.  By another summons dated 7 May 2002, Madam Yang sought a declaration that the assets held by the HS Trust were held on resulting and/or constructive trust for the Deceased, herself and/or TCI.  (These two summonses are referred to as “the Summonses” collectively below.)  Madam Yang was a party to the Summonses.

10.The ancillary relief proceedings were subsequently settled by way of a consent order dated 27 September 2002.  Neither of the Summonses was determined.

A4.   Claims against the estate

11.After the Deceased’s death, TCI alleged that during his lifetime, he was indebted to the company to the tune of US$188 million. SHH also alleged a debt due from the Deceased in the region of HK$508 million. These sizable claims, if established, would effectively wipe out the residuary estate to which Madam Wong and Perlie are entitled under the Will.  It is their case that these claims were instigated by Madam Yang and/or her family.

12.On 19 April 2011, the Executors commenced HCMP730/2011, seeking directions for the administration of the estate.  TCI and Madam Yang were joined as respondents.  One of the directions that the Executors sought is “whether and is so what steps ought to be taken by [the Executors] in defending and/or compromising the claims of [TCI and Madam Yang]”.

A5.   Actions relating to the HS Trust

13.On 19 October 2010, Madam Yang, the Children and TCI commenced HCA1572/2010 against the trustees of the HS Trust and the company holding the HS Trust assets, seeking declarations in relation to their beneficial entitlement to the HS Trust and consequential relief.  Madam Wong and Perlie are not parties to the action, although it is not disputed that the avowed purpose of the action is to exclude them from benefiting from the HS Trust.

14.Lawyers acting for Madam Wong had tried to seek information from the trustees as to the administration and distribution of the HS Trust but to no avail.  The trustees took the view that she and Perlie are not currently specified beneficiaries and that they do not have any interest in the HS Trust.

15.Separately, the trustees of the HS Trust have commenced two actions in the BVI to seek directions from the court on, inter alia, how they should respond to the HCA1572/2010 and the proper construction of the HS Trust and in particular, whether they have the power to vary the beneficial interest by implementing the Memorandum referred to above. Madam Wong has applied successfully to be joined as a party to the BVI proceedings.

16.The above proceedings in Hong Kong and BVI gave rise to various satellite applications.

A6.   Madam Yang’s disclosure application

17.The first was taken out by Madam Yang on 23 May 2011 in HCMC3/2001, in which she sought to be discharged from the implied undertaking of confidentiality in connection with the documents adduced in the ancillary relief proceedings.  Madam Wong then applied to inspect the court file in relation to the ancillary relief proceedings so that she could have access to the Madam Yang’s summons and the related documents, which was refused by the court on 29 July 2011.  Having obtained a Beddoe order, the Executors successfully opposed Madam Yang’s application, which was dismissed by the court on 8 December 2011.

A7.   Madam Wong’s disclosure application

18.Madam Wong then took out her own application for disclosure in HCMC3/2001 on 12 October 2011.  She complained that she had been handicapped by the lack of documentary evidence in her attempt to assert her and Perlie’s claims in the HS Trust.  She sought an order releasing her from her implied undertaking not to use the documents set out in the schedule to the summons (“the Documents”) for any purpose other than the proceedings in which they were disclosed, namely the Summonses and an order permitting her to use the said documents in proceedings in BVI and, if so advised, in Hong Kong for the purpose of seeking the assistance of the court in ensuring the proper administration of the HS Trust and the trust assets.

19.The Documents were produced in the course of the Summonses.  They included the HS Trust Deed, documents relating to the creation of the HS Trust and its administration, and a number of key documents relating to TCI and the part it played.

A8.   The Beddoe application

20.In response, the Executors took the view that they are duty bound to protect the interest of the Deceased and that Madam Wong’s disclosure application should be opposed.  So they took out the present Beddoe application, by way of originating summons, which was returnable before the Deputy Judge on 30 January 2012 (“the Hearing”).

21.The Hearing, set down at 9:30 am for 30 minutes, was the first hearing for the originating summons.  The Executors were represented by Mr Chan, SC leading Mr Yin.  Madam Yang, David, Cynthia and TCI did not appear as they did not oppose the Beddoe application.  Madam Wong and Perlie were represented by Ms Po.  The Executors placed before the Judge a bundle, containing the evidence in support and counsel’s opinion, which was, in accordance with the well established rule of practice, not made available to Madam Wong and Perlie and their legal representatives.  The Deputy Judge heard submissions from counsel, which lasted for about 15 minutes.  He then adjourned the matter and gave his reasoned decision at 4 p.m. on the same day.

22.In her written submissions, Ms Po acknowledged that while the Beddoe application was a matter between the court and the Executors but went on to state that Madam Wong and Perlie wished to draw the court’s attention to various matters.  Ms Po then submitted that the Executors should not oppose Madam Wong’s disclosure application for two reasons and, logically, should not expend the Deceased’s estate’s funds in the opposition.

23.The first reason was that the right to insist on the confidentiality in legal proceedings belonged to the Deceased and accrued to the residuary estate upon his death.  Hence, the Executors should exercise the right in favour of the residuary beneficiaries and not otherwise.  This was rejected by the Deputy Judge, who observed that it is incorrect to equate the interests of the estate with that of the residuary legatees.

24.The second reason was that the Executors’ first and foremost duty is to protect the interests of the residuary beneficiaries, who are seeking to protect their legitimate interest under the HS Trust granted to them by the Deceased.  The Executors should accordingly assist them in Madam Wong’s application, rather than to oppose or obstruct it.  That was also rejected by the Deputy Judge.  He said the Executors’ utmost duty is to protect the interests of the estate, and it is in the interests of the estate to maintain the integrity of the Deceased’s privacy, hence the confidentiality in legal proceedings.

25.Ms Po went on to submit that the Executors should have regard to the Deceased’s wishes as to how to dispose his trust properties.  They should therefore assist Madam Wong in her application.  The Deputy Judge did not accept the submission, noting that Ms Po had submitted no reason why the Deceased’s privacy should be invaded in order to respect his wishes or how his wishes could be better respected by plundering his privacy.

26.Finally, the Deputy Judge considered the proposed stance of the Executors in Madam Wong’s disclosure application proper.

27.The Deputy Judge ordered that the Executors be at liberty to apply the funds of the Deceased’s estate towards payment of and/or that they be indemnified by the Deceased’s estate in respect of so much of the costs as may be incurred by them in contesting Madam Wong’s application, including, without limitation, the costs which may be incurred in any appeals by Madam Wong (“the Beddoe Order”).

28.The Deputy Judge further ordered that the Executors’ costs of the application, save for the Hearing, be paid out of the Deceased’s estate on a common fund basis and that the costs of and pertaining to the Hearing be paid by Madam Wong with a certificate for two counsel (“the Costs Orders”).  He ordered costs against Madam Wong because he considered that no hearing would have been required for the disposal of the application but for the desire of Madam Wong to place before the court submissions which were in substance opposition.

B.   PROPER PROCEDURE

29.At the outset, in light of how the matter was processed before the Deputy Judge, we consider it necessary to say a few words on the proper procedure of a Beddoe application[4] when a beneficiary is an opposing party to the proceedings for which directions are sought by the trustee.  What we are going to say will also set the discussion of the parties’ submissions advanced before us in context.

30.For present purpose, we will refer to the trustee of a trust or an executor or administrator of an estate who takes out the Beddoe application as “the Trustee”; the trust or estate concerned as “the Trust”; the beneficiary or beneficiaries of the Trust as “the Beneficiary” or “the Beneficiaries”; the proceedings which the Trustee intends to commence, defend or take part in as “the Main Action”; and the Beneficiary who opposes the Trustee in the Main Action as “the Defendant Beneficiary”.

31.Ordinarily, a Trustee is entitled to an indemnity out of the Trust against all charges and expenses properly incurred by him.  To protect himself against the possibility that it may be held that the charges and expenses incurred by him in the Main Action are not proper, thus depriving him of the indemnity and exposing him to personal liability of costs, the Trustee may seek the court’s direction about the conduct of the Main Action by making a Beddoe application under Order 85, rule 2 of the Rules of the High Court[5]. As explained by Cotton LJ in Re Beddoe, Downes v Cottam :[6]

“… all litigation should be avoided, unless there is such a chance of success as to render it desirable in the interests of the estate that the necessary risk should be incurred. If a trustee is doubtful as to the wisdom of prosecuting or defending a lawsuit, he is provided by the law with an inexpensive method of solving his doubts in the interest of the trust. He has only to take out an originating summons, state the point under discussion, and ask the Court whether the point is one which should be fought out or abandoned. To embark in a lawsuit at the risk of the fund without this salutary precaution might often be to speculate in law with money that belongs to other people.”

32.Once the court’s sanction is obtained, the costs incurred by the Trustee in conducting the Main Action in the approved manner will be recoverable from the Trust.

33.The function of a Beddoe application is to predetermine the question of recovery of costs of the Main Action from the Trust by way of indemnity to the Trustee as between the Trustee and the Beneficiaries.  Put another way, what is to be predetermined is whether as between them the costs to be incurred by the Trustee in the proposed conduct of the Main Action should be recovered by him as expenses of the Trust.  Since the question to be decided in the Beddoe application directly affects the Beneficiaries, namely whether the Trust money should be spent or placed at risk in the Main Action, they are necessary parties to the Beddoe proceedings and are entitled to be heard on that question.

34.However, in the case of a Defendant Beneficiary, it is the well established rule of practice that :

(1)  he is not entitled to be heard when the merits of the Main Action are discussed before the Beddoe court (“the 1^st Rule”) and; that

(2)  he is normally not entitled to have access to the evidence adduced by the Trust in support of the Beddoe application (‘the 2^nd Rule”).

35.The leading authority on this practice is Re Moritz, where Wynn-Parry J said :[7]

“Speaking for myself, so far as I know, it has been the practice of this court, without exception, over a great many years, that where, in such as case as this, application is made by a trustee, ex necessis where there are disputes, for directions from the court as to whether or not proceedings should be brought against the defendants, those defendants are not entitled to be heard upon that application. The court acts upon such evidence as is placed before it and it expresses itself one way or the other.

…

As I understand it, the practice in this Division is that where a trustee finds it is compelled to ask for directions of the court as to whether or not certain proceedings should be taken, while it is proper and indeed necessary to join the parties against whom the proposed relief is sought, those parties should not be present in Chambers when the matter is debated; and they should not be furnished with the evidence upon which the court is asked to act.”

The general rule of practice stated by Wynn-Parry J embraces both the 1^st and 2^nd Rules.

36.The rationale behind the rule of practice is obvious.  Because of his opposing interest in the Main Action, the Defendant Beneficiary should not be present when the merits of the Main Action are discussed since they might hear something they should not about the strength or weakness of the Trustee’s case or not be allowed to have access to the evidence adduced by the Trustee in support of the Beddoe application, which necessarily addresses the merits of the Trustee’s case. 

37.This general rule of practice was endorsed by Wilberfoce J (as he then was) in Re Eaton :[8]

“… I am satisfied … that Re Mortiz correctly reflects the practice and correctly states the view which is followed in this Division and moreover that this practice is correct. Re Moritz does, however, do no more than to state a general rule and it seems to me that the court in dealing with matters, acting, as it does, essentially in an administrative capacity, should, and does, endeavour to adjust its actions to the circumstances of the individual cases with a view to doing justice so far as possible to all the parties.”

38.However, the facts in Re Eaton show that the 2^nd Rule is not an immutable rule.  There, Wilberforce J directed that leading counsel’s opinions and instructions were to be supplied to the defendant even before the Beddoe hearing.[9]  His Lordship explained his decision thus :[10]

“In principle, the course to be followed is that which Wynn-Parry J indicted in Re Moritz. I endorse that as representing the appropriate general practice of the court : but I propose to adapt it, so far as practicable, to the circumstances of this case by giving the two specific directions or indications which I have mentioned.”

39.Accordingly, guided by the need to do justice to the case, the Beddoe court may direct evidence adduced by the Trustee, with necessary safeguards such as redaction, to be provided to the Defendant Beneficiary.  This is a matter entirely for the Beddoe court.  For our part, we think the circumstances that would persuade the Beddoe court to exercise the discretion in favour of the Defendant Beneficiary must be very rare.

40.While the Beddoe court may adapt the 2^nd Rule in order to do justice to the particular case, the 1^st Rule firmly remains intact.

41.It has been said that a Defendant Beneficiary may address any arguments he may wish to the court and indeed should be permitted to participate fully in the proceedings save only for their absence when the strength or weakness of the trustee’s case is considered by the court.[11]  We in principle agree with this proposition, but subject to one very important caveat, which is this.

42.As noted, the Defendant Beneficiary should not be present when the merits of the Main Action are discussed.  Occasionally, as is the case here, the Defendant Beneficiary may seek to argue that since the Trustee’s proposed course in the Main Action is not supportable, it would be contrary to the interest of the Trust to allow him to expend the Trust money to so conduct himself in the Main Action.  But even so, the Beddoe court should be slow to receive submissions from the Defendant Beneficiary on the merits of the Main Action unless it can be readily demonstrated that, as a simple knock-out point, the Trustee’s proposed course is wholly devoid of merits.  We say so for three reasons.

43.First, the Beddoe jurisdiction, essentially administrative, is designed to provide guidance to the Trustee as to the proper exercise of his powers in the problematic circumstances with which he is faced.  It does not predetermine the merits of the Main Action.  It would be wrong in principle to allow the Defendant Beneficiary to turn the Beddoe proceedings into a platform for him to ventilate or rehearse his arguments on merits.

44.Second, given his vested interest in the Main Action, any submissions made by the Defendant Beneficiary on merits must be treated with great circumspection.  Further, the Defendant Beneficiary normally does not have access to the evidence relied on by the Trustee in support of the Beddoe application.  Even if he does, the evidence will be severely curtailed. He does not know in full as to how the Trustee exactly addresses the court on merits.  And the court will not invite the Trustee to deal with merits in his presence.  In the circumstances, the value of receiving the Defendant Beneficiary’s submissions on merits must be extremely doubtful.

45.Third, Beddoe proceedings are meant to be inexpensive and should be capable of being disposed of expeditiously.  If the court were to allow the Defendant Beneficiary to make substantive submissions on merits, there is an obvious risk that the proceedings may become drawn out and expensive.

46.In our view, in satisfying the Beddoe court that his proposed course in the Main Action should be sanctioned, what the Trustee needs to show is no more than a reasonably arguable case on merits.  (We have not heard any submissions to the contrary from leading counsel appearing before us.)  As long as the Trustee passes the threshold, any submission by the Defendant Beneficiary based on lack of merits is doomed to fail.

47.Once the Beddoe court forms the view that the Trustee has passed the threshold, and it should have no difficulty to do so after reading the evidence in support and the written submissions lodged by the Trustee and any written submissions by the Defendant Beneficiary, it should not allow the Defendant Beneficiary to dwell on merits any further.  If the Defendant Beneficiary has no further submission to make, then he should be asked to leave the courtroom so that the court can discuss the matter further with the Trustee in his absence.  Or if no further discussion with the Trustee in the absence of the Defendant Beneficiary is required, the court can proceed to determine on the Beddoe application.

48.Turning to the proceedings below, as we understand it, Ms Po’s submissions really went into the merits of the Trustee’s proposed opposition to Madam Wong’s disclosure application.  But she was unable to deliver a simple knock out point.  Presumably, Mr Chan must have made his reply submissions on merits.  With respect to the Deputy Judge, we do not think it was necessary to receive further oral submissions on merits.  But because he had, he concluded that Madam Wong had played an excessive role in opposing the Beddoe application and visited her with the Executors’ costs for the Hearing.  As we will demonstrate in a moment, he had erred in so doing.

49.So much for the procedure.  We now come to the substance of this appeal.

C.   DISCUSSION

50.We first deal with the Beddoe Order.

C1.   The Beddoe Order

51.The Documents were disclosed in the course of the ancillary relief proceedings, which were held in chambers not open to public under rule 81(2) of the Matrimonial Causes Rules.[12]  They are subject to the implied undertaking by the parties thereto not to use them for any collateral purpose other than the ancillary proceedings.  The juridical basis of such an implied undertaking is admirably explained by Lord Keith of Kinkel in Home Office v Harman :[13]

“Discovery constitutes a very serious invasion of the privacy and confidentiality of a litigant’s affairs. It forms part of English legal procedure because the public interest in securing that justice is done between parties is considered to outweigh the private and public interest in the maintenance of confidentiality. But the process should not be allowed to place upon the litigant any harsher or more oppressive burden than is strictly required for the purpose of securing that justice is done… The implied obligation not to make improper use of discovered documents is, however, independent of any obligation under the general law relating to confidentiality. It affords a particular protection accorded in the interests of the proper administration of justice. It is owed not to the owner of the documents but to the court, and the function of the court in seeing that the obligation is observed is directed to the maintenance of those interests, and not to the enforcement of the law relating to confidentiality.”

52.The implied undertaking is of particular importance in ancillary relief proceedings, as explained by the English Court of Appeal in Clibbery v Allan where Dame Elizabeth Butler-Sloss P, after reviewing the relevant authorities, said :[14]

“72. In each of the above case, the obligation on the parties to make full and frank disclosure in their financial disputes was of such importance that it was in the public interest to preserve confidentiality of that information by means of the implied undertaking. In order to achieve compliance with disclosure by the party under the obligation to do so, the party seeking the disclosure is required by the court only to use that information for the purposes of the proceedings. It is the protection provided by the court in cases of compulsion. Ancillary relief applications are appropriately heard in private in accordance with the 1991 rules, see above. The public may not, without leave of the court, hear the evidence given in these applications. It would make a nonsense of the use of an implied undertaking if information about the means of a party, in some cases sensitive information, could be made public as soon as the substantive hearing commenced. Information disclosed under the compulsion of ancillary relief proceedings is, in my judgment, protected by the implied undertaking, before, during and after the proceedings are completed. ....

73.  The implied undertaking extends, as the cases to which I have referred above show, to voluntary disclosure in ancillary relief proceedings, to the information contained in the documents and to affidavits and statements of truth and witness statements.  All such information is required for the full and frank exchange of financial information and all the relevant circumstances which may be necessary to enable the court to know, in order to come to a fair conclusion in accordance with the exercise of its statutory jurisdiction. …”

53.The first and foremost issue in this appeal is whether after the death of the Deceased, the Executors can enforce the implied undertaking imposed on Madam Wong in the ancillary relief proceedings concerning the Summons.  For present purpose, we need not come to a definite view on this issue.  As long as the point is reasonably arguable, the Executor would pass the threshold.  Since we only need to determine if the point is reasonably arguable, the views that we express are not meant to be conclusive.  To avoid repetitions, we will not use the words “it is reasonably arguable” whenever we express our views but they should be so understood. 

54.Mr Cooper, QC, for Madam Wong and Perlie, submitted that the right to enforce the implied undertaking, being a personal right, lapsed upon the Deceased’s death.  There is no clear authority that the Deceased’s right to privacy, which the Deputy Judge had identified as an interest that the Executors should protect, survived his death.  But Mr Copper readily accepted the law of privacy is still developing.  Ms Wong, SC, for the Executors, submitted that the Deceased’s right to privacy or confidence, conferred on him by way of the implied undertaking, survived his death and passed to the Executors.  Neither counsel has been able to cite any direct authority to support their argument.

55.In the absence of direct authority, we will approach the issue from first principle, namely, the implied undertaking imposed on Madam Wong herself continues not only after the ancillary relief proceedings were completed but also after the Deceased’s death.  It follows, in our view, that the corresponding right to enforce the implied undertaking conferred on the Deceased does not simply cease upon his death.

56.We next consider if the right to enforce the implied undertaking is capable of being passed to the Executors.  In Barder v Caluori,[15] the House of Lords considered the question whether further proceedings could be taken in a divorce suit after one of the parties had died.  Lord Brandon of Oakbrook concluded :[16]

“…the answer to that question, when it arises, depends in all cases on two matters and in some cases also on a third. The first matter is the nature of the further proceedings sought to be taken. The second matter is the true construction of the relevant statutory provision or provisions, or of a particular order made under them, or both. The third matter is the applicability of section 1(1) of the Act of 1934.”

57.The only point taken by Mr Cooper is based on section 20 of the Law Amendment and Reform (Consolidation) Ordinance,[17] which provides :

“(1) Subject to the provisions of this section, on the death of any person after 26 October 1951, all causes of action subsisting against or vested in him shall survive against, or, as the case may be, for the benefit of, his estate :

Provided that this subsection shall not apply to causes of action for defamation or seduction or for inducing one spouse to leave or remain apart from the other or to claims for damages on the ground of adultery.”

Mr Cooper submitted that even if the law were to recognize the Deceased’s right to privacy, it is not a cause of action within Section 20.  Citing Letang v Cooper,[18] he submitted that a cause of action is simply a factual situation the existence of which entitles one person to obtain from the court a remedy against another person.  He argued that while the person who has disclosed documents in the course of court proceedings has locus standi to object to the court exercising the discretion to release that undertaking, this does not entitle him to a remedy against another person.  So no cause of action arises.

58.We are concerned with the right to enforce the implied undertaking.  That right does not merely give the provider of the documents the right to be heard on the question of whether the court should sanction a release from that undertaking.  It also entitles him to commence contempt proceedings against the recipient of the documents who has acted in breach. This is a form of remedy that the document provider can obtain from the court against the recipient.  It qualifies his right to enforce the implied undertaking as a cause of action within the meaning of Section 20, which survives and passes to his estate.

59.We therefore conclude that the Deceased’s right to enforce the implied undertaking against Madam Wong survives upon his death and passes to the Executors by virtue of Section 20.

60.Mr Cooper then submitted that to enforce the implied undertaking does not benefit the Deceased’s estate in the sense that no monetary or property value can be brought to the estate.  He further submitted that the Executors should respect the Deceased’s wish to add Madam Wong and Perlie as beneficiaries under the HS Trust.  Had he been alive, he would have supported Madam Wong’s application so that she and Perlie could assert their legitimate interest in the HS Trust.  The Executors should not have opposed Madam Wong’s application.  He even went on to submit that the Executors should not take any part in Madam Wong’s application at all.  Ms Wong submitted that the benefit to the estate is to hold Madam Wong to her conscience under the implied undertaking.  The Executors ought definitely to oppose her application. Such are the entrenched positions of the parties.

61.With respect, we think the correct position lies somewhere in between.  Whether or not the Deceased’s estate will be materially prejudiced by releasing Madam Wong from her implied undertaking is cogently relevant to her disclosure application.  Although we doubt if binding Madam Wong to her conscience is sufficient, we cannot safely conclude that on the materials before us, the Deceased’s estate would not be prejudiced by releasing her from the implied undertaking definitely.  The Documents concern the setting up and operation of the HS Trust, which is a family trust.  It is mostly likely that they contain sensitive financial information of the Deceased, the release of which may well affect his estate.  Even if the Deceased’s wish were to be respected, it does not necessarily follow that, had he been alive, he would definitely agreed to release Madam Wong from her implied undertaking to use sensitive information concerning his finances for the purpose of pursuing her and Perlie’s claim under the HS Trust.  In our view, the Executors should appear before the judge hearing Madam Wong’s disclosure application to provide assistance but the Executors should not advocate any particular outcome.  They should set out all the relevant circumstances including an update of the latest development of the case, if necessary, and make submissions on the applicable law.

62.In short, we agree that the Executors should be allowed to take part in Madam Wong’s disclosure application but disagree that they should be authorised to oppose it.  Instead, they should only adopt a neutral stance and render any assistance to the court as may be directed.

63.Finally, Mr Cooper complained that the Deputy Judge gave no consideration at all to the prospects of success in the Trustee’s opposition to Madam Wong’s application.  We disagree.  We think the Deputy Judge must have considered all the evidence adduced by the Executors and leading counsel’s opinion when he said he found the Executors’ stance proper, although we differ from him as to whether approval should be given to the Executors to oppose it.

64.We next turn to the Costs Orders.

C2.   The Costs Orders

65.Ordinarily, absent any improper conduct, both the Trustee and the Beneficiaries to a Beddoe application are entitled to have their costs paid out of the Trust : Davies v Watkins.[19]  The mere fact that the Beddoe application is necessitated by the Defending Beneficiary’s stance in the Main Action is not improper conduct.  It is not a ground for depriving him of his costs.  However, he might become at risk as to costs if he adopts an excessive role in the Beddoe application and seeks to use it as a forum for promoting his claim in the Main Action.[20]

66.Here, the Beddoe application was necessitated by Madam Wong’s disclosure application.  However, Ms Po had made Madam Wong’s position very clear at the outset of her written submissions.  She readily recognized that the Beddoe application was essentially a matter between the court and the Executors.  She nevertheless wished to put forward for the court’s consideration reasons why the Executors should not be allowed to expend the estate’s money to oppose Madam Wong’s application.  Although her submissions went into the merits of the Executors’ objection, we do not think it can be said that Madam Wong had thereby adopted an excessive role or had sought to use the Beddoe proceedings as a forum for promoting her own application.

67.More importantly, we have now come to the conclusion that the Executors should only be allowed to provide assistance to the court hearing Madam Wong’s disclosure application without adopting an opposing or indeed any stance, it would be wrong to deprive Madam Wong of her costs for the Hearing or, as the Deputy Judge had ordered, to ask her to bear the Executor’s costs for the Hearing.

D.   DISPOSITIONS

68.For the above reasons, we allow the appeal to the extent that :

(1)  The Beddoe Order be varied to read :

“The Executors be at liberty to apply the funds of the Deceased’s estate towards payment of and/or that the Executors be indemnified by the Deceased’s estate in respect of so much of the costs as may be incurred by them in appearing in Madam Wong’s application by her Summons dated 12 October 2011 in HCMC No 3 of 2001, adopting a neutral stance and for the purpose of rendering assistance to the court as may be directed, such costs may include, without limitation, the costs which may be incurred in any appeals by Madam Wong herein.”

(2)  The Costs Orders relating for the costs for the Hearing be set aside and in its place an order be made that :

“The costs of the Executors and Madam Wong, including the costs of and pertaining to the Hearing, be borne by the Deceased’s estate, in the case of the Executors on trustee basis and in the case of Madam Wong on common fund basis.”

69.Further, we think the general principle on costs stated above should equally apply to the costs of this appeal.  We therefore make an order nisi that the costs of the Executors and Madam Wong and Perlie for this appeal be borne by the Deceased’s estate on trustee basis and common fund basis respectively, with a certificate for two counsel.

Mr Gilead Cooper QC leading Mr Clifford Smith SC and Ms Wing Kay    Po, instructed by CWL Partners, for the 3^rd and 4^th defendants

Ms Lisa K Y Wong SC leading Mr Bernard Man, instructed by Clifford    Chance, for the plaintiffs