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HCA 11070/1998
IN THE HIGH COURT OF THE
HONG KONG SPECIAL ADMINISTRATIVE REGION
COURT OF FIRST INSTANCE
ACTION NO. 11070 OF 1998
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BETWEEN
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THE OFFICIAL SOLICITOR, EXECUTOR OF THE ESTATE OF SHIU PAK NIN, DECEASED (SUBSTITUTED AS PLAINTIFF IN PLACE OF SHIU PAK NIN BY HIS NEXT FRIEND THE OFFICIAL SOLICITOR, PURSUANT TO MASTER B KWAN’S ORDER DATED 19 AUGUST 2009) |
Plaintiff |
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and
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HSBC INTERNATIONAL TRUSTEE LIMITED |
1st Defendant |
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FLORA SHIU |
2nd Defendant |
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PANTOL LIMITED |
3rd Defendant |
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Before: Deputy High Court Judge Au-Yeung in Chambers
Date of Hearing: 12 May 2011
Date of Handing Down Judgment: 12 August 2011
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JUDGMENT
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1. This Summons raises the issue of whether or not a next friend should be ordered to pay costs of the defendants for the period when he was the next friend, leaving him to seek indemnity from the estate of the deceased plaintiff for whom he acted.
THE FACTS
2. The facts, which are largely not disputed, are taken from the succinct skeleton submission of Mr Yin for the Official Solicitor.
3. The present action (“this High Court Action”) was instituted by Mr Shiu Yuen Chit (“Mr Shiu”) as next friend for his father Mr Shiu Pak Nin (“the Father”), now deceased. The purpose of the exercise was to set aside 2 trusts (“the Impugned Trusts”). If the exercise were successful, then upon the death of the Father, the bulk of his property would devolve to Madam Law (Mr Shiu’s mother) and her issues under a will (“the Will”) which was purportedly executed by the Father after the date of the Impugned Trusts, instead of being divided more or less equally amongst all of the issues of the Father by different women under the Impuged Trusts.
4. The 2nd Defendant was one of the beneficiaries under the Impugned Trusts but not a beneficiary under the Will. She was the chief protagonist in this High Court Action. She retaliated by commencing mental health proceedings in HCMP 4628 of 2003 (“the MH Proceedings”) in which the Official Solicitor was appointed to act as the committee of the estate of the Father.
5. Mr Shiu was subsequently replaced by the Official Solicitor as the next friend in this High Court Action. On 19 August 2009, the Official Solicitor as executor substituted herself as plaintiff and ceased to be the next friend of the Father in this High Court Action.
6. Eventually, the Official Solicitor decided (with the sanction of the Court sitting in its mental health jurisdiction) that it would not be in the best interest of the Father for this High Court Action to be fought to the end. Pursuant to the Order of Lam J in the MH Proceedings, a Deed of Confirmation was executed in the name of the Father by the Official Solicitor acting as the committee of his estate whereby the validity of the Impugned Trusts was affirmed. At the same time, a statutory will was executed for the Father pursuant to the order of the Court so as to avoid litigation over the validity of the Will which otherwise would almost certainly arise after the death of the Father. This has rendered the issues raised in this High Court Action academic. The present summons was taken out pursuant to an order of Lam J dated 16 May 2007 in the MH Proceedings in order to bring this High Court Action to a formal conclusion.
7. Mr Shiu was next friend from 1998 when the writ in the High Court Action was issued. He remained so despite the order dated 27 March 2000 appointing the Official Solicitor as committee until 31 January 2002 when he (with his consent) was replaced by the Official Solicitor. The Father died on 26 March 2008. The Official Solicitor is now appearing in her capacity as his executor.
8. Paragraphs 1 and 6 of the Summons have been disposed of, such that this High Court Action has been dismissed and the funds in Court have been released to the 1st Defendant as trustee of the 2 Impugned Trusts. Paragraphs 2 and 4 are not in dispute.
THE DISPUTE
9. The disputed parts of the Summons are as follows:
“3. Upon dismissal of this action, [Mr Shiu] do pay the Defendants’ costs of the HC Action incurred prior to 31st January 2002 [i.e. during the time he was the next friend], such costs to be taxed on a trustee basis as against the 1st Defendant and on a party-and-party basis as against the 2nd and 3rd Defendants if not agreed, but such payment is to be without prejudice to any right of indemnity which [Mr Shiu] may have as against the Estate of [the Father] in respect of such costs.
5. Any right of indemnity which the parties may have under paragraphs (2) and (3) above to be determined in HCMP No. 2276 of 1999 [i.e. the MH Proceedings].”
10. Since this High Court Action was dismissed, it is correct that the Defendants should be granted party-and party costs and on the bases set out in paragraph 3 of the Summons. The true question is whether the next friend or the estate is the first port of call for the Defendants’ costs. The dispute is thus effectively between the Official Solicitor as executor and Mr Shiu as former next friend.
11. Mr Shiu submits, in relation to paragraph 3 of the Summons that a next friend is not liable for costs because of the statutory scheme on costs and the view of the Court of Final Appeal. He does not consent to an order being made for fear of insufficient funds in the estate. In relation to paragraph 5, he submits that the Court in its mental health jurisdiction is functus officio. The Official Solicitor, on the other hand, prays in aid the Chancery practice in England and the Court’s inherent jurisdiction to order the next friend (who is an officer of the Court) personally to pay costs to the defendants but with a right to indemnity from the estate.
12. The issues are:
A. Whether the Court has jurisdiction to order a next friend to bear costs?
B. The proper forum for exercise of that jurisdiction if it does exist.
A. WHETHER THE COURT HAS JURISDICTION TO ORDER A NEXT FRIEND TO BEAR COSTS
13. To answer the first issue, one has to examine
(1) the statutory scheme;
(2) the Chancery practice of England; and
(3) the inherent jurisdiction of the Court; and
(4) the view of the Court of Final Appeal.
A1. The Statutory Scheme
14. The power to award costs is regulated by statute and not common law: Financial Secretary v. Wong [2003] 6 HKCFAR 511
“103. One starts with the proposition that, historically, at common law, the court had no power to award costs.
104. As Lord Blackburn pointed out in Garnet v Bradley (1877-78) LR 3 App Cas 944 at p.962:
“Costs in Courts of Common Law were not by Common Law at all, they were entirely and absolutely creatures of statute ...”
Hence, in R v Beadle [1857] 7 El and Bl 492; 119 ER 1329 the order of Quarter Sessions awarding costs to a successful defendant was quashed for want of jurisdiction. Lord Campbell CJ put the matter succinctly thus:
“... as yet, there is no enactment applicable to this case where, on an information for a penalty under an Excise Act, there has been an acquittal, an appeal against that acquittal, and a confirmation of it. It would be becoming that a party thus twice tried, and twice acquitted, should have his costs; but he has them not by common law; and there is no enactment giving them to him.”
105. In the Court of Chancery, the position was different - see the observations of Lord Hatherley in Garnetv Bradley at (1877-78) LR 3 App Cas 944 at p.957 – the Court of Chancery always having had a wide discretion as to the measure and extent as to costs : see also Andrews v. Barnes (1888) 39 Ch D 133 at 138.
106. Then came the Judicature Act 1875, mingling the jurisdictions of the courts of common law and equity. By Order LV (incorporated as part of the Act in the schedule) judges of the High Court were given a general discretion as to costs. Order LV is in these terms:
“Subject to the provisions of the Act, the costs of and incident to all proceedings in the High Court shall be in the discretion of the Court; but nothing herein contained shall deprive a trustee, mortgagee, or other person, of any right to costs out of a particular estate or fund to which he would be entitled according to the rule hitherto acted upon in Courts of Equity: Provided, that where any action or issue is tried by a jury, the costs shall follow the event, unless upon application made at the trial, for good cause shown, the Judge, before whom such action or issue is tried, or the Court shall otherwise order.”
107. Plainly, the intention of the legislature was to sweep all the powers of the judges of the High Court as regards costs under one roof: categorized by Lord Hatherley in Garnet v Bradley (1877-78) LR 3 App Cas 944 at p.955 as the judge's
"absolute discretion (meaning of course his judicial discretion) to determine this question of costs".
108. Ever since that time, the jurisdiction in England to award costs has been entirely statutory. Thus, in Zanussi v Anglos Venezuelan Real Estate and Agricultural Development Ltd (unrep., The Times, 18 April 1996), the Court of Appeal held that the English statute did not confer jurisdiction to award costs other than costs incurred in the proceedings before the court or incidental to those proceedings.
109. In Hong Kong the Supreme Court of Judicature was first established in 1844 by Ordinance No. 15 of that year. In essence the law of England was introduced into Hong Kong, except where local conditions rendered them inapplicable or where they had been modified by laws passed by the local legislature. The Supreme Court Ordinance of 1873 established the model for the modern Supreme Court which existed (with many modification)...
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