COURT OF FINAL APPEAL, HKSAR
JUSTICE KEMAL BOKHARY PJ
JUSTICE PATRICK CHAN PJ
JUSTICE R.A.V. RIBEIRO PJ
JUSTICE LITTON NPJ
LORD MILLETT NPJ
26 MAY 2011
Justice Bokhary PJ
At the end of the hearing, we dismissed the appeal saying that we would give our reasons later. We also heard arguments on the question of costs and reserved our decision. Having considered the matter, we now order that
the appellant do pay the 1st and 2nd respondents their costs of this appeal, if any, on a trustee basis and the 3rd and 4th respondents their costs of this appeal on a common fund basis;
any costs which cannot be recovered from the appellant be paid out of the estate; and
the estate be indemnified by the appellant for all such payments.
Our reasons for dismissing the appeal and making this costs order are set out in the judgment of Mr Justice Chan PJ.
Justice Chan PJ
Ms Mui Yim-fong (“the Deceased”), a famous singer and actress, passed away on 30 December 2003. She was survived by the appellant (her mother who is the plaintiff in this action) and two elder brothers. She left a will which she executed on 3 December 2003 (“the Will”) leaving her residuary estate to a discretionary trust (“the Karen Trust” or “the Trust”) which she set up by a trust deed executed on the same day shortly before making her will. The Will appointed the HSBC International Trustee Ltd (“HSBC”) the sole executor of the Will and the trust deed made HSBC the trustee of the Trust (“the Trustee”). HSBC in its dual capacity was made the 1st and 2nd defendants in this action. By an order of the court, it was excused from attendance in these proceedings. Pursuant to the Trust, the 4th defendant (“Eddie Lau”), a close friend of the Deceased, was appointed one of the beneficiaries and the 3rd defendant (“New Horizon”), a Buddhist organization, was named as the repository beneficiary.
Proceedings in the courts below
The appellant challenges the validity of the Will and the Trust and seeks a declaration that the Deceased had died intestate and that she, the appellant, be granted letters of administration of the Deceased’s estate. She did not put forth any positive case but put the defendants to proof of the validity of these documents. The judge (Andrew Cheung J) dismissed her claim. He found that the Will was duly executed by the Deceased, that she had testamentary capacity at the time of execution and that she had due knowledge and approval of the contents of the Will. He ordered that probate be granted to HSBC. He also declared that the Karen Trust is a valid trust.
The appellant’s appeal was dismissed by the Court of Appeal (Tang VP, Yeung and Yuen JJA) who agreed with the findings of the judge and further held that the Trust is valid. Leave was granted to her by the Court of Appeal to appeal to this Court.
The facts as found by the judge
The trial took 18 days and a number of witnesses were called in support of the Will and the Trust, including Mrs Sheila Ho, Mrs Doris Lau and Dr Teo who were involved in the preparation and/or execution of these documents. The judge found them to be honest, credible and reliable witnesses. At the trial, a lot of medical evidence from experts was also adduced with regard to the Deceased’s mental capacity at the relevant times. As the judge had found that the Deceased had testamentary capacity to execute the Will and the trust deed and this was not challenged on appeal, it is not necessary for the purpose of this appeal to refer to the medical evidence. Apart from that, the salient facts as found by the judge are as follows.
Sheila Ho and the Deceased
Mrs Sheila Ho (“Sheila Ho”) was the god-mother of the Deceased. She and her late husband had treated the Deceased as their own daughter during her lifetime. The Deceased was given the name of Ho Ka Nam and this apparently was the reason for choosing “Karen” (which phonetically resembles “Ka Nam”) as the name of the Trust.
In 2001, the Deceased was first diagnosed to have cervical cancer. In July 2003, she consulted Dr Teo, a cancer specialist, who advised her that her cancer had reached an advanced and incurable stage. During the next few months, she was admitted to hospital more than 10 times. In September, she made a public announcement about her health condition.
Retaining Doris Lau of HSBC
Dr Teo suggested to the Deceased that she should consider making a will. In fact, in early 2003, the Deceased had already consulted Sheila Ho about making provision for the appellant’s living expenses after the Deceased’s death expressing the concern that the appellant should not be given any lump sum as she was not good at managing her finances. Sheila Ho introduced the Deceased to Mrs Doris Lau of HSBC (“Doris Lau”) for professional advice.
On 19 October, the Deceased contacted Doris Lau on the phone and enquired about estate planning. Doris Lau gave her some general advice. There was a file note on this conversation. About a week later, Doris Lau was provided with information on the Deceased’s assets which was prepared at Doris Lau’s request.
The meeting on 31 October
On 31 October, the Deceased had a meeting at her home with Doris Lau in the presence of Sheila Ho. What was discussed at the meeting was recorded in the file notes kept by Doris Lau.
At the meeting, Doris Lau explained to the Deceased the machinery and advantages of a discretionary trust. The Deceased was impressed by the use of a trust arrangement and wanted to distribute her assets via such arrangement. She indicated that she wanted to leave two properties (held by two private companies) to her very special friend Eddie Lau and some funds to subsidize the tertiary education of her nephews and nieces. She also wanted to ensure that the appellant would be given a monthly allowance of $70,000 until her death to maintain her then life style with one chauffeur and two domestic helpers. The Deceased was adamant that the appellant should not be given any lump sum. Doris Lau advised the Deceased to seek independent tax advice from PricewaterhouseCoopers. She also suggested that the Deceased should make a will as a back-up pending her decision to set up and the actual setting up of a trust. She gave a will appointment questionnaire to the Deceased to complete. Sheila Ho later went through this document with the Deceased and filled it up at the request of the Deceased who indicated her definite intention to set up a discretionary trust.
Proceeding with setting up the trust
In early November, the Deceased performed a series of 8 concerts in Hong Kong and was later admitted to hospital. On 23 November, she flew to Japan to shoot a TV commercial, but had to return to Hong Kong later when she fell ill. She was immediately sent to hospital.
On 27 November, Doris Lau and Sheila Ho obtained instructions from the Deceased to proceed with setting up the trust and to retain PricewaterhouseCoopers to advise her on her tax position. On the same day, Sheila Ho passed on the Deceased’s request to have a will prepared and executed as soon as possible. On the following day, several drafts of a will were prepared by HSBC’s Probate Department based on the questionnaire. These drafts apparently did not reflect the Deceased’s wishes. Doris Lau realized that the Probate Department (which did not have the benefit of her file notes) had misunderstood the Deceased’s instructions as appearing in the questionnaire.
On 1 December, Doris Lau advised Sheila Ho on the phone that it was important that there be no discrepancy between the trust and the will and that any mismatch could be eliminated by naming the trust as the sole beneficiary under the will. This was relayed by Sheila Ho to the Deceased who confirmed that this was the best arrangement to make. Sheila Ho passed on this message to Doris Lau who immediately gave instructions to her colleagues to prepare the trust document and to redraft the will.
On 2 December, these documents were finalized and ready for execution. Doris Lau advised Sheila Ho that a doctor needed to be present when the documents were executed to certify the Deceased’s mental capacity in view of the fact that she was then hospitalized.
Execution of the Will and the Trust
In the evening of 2 December, the Deceased had a long discussion with Dr Teo on the results of a CT scan on her. Dr Teo noticed her to be most alert and concerned about her own condition and that she had no difficulty in understanding Dr Teo’s explanation.
At 8.30 a.m. on 3 December, Dr Teo came to the hospital to do the morning round and saw that the Deceased had already woken up. In her conversation with Dr Teo, he noticed that she was her normal self, fully alert and as attentive, responsive and smart as before. Doris Lau arrived at the hospital at around 11 a.m. Sheila Ho was there. Dr Teo was asked to witness the explanation and execution of the documents. He advised Doris Lau that he considered that the Deceased had full capacity and was of a sound and clear mind to execute the documents.
Doris Lau explained the contents of the trust deed to the Deceased clause by clause. The Deceased followed the explanation well and asked pertinent questions and gave appropriate responses. She then executed the trust deed and Sheila Ho signed as a witness. She also asked Sheila Ho to give $1,000 cash to Doris Lau for the purpose of the Trust.
Doris Lau then explained the contents of the Will to the Deceased. After her explanation, the Deceased executed the Will in the presence of Dr Teo, Doris Lau and Sheila Ho, with Dr Teo and Sheila Ho signing as witnesses.
After Dr Teo left the ward, Doris Lau continued to explain the trust memorandum to the Deceased in the presence of Sheila Ho. The Deceased fully followed and confirmed the contents of the memorandum. She was aware that her wishes as set out in the trust memorandum were not binding on the Trustee. She also asked questions concerning how the Trustee would manage the Trust.
Deterioration of condition and subsequent death
In the late afternoon of 3 December, as a result of the Deceased’s liver condition, Dr Teo noticed that she was drowsy and had interrupted speech. She was also noticed to be in a drowsy state between 4 and 7 or 8 December but otherwise mentally alert. On 20 December, she executed an enduring power of attorney in the presence of Ms Jacklyn Ng, a solicitor from Johnson, Stokes & Master and Doris Lau. Jacklyn Ng noticed that the Deceased was fully aware of what she was doing, following the explanation and asking questions.
The Deceased told Doris Lau that she wished to execute the documents for injecting assets into the Trust after Doris Lau’s return from her Christmas holidays. This never happened. Sadly, on 30 December, the Deceased passed away.
Relevant provisions in the Will and the Trust
The Will appointed HSBC as executor and trustee to hold the Deceased’s residuary estate “upon trust for HSBC acting in its sole capacity as the trustee for the time being of the Karen Trust”.
Under the Trust, the Trustee is to hold the Trust Fund upon trust to invest the same (Clause 4(a)). Apart from the initial $1,000, further assets are expected to be injected into the Trust Fund (preamble (B)) and the Trustee has the right to accept additional property (Clause 4(b)). Under Clause 5(a), the Trustee has very wide powers “to appoint pay or apply the whole or any part of the Trust Fund and the income thereof” for the benefit of “all or such one or more to the exclusion of the other of the beneficiaries and in such proportions or manner and upon such other terms and conditions as the Trustee shall in its absolute and uncontrolled discretion deem appropriate” subject to restrictions which are not relevant in this case. “Beneficiaries” is defined to mean the appellant and any person or class of persons as may be appointed from time to time by the Trustee who is empowered under Clause 5(c) to, in its absolute discretion at any time by deed, appoint additional persons not being members of the Excluded Class to become beneficiaries. “Excluded Class” is defined to mean basically the Deceased and the Trustee and under Clause 30, no benefit shall be paid to persons within the Excluded Class. There is a provision for a Final Repository but it was not named in the trust deed.
Apart from other provisions regarding the various powers and duties of the Trustee in respect of the management of the Trust, Clause 33 provides, among other things, that the Trustee shall not be obliged to make known to any Beneficiary or the Final Repository that this Trust exists or any matters in relation thereto or that they are named as such. We shall return to this clause later.
The Trust was accompanied by a trust memorandum of wishes which was signed by HSBC in which was recorded the Deceased’s wishes. In Clause 3 of the memorandum, the Deceased was recorded as having made 3 suggestions for the distribution of her estate:
the Trustee would hold and distribute to Eddie Lau all the shares in two private companies each of which was used to hold a landed property;
the Trustee would set aside a sum of $1,700,000 upon trust for the Deceased’s nephews and nieces for the purpose of making payments to them to finance their education; and
the Trustee would hold the balance of the Trust Fund for the purpose of paying $70,000 per month to the appellant for her use and benefit while she is alive and upon her death, the entire balance of the Trust Fund would be distributed to New Horizon.
Matters raised in present appeal
In support of her present appeal, the appellant has filed a written case and two supplemental cases. In her written cases, she also relies on the 7 written submissions which she had filed before the Court of Appeal. In her written cases, she seeks to raise four matters:
She claims that there was collusion and conspiracy on the part of Sheila Ho and Doris Lau, who were involved in the preparation and execution of the Will and the trust deed. This is a point which was not raised at the trial and we shall refer to it as “the new point”.
She also claims that there was new evidence relevant to the case which ought to be admitted. Such evidence concerns the relationship between the Deceased and her brothers during her lifetime which might throw light on the Deceased’s intention at the time of her death (“the new evidence point”).
She argues that there were no concurrent findings made against her by the lower courts and in any event, the judge was plainly wrong to have made those findings and the Court of Appeal did not actually deal with such findings (“the concurrent findings point”).
She also argues that the lower courts had erred in holding that Clause 33 of the Karen Trust does not vitiate the discretionary trust (“the Clause 33 point”).
Before this Court, Mr Samson Hung has been instructed to appear for the appellant. He indicates to the Court that he has nothing to add to what is contained in the appellant’s written cases and would like to address the Court on only two issues: first, the Deceased’s knowledge and approval of the contents of the Will and the Trust; and second, the Clause 33 point. We shall deal with both her written cases and counsel’s further oral submissions.
The new point
The appellant argues that the issue of collusion and conspiracy is not a new point because the materials and evidence supporting these allegations were before the trial judge and were capable of raising suspicions which have to be dispelled by the respondents in discharging the burden of proving the Will. As a result of these suspicions, the judge was not entitled to make the findings which he did. It is further argued that even if this is a new point, the Court should allow them to be raised in the special circumstances of this case and in the interest of justice.
There is nothing in this submission. The appellant’s position at the trial was to put the respondents to strict proof of the Will and the Trust. Although various allegations were made in the Re-re-re-Amended Statement of Claim, they were aimed at raising suspicions regarding the respondents’ case. The allegation of collusion and conspiracy has never been properly pleaded or particularized. In paragraph 15 of the pleading, it was alleged that the Will was obtained by the “undue influence” of Sheila Ho. However, the particulars of this plea included an averment that Sheila Ho had “colluded” with Eddie Lau and others “to prevent the appellant from seeing the Deceased while she was in hospital”. Paragraph 16 further alleged that “all the arrangements for the preparation and execution of the Will and the trust deed were conducted by Sheila Ho and Doris Lau” which might faintly suggest some sort of conspiracy. Such a plea of undue influence was expressly abandoned by the appellant’s senior counsel at the trial.
Quite rightly so: on the facts of this case, there was no basis for casting suspicion on the validity of the Will and the trust deed. There was no evidence or even a suggestion that Sheila Ho (who is not a beneficiary under the Will or the Trust) had or would have any possible gain in colluding or conspiring against the appellant. The so-called “close connection” between her and a director of New Horizon and Eddie Lau who are beneficiaries under the Trust does not add anything to the allegation. As for Doris Lau, although she was an officer of HSBC which was named as sole executor of the Will and the trustee of the Karen Trust, there was again not the slightest suggestion that she would personally stand to gain for colluding or conspiring against the appellant. These were serious allegations which ought to have been put to the relevant witnesses especially Sheila Ho and Doris Lau. As they were abandoned, Sheila Ho and Doris Lau were deprived of the opportunity of answering them and no evidence was adduced by the respondents to counter such allegations or indeed any of the allegations contained in the appellant’s written cases.
In our view, this is a clear case which falls within the Flywin principle. (Flywin Co Ltd v Strong & Associates Ltd (2002) 5 HKCFAR 356). The Court of Appeal was plainly correct in not allowing the appellant to take this point on appeal. It is unfair for the appellant to put the blame (as she did) on her senior counsel for not taking this point at the trial: in one of her written cases, she admitted that she was “convinced” by counsel that this was the “wisest course” to take.
The new evidence point
The new evidence which was sought to be adduced concerns the relationship between the Deceased and her brothers during her life time. It is sought to show that although there was previously some discord between them, this had happened many years ago and that they were on good terms before the Deceased passed away. The purpose of seeking to adduce such new evidence, it is said, is to throw light on the Deceased’s intentions at the time before her death. It is submitted that such evidence can hardly be disputed and would cause no prejudice or injustice to the respondents. It is also said that such evidence was not adduced before the trial judge because her then senior counsel had chosen not to do so.
The so-called new evidence is actually different from what the appellant sought to adduce before the Court of Appeal which were various paper cuttings and magazine articles about her brothers helping the Deceased in her concerts. No explanation has been given for this difference. It must also be noted that the poor relationship between the Deceased and her brothers was not challenged in cross examination; nor was it denied by the appellant in her own evidence. In any event, as admitted by the appellant, what is sought to be adduced does not satisfy the Ladd v Marshall ( 1 WLR 1489) requirements in that it is evidence which could with reasonable diligence have been adduced at the trial; such evidence would also not be of material relevance to the issues in the case. There is simply no reason for admitting such fresh evidence.
The concurrent findings point
The appellant argues that there were no concurrent findings against the appellant because the trial judge’s findings and conclusions are plainly wrong and fundamentally flawed and the Court of Appeal had failed to deal with the weaknesses in the respondents’ evidence and the errors in the judge’s findings. In her written cases, she has made numerous points criticizing the evidence which was accepted by the judge and the Court of Appeal and submits that these findings should be overturned as they amount to a miscarriage of justice.
This Court has on previous occasions made it clear that the Court will not disturb concurrent findings of fact made by the trial and intermediate courts unless there is some miscarriage of justice or violation of some principle of law or procedure. Sky Heart Ltd v Lee Hysan Co Ltd (1997-1998) 1 HKCFAR 318, 334; also Wu Yee Pak v Un Fong Leung (2004) 7 HKCFAR 498; Guangdong Native Produce Co Ltd v Tam Tze Ying trading as Sun Ying Trading Company (2008) 11 HKCFAR 455. The Court will only do so where there are exceptional circumstances and it is necessary for an appellant who seeks to challenge concurrent findings to demonstrate what these exceptional circumstances are before the Court would embark on a detailed review of the evidence and the relevant findings. Chan Wai Sun v Law Shiu Kai Andrew (2007) 10 HKCFAR 601.
We have not been shown any exceptional circumstances in the appellant’s lengthy written cases. We are simply invited to examine all the evidence again in the light of the so-called “inherent improbabilities, contradictions, inconsistencies and holes in the evidence adduced by the respondents”. This case largely turns on the credibility of the key witnesses involved in the preparation and execution of the documents in question. The judge was not unaware of the inconsistencies and discrepancies raised by the appellant. He had carefully analyzed all the evidence, assessing and testing it against contemporaneous file notes, surrounding circumstances and inherent probabilities of the evidence and had given convincing reasons for accepting and rejecting any part of the evidence. The Court of Appeal had also conducted a close examination of the relevant parts of the evidence before agreeing with the judge’s conclusions. We are not prepared to examine in detail all the evidence again except those parts which are relevant to the points raised in this appeal. Nor do we see any ground for disturbing the lower courts’ concurrent findings of fact.
Counsel’s submission on knowledge and approval
Mr Hung submits that the Deceased was all along quite concerned about making provision for the appellant and that was the primary purpose for making the Will and the Trust. However, under the Trust Memorandum, her wishes were not binding on the Trustee who has very wide discretionary powers under the trust deed. This should have caused great concern to the Deceased as her wishes to make provision for the appellant might not be followed by the Trustee. It is argued that this is an important circumstance which the court must consider in deciding the issue of knowledge and approval on the part of the Deceased.
We do not think counsel’s submission advances the appellant’s case any further. There are concurrent findings that the Deceased had knowledge and approval of the contents of the Will and the trust deed before execution. The points raised by Mr Hung had been carefully dealt with by the judge. He made an express finding on the facts on this important issue instead of merely drawing an inference from proof of due execution and testamentary capacity. There is clear evidence which the judge was entitled to accept and did accept that the Deceased was fully aware of the non-binding nature of the Trust Memorandum; that she did ask Doris Lau questions pertinent to this point; and that she was concerned about preserving confidentiality and was relieved to learn that her proposed bequest to Eddie Lau was not mentioned in the Will or the trust deed. Her concern over the appellant was partly addressed by the naming of the appellant in the trust deed and not merely in the Trust Memorandum.
It is important to note that the judge had apparently also accepted that the Deceased was particularly appreciative of having appointed a professional trustee, so that she could be sure that her wishes regarding the disposal of her assets would be respected and that the Trustee would act in good faith and in the best interests of the beneficiaries. We are satisfied that these points had plainly been taken into consideration by the lower courts.
The Clause 33 point
Mr Hung’s argument on the Clause 33 point is similar to that presented to but rejected by the Court of Appeal. It is submitted that this clause which provides that there is no obligation on the part of the Trustee to disclose to any beneficiary or the final repository even the existence of the Trust or that any of them is named as a beneficiary is too wide. If the Trustee is entitled to keep such information from all potential beneficiaries, it would be extremely difficult for any beneficiary to enforce his or her right under the Trust. The beneficiaries are, it is submitted, in effect left with no enforceable right against the Trustee. Reliance is placed on a remark made by Millett LJ (as he then was) in Armitage v Nurse  Ch 241, 253:
.... there is an irreducible core of obligations owed by the trustees to the beneficiaries and enforceable by them which is fundamental to the concept of a trust. If the beneficiaries have no rights enforceable against the trustees there are no trusts.
It is sought to argue on the basis of this dictum that not only is Clause 33 void but also the whole Trust is invalid.
Clause 33 (which is in an unusual form) is apparently aimed at preserving confidentiality (the Deceased was keen to keep her bequest to Eddie Lau confidential) and protecting the Trustee from unwanted requests for discovery or even litigation which may reduce or deplete the Trust Fund. The Trustee has very wide discretionary powers under the Trust and since it may not exercise its powers in favour of any particular potential beneficiary, it may be considered pointless to inform any beneficiary that the Trust exists or that he or she is named as a beneficiary. It is only when the Trustee has exercised its powers that any beneficiary becomes absolutely and indefeasibly entitled to any part of the Trust Fund and the Trustee is then obliged to contact such beneficiary and inform him or her of such entitlement. This is the effect of Clause 33 and this is how it is intended to work in practice.
In Armitage v Nurse, Millett LJ’s dictum was made in the context of considering a clause in the trust which purported to exempt the trustees from liability for constructive and equitable fraud. This statement is of course correct since it would be contrary to the basic concept of a trust if the trustee were to owe no obligation at all to the beneficiaries or under absolutely no duty to account to the beneficiary for breach or indeed any default. But this is not the situation in the present case. Nor was Millett LJ’s dictum intended to apply to the present situation.
The trust deed in the present case clearly established a valid trust which was originally intended to be an inter vivos trust. There are provisions which impose enforceable obligations on the Trustee towards both the settlor (the Deceased) and the beneficiaries. There is no question of the Trustee having no duty to be accountable to the settlor or those beneficiaries who have a vested interest in the Trust Fund after an exercise of the Trustee’s discretionary powers in their favour. In any event, as Lord Walker of Gestinghorpe said in Schmidt v Rosewood Trust Ltd  2 AC 709, 724, the court always has a supervisory jurisdiction over a trust:
It is fundamental to the law of trusts that the court has jurisdiction to supervise and if appropriate intervene in the administration of a trust, including a discretionary trust.
There is no direct authority on whether, as a matter of law, there is any obligation on a discretionary trustee to provide information on the trust to potential beneficiaries. Mahoney JA in Hartigan Nominees Pty Ltd v Rydge (1992) 29 NSWLR 405, 432 expressed some doubt as to the existence of such a duty. However, it is not necessary for the purpose of this appeal to decide this point. This is because even if Clause 33 is void (as submitted by counsel), the remedy is to seek discovery as the appellant had done in the present case. (See e.g. Murphy v Murphy  1 WLR 282 and Schmidt v Rosewood Trust Ltd.) The fact that it may be void does not lead to the conclusion that the whole trust (which is otherwise valid in all other aspects) is infected and hence invalid. The Court, in construing the document and seeking to give effect to the settlor’s intention, would not readily hold that the whole trust is invalid. We are not satisfied that the Trust in the present case is invalid.
It should be noted that not only was the appellant informed by the Trustee that she is one of the beneficiaries shortly after the death of the Deceased, she is in fact the only person named as a beneficiary in the trust deed. Her interest or any right or interest which she may have under the Trust has not been prejudiced.
For the reasons given above, there is no merit in any of the points raised by the appellant and the appeal must be dismissed.
Costs of this appeal
On the question of costs, the principles applicable to probate actions which are relevant to the present case can be summarized as follows:
The general rule that costs should follow the event applies where a party has unsuccessfully raised opposition to a will. Spiers v English  P 122; Re Cutcliffe’s Estate  P 6; Nina Kung v Wang Din Shin, (2006) 9 HKCFAR 800.
There are two exceptions to the general rule. The first is where the litigation is caused by the conduct of the testator or the residuary beneficiary: the costs of the litigation would normally come out of the estate. This is not the case here. The second exception is where the circumstances are such that there are reasonable grounds for opposing the will: the court would allow good cause to be shown why the general rule should not apply. In such a case, the unsuccessful party will not usually be condemned in costs, although he may not be given his costs out of the estate. See Williams, Mortimer and Sunnucks on Executors, Administrators and Probate 19th ed. para. 40-06. Mitchell v Gard (1863) 3 Sw. & Tr. 275; Spiers v English; and Nina Kung v Wang Din Shin, paras 11 to 14.
Where the opposing party goes beyond putting the proponent of the will to strict proof of its validity, such as putting forth a positive case of, say, undue influence, fraud or forgery, the litigation becomes hostile. In such a case, the general rule applies and if he is unsuccessful, he will be ordered to pay the costs of the other party. This is to ensure that a party would not unjustifiably challenge the will with the hope that the costs of doing so will be borne by the estate or the other party. Mitchell v Gard, at 279. See also Nina Wang v Wang Din Shin, paras 15 to 17.
Where the opposing party having failed to challenge the will before the judge takes the matter on appeal, there is little or no reason why this should not be regarded as hostile litigation or why he should not be ordered to pay the costs of the other parties to the appeal (on a generous basis, if necessary), if he turns out to be unsuccessful.
The judge ordered that the costs of HSBC as the 1st and 2nd defendants be borne by and paid out of the estate on a trustee basis; that the 3rd and 4th defendants’ costs be borne by and paid out of the estate on a common fund basis and that there be no order as to costs for or against the appellant. It would appear that the reason for such a costs order was that the judge considered that since there was some medical evidence which might cast doubt on the Deceased’s mental capacity at the relevant times, this was a matter which required an enquiry by the court and that costs should be dealt with under the second exception.
The situation was however entirely different when the appellant took the matter on appeal. She not only challenged the judge’s findings but also wanted to take new points and adduce fresh evidence. The Court of Appeal ordered that the costs of HSBC in the appeal be paid out of the estate to be taxed on a trustee basis; and that the costs of the 3rd and 4th defendants be paid out of the estate to be taxed on a common fund basis. The court also ordered the appellant to indemnify the estate in respect of the costs of the other parties.
Mr Hung argues on behalf of the appellant that the costs of all the parties including the appellant’s own costs should be paid out of the estate. It is submitted that there are reasonable grounds for her to challenge the Will and the Trust and that Clause 33 is an unusual clause which naturally caused concern. He also asks for the order of the Court of Appeal ordering the appellant to reimburse the estate to be set aside for the same reasons. On the other hand, the respondents in effect ask for a similar order as that made by the Court of Appeal.
We are satisfied that the appeal before this Court must be regarded as hostile litigation. The appeal is entirely without merits. The respondents should not be vexed by one appeal after another. We are initially minded to simply order that the appellant should bear the costs of all the respondents in this appeal on the appropriate bases. We note however the following matters.
First, the appellant has no independent financial means and is now living on the monthly payment of $120,000 made out of the estate. While this is not a small amount, it is unrealistic to expect her to pay out of her own pocket all the costs incurred by the respondents in resisting the appeals before the Court of Appeal and this Court.
Second, as the respondents, especially the 3rd and 4th respondents, are unlikely to be able to recover any costs directly from her, it would be most unfair to them if they were not able to recoup those costs from the estate. This is particularly so for the 3rd respondent, the final repository, which does not even know how much, if any, it would be entitled to under the Trust at the end of the day.
Third, if the appellant is required to indemnify the estate for the costs which the respondents could recover out of the estate, this will no doubt reduce her monthly payments. This would be contrary to the wishes of the Deceased who wanted the appellant to maintain the same life style as before.
Fourth, any court order requiring the Trustee to reimburse the respondents out of the estate would have the effect of fettering the Trustee’s discretion conferred under the trust deed.
Having considered the question of costs carefully in the light of these matters and balancing the interests of the parties, we would order that
the appellant do pay the 1st and 2nd respondents their costs of this appeal, if any, on a trustee basis and the 3rd and 4th respondents their costs of this appeal on a common fund basis;
any costs which cannot be recovered from the appellant be paid out of the estate; and
the estate be indemnified by the appellant for all such payments.
Lastly, it is hoped that in considering whether and if so how to seek indemnity from the appellant, the Deceased’s wishes would be respected.
Samson K M Hung and Chan Zin Jin (instructed by Messrs Rowdget W Young & Co) for the Appellant.
Messrs Mayer Brown JSM for the 1st and 2nd Respondents (Attendance excused).
Albert Yau and Kevin Poon (instructed by Messrs Wong, Shum & Co) for the 3rd Respondent.
Richard Leung (instructed by Messrs P C Woo & Co) for the 4th Respondent.
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