TSUI WAI CHAU v. EDMUND CHEUNG & CO. (A FIRM) AND ANOTHER

FAMV000012/2000

(Not for Circulation)
FAMV No. 12 of 2000

IN THE COURT OF FINAL APPEAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MISCELLANEOUS PROCEEDINGS NO. 12 OF 2000 (CIVIL)

(ON APPLICATION FOR LEAVE TO APPEAL

FROM CACV No. 166 OF 1999)

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Between:
TSUI WAI CHAU Applicant
AND
EDMUND CHEUNG & CO. (A FIRM) 1st Respondent
TSUI WAI HO 2nd Respondent

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Appeal Committee: Mr Justice Litton PJ, Mr Justice Ching PJ and Mr Justice Bokhary PJ

Date of Hearing: 18 May 2000

Date of Determination: 18 May 2000

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DETERMINATION

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Mr Justice Litton PJ :

1. This application concerns an order for costs made by a Master in chambers on 4 February 1999 in what were called interpleader proceedings.

2. The history, briefly, is as follows. A firm of solicitors Messrs Edmund Cheung and Co. (Edmund Cheung) had received instructionsfrom two brothers, James Tsui and Albert Tsui, to act for them as executors of their father’s will. In the course of administeringthe estate large sums came into Edmund Cheung’s hands. There was a falling out between the two brothers who eventually instructedseparate solicitors to act for them. In the meanwhile the liability for estate duty was piling up, with interest running at over$1,300 per day. In January 1998 Edmund Cheung paid $4.5 million to the estate duty office but this was not enough to discharge theliability for estate duty. On 15 January 1998 James Tsui’s solicitors wrote to Edmund Cheung saying that he (James Tsui) agreed tothe release of all funds held by them to settle the outstanding estate duty; but, for reasons which are not clear to us, Edmund Cheungwas reluctant to do this and felt it necessary to commence what they called “interpleader proceedings” : a course which James Tsuiseemed to approve. On 22 May 1998 Albert Tsui’s solicitors (“Sinclair Roche”) wrote to James Tsui telling him, amongst other things,that Edmund Cheung still held funds on behalf of the estate and that they, Sinclair Roche, had urged them to take out interpleaderproceedings. On 27 May 1998 James Tsui wrote personally to Edmund Cheung complaining of their tardiness in taking out an interpleadersummons, reminding them that both he and Sinclair Roche had previously urged them to do so. Thus, on 28 May 1998, Edmund Cheung issuedan originating summons naming James Tsui as “1st claimant” and Albert Tsui as “2nd claimant” asking them to appear and state thenature of their respective claims to the “subject matter in dispute”, purportedly under Order 17 of the Rules of High Court. Thissummons was misconceived. The brothers were making no adverse claims to the funds as such. The matter did not come within the scopeof Order 17. Be that as it may, the matter went before a Master in chambers on 24 July 1998 who made an order by consent, authorizingEdmund Cheung to retain $80,000 and to pay over the balance of the fund to the estate duty office. The costs of the proceedings werereserved. The matter then went before Master Cannon who, by her order dated 4 February 1999, ordered James Tsui to pay the costspersonally. The basis for this order is unclear as we do not have before us the Master’s reasons.

3. James Tsui took the matter on appeal under Order 58 and this was heard by Findlay J on 27 May 1999. James Tsui appeared in person.The appeal was dismissed with costs. Findlay J took the view (which was probably correct) that James Tsui did not understand thepurpose of the interpleader summons. The Judge observed :

“He says he thought it was concerned with settling disputes between co-executors. He says that once he realized its purpose he soughtto have it withdrawn.”

4. The Judge then went on to say :

“Mr James Tsui has been quite unable to advance to me any single reason why the other persons involved, the solicitors and his co-executor,or indeed, the estate, should bear the costs of his mistaken understanding of the situation. It is said that he finds himself inthe situation he does because of his mistaken understanding, but that is no reason why I should say to his solicitors, his co-executor,or the estate, that : “you must pay for Mr James Tsui’s mistake.” That would be quite unfair. Accordingly I find there is no basisat all upon which I can grant Mr James Tsui any relief in this appeal. Accordingly the appeal is dismissed and the Master’s orderis affirmed.”

5. Pausing here, it is right to observe that if James Tsui (a layman) was mistaken as to the purpose of the interpleader summons so,it would appear, were the two firms of solicitors involved. By the time Findlay J made his order, nearly a year had elapsed sincethe original consent order, and two additional sets of costs had been incurred. If, at the outset, the Master who had made the consentorder had dealt with the remaining issue of costs then and there, summarily, leaving it to the parties to pay their own costs, theamount involved would have been minimal : In all probabilities none of the subsequent proceedings would have occurred. This caseprovides a classic example of how courts, in striving to achieve ideal justice, particularly on a matter of costs, can end up witha situation where the remedy is worse than the disease.

6. The sorry tale does not end here. James Tsui was dissatisfied with Findlay J’s order and took the matter on appeal to the Court ofAppeal. In so doing he did not seek the leave of a judge, as required by s.14(3)(e) of the High Court Ordinance. The appeal was heard on 18 January 2000 by the Court of Appeal (Leong and Wong JJA), who gave James Tsui leave to appeal, out oftime, and allowed his appeal. The orders in the courts below were quashed. The Court of Appeal ordered that all the costs incurred,including the costs of the appeal, be paid out of the estate. Whilst James Tsui appeared in person in the Court of Appeal and thereforeincurred no legal costs, Edmund Cheung and Albert Tsui were separately represented by solicitors and counsel.

7. It is in these circumstances that Albert Tsui, represented by Mr Charles Sussex SC, now appears before us seeking leave to take thismatter to the Court of Final Appeal. Apart from being an executor Albert Tsui is also a substantial beneficiary of the estate.

8. At the forefront of Mr Sussex’s submission is this proposition : The Court of Appeal had proceeded in disregard of established principlesgoverning interference by an appellant court with a judicial discretion exercised by courts of first instance, particularly on amatter of costs where the discretion is particularly wide; the Court of Appeal had simply substituted its own discretion for thatof the judge, which the Court of Appeal is not empowered to do.

9. We find aspects of the Court of Appeal’s judgment disturbing. It is not easy to discover the juridical basis for its interferencewith the Master’s exercise of discretion as affirmed by the judge. The Court of Appeal acknowledged that they had to find “specialcircumstances” before they could give leave to appeal – no leave having been previously granted by a judge – but what constituted”special circumstances” in the eyes of that Court is unclear : It appears to boil down to no more than this : That James Tsui’s requestto Edmund Cheung to institute the interpleader proceedings was not wholly unreasonable. This might well be correct but seems a fragilebasis for exercising an exceptional jurisdiction.

10. On the other hand, this is not a clear cut case : At any rate upon the material before us. If we were to give leave, it is just possiblethat, on deeper exploration, it might be shown that Findlay J’s approach was unsound : In which case the whole issue of costs couldbe at large, with the Court of Final Appeal being invited to exercise a discretion as to costs at the very summit of the judicialhierarchy, on a matter that might well have been dealt with summarily by a Master in chambers. The cost effectiveness of remediesof that kind would be out of all proportions to the value of the ends achieved. It would hardly be practical justice, and may noteven be theoretical justice.

11. Expressing, as we do, disquiet over the Court of Appeal’s approach in this case, and at the same time confidence that the Court ofAppeal’s judgment would not establish any sort of precedence for anything, we must dismiss this application.

( Henry Litton ) ( Charles Ching ) ( Kemal Bokhary )
Permanent Judge Permanent Judge Permanent Judge

Representation:

Mr Charles Sussex SC (instructed by Messrs Sinclair Roche & Temperley) for the Applicant

Messrs Edmund Cheung & Co. (represented by Messrs Chan, Leung & Cheung), 1st Respondent, absent

Mr Tsui Wai Ho, 2nd Respondent, absent