The power behind the throne: costs orders against a non-party

The making of costs orders against a witness (who was not a party to the proceedings) was considered by the Hong Kong Court in To Pui Kui, the Administratrix of the Estate of Ng Po Sum, Deceased v Ng Oi Che and Others.  Such orders are rare, one reason being that witnesses should be able to give their evidence without fearing that they will face any civil action in respect of the evidence that they give.

Facts

This case concerned two groups fighting over the estate of Mr Ng Po Sum ("Mr Ng").  The Plaintiff was the wife of Mr Ng and administratrix of his estate.  On her side, were four of her and Mr Ng's children, including their son Andrew, who held a power of attorney to act in his mother's capacity as administratrix.  He appeared at trial as a witness for the Plaintiff.  On the other side, were four other children of the Plaintiff and Mr Ng, including their daughter Stephanie, who was named as the 1st Defendant.  The 2nd Defendant was a bank in which Mr Ng held two bank accounts and a safe deposit box.  The 3rd Defendant was a company set up by Mr Ng to hold his assets.

The Plaintiff alleged that:

1. the 1st Defendant misappropriated (i) money from the bank accounts and (ii) the contents of a safe deposit box without the knowledge or consent of the Plaintiff;
2. the 3rd Defendant was a knowing recipient of the misappropriated money; and
3. the 2nd Defendant breached its contractual or common law duty in that it should have been put on inquiry as to the legitimacy of the transfers out of the bank accounts and the removal of the contents of the safe deposit box.

All these claims were dismissed by the Court.

The Court found that the Plaintiff had instructed the 1st Defendant to (and agreed that she should) transfer the money from Mr Ng's bank accounts into the 3rd Defendant's account to pay for Mr Ng's funeral expenses and to purchase a car to be used by Andrew for the Plaintiff's benefit.  In addition, the money had in fact been used for such purposes.  The Court also found that the Plaintiff had instructed the 1st Defendant to empty Mr Ng's safe deposit box together with Andrew.

Costs and the legal principles

Following an application by the 1st and 3rd Defendants, the Court joined Andrew as a party to the proceedings for the purpose of costs and ordered that he be jointly and severally liable with the Plaintiff for the costs of the action.  The Court found that Andrew had manipulated and controlled the Plaintiff in commencing the action to achieve an ulterior purpose and that he had a personal interest in the outcome of the proceedings.  In brief, the oral evidence given by the Plaintiff at trial revealed that, had she known the reasons why the 1st Defendant transferred money out of Mr Ng's bank accounts, she would not have commenced the action.  Andrew, on the other hand, knew where the money went and therefore knew that the action was without merit, but did not correct the Plaintiff's mistaken belief that the 1^st Defendant had misappropriated the money in Mr Ng's bank accounts.

The Court has jurisdiction to make a costs order against a non-party under section 52A of the High Court Ordinance and Order 62, rule 6A of the Rules of the High Court although such a power is only to be exercised in exceptional circumstances.  As to what is considered an exceptional circumstance, the Court referred to the case of Dymocks Franchise Systems (NSW) Pty Ltd v Todd [2004] 1 WLR 2807 where it was said that costs orders will generally not be made against 'pure funders'.  However, justice will require that such orders be made against those who not merely fund the proceedings but also control or benefit from the proceedings i.e. the non-party is the real party to the litigation.

Comments

It is common in the context of family disputes for someone other than the party to the proceedings to fund the litigation.  Whilst the funder is not a party to the proceedings, this case demonstrates that there may still be cost consequences for the funder in the event that the party he funded loses in the proceedings and the funder is, in the view of the Court, the real party to the proceedings.

If you wish to discuss, please contact Gareth Thomas or Richard Norridge of our Private Wealth and Trusts team.