FCMC 17190/2014
IN THE DISTRICT COURT OF THE
HONG KONG SPECIAL ADMINISTRATIVE REGION
MATRIMONIAL CAUSES
NUMBER 17190 OF 2014
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| BETWEEN | | |
| B, L | Petitioner |
| and | |
| K, WS | Respondent |
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| Coram: Her Honour Judge Sharon D. Melloy in Chambers (Not open to public) |
| Date of Hearing: 26 March 2015 |
| Date of Judgment: 13 April 2015 |
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JUDGMENT
(Maintenance Pending Suit, pre nuptial agreements and litigation funding)
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Introduction
1. This is an application by the Petitioner wife. In her summons dated the 20 March 2015 she requests that:
1. Upon the undertakings requested of the Respondent as follows:
(a) that he will guarantee until further order the payment of the salary and all employment obligations arising out of the Petitioner’s re-employment of her domestic helper ABA and take all steps necessary with the Immigration Department to facilitate the helper resuming her position as a helper in the Petitioner’s home forthwith without having to return to the Philippines;
(b) that he will not take any steps to terminate the domestic helper contract for the second helper NA and will, when she is released from hospital, ensure until further order that her salary and all of his employer obligations towards her continue to be met by him;
(c) That he will continue to pay until further order the rental on the Petitioner’s and the children’s home at XX, A Garden, XX Shouson Hill Road, Hong Kong together with all utilities bills relating to the said property;
(d) That he will to pay for all school fees and education related expenses for the Children;
(d) That he will maintain until further order the Petitioner’s subsidiary credit cards without any further reduction in the combined total level of credit currently standing at HK$220,000:-
1) AE Company Corporate Card
2) Citibank Octopus Visa Card (xxxx-xxxx-xxxx-6266)
3) Citibank Rewards Master Card (xxxx-xxxx-xxxx-9618)
4) HSBC Visa Platinum Card (xxxx-xxxx-xxxx-1843);
(f) That he will take no steps which would interfere with the ability of the Petitioner’s mother EB to remain in Hong Kong under her present visa;
2. That the Respondent do pay to the Petitioner a monthly sum in maintenance pending suit to be determined by the court which will cover the reasonable living costs of the Petitioner and the Children, inclusive of a sum to be determined for the upkeep of the Petitioner’s property at xxx, Moscow, Russia and a monthly sum in legal fees up to and including the hearing of any Financial Dispute Resolution hearing.
3. Time for service of this summons be abridged.
4. The Respondent do pay the costs of this application.
2. Thus this is essentially an application for maintenance pending suit pursuant to s 3 Matrimonial Proceedings and Property Ordinance Cap 192 (MPPO) and an application for interim maintenance for the two children of the family pursuant to s 5 of the same ordinance. The wife also seeks provision for her legal costs up until the Financial Dispute Resolution hearing.
3. This application differs from the norm in that it is brought in the shadow of an argument concerning a pre nuptial agreement (PNA) entered into by the parties on the 14 February 2007. The parties subsequently married in August 2007 and had two children who are now aged 5 and 3 years old respectively. The divorce petition was issued on the 15 December 2014 and the decree nisi was pronounced on the 2March 2015. On the 6 March 2015 the husband issued a summons, which has become known in England and Wales as a Crossley application, in which he asks that the Petitioner show cause why she should not be bound by the PNA. That hearing will hopefully come back before me for determination in September. This hearing is to determine the financial arrangements between the parties in the meantime.
Background
4. The parties are now 61 and 29 years old respectively. At the time of the PNA the wife had just turned 21 years of age and the husband was 53. The wife is from the Ukraine originally and she travels on a Ukrainian passport. I am not sure what nationality the husband is – although reference is made to New Zealand in the PNA. The parties had been married for 7 years at the time that the decree nisi was pronounced and as I have said they have two young children. The husband describes himself in his Form E as a Chief Investment Officer, although there is no reference to an employer and the wife says that she is a housewife, but that she also engages in a little part time modelling and acting.
5. It is clear from the information at hand that the parties have enjoyed an extremely high standard of living. They lived, until recently, in a house on the south side of the island at a rental cost of HK$590,000 per month. A cursory glance of the husband’s bank accounts show very large sums of money going in and out. I am told that they enjoyed 5 star holidays and that the wife was not really required to budget. During the course of the proceedings to date the wife has been called “spoiled”. I would accept however, as pointed out by Mr Pilbrow S.C for the wife, that if she is spoiled then that is because the husband has chosen to spoil her. There is no doubt that to date she and the children have enjoyed what appears to be a luxurious lifestyle.
The prenuptial agreement
6. Given the time constraints it has not been possible for the wife to file an affidavit in response to the husband’s affidavit on the Crossley application. Thus I do not know as yet what her case is on the PNA. I should add however that on the face of it this case is clearly not comparable to BN v MA [2013] EWCA 4250 (Fam), an English case which both sides referred me too during the course of this hearing. I will come to that case again later. It is also of note that the parties entered into this PNA a long time before the recent decision in our Court of Final Appeal namely SPH v SA [2014] 17 HKCFAR 364.
7. As to the actual terms of the PNA, it was agreed inter alia that the wife would receive a lump sum on a sliding scale dependent on the number of years that the parties had been married. Given that they had been married for between 7 and 8 years it is agreed that according to the PNA this would entitle the wife to a lump sum of US$850,000. She would not be entitled to any maintenance for herself. Maintenance for the children is set at US$50,000 per annum per child, which could be varied by agreement. In addition the husband agreed to pay for the children’s educational expenses, all reasonable extracurricular activities and all reasonable expenses incurred in respect of the children’s access visits to him. It appears to have been presumed that the children would be primarily based with their mother.
8. Counsel for the husband did however acknowledge in court that the husband’s legal team recognised, as set out in the PNA, that in so far as the children are concerned that the level of maintenance should be set by the court in the absence of any agreement between the parties.
9. In addition the husband agreed to provide a home for the wife and children – but on the following terms:
7.1 “The matrimonial home” means the property that has been purchased or leased by the parties and is their habitual and main place of joint residence, at the time of the parties’ separation or dissolution of the marriage, and does not refer to any property purchased for investment purposes and/or as a holiday home.
7.2 B [the husband] confirms that in the event of M [the wife] and B [the husband] having a child or children during their marriage that he will make reasonable provision for M and any child or children of the marriage for an appropriate home to compensate for the loss of such matrimonial home following separation or dissolution of the marriage.
7.3 In the event of the termination, or annulment of the marriage or the separation of the parties, it is agreed that the value of the said matrimonial home shall remain entirely with B and M waives any claim, financial or otherwise in respect of the same.
The weight to be attached to the prenuptial agreement prior to the Crossley application being heard
10. As I have said both parties referred me to BN v MA [2013] EWCA 4250 (Fam). Counsel for the husband, Mr Barnes, argued that it would be inappropriate to stray too far away from the terms of the PNA pending determination of the Crossley application. Mr Pilbrow meanwhile attempted to convince the court that the wife was not seeking to go outside the PNA in that she was only seeking funds for the children and for herself as a “carer” of the children and she was not asking me to prejudge the PNA.
11. With respect however it seems to me that this approach is somewhat artificial given that it is clear on the face of the documents that the PNA does not allow for any maintenance to be paid to the wife either on an interim basis or otherwise:
10. 10.1 In the event of the dissolution of the marriage by divorce, B and M hereby undertakes that no application will be made by her for an Order for alimony or maintenance or periodical payments against B, and B and M hereby agree that any financial settlement for M will be determined by way of a capital payment only – if necessary paid by instalments as provided for below.
12. I also agree with Mr Barnes that there can be no doubt that that the wife is now seeking maintenance – at least on an interim basis.
13. I should add however that although the Hon Mr Justice Mostyn did make the following comments in BN v MA the factual circumstances in that case were very different from those in this case.
33. In my judgment, when adjudicating a question of interim maintenance, where there has been a prenuptial agreement, the court should seek to apply the terms of the prenuptial agreement as closely and as practically as it can, unless the evidence of the wife in support of her application demonstrates, to a convincing standard, that she has a likely prospect of satisfying the court that this agreement should not be upheld.In the absence of any evidence of that nature from the wife, it is my judgmentthat it is appropriate for me to seek to apply the agreement to this case as closely as I can, provided that the wife is not left in any real predicament of need. In these circumstances, I am satisfied that the proposal advanced by Mr M in paragraph 8 of his skeleton argument is reasonable and should be adopted. The fact that the parties may have agreed further things is no concern of mine. If the parties wish to make a voluntary agreement in relation to further aspects, that is a matter for them, but it is not something I am going to impose on the husband. It will be a matter for him.
In particular Mostyn J had formed a very definite initial view of the wife’s claim. He said amongst other things that it was “extremely speculative”. He also reiterated the test for all nuptial agreements, which bears some repeating, namely:
The Supreme Court has modified the test for the treatment of these nuptial agreements, as expressed in Edgar and Xydhias and, indeed, in MacLeod, so as to provide one single test applicable to all nuptial agreements, which is this, “The court should give effect to a nuptial agreement that is freely entered into by each party with a full appreciation of its implications unless in the circumstances prevailing it would not be fair to hold the parties to their agreement”. That now is the test to be applied in every case where a nuptial agreement falls for consideration.
14. I should add that in this instance I have formed no such view. Putting it as neutrally as I can, and bearing in mind the fact that as I have said I have yet to see any evidence from the wife on the Crossley application, it seems to me that this wife will have an arguable case on the PNA. I have no doubt that arguments will inter alia be raised in relation to the “fairness” of the document. Thus it seems to me that the appropriate approach in the circumstances is that the terms of this order should be as close to the PNA as fairness dictates in the circumstances.
Offers of settlement
15. At the beginning of the hearing the husband offered to pay what he has been paying to date and declined to offer any undertakings on the premise that there was no need. He also agreed that the wife should be able to continue to use her credit cards up to a limit of HK$220,000 per month. The difficulty from the wife’s perspective is that she said that she did not have access to any cash. She asked that a) the new status quo be maintained (presumably to include the new accommodation that she and the children have moved into), b) she be provided with legal funding and c) that she be provided with some cash.
16. As the hearing progressed more information came to light. The husband confirmed that he was presently paying the following sums for or on behalf of the wife and children:
| * Complete List of Monthly Household Expenditure Expenses Direct to Ms BL & the children) |
| Mar-15 | |
|
House Rental |
HK$142,000.00 | |
|
School Fee for AK (PN3) |
HK$16,196.00 |
* HK$9,000.00 will be collected from May 1, 2015 as half day school fee* |
|
Domestic Helpers |
HK$4,110.00 | |
|
Electricity |
HK$1,066.00 |
* Consumption from Feb 17 – Mar 18, 2015 |
|
Gas |
HK$1,000.00 |
* Estimated consumption, awaiting current bill to be received |
|
Water |
HK$1,000.00 |
* Estimated consumption, awaiting current bill to be received |
| HK$165,372.00 | |
| ===================================== |
School Fee for NK
(R1 – LP HKIS) | * total HK$88,500.00 was PAID covered Jan – Jun 2015 school term* |
17. He said that this was in keeping with paragraph 7 of the PNA when he agreed to provide the wife and children with a home and paragraph 9 in relation to the provision of school fees. He undertook during the hearing to continue to make these payments.
18. He also agreed to enter into undertakings as set out in paragraphs 1 (a) – (e) of the wife’s summons referred to in paragraph 1 above.
19. In so far as the litigation funding is concerned the husband initially proposed advancing the wife US$100,000 from her lump sum payment of US$850,000. Towards the end of the hearing he upped this to US$300,000. Further he changed his stance slightly in that Mr Barnes said (and I paraphrase) that the issue of whether and how this lump sum payment should be regarded would ultimately be decided by the court. This would include whether or not it should be applied against the lump sum of US$850,000. He added that this was without prejudice to either sides claim. Therefore he argued that the wife’s claim for litigation funding could not succeed.
20. Thus the US$300,000 proposed by the husband for litigation funding was not, at the end of the day, necessarily on the premise that this sum should be advanced against the wife’s lump sum of US$850,000.
The law
Maintenance pending suit
21. The ordinance states that the only governing principle is that the court shall make such order, as it considers reasonable in all of the circumstances of the case. (See s 3 and s 5 MPPO Cap 192). Consequently applications such as these are of necessity approached on a broad-brush basis
Litigation costs
22. In so far as the law on the funding of litigation costs is concerned reference will be made to Currey v Currey [2006] EWCA Civ 1338.
Discussion
23. The main difficulty with the wife’s case is that she was unable to provide the court with an accurate budget. This is rightly considered a basic pre requisite of any maintenance pending suit application (see HJFG v KCY [2012] 1 HKLRD 95). She has therefore “worked backwards”. In her affidavit of the 24 March 2015 she sought approximately HK$360,000 per month as follows:
12. Accordingly, before the date of my petition the total sum available to me and the Children each month was approximately HK$361,746 being:-
| · | HK$283,246 | Average supplementary card spending in 2014 |
| · | HK$30,000 | Cash |
| · | HK$9,500 | Salary |
| · | HK$39,000 | USD$5,000 for Moscow property costs |
| HK$361,746 | |
24. This was on the premise that, on her case, she had almost unfettered use of the credit cards.
14. According to B [the husband] (in Annex 5.1-5.2 of his Form E) my average monthly expenditure on the Supplementary Cards was as follows:
| · | 2011: | HK$181,203 per month or HK$2.174m per annum |
| · | 2012: | HK$256,710 per month or HK$3.080m per annum |
| · | 2013: | HK$249,141 per month or HK$2.989m per annum |
| · | 2014: | HK$283,246 per month pr HK$3.398m per annum |
25. In addition, as indicated above, she had received an income of HK$10,000 (less MPF of HK$500) from the husband’s company plus an additional HK$30,000 cash from him direct. The HK$9,500 “salary” stopped in February 2014 and the additional HK$30,000 stopped sometime in mid 2014. Since then she has had no access to regular cash sums. Counsel for the husband points out that she can simply take out a cash advance from the credit cards – which is true, but probably does little to alleviate her concerns about the level of funds presently available to her.
26. In determining the appropriate level to be paid I am also conscious on the one hand that it is not possible nor appropriate to approach this case on the premise that the wife should be able to “get by” on the money offered to her by the husband. To that end I was referred to the judgment of my brother judge – HH Judge Bruno Chan in C v F [2006] 1 HKFLR 41, who in turn quoted from Thorpe J in F v F (Ancillary Relief: Substantial Assets) 1995 2 FLR 45 as follows:
Thus, in determining the wife’s reasonable needs on an interim basis it is important as a matter of principle that the court should endeavour to determine reasonableness according to the standards of the ultra-rich and to avoid the risk of confining them by the application of scales that would seem generous to ordinary people. Thus I conclude that it would be wrong in principle to determine the application on some broad conclusion that if the wife cannot manage at the rate of a quarter of a million a year, she ought to be able to. I think that it is necessary to establish a yardstick that more nearly reflects the standard of living which has been the norm for the wife ever since marriage and for the husband for considerably longer.
27. I agree. On the other hand I also accept, as indicated above, that it would be appropriate, in the circumstances of this case, for the terms of the order to be as close to the PNA as fairness dictates in the circumstances. I have also taken into account the offers now made by the husband during the course of the hearing.
28. Although the PNA makes no allowance for maintenance for the wife either in her own right or as the children’s carer, the husband clearly acknowledges that in the short term at least she should have access to an appropriate level of interim funding otherwise he would not have offered her the continued use of the credit cards. I should add that it seems to me that that must be the most appropriate way to proceed and that fairness dictates that the wife must have access to an appropriate level of interim support regardless of the outcome of the Crossley application. However it is of note that the husband has not offered to pay her maintenance for the children as a separate item, even as anticipated in the PNA in the sum of US$50,000 per child per annum. It is not clear why this is so – unless maintenance for the children is to be rolled into the credit card provision. At paragraph 9 of the PNA the following is stated in relation to the children’s maintenance:
B and M undertake that they will look after and care for all children born of the marriage and/or adopted by them during the subsistence of the marriage, to the best of their ability. B and M hereby further agree that whilst each of them will abide by any Order of a Court of competent jurisdiction setting out the level of their respective obligations in respect of any children they might have, that might be made following their separation and/or dissolution of the marriage, that they hereby agree that in the event of such separation and/or dissolution that provided any such child or children remain in the care and control of M that B will pay to M for the maintenance of each child the sum of HK$50,000.00 per child per annum (such sum to be varied only by agreement) and he will in addition pay for their educational expenses, all reasonable extracurricular activities and for all reasonable expenses incurred in respect of their access visits to see him.
29. This equates to HK$32,500 per child per month. It seems to me that on a broad brush basis and in keeping with the provisions of the PNA, it would be appropriate for this sum to be paid to the wife, for and on behalf of the children. How much of the HK$220,000 per month relates to the children’s additional expenses (including their share of any general expenses) and how much relates to the wife’s expenses either as the children’s carer or otherwise remains to be seen.
30. In so far as the provision for the credit cards is concerned, there was some debate during the hearing about how far one should go back in determining an appropriate bench mark for credit card expenditure. The wife originally asked for HK$283,246 per month based on her credit card expenditure for 2014. I have taken into account however that the marriage was in trouble towards the end of that year and the husband complains about the wife’s expenses during that period. If however we go back to 2012 or 2013 the level of expenditure is reduced slightly. In round figures it seems to me that HK$250,000 on credit card expenditure would be reasonable and in keeping with the level of expenditure enjoyed by the wife in happier times. In the wife’s summons she seeks HK$220,000 per month and the husband has confirmed that he will provide that sum – or that figure as a combination of cash and credit card provision. This seems like a sensible compromise in the circumstances. I will therefore hold the parties to their tacit understanding in this respect. In the event that the wife wishes to receive some of this figure in cash then that is a matter for further discussion between the parties.
31. The real issue is that the husband does not agree to pay anything in addition to this sum – either as maintenance for the children or as a separate cash component for the wife. I accept that during the marriage the wife received approximately HK$39,500 in cash to cover other extraneous items including some food. There would however have been some cross over here between the expenses for the wife and the expenses for the children. The same obviously applies to the credit card expenditure. In such circumstances I am not inclined to order that any further sums be provided in addition to the maintenance of HK$65,000 per month for the children. I am also not inclined to allow any additional sums for the property in Moscow given the lack of documentary evidence in support of the wife’s claims.
32. Thus the wife will receive or shall benefit from the provision of the following sums:
| a) | Credit card provision (or cash/credit card alternative) | HK$220,000 |
| b) | Housing etc as set out in paragraph 16 above | HK$165,000 |
| c) | Children’s maintenance | HK$65,000 |
| Total | HK$450,000 |
| | |
33. In addition the husband will be responsible for any additional items in paragraph 1 1(a) - (e) above to the extent that they are not already paid for by him.
Litigation funding
34. The husband’s basic stance is that the court does not need to consider the issue of litigation funding given that he is now prepared to advance the wife US$300,000 – which should be sufficient to cover her costs up to and including the Crossley application. However that was not the husband’s stance originally and given that it seems to me appropriate to consider the matter more fully.
35. The Family Court in Hong Kong has consistently relied on the guidance provided by Currey v Currey (no 2) [2007] 1 FLR 946 in this respect. In considering the issue of litigation funding the two stage approach identified by Wilson LJ in that case bears some repetition namely that the four points be considered first as set out below, and that the matter then be considered in the round as part of an overarching enquiry. The four points are as follows:
(1) That the applicant spouse has no assets, or none that can reasonably be deployed (at para [19], [20]).
(2) That she can provide no security for borrowing, or none which can reasonably be offered (at paras [19], [20]).
(3) That she cannot reasonably obtain legal services by offering a charge on the outcome of the litigation (at para [20] and see Sears Tooth, per Wilson J).
(4) That she cannot secure publicly funded legal help ‘at a level of expertise apt to the proceedings’ (at para [20])”
The Four Points
36. Turning to the four points first, on the wife’s evidence it seems to me that although it could be said that she does have some assets at her disposal, which might be reasonably deployed by her to pay for legal costs e.g. the property in Moscow and the Ukraine, I accept that the reality is that it will be very difficult if not impossible in the present political climate for her to borrow against these properties. This is especially so given that she does not work in a full time capacity. I also accept that it would not be appropriate for her to sell her jewellery.
37. It was also suggested that her lawyers might be prepared to act for her on credit – which seemed to me to be quite an extraordinary suggestion given the circumstances. Alternatively it was suggested that she might use some of her income for that purpose. With respect given that her costs estimate is HK$2.3 million – it is clear that it will simply be impossible for her to utilize the funds that she needs to support herself and the children at a reasonably high level and at the same time to pay for her legal costs from that same source. I also accept that any funds that she had are now almost depleted. I also accept that it is unlikely that she could obtain legal services on the basis suggested by 3) above or that she would be eligible for legal aid.
Overarching enquiry
38. I also accept that in considering this matter overall that it would be entirely reasonable for the husband to provide the wife with litigation funding. Thus the offer of US$300,000 is accepted – but this is not subject to any caveats. This will also be subject to the normal undertaking that the sum of US$300,000 shall be paid directly to the wife’s lawyers. I should add that it is accepted that this sum is likely to take the wife up to and including the Crossley application. Depending on the outcome of that hearing the issue of litigation funding will most probably need to be considered again.
Costs
39. In all of the circumstances of this case it seems to me that it would be appropriate to reserve costs for the time being.
The order
UPON the Respondent husband undertaking:-
(a) That he will guarantee until further order the payment of the salary and all employment obligations arising out of the Petitioner’s re-employment of her domestic helper ABA and take all steps necessary with the Immigration Department to facilitate the helper resuming her position as a helper in the Petitioner’s home forthwith without having to return to the Philippines;
(b) That he will not take any steps to terminate the domestic helper contract for the second helper NA and will, when she is released from hospital, ensure until further order that her salary and all of his employer obligations towards her continue to be met by him;
(c) That he will continue to pay until further order the rental on the Petitioner’s and the children’s home at XX, A Garden, XX Shouson Hill Road, Hong Kong together with all utilities bills relating to the said property;
(d) That he will to pay for all school fees and education related expenses for the Children;
(e) That he will maintain until further order the Petitioner’s subsidiary credit cards without any further reduction in the combined total level of credit currently standing at HK$220,000 per month:-
1) AE Company Corporate Card
2) Citibank Octopus Visa Card (xxxx-xxxx-xxxx-6266)
3) Citibank Rewards Master Card (xxxx-xxxx-xxxx-9618)
4) HSBC Visa Platinum Card (xxxx-xxxx-xxxx-1843);
(f) Or in the alternative that he will provide cash/credit card provision up to a maximum of HK$220,000 per month.
IT IS ORDERED THAT
1) The Respondent shall pay interim maintenance to the Petitioner for the two children of the family in the sum of HK$32,500 per child per month the first payment to be backdated to the 1 April 2015 and thereafter to be paid on the 1st day of each succeeding month until further order.
2) The sum of US$300,000 shall be paid to the Petitioner’s solicitors by the Respondent as litigation funding, such sum to be paid within the next 28 days.
3) Costs be reserved.
| ( Sharon D. MELLOY ) |
| District Judge |
Mr David Pilbrow SC instructed by Howse Williams & Bowers for the Petitioner
Mr Peter Barnes instructed by Withers for the Respondent