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Matrimonial Causes2014

W v. C

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96459-EN-2014-11-28

W v. C

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FCMC 2201 / 2014

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES

NUMBER 2201 OF 2014

----------------------------

BETWEEN
 WPetitioner
and
 CRespondent

----------------------------

Coram: Deputy District Judge K K PANG in Chambers (Not Open to Public)
Date of Hearing : 13 November 2014
Date of Handling Down of this Ruling : 28 November 2014

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RULING ON COSTS

---------------------------------

 

1.  This is hearing of a Summons taken out by the Husband (“H”), the respondent in the action, to vary the costs order nisi given in a judgment dated 11 August 2014 (the “Judgment”).

2.  By a summons filed on 8 May 2014, the Wife (“W”), the petitioner in the action, sought a sum of HKD46,000 per month as maintenance pending suit (“MPS”) plus a sum of HKD35,000 per month as legal costs provision.  The substantive hearing of the application took place on 25 July 2014.  By the Judgment, it is ordered H shall pay W HKD15,000 per month as MPS and HKD35,000 per month as legal costs provision and on a nisi basis that H shall pay W’s costs of the application, including all reserved costs, with certificate for counsel (“the Costs Order Nisi”).

3.  H now applies to vary the Costs Order Nisi.  H says that the appropriate costs order should be that the costs of W’s application for MPS and legal costs provision (including the costs of the hearing dated 25 July 2014 and all costs reserved) shall be paid by W to H with certificate for counsel.

4.  The court has a wide discretion as to costs.  For the present case, the relevant provisions in the Rules of the High Court governing the exercise of discretion as to costs are Order 62 rules 3(2A) and 5, which contain amendments introduced as a result of the Civil Justice Reform.  Both parties accept that the effect of Order 62 rule 3(2A), was as explained by To J in Melvin Waxman & Another v Li Fei Yu & Another, HCA No 1972 of 2012, 11 September 2013 (unrep) at para 11:-

“The amendment to rule 3(2) and the introduction of rule 3(2A) specifically applicable to costs in interlocutory proceedings makes it clear that the legislative intent was to distinguish between costs in interlocutory proceedings and costs in other proceedings. Under the new rule 3(2), the general rule of costs to follow the event is preserved for costs in proceedings other than interlocutory proceedings. But a different approach is provided under the new rule 3(2A) for costs in interlocutory proceedings. Under this new rule, the court may order costs to follow the event or make such other order as it sees fit. The court is no longer required to apply the general rule of costs following the event except in special circumstances, though that principle remains as one of the options. The court may make such other order as it sees fit. Rule 3(2A) gives the court even wider discretion than that under rule 3(2) in respect of costs in other proceedings.”

5.  In other words, the “rule” that costs normally follow the event is no longer the usual order in an interlocutory application, but remains an option.  When dealing with costs orders, under Order 62 rule 5(1)(e) the court may take into account the conduct of all the parties.  Rule 5(2) provides that conduct for this purpose includes (a) whether it was reasonable for a party to raise, pursue or contest a particular allegation or issue, (b) the manner in which a party has pursued or defended his case or a particular allegation or issue; (c) whether a claimant who has succeeded in his claim, in whole or in part, exaggerated his claim; and (d) conduct before, as well as during, the proceedings.

6.  W’s application for MPS consists of two parts: (a) W’s monthly living expenses; and (b) legal costs provision for W.

7.  About W’s application for monthly living expenses, H contended that he is the successful party in this part of W’s application.  When W took out her summons on 8 May 2014, she sought a monthly sum of HKD46,000 for her living expenses.  The same amount was requested in the skeleton submissions filed on her behalf on 22 July 2014.  At the beginning of the hearing dated 25 July 2014, W reduced her request to HKD38,600.  After trial, it is eventually ordered that H shall pay MPS for W’s living expenses at the rate of HKD15,000 per month.  H’s open offer was HKD12,000 per month.  The difference between the amount awarded by the court and H’s open offer is HKD3,000, but there is a difference of HKD23,600 between the amount awarded and W’s last request.  H took notice that out of the 17 items of expense put forward by W in her monthly budget, 4 items were accepted by H.  The court did not agree with either H or W for 1 item.  The court only agreed with W’s claim for 2 items while it agreed with H on 10 items. 

8.  Despite that W has lost a good many issues on the expenses put forward by her in her monthly budget, at the end of the day H has to pay W money of an amount well over his open offer. I am not myself able to follow H’s contention that he is the successful party in W’s application for monthly living expenses pending suit.  It seems that in reality and substantively W has succeeded in this part of her claim.

9.  However, I agree with H that W is responsible for what Deputy High Court Judge Mostyn QC (as he then was) guarded against in TL v ML (Ancillary Relief: Claim Against Assets of Extended Family) [2006] 1 FLR 1263 – forensic exaggeration.  It is clear to me W has overinflated her monthly budget.

10.  The court is entitled to consider that W’s conduct that has exaggerated her claim for living expenses when deciding costs.  It is pertinent to note that substantial evidence has filed by the parties and much of the hearing time was spent on the parties’ contention about the W’s reasonable needs.

11.  At the same time, the court is entitled to consider H’s conduct that he has tried to paint a picture that he has no income, and with limited assets do not have the ability to pay the requested MPS.  His financial position is contradicted by evidence of Ah Lung and the court is “incredulous” to the alleged financial position of him.

12.  Regarding W’s request for legal costs provision, the court accepted W’s request and awarded legal costs provision for W at the rate of HKD35,000 per month.  One of the two core objections raised by H in relation to this part of W’s application was that she failed to provide a breakdown as to how the requested amount of HKD35,000 per month was arrived at.  As it was not until the day of the hearing did W through her counsel produce an estimate of her legal costs up to FDR, H contended he was entirely justified in resisting W’s request for legal costs provision when the burden is squarely on her to substantiate her own application.  As well, H asked for the costs of this part of W’s application.

13.  I am not persuaded by W’s contestation that her estimate of only HKD35,000 per month up to FDR is very conservative and practical and therefore a breakdown of her anticipated legal costs is not necessary.  The applicant’s duty to provide a breakdown of the anticipated legal costs has been repeatedly emphasized by the courts: see KWTM v NSH, FCMC No 14639 of 2007, 3 September 2008, unrep at para 79; K v K, CACV No 80 of 2010, 31 August 2010, unrep at para 14; and HJFG v KCY [2012] 1 HKLRD 95 (CA) at para 90.

14.  W’s summons was taken out on 8 May 2014, which came with a supporting affirmation containing no information about her legal costs.  She filed two lengthy affirmations in reply on 9 July 2014.  Again, there was no information about her legal costs.  Even her Form H filed on 24 July 2014 (i.e. the day before the hearing) contains no information about her anticipated legal costs.  Parts 2 and 3 of her Form H were simply stated as “to be assessed”.  W provided a breakdown of her legal costs on the day of the hearing, but she failed to give a satisfactory explanation on why she waited until the last minute to provide such information.

15.  It is noted by W that H has never challenged the amount of HKD35,000 being unrealistic or excessive.  In his “without prejudice” letter, H’s position is that he has no obligation to pay as the W has a property in Hong Kong which allegedly could be sold to meet her legal costs.  H’s position remained the same during the hearing.  In view of H’s denial of the liability to W’s claim for legal costs provision, it seems unlikely that the parties could get rid of the hearing on this part of W’s claim supposing W had provided H a breakdown of her anticipated legal costs. Nonetheless, a breakdown of the estimate of her legal costs can give the court and H an earlier opportunity to properly consider the reasonableness of her requests and can work to narrow down the dispute between the parties on the question of quantum, if not liability, and surely H would drop his point on W’s duty to provide a breakdown of her legal costs.  In the present hearing, Mr Yiu has cited cases in H’s List of Authorities to advance his point on the applicant’s duty to provide a breakdown of the anticipated legal costs.

16.  Under Order 62 rule 5(1)(d), the court may take into account a “without prejudice save as to costs” offer.  By a “without prejudice save as to costs” letter dated 26 Jun 2014, H offered as MPS to W the sum of HKD12,000, but he did not make an offer for legal costs provision.  The offer was rejected by W by a “without prejudice save as to costs” letter dated 15 July 2014, in which W indicated her willingness to accept the sum of HKD60,000 per month.  H then sent an open letter dated 23 July 2014 repeating his offer of HKD12,000, still making no offer for legal costs provision on the basis that W could sell her property in Hong Kong to meet her legal costs.  It is noted by W that the sum finally awarded by the court i.e. HKD15,000 + HKD35,000 is not too far from W’s without prejudice offer of HKD60,000 per month.

17.  I agree with H that the “without prejudice save as to costs offer” by W dated 15 July 2014 should be viewed in the backdrop that at that stage H was faced with a blanket request for HKD35,000 per month as legal costs provision with no information as to how the sum of HKD35,000 was arrived at.

18.  In KWC v LYY, FCMC No 14968 of 2006, 17 November 2009 (unrep), the wife in the action, who put forward several Calderbank offers, was criticized by HHJ Bebe Chu in para 26:-

“In my view, both W’s Calderbank Letters clearly fall short of these requirements. Making a Calderbank offer does not simply mean putting forward an amount, albeit a high amount which eventually in this case well exceeded the award, but also setting out the basis of the offer to enable the other side to consider it properly and seriously. At that time, H was saying his proposal of HK$2,67 m was only one third of what he said were the Family Assets at the time of the separation, which was about HK$8 m. If W disagreed with H’s calculations, she should have made it known, whether in her 2nd Calderbank Letter or otherwise, and explained what she regarded as the value of the Family Assets were and how she arrived at the sum of HK$1 m. It was also not clear whether W had arrived at this sum after taking into account her alleged amount of maintenance for the children. By failing to set out the basis of her offer, H might have thought that W was only offering him HK$1 m out of the HK$8 m, ie 13% of the assets. This should also be seen against the background that W’s then disclosed net current assets of about HK$11 m and H’s of about HKD14,000. In such circumstances, there being no proper explanation as to the basis of her offer of HK$1 m, which was further to be paid over 12 months, it was not unreasonable for H to reject W’s offer in her 2nd Calderbank Letter. I also note that there was no mention by W in her 2nd Calderbank Letter as to what her estimated costs would be if the matter were to proceed to trial. H was under legal aid, but W was not and I would have thought it would be helpful for H to know what her costs might be if the matter were to proceed to trial and that such costs might have to be deducted from his award.”

19.  W’s “without prejudice save as to costs” offer dated 15 July 2014 falls short of the requirements referred to in KWC v LYY, supra.  Additionally, in fact there is a large difference between the without prejudice offer of HKD60,000 and HKD15,000 + HKD35,000 per month.  It follows that I agree with H that W’s “without prejudice save as to costs offer” dated 15 July 2014 does not assist her.

20.  In view of that the amount awarded is well over his offer, neither H’s without prejudice nor open offer of HKD12,000 assist him.

21.  All in all, I remind myself of the provisions of Order 62 rules 3(2A) and 5 of the Rules of the High Court, which set out the factors which the court shall have regard in exercising its discretion as to costs.  I place particular significance on the fact that by and large W is the successful party, at the same time bearing in mind that the court is no longer required to apply the rule of costs following the event except in special circumstances, though the rule remains as one of the options.  I caution myself of the need to consider the overall justice of the situation and examine all the factors and circumstance, taking into account whether a party has succeeded on part of his case, even if he has not been wholly successful, and the underlying objectives in Order 1A.  I also place particular significance on that W has overinflated her monthly budget, that despite H’s argument to the contrary, it is the court’s finding that there can be no question of H not having the ability to pay W the requested MPS, and that the two most outstanding matters for the purpose of the present MPS application are W’s reasonable needs and H’s ability to pay.  I also place particular significance on W’s conduct in her claim for legal costs provision, particularly her inordinate delay in providing a breakdown of her anticipated legal costs.  Looking at all matters in the round, I regard it is reasonable and just to make the order that H shall pay W half of the costs of the MPS application including all reserved costs with certificate for counsel’s attendance, to be taxed if not agreed.

22.  During the hearing of this application, I told the parties that I was minded to have the question of costs of this application to be disposed on the papers.  Second though about this, I make the order that there be a costs order nisi that W shall pay H half of the costs of this application with certificate for counsel’s attendance, to be taxed if not agreed.  This costs order nisi becomes absolute 14 days after the handing down of the Ruling unless a party has applied to the court for varying the order.

( K K PANG )
Deputy District Judge

Ms Jennifer K W Tsui instructed by T H Koo & Associates for the petitioner

Mr Engene Yim instructed by Hastings & Co for the respondent

94912-EN-2014-08-11

W v. C

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FCMC 2201 / 2014

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES

NUMBER 2201 OF 2014

----------------------------

BETWEEN

 WPetitioner

and

 CRespondent

----------------------------

Coram: Deputy District Judge PANG in Chambers (Not Open to Public)

Date of Hearing : 25 July 2014

Date of Judgment : 11 August 2014

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J U D G M E N T
(Maintenance Pending Suit)

---------------------------------

 

The wife’s application

1.  This is hearing of the petitioner wife (hereinafter called “W”)’s summons dated 8 May 2014 for maintenance pending suit (hereinafter called “MPS”) in the sum of HKD46,000 per month from date of the petition and for provision of legal costs in the sum of HKD35,000 per month until the hearing of the Financial Dispute Resolution (hereinafter called “FDR”) or further order.  During today’s hearing, W reduced the amount she asked for her monthly maintenance from HKD46,000 to HKD38,600 per month.  The respondent husband (hereinafter called “H”) has been paying the sum of $10,000 per month pursuant to an Order dated 12 May 2014, pending the outcome of this application. His open offer is that he is prepared to pay W the sum of HKD12,000 per month as MPS.  He considered that W’s application for legal costs provision should be refused since she has failed to bring herself within the test laid down by the English Court of Appeal decision in Currey v Currey [2007] 1 FLR 946.

Background

2.  H (now aged 67) and W (now aged 61) were married in 1971.  There are 6 children out of this marriage (5 daughters and 1 son) who are all adults and self-supporting.

3.  The parties started a goldsmith business in 1970s.

4.  W became a full-time housewife after the birth of Helen, the 2nd daughter, in about 1976.

5.  It is undisputed that H set up another family with a Madam Szeto in about early 1980s and has 4 children born to this extra-marital relationship.  H said this was an open relationship of which W was aware from as early as 1983.  W contends she did not know about H’s second family until shortly after the parties immigrated to Vancouver.

6.  The parties together with the 6 children immigrated to Vancouver in about 1989.  H returned to Hong Kong to carry on the goldsmith business shortly afterwards whilst W and the children stayed in Vancouver.

7.  H would visit the family in Vancouver during holidays.  H said the parties have been living in separate household since early 1990s as and when H returned to Hong Kong while W led a separate life in Vancouver.  He further said there was a mutual understanding between the parties that their marital relationship was over but they would remain friendly for the sake of the children, which is disputed by W whose case is that there was no separation until shortly before she filed the petition for divorce.

8.  After a few years, one after the other, Flora, the eldest daughter, and Ah Lung, the eldest son, returned from Vancouver to join H’s goldsmith business in Hong Kong.

9.  H’s business has flourished and he has made a big success of his investments in landed properties in Hong Kong.  W estimates that as of now, he has assets either under his name or other nominees up to at least HKD100 million.

10.  W petitioned for divorce in February 2014 initially on the basis of unreasonable behaviour, which was subsequently amended to one year separation with consent.

Legal Principles

11.  W’s application is governed by section 3 of the Matrimonial Proceedings and Property Ordinance (Cap. 192) (the “MPPO”).

12.  The court has a wide discretion in the matter, subject to the result being reasonable.  In TL v ML & Ors (Ancillary Relief: Claim Against Assets of Extended Family) [2006] 1 FLR 1263, Deputy High Court Judge Mostyn QC (as he then was) stated, at 1289:-

“The sole criterion to be applied in determining the application is ‘reasonableness’ (s 22 of the Matrimonial Causes Act 1973), which, to my mind, is synonymous with ‘fairness’.”

13.  The court will consider all factors that may influence the outcome of the application so as to make such order as it regards reasonable in all circumstances of the case.  In C v F [2006] HKFLR 41, HHJ Bruno Chan stated at paragraph [45]:-

Although the sole statutory guideline in considering maintenance pending suit is that the award shall be ‘reasonable’, the court will nevertheless bear in mind all the factors drawn to its attention relating to the marriage and the parties to it and perhaps the two most outstanding matters in every case, as in this one, are the standard of living of the parties, and the ability of the husband to pay.”

Discussion

W’s Reasonable Needs - W’s General Expenses

14.  Both parties agree that W has lived a frugal lifestyle and her standard of living is not high despite H being a successful businessman.

15.  About W’s resources, she has cash of about HKD30,000 and CAD11,500 in her bank accounts maintained in Hong Kong and Canada respectively.

16.  She has two properties under her name, i.e.:-

(i) her residence in Vancouver (hereinafter called “7788 Ash Street”), valued at around HKD3.5 million; and

(ii) a flat in Hong Kong (hereinafter called “9/F Wyler Garden”) which is subject to a mortgage and has a net equity of around HKD2.55 million.

17.  W said she owed Flora and Ah Lung, who have helped her with the down payment of 9/F Wyler Garden and have been making contributions to her living expenses and legal costs, loans up to over HKD 2 million.

18.  According to her Form E, W needs HKD7,300 per month to keep 7788 Ash Street where she and her three unmarried daughters, namely, Helen, Nancy, the 3rd daughter, and Shirley, the youngest daughter, live in Vancouver.  The said expenses of HKD7,300 per month include:-

(a) property tax in the sum of CAD127.06;

(b) management fees in the sum of CAD207.99;

(c) home insurance in the sum of CAD28.00;

(d) home security system fees in the sum of CAD22.40;

(e) utilities in the sum of CAD350.00;

(f) car license fee and insurance in the sum of CAD112.67;

(g) car repairs and fuel in the sum of CAD185.

Total = CAD1,033.12 X 7 ≒ HKD7,231.84

19.  H’s position is that as W is residing there with 3 self-supporting daughters, the expenses which is attributable to W should be HKD7,231.84 ÷ 4 ≒ HKD1,800. 

20.  In my view, W as the registered owner is personally liable to pay the property tax and management fee of the home property.  Being the owner and beneficiary, she is also liable to the payment of the home insurance and security system.  I consider that W’s expenses on the above items (a), (b) (c) and (d) are necessary and reasonable.  For utilities such as electricity, town gas, water, etc. I accept that the adult daughters should chip in for the expenses.  In view that W now spends 9 months in Hong Kong, I deduct CAD300 from the said expenses of CAD350.  It is curious that car expenses are included here.  No explanation has been given as to why this is so.  There is no evidence whether W drives in Vancouver.  In these circumstances I regard the car expenses should be excluded.  Thus, I allow CAD1,033.12 – (300 + 112.67 + 185) = 435.45 x 7.16 ≒ HKD3,100.

21.  9/F Wyler Garden was bought in July 2008 and is let out for rental income in the sum of HKD8,800 per month to cover the mortgage repayment and other expenses totally about HKD7,400 per month.

22.  W now spends around 9 months in a year in Hong Kong.  When she is in Hong Kong, she lives alone in a small flat (hereinafter called “8H Grand Waterfront”) purchased by Nancy, Janis, the 4th daughter, and Shirley.  W said she pays the mortgage repayment, management fees and Government rent of the said flat in the sum of HKD6,431, HKD1,110 and HKD90.75 respectively, totally in the sum of HKD7,631.75 per month for her use of the said flat.

23.  This is a property owned by W’s three daughters. It is noted W has failed to adduce any documentary evidence showing that she has been actually paying the mortgage repayment and Government rent of the said flat.  This is W’s application for MPS and she carries the burden to prove her payments of the alleged expenses.  I am not satisfied W has discharged such burden. W produced bank statements showing her payments of the management fees of HKD1,110 per month.  W lives rent free about 9 months a year at this flat.  I consider it is reasonable that she pays the management fees.  I allow the management fees of HKD1,110 per month.

24.  Utilities in the sum of HKD100 is agreed.

25.  W has not adduced receipts in support of her food expenses but I consider that the claim of HKD3,000 is reasonable.

26.  Household expenses in the sum of HKD500 is agreed.

W’s Personal Expenses

27.  W said she needs an extra sum of HKD20,095 per month for personal expenses. My assessment of her reasonable personal expenses is as follows.

28.  Meals out of home:  Despite that there is a separate item for food, I consider a sum of HKD2,000 is reasonable.

29.  Transportation:  I agree with H that a reasonable amount should be HKD800.

30.  Clothing/shoes:  I agree with H that a reasonable amount should be HKD1,000.

31.  Personal grooming:  I agree with H that a reasonable amount should be HKD300.

32.  Entertainment:  I agree with H that a reasonable amount should be HKD300.

33.  Holidays:  I agree with H that a reasonable sum should be HKD500.

34.  Medical/dental:  I agree with H that a reasonable amount should be HKD400.

35.  Insurance in the sum of HKD1,495.17 is agreed.

36.  Mobile phone in the sum of HKD300 is agreed.

37.  Contribution to parents:  Inasmuch as there is no evidence showing that this item was used to be accepted by H as a part of the expenses for the family, I do not regard that this is an acceptable item for the purpose of the present application.

38.  Air-tickets:  Supposing that W is spending most of her time in Hong Kong, I allow one return ticket to and from Vancouver every year i.e. HKD12,000 ÷ 12 = HKD1,000.

39.  Tonic/nutrient food:  Though this is not supported by receipt, I agree with H that a reasonable amount is HKD500.

40.  On the basis of the above figure, the reasonable monthly expenses of W are as follows:-

ItemsHKD
General expenses
Utilities100
Food3,000
Household expenses500
7788 Ash street3,100
8H Grand Waterfront1,110
Sub-total:7,810
Personal expenses
Meal out of home2,000
Transportation800
Clothing/shoes1,000
Personal grooming300
Entertainment300
Holidays500
Medical/dental400
Insurance1,495.17
Mobile phone300
Air-tickets1,000
Tonic/nutrient food500
Sub-total:8,595.17
Total:16,405.17

41.  Taking into account W is making about HKD1,400 per month from the rental income of 9/F Wyler Garden, her reasonable need for maintenance is about HKD15,000 per month.

Provision for Legal Costs

42.  In a discussion on the law applicable to a MPS application for legal costs contribution in T v L, FCMC 8460/2012, Judgement dated 25 June 2013, I said as follows:-

“6. It has been held that an application for MPS can include provision for legal costs. The leading Hong Kong case is KGL v CKY [2003] 2 HKLRD 301. In the present case, counsel for the parties accept that an application for MPS can include wife’s instant application which is for costs contribution for the trial of the question of custody, care and control much the same as applications for costs contribution for the trial of the question of ancillary reliefs.

7. Since the English Court of Appeal decision in Currey v Currey [2007] 1 FLR 946, judges in the Hong Kong Family Court have relied on the case as setting out the guiding principles for granting applications for costs contribution as MPS. It has been dubbed as the Currey test.

8. The Hong Kong Court of Appeal recently examined the application of the Curry test to Hong Kong courts and the principles articulated by Wilson LJ in Currey v Currey were adopted as providing prudent guidance to both judges and practitioners in this jurisdiction in the case of HJFG v KCY [2012] 1 HKLRD 95 at [113-117] in the following manners:-

“74. Whatever may have been the position ten years ago, it is no longer disputed that the words of s 3 of the Ordinance are wide enough to empower the Hong Kong courts to include an element towards a party’s legal costs in an order for maintenance pending suit: see KGL v CKY [2005] 1 HKFLR 215.

75. In submitting that, in light of existing authority, the wife had not made out a claim for a contribution towards her costs, Ms Stone relied principally on guiding principles enunciated by Wilson LJ, as he then was, in Currey v Currey [2007] 1 FLR 946.

76. Those principles have been adopted in the Matrimonial Division of the District Court: see H v H (Interim Maintenance) [2007] HKFLR 311. To my knowledge, however, they have not been adopted in this Court or the Court of First Instance.

77. Accordingly, before Poon J, the guiding principles set out in Currey, while of persuasive value, were in no way binding on him.

78. S 3 of the Ordinance, of course, still required the judge to be satisfied that any contribution towards the wife’s on-going legal costs was reasonable. That meant that he had to be able to conduct some analysis of the nature and extent and purpose of the contributions sought. On the part of the wife, that required some breakdown of her anticipated costs.

79. Aside from the fundamental requirement of supplying a sufficiently detailed breakdown of anticipated costs, I am of the view that the following principles articulated by Wilson LJ in Currey should in future be adopted as providing prudent guidance to both judges and practitioners in this jurisdiction.

80. In this view of Wilson LJ, the initial, overarching inquiry should be into -

“… whether the applicant for a costs allowance can demonstrate that she cannot reasonably procure legal advice and representation by any other means.  Thus, to the extent that she has assets, the applicant has to demonstrate that they cannot reasonably be deployed, whether directly or as the means of raising a loan, in funding legal services.”

81. As Wilson LJ pointed out, satisfying that condition alone may not be sufficient. In this broad exercise of discretion, a judge may consider that other factors must come into play –

“The subject matter of the proceedings will surely always be relevant; and, insofar as it can safely be assessed at so early a juncture, the reasonableness of the applicant’s stance in the proceedings will also be relevant.”

82. The period over which an allowance for legal costs was to be paid was also considered by Wilson LJ to be a factor of considerable relevance. Applicants should be not therefore expect that an order that the allowance be paid until the final determination of all proceedings will be the inevitable order. It was observed that if the application for an allowance for legal costs was made before the FDR hearing, it may well be wise to order that the costs allowance should fund the applicant only up to that hearing –

“The FDR appointment is a watershed and all reasonable inducements to both parties there to negotiate positively in the light of informal judicial indications should be in place.  The knowledge of a spouse in receipt of a costs allowance that, absent settlement at or in the immediate aftermath of the FDR, she will have to apply for a further allowance, which may or may not be granted, seems to me to amount only to a reasonable inducement, as opposed to improper pressure, to reach settlement.”

83. In this regard, as Wilson LJ pointed, if the FDR hearing fails, it will be for the new judge, on the basis of material properly before him – for example, rival open offers of settlement – to determine whether a new allowance for legal costs should be granted and, if so, in what amount.

84. Those observations accord with my understanding of the Hong Kong FDR procedures.

85. Wilson LJ spoke of a legal costs allowance being structured, especially as to its duration, so as to best encourage a spouse in receipt of the allowance to act reasonably, looking in good faith to try and reach settlement. In KGL v CKY (page 219), this Court adopted the same fundamental reasoning albeit by reference to the spouse paying the allowance:-

“There is no reason why public funds should be expended to fund litigation when there are ample resources available within family funds.  With proposals for more active juridical involvement in pre-trial proceedings to restrict the incidence of costs this is in line with the modern approach.  The court can keep better control of litigation if it’s funding is at least in part within its purview. The party that controls the funds will be less willing to use them on unnecessary interlocutory procedures if he or she will have to provide funding for the other side.”

9. Perhaps more importantly, it was stated that, at para [37(a)]:-

The sole criterion to be applied in determining the application is “reasonableness”, which is synonymous with “fairness”.

10.     I regard that the so-to-speak Currey test should not be taken as an exhaustive test.  The only governing principle remains that the court will make such order as it considers reasonable in all circumstances of the case.  The conditions in Currey v Currey were adopted by the Hong Kong Court of Appeal as providing prudent guidance to both judges and practitioners in this jurisdiction, but still the court has to consider all other factors that may influence the outcome of the application as well as the interaction between them and the conditions of the Currey test so as to achieve a reasonable and fair result.”

43.  W remarked that she is not eligible to legal aid. The bulk of the matrimonial assets are under H’s control.  She further said that there are no assets which she can reasonably deploy for legal costs.

44.  H said applying Currey test, it is clear that W’s request for legal costs provision ought to be rejected because:-

(1) There is no question of W having no assets.  W has 7788 Ash Street (which is valued at HKD3.5 million) as well as 9/F Wyler Garden (which is estimated to have a net value of about HKD2.5 million).  There is no reason why W’s properties cannot be reasonably deployed by way of either re-mortgaging or selling it.

(2) W sold all her stocks prior to the filing of her Form E and withdrew HKD257,000 out of the sale proceeds from her bank account.

(3) W claims that she has been paying the mortgage repayments for 8H Grand Waterfront but this cannot be identified from the bank statements disclosed by her.  Accordingly, either W has undisclosed financial resources or she lied about the mortgage repayment.

(4) W is able to obtain loans from Flora and Ah Lung.

45.  I deal with the last point first.  It is accepted that W has been receiving contributions from Flora and Ah Lung.  I agree with W’s view that contributions from them cannot become an obligation.  It is H’s obligation to provide for W.  In my view, it cannot be reasonable or fair to allow H to shift his burden to the children.

46.  As to the pen-ultimate point in the above, given that W has been a full time housewife for nearly 40 years, I am satisfied that it is unlikely that she has any undisclosed assets.

47.  W explained that she has already used up the sale proceeds of her stocks on her legal costs.  This seems congruous with the Form H filed on behalf of W, which indicated she has incurred legal costs in the sum of HKD651,000.

48.  W has no income.  It is doubtful that she can obtain a bank mortgage over her properties.  At the same time, W lives in Vancouver and Hong Kong.  She has children living in Vancouver and children and grandchildren in Hong Kong.  She now stays at 8H Grand Waterfront when she is in Hong Kong.  In the long run, she needs her own residence in Hong Kong.  On a preliminary view, there is evidence showing that H is in control of valuable assets consisting of a profitable goldsmith business and a long list of landed properties (see the following discussion on H’s ability to pay).  In these circumstances, I do not consider that it is fair to force W to sell her home in Vancouver or the 9/F Wyler Garden in Hong Kong in order to fund this litigation.

49.  W’s estimate of her legal costs from today up to and including the FDR hearing is as follows:-


 
Items

Solicitor’s costs

Counsel fees

Total
HKD
 

Questionnaire(s) on H’s financial information

60,000

120,000

180,000

Answer(s) to H’s Questionnaire(s)

30,000

55,000

85,000

S 17 Application (preparing affirmations in support, attending call over hearing and trial)

30,000

165,000

195,000

FDR hearing (assuming ½ day)

18,000

80,000

98,000

Conferences, preparing/settling additional affirmations and correspondence

60,000

55,000

115,000

Sub-total:

198,000

475,000

673,000

50.  W requests legal costs provision in the sum of HKD35,000 per month.  That is to say, she estimates it takes about 19 months from today up to the FDR hearing.

51.  In his Form E, H stated he had a net liability of HKD 1 million (subject to the value of shares in a private company named Qiao Feng (hereinafter called “QF”)).  It is worth noting that his bank balance was only at HKD5,660.

52.  Ah Lung produced a Organization Chart [B2/438] and tables [B2/439 – 451] showing the shareholding and directorship of various private companies under the chart.  It appears that H is in control of numerous inter-relating private companies.

53.  It is apparent that H’s financial position is not as straightforward as he has given under his Form E.  It is expected that the discovery exercise on H’s resources might be complex and difficult.  Looking at the evidence in the round, I am satisfied that W’s estimate of her future legal costs is reasonable.

H’s Ability to Pay

54.  According to H, not only that has he a net liability of about HKD 1 million, but he also has no income.  Although he is a director of numerous private companies, he said he does not receive any remuneration.

55.  H denied that he is a rich person.  He said he has already distributed a large portion of his assets to the 6 children of the family as well as the children with Madam Szeto. 

56.  What is more, H said his financial ability is further impaired by the litigation that he had with Flora and Ah Lung.  H has been carrying on his goldsmith business through private companies, of which YKA and YKB are two.  Like what he said in the above, H has allotted shares in YKA and YKB to Flora and Ah Lung.  Shortly before W petitioned for divorce, Flora and Ah Lung commenced legal proceedings in the High Court against H in the nature of shareholders dispute, which were allegedly on set by H’s proposal to invite his two sons with Madam Szeto to join his business, which said proposal was strongly opposed by Flora and Ah Lung.  The High Court action eventually settled out of court in April 2014.  A term of the settlement agreement is that H shall buy out Flora and Ah Lung’s shares and he needs to pay about HKD12 million to Flora and Ah Lung by 28 July 2014.  As a result, H is making arrangements for the landed properties held under QF and its subsidiaries to be pledged to the banks to raise funds to meet the payment of the settlement sum.

57.  It is accepted by H that he is the sole beneficial owner of the QF, which holds 99.9% of the shares of another private company, namely Maxlon, a property holding company that presently holds about 19 landed properties in Hong Kong [B2/456-461].  W said all of the said landed properties are rented out for income.  In his Form E, H said that Madam Szeto is the beneficial owner of 20% of the shares of Maxlon.

58.  Ah Lung produced a copy of the Board Resolutions of YKA and YKB dated 5 May 2014 [B2/469-472], showing the amount of dividends declared by the said companies for the financial years ended 31 March 2013 and 31 March 2014.  It is seen that QF received around HKD1.2 million and HKD1.5 million as dividends from AKA and AKB respectively for the financial year ended 31 March 2013, and HKD0.8 million and HKD1.27 million as dividends from AKA and AKB respectively for the financial year ended 31 March 2014.

59.  Taking an overview of the evidence, I am incredulous to H’s contestation that he does not have the cash flow to make any extra MPS. Along with, it is trite that for MPS purposes resources may include H’s ability to provide money by overdrafts or through loans.  It is clear from the above that QF, YKA, YKB and the other private companies of which H is in control have substantial values.  In this regard, I take note that it is H’s own case he can raise at least HKD12 million by way of a pledge on his interest over landed properties.

60.  I also take notice that Flora received around HKD0.3 million and HKD0.38 million as dividends from AKA and AKB respectively for the financial year ended 31 March 2013, and HKD0.2 million and HKD0.32 million as dividends from AKA and AKB respectively for the financial year ended 31 March 2014, and Ah Lung received around HKD0.6 million and HKD0.76 million as dividends from AKA and AKB respectively for the financial year ended 31 March 2013, and HKD0.4 million and HKD0.64 million as dividends from AKA and AKB respectively for the financial year ended 31 March 2014.  No doubt H will receive more dividends from YKA and YKB in the years to come after he buys out Flora and Ah Lung’s shares in the said companies.

61.  All in all, I find there can be no question of H not having the ability to pay W the requested MPS.

Other considerations

62.  H’s case is that the parties have already reached an agreement concerning finances upon their separation in early 1990s, and in accordance with the separation agreement, he purchased a house in Vancouver in the name of W and continued providing maintenance to W and the children.  As stated by W, there was no separation until recently and that being so there could not be any separation agreement made between the parties.  That is certainly an issue to be determined by the court at the final hearing of the question of ancillary reliefs.  However, regardless of the actual date of separation, the followings are not in dispute:-

(1) H initially remitted a monthly sum of HKD60,000 to HKD70,000 to W for her and the children after the family immigrated to Canada.

(2) By 2005, such monthly sum was adjusted to HKD16,000 per month.

(3) It was further reduced to HKD12,000 per month in early 2008.

(4) Starting from about May 2008 (when all 6 children reached the age of majority) the monthly sum to W was reduced to HKD9,000.

63.  I have not lost sight of H’s contention that the fact H has been paying a monthly sum of HKD9,000 as W’s maintenance for 6 years is certainly an important factor which the court should take into account and look at with scrutiny when determining the amount of MPS. 

64.  Despite that, W said she has been unable to meet her living expenses with HKD9,000 per month.  She has been living on the generosity of Flora and Ah Lung, who would give her monthly contributions.  Ah Lung said that he would give his mother HKD5,000 each month and would give more on special occasions.  As such, I do not consider that I should limit the amount of the MPS to HKD9,000.

65.  MPS applications are dealt with on a broad brush approach. With the benefit of further evidence and a detailed examination, the court will make its conclusion on the question of ancillary reliefs and any under provision or over provision in the MPS order may be set off if it is fair and just so to do.

66.  I am aware that H said he built up his wealth without any help or contribution from W in a period of over 20 years coming after the parties have reached a separation agreement on finances in early 1990s.  H contends if the court accepts H’s case, the court may well exercise its discretion to exclude assets acquired by him after the parties’ separation from an equal division (see LKW v DD (2010) 13 HKCFAR 537 at paragraph [94]).  He said for that reason this is not a case where the wife will surely get one half of the assets.  The effect is that the financial provisions W may get at the conclusion of final ancillary relief hearing may not be sufficient to set off against any over provision.

67.  I find in the above that it is reasonable to require H to pay W MPS in the sum of HKD15,000 per month for maintenance.  It is H’s open offer that he is prepared to pay W HKD12,000 per month for maintenance.  The difference between my finding in the above and H’s open offer is only HKD3,000 per month.  In addition, W’ request for legal costs provision up to the FDR hearing is in the total sum of HKD673,000.  In my view, the above sums represent only a very amount in comparison with the size of the potential family pot.  In any event, it should be noted W has two properties which are available for distribution and can be used to make up any over provision if at the end of the day the court considers it fair and just to do so.  I do not find that there is much substance in H’s argument in the above mentioned paragraph.

Conclusion

68.  I consider that it is fair to back-date the order for H’s maintenance payment to the date of this application, i.e. May 2014.  It is unnecessary to do any back-dating in respect of the provision for legal costs.

69.  It is ordered that H shall pay W the sum of HKD15,000 per month for her maintenance, the 1st payment to be made on 14 May 2014 and subsequent payments on the 14th day of each succeeding month until further order of the court.  H shall pay the arrears in the sum of HKD5,000 per month for the period from 14 May to 14 July, both months inclusive, i.e. totally in the sum of HKD15,000, by 5 equal monthly instalments, the 1st payment to be made on 14 September 2014 and subsequent payments on the 14th day of each succeeding month until full payment.

70.  It is further ordered that H shall pay W the sum of HKD35,000 per month as provision for legal costs, the 1st payment to be made on 14 September 2014 and subsequent payments on the 14th day of each succeeding month, until 14 March 2016, or further order of the court.

71.  W is successful in this application.  As far as I can see now, H should pay her costs of this application, including all reserved costs.  There shall be certificate for counsel.  This is a costs order nisi, which becomes absolute 14 days after this order is made unless a party has applied to the court for varying the order.

( K K PANG )
Deputy District Judge

Ms Jennifer K W Tsui instructed by T H Koo & Associates for the Petitioner

Mr Engene Yim instructed by Hastings & Co for the Respondent