BM formerly known as L, KMM v. N, DG

FCMC 595 / 2014

[2019] HKFC 35

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES

NUMBER 595 OF 2014

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RULING
(Variation of order nisi on costs)

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Introduction

1.  On the 19 September 2018 I handed down a judgment on the Respondent father’s application to vary the maintenance provision for the child of the family, a little girl known as S. S is 7 years of age having been born on the XX October 2011.

2.  In the judgment I reduced the maintenance payable by the father to the mother for S, from HK$28,000 per month to HK$16,000 per month. I also released the father from his undertaking to pay for agreed extra-curricular activities (ECA’s). I did not release him from his undertaking to pay for S’s school fees. This order was also backdated to the 1 June 2017 – i.e. the month after the mother stopped paying any form of rent and shortly after the father issued his summons.

3.  In so far as the costs are concerned I said as follows:

Costs

35. Given that neither party has been wholly successful, and notwithstanding the difficulties with some of the mother’s evidence, I shall make an order nisi to be made absolute in 14 days time that there shall be no order as to costs.

4.  The “difficulties” with some of the mother’s evidence included the fact that the mother had been less than honest about certain relevant facts including how much she was paying for rent post separation and when she started to pay nothing at all. There were also issues surrounding the date when she started to formally cohabit with Mr B, the wife’s now husband. I found that the mother’s evidence in relation to all of these matters was “somewhat elusive”. I added

9. Similarly her evidence concerning her own income and earning capacity was less than straightforward. Despite denying categorically that she was earning anything at all in her affirmation of the 21 March 2017 – or that she had an earning capacity, she subsequently admitted to earning HK$15,000 per month.             

5.   In other words I found that the mother had lied on oath. In addition, her presentation of the evidence on S’s direct expenses in particular was chaotic, with three different sets of figures being produced – some at very short notice (see paragraph 21 of the judgment).

6.   There were also issues with respect to the wife’s disclosure which made progressing the litigation difficult.

7.   It is against this background that the mother issued her summons of the 28 September 2018 as follows:

1.  The Petitioner’s application that the Respondent pay the Petitioner’s costs of his application for variation from the 8 June 2017, the date of the Petitioner’s Open Offer, shall be determined on the papers without an oral hearing.

……

7.  The Respondent pay the Petitioner’s costs of his application for variation from the 8 June 2017, the date of the Petitioner’s Open Offer, to be taxed if not agreed with certificate for counsel.

The law

8.   The law is not in dispute and reference can be made to Ms Rattigan’s submission dated the 28 December 2018 where she stated inter alia as follows:

Applicable Legal Principles

5.  RHC O.62 and O.62A apply in respect of costs in the Family Court.  The general rule in civil proceedings is that costs should follow the event.  This starting point also applies in family proceedings, although it will be displaced more easily. Gojkovic v Gojkovic [1991] 2 FLR 233.

6.  As set out in Family Law and Practice in Hong Kong

“Family proceedings often involve multi-faceted issues that require intensive fact-finding exercises. Moreover, the conclusions of orders arising from family proceedings, which in itself can be an emotionally turbulent experience, have far reaching and profound effects on the lives of the parties and he children involved”

7.  The Family Court has a wide discretion when considering costs.  Since the decision of the Court of Final Appeal in LKW v DD [2010] 13 HKCFAR 537. the overall principle of achieving ‘fairness’ replaces ‘reasonable requirements’ and this will also extend to awards for costs.

9.   In Gojkovic v Gojkovic [1992] Fam 40, as referred to above, Butler-Sloss LJ set out the matters that the court might consider when considering the issue of costs. She said:

“There are many reasons which may affect the court in considering costs, such as culpability in the conduct of the litigation: for instance (as I have already indicated earlier) material non-disclosure of documents. Delay or excessive zeal in seeking disclosure are other examples. The absence of an offer or of a counter-offer may well be reflected in costs – or an offer made too late to be effective. ... It would, however, be inappropriate, and indeed unhelpful, to seek to enumerate and possibly be thought to constrain in any way, that wide exercise of discretion. But the starting point in a case where there has been an offer is that, prima facie, if the application receives no more or less than the offer made, she/he is at risk not only of not being awarded costs, but also of paying the costs of the other party after communication of the offer and a reasonable time to consider it. That seems clear from the decided cases and is in accord with the Rules of the Supreme Court and the County Court Rules 1981 requiring the court to have regard to the offer. I cannot, for my part, see why there is any difference in principle between the position of a party who fails to obtain an order equal to the offer made and pays the costs, and a party who fails by the offer to meet the award made by the court. In the latter case prima facie costs should follow the event, as they would do in a payment into court, with the proviso that other factors in the Family Division may alter that prima facie position”.

This general approach has been routinely adopted in Hong Kong.

Discussion  

10.   The court asked the parties to provide a joint bundle of relevant documents. This was received on the 16 January 2019. From this it can be seen that the parties were actively negotiating with each other from March – June 2017 and that they came very close to settlement at that time. They differed in the treatment of the ECA’s. The husband offered to pay HK$15,000 per month plus full payment of the school fees. See the Calderbank letter of the 23 May and the follow up letter of the 5 June 2017. The wife for her part asked that in addition that he continue to comply with his original undertaking to pay for jointly agreed ECA’s. (See her without prejudice letters of the 2 June and her open letter of the 8 June 2017). The husband’s offer is only HK$1,000 per month less than that finally ordered by the court. The wife’s counter offer at that time also cannot be said to have beaten the order of the court.

11.   In any event the husband’s position changed once it became clear that the wife had been cohabiting with her current husband for a considerable period of time and he then reduced his offer. The wife retained her position as set out above, until her skeleton submission was filed prior to trial. At that stage she sought HK$22,000 per month plus payment of the school fees. She withdrew all offers at trial.

12.   It is then difficult to see why the wife should have her costs from the date of her open offer on the 8 June 2017, when that offer did not beat the court’s order and the wife withdrew this offer in any event. Further the offer was made in an environment where full and frank disclosure had not been given by the wife.

13.   In Ms Rattigan’s submission she concludes as follows:

Conclusion

26.&   While the Court ultimately found that “neither party was wholly successful”, the Respondent clearly met with more success than the Petitioner.

27.&   The Respondent succeeded on one of the main areas of expense that was being claimed for housing, there was a downward variation and it was backdated to just after his summons was issued.

28.&   The Court made adverse findings against the Petitioner’s credibility, there were no such findings against the Respondent.

29.&   The Petitioner’s 4th Affirmation does not reveal any grounds for disturbing the costs order nisi, in particular there was no ‘calderbank’ or other offer put forward by the Petitioner that was ultimately equal to or beat the award that was made by the Court.  In fact the closest offer made to the final judgement was a Calderbank offer made by the Respondent on 23^rd May 2017, as noted in paragraph 8 of his 9^th Affirmation.  Further the Court was fully aware of the Petitioner’s letter of 8th June, this having been drawn to the Court’s attention by the Respondent at trial.

30.&   On the basis of the above, “no order as to costs” could be seen as being somewhat harsh against the Respondent, there would certainly have been justification in awarding costs against the Petitioner, but not vice versa.

31.&   In such circumstances, where the Court has exercised its discretion to make no order as to costs, it is entirely unreasonable for the Petitioner to seek to vary this to a costs order in her favour.  If the Petitioner wants to challenge the way that the discretion was so exercised by the Court with something that was known to the Judge at the time (in this case her open offer), the proper way should be by appeal or leave to appeal.

32.&   There is no justification for this on the basis of the Court’s findings, and nothing further is revealed by the Petitioner’s 4^th Affirmation that would justify any variation. The Respondent should therefore be awarded the costs of this unreasonable application, which could have been well avoided had the Petitioner agreed to the Respondent’s offer made by letter dated 9 November 2018 (DGN-35 of his 9^th Affirmation) to withdraw the same (on the basis of no order as to costs).

In retrospect I tend to agree.

Decision

14.   In such circumstances paragraph 1 of the Petitioner’s summons dated the 28 September 2018 shall be dismissed. The original court order do stand namely there shall be no order as to costs with respect to the father’s summons dated the 8 March 2017. Further the Petitioner shall pay the costs of and arising out of her summons dated the 28 September 2018 on a party and party basis to be taxed if not agreed with certificate for counsel.

FCMC 595 / 2014

[2018] HKFC 160

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES

NUMBER 595 OF 2014

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J U D G M E N T
(Variation of maintenance)

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Introduction

1.  This is an application by a Respondent father to decrease the maintenance for the only natural child of the family, a little girl, S. S is nearly 7 years of age having been born on the XX October 2011. During the course of the parties’ short marriage the father also treated an older child, O as a child of the family. O is now 14 years of age and it is accepted that he does not form part of the current application. The mother also receives maintenance from O’s father for O’s expenses.

2.  In the father’s summons dated the 8 March 2017 he asks to decrease the maintenance from HK$28,000 per month to “a sum that the court deems fit”. In addition, he asks to be discharged from his undertakings that a) he be responsible for S’s education tuition fees, until such time as she ceases her full time education and b) that he also be released from his undertaking to pay for all Extra Curricular Activities (ECA’s) that are agreed between him and the Petitioner mother. In his counsel’s opening submission, he says that he is prepared to pay maintenance of HK$7,750 per month plus 2/3 of S’s school fees. Post-trial he amended that figure to HK$9,126 per month. He also suggests that he continue to pay for S’s ECA’s when she is with him and that the mother pay for those ECA’s when she is with her. He also proposes that each party be responsible for their own holiday costs with S. He is willing to undertake to continue to provide medical insurance for S and to pay for any necessary medical/dental treatment for her that is not covered by his insurance.   

3.  This is not a case where the husband says that he can no longer afford to pay the level of maintenance originally ordered, rather it is his case that the maintenance that he has been paying has been in excess of S’s actual expenses. He seeks a variation because the mother has remarried, she is no longer paying rent and she is now working and receiving a small income. In essence he says that he is contributing to the general running costs of the mother’s household.

4.  In contrast, it is the mother’s case that in reality her new husband is contributing financially towards both S’s expenses and the expenses of the elder child, O. O, a boy, is now 14 years of age having been born on the XX April 2004. O attends the X International School and S attends the Y School. In addition, the mother has had a further child with her new husband. The baby, H was born on the XX November 2016 and is now 22 months old.

5.  In an attempt to try to settle matters the mother made the father two offers, both of which were rejected. Initially she said that she would be prepared to accept HK$22,000 per month and later she reduced that figure to HK$15,000 per month plus a continuation of the payment of the school fees. Given that the father did not accept either figure it is the mother’s case that these offers have since been withdrawn. The father for his part seeks a significant decrease and he asks that this figure be backdated to March 2016.    

The issues

6.  There are then three issues to be determined as follows:

a) how much maintenance should the father now pay for S and should that be a decreased figure?

b) should the father be released from his undertakings to pay for S’s school fees and ECA’s?

c) should the new figure be backdated and if so to what date?

Background

7.  The parties married on the XX March 2009 and S was born on the XX October 2011. The parties separated towards the end of 2012 and they subsequently settled their differences through mediation. Agreement was reached with respect to both the arrangements for S and the parties’ finances. By virtue of the court order dated the 4 March 2015 the mother received a lump sum by instalments of HK$6 million in full and final settlement of her claims for ancillary relief. In addition, the father undertook as follows:

E.   AND UPON the Respondent hereby undertaking to the Petitioner and to this Honourable Court that he shall be responsible for the following costs in relation to the child of the family, namely N, SS, a girl, born on XX October 2011 (“the Child”) in the following manner:-

(i)   all education tuition fees of the Child until such time as she ceases full time education.  For the avoidance of doubt, all payments from the Respondent for the Child’s education tuition fees shall be made by the Respondent directly to the education institution; and

(ii)  all extra-curricular activities of the Child that are first agreed between the Petitioner and the Respondent.  For the avoidance of doubt, all payments from the Respondent for the Child’ extra-curricular activities shall be made to the Petitioner within 7 days of the production of the relevant receipt(s) to the Respondent.

In addition, he agreed to pay maintenance for S of HK$28,000 per month. It was agreed that he would not be financially liable for O.

Background to the litigation

8.  The father issued his summons on the 8 March 2017. Initially he was concerned that he was contributing towards the general living costs of the household, which on his case included the mother’s new husband Mr B, and Mr B’s brother. It is the father’s case that when the parties separated that the mother was paying rent at the former matrimonial home of HK$58,000 per month. It was his belief that this was then reduced to HK$50,000 per month. However, during the trial, it became clear that infact the mother had started to pay HK$42,000 per month after she moved out of the former matrimonial home and moved into a new rental property with the two children. It also subsequently became clear that the mother stopped paying any rent at all from about June 2017. There is also an issue about when she started to formally cohabit with Mr B. Although there is some dispute about this I accept that she must have been in a relationship with Mr B since in or around February/March 2016 given that H was born in November 2016. I accept that the mother’s evidence in relation to all of these matters was somewhat elusive.

9.  Similarly her evidence concerning her own income and earning capacity was less than straightforward. Despite denying categorically that she was earning anything at all in her affirmation of the 21 March 2017 – or that she had an earning capacity, she subsequently admitted to earning HK$15,000 per month.      

The law   

10.  In contrast the law is straightforward and not in dispute. The father’s application is made pursuant to section 11 (7) of the Matrimonial Proceedings and Property Ordinance Cap 192, which states that:

“(7) In exercising the powers conferred by this section the court shall have regard to all the circumstances of the case, including any change in any of the matters to which the court was required to have regard when making the order to which the application relates ……”

11.  It is accepted that in considering a change of circumstances, I should look at the case de novo. In other words, the court is not necessarily bound by the existence of a previous order. I must look at the situation afresh and make an order based on the parties’ existing financial circumstances. See Jackson’s Matrimonial Finance and Taxation, 8^th edition Chapter 3.147 - 3.157 where it is stated that:

The modern approach is that the Court has to consider all the circumstances of the case, and the Court is not hide-bound by the existence of a previous Order; the Court must look at the case de novo and make an Order that is reasonable in the current circumstances.  The usual basis on which a variation of an Order for periodical payments is founded is that there has been a material change in the circumstances of one or both the parties.  On application for revision, the Court, as it was put in one case, has ‘regard to all the circumstances of the case’ in the same manner as if those circumstances had existed at the date of the original Order.

12.  As indicated above there would normally be a reason for the application to vary or what some might call a “trigger”. In this instance despite the mother’s suggestion that there has been no material change of circumstance, I tend to agree that there is plenty here to warrant a revision. It is trite, but worth repeating, that the court has a very wide power, including a power to terminate payments and to backdate the variation ordered. Generally, an order would not be backdated beyond the date of the application. The overall objective is always to achieve a fair outcome (see M v M, FCMC 4070 of 1990, dated 12 May 2006, unreported).

13.  Counsel on both sides referred me to a number of cases on variation including the Court of Appeal decision in AEM v VFM [2008] HKFLR 106. In that case the Hon Cheung JA made the following point when setting out the law. Referring in particular to agreements reached by consent he said:-

8. At the same time the basis and intended effect of the original order are relevant factors to which the Court on variation should pay regard and there should not be a radical departure from the approach taken by the parties themselves when they had entered into an agreement embodied in a consent order: Boylan v. Boylan [1988] FLR 282.

14.  By the same token, it is also true, as pointed out by Mr Clough for the mother that:

21. It is plain that the Court is not blinkered on an application for variation by the previous order.  The Court first decides whether there has been a material change of circumstances and, if there has, determines whether the original order should therefore be varied.  The Court decides what the new order should be; it does not take the original order and see how particular constituent parts have changed and adjust each accordingly.  It would be wrong for the court to rely on what one what one party recollects was said during the course of mediation.

I agree with both of these points.

Discussion  

General expenses

Housing

15.  One of the biggest areas of dispute during the hearing related to S’s housing needs. As at the date of the trial it seems that S was living with her mother and Mr B, and indeed the rest of the family, in accommodation provided by Mr B. I should say at the outset that if the accommodation was being purchased or had been purchased by Mr B, that it does not seem to me to be appropriate for the father to make any contribution towards the cost of that housing. There is no obligation on him to pay for an expense that does not exist (in the event that the property has already been purchased), nor should he be obliged to contribute towards the mortgage of a property that is held in either the sole name of Mr B or jointly with the mother. In other words, he should not be required to contribute towards the acquisition of an asset that is not held either legally or beneficially by his daughter.

16.  Conversely, I accept that it could be said that the provision of housing for S by the mother, through her marriage to Mr B, is a contribution that the mother is making towards S’s financial upkeep.

17.  Consequently, I will not notionally include a contribution towards rent in the mother’s list of expenses – given that that does not appear to exist in reality. I will not expect the father to make any contribution towards S’s housing needs given this factual scenario.

Other general expenses

18.  The mother has only provided one schedule of her general expenses and this can be found in her Form E dated the 2 May 2017 as follows:

4.1 General

Item	Amount
Rent	$42,000.00
Mortgage Instalments	---
Utilities (electricity, gas, rates telephone & water)	$6,000.00
Management fees	---
Food	$10,000.00
Household expenses	$10,000.00
Car expenses	---
Insurance premia
Domestic helper(s) – 1 full time and 1 part time	$9,500.00
Other (specify)	---
Total monthly household expenses	HK$77,500.00

19.  Mr Clough urges me not to take an overly mathematical approach to these figures and maintains that it would not be fair or reasonable for these figures to simply be divided by the number of occupants in the house. Conversely it seems to me that it would also be patently unfair for both the father in this application and O’s natural father, to pay for the majority of these expenses to the exclusion of Mr B and the mother. In such circumstances I have taken the general expenses, excluding the rental, of approximately HK$31,550 as follows:

   General

Item	Amount
Rent	0
Mortgage Instalments	---
Utilities (electricity, gas, rates telephone & water)	$6,000.00
Management fees	---
Food	$10,000.00
Household expenses	$10,000.00
Car expenses	---
Insurance premia
Domestic helper(s) – 1 full time	$5,550
Other (specify)	---
Total monthly household expenses	HK$31,550.00

20.  It is of note that I have allowed for one domestic helper given that the mother confirmed during the hearing that she currently has one domestic helper to assist her. I have used these figures as my starting point. If one divides the figure of HK$31,550 by 4 one is left with HK$7,887.50 each for S, O, the mother and Mr B. This seems to me to be in the right ball park. I have not included a percentage share for the baby as it seems to me that his actual share of the general household costs is likely to be fairly minimal at present. I will round this figure up to HK$8,000 per month being the father’s contribution to S’s share of the general household expenses.

S’s direct expenses

21.  In so far as S’s direct expenses are concerned, the mother produced one set of figures in the same Form E dated the 2 May 2017. During the second day of trial, on the 31 May 2018, she hurriedly produced two further sets of figures, notwithstanding the fact that the trial had gone part heard and she had had additional time to prepare her case. In her oral testimony she confirmed that she was relying on the second set of figures in exhibit P-2 and that she had receipts to support these figures. These are as follows:    

Item	Amount
School books and stationery	523
Transport to school (including school bus)	1,750
Medical / Dental	750 (dental) 4,042 (medical)
Extra Curricular Activities	4,263
Entertainment / presents	2,575
Holidays	3,724
Clothing / Shoes	2.291
Insurance premia
Other Transport	472
Uniform	310
Total monthly expenses for the child	HK$20,700

   Less HK$3,766 for medical reimbursement

Total:

HK$17,000

22.  She added that S currently had swimming on Tuesday’s, an ECA at school on Wednesday afternoons followed by tennis and Kumon on Thursdays. It is of note that the parties have not been able to agree on ECA’s. S takes ballet and flute lessons when she is with the father. In the witness box the father said that he did not agree with S taking Kumon and that he thought that she was naturally gifted at math and that taking Kumon classes was likely to be counterproductive in the circumstances. He also did not agree with her taking expensive tennis lessons at the Z Club and was of the view that he would not be able to attend to watch her, as he is not a member of that Club. He also queried the cost of the swimming lessons. Generally, it is of note that the parties do not communicate well on this or indeed on anything else. I accept therefore that it would be preferable if I allowed a certain amount of money for ECA’s when S is in the care of the mother.

Extra Curricular Activities

23.  I will allow HK$4,000 per month under this head. It is a matter for the father if he wishes S to take ballet and flute lessons when she is in his care.

School books and stationery

24.  The mother produced receipts that covered a two-month period and then claimed that the total should be a monthly figure. This seemed somewhat contrived. Originally she sought HK$500 per month in her Form E. I will allow HK$300 per month – which seems more in keeping with the actual receipts produced.

Transport to school

25.  There is no dispute over the pro rate red figure of HK$1,750 per month. Consequently, this is the figure that shall be allowed.

Medical and dental

26.  Both parties have taken out medical insurance for S. The father says that his insurance policy is superior and he offers to continue to cover S for medical and dental costs and to pay for any necessary medical and dental treatment not covered by the insurance. These undertakings are accepted and shall be included in the preamble of the order. It is a matter for the mother if she wishes to take out additional insurance cover for S.

Entertainment/Presents/Holidays

27.  I will exclude these expenses from the schedule. I accept that each party shall be responsible for these expenses for S, when she is with them. It is of note that the mother acknowledges that Mr B will be subsidizing S’s holidays when she is with the family.

Clothing shoes

28.  The mother produced receipts for one month only for a total sum of HK$2,291. She now seeks that figure. The father offers HK$200 per month. Neither figure seems to me to be realistic for a growing child. I will allow HK$1,000 per month. It is of note that school uniform is an additional expense.

Insurance premia

29.  The mother has not produced any evidence in support of this item other than as set out above. No allowance will be given for this.

Other transport

30.  The father accepts that there will be some other transport costs including taxi’s but he does not accept the receipts produced by the mother at HK$472 spread over two months to be representative. I do not agree with him on this point. I will allow HK$500 per month under this head.

School uniform

31.  There is also a dispute over this item. An order form was produced by the mother but no actual receipts or proof of payment. However, it is clear that this is an ongoing expense that the mother has. I will allow HK$250 per month.

32.  Thus in total it seems to me that the father should be contributing approximately HK$8,000 per month towards S’s actual expenses rounded up as follows:

Item	Amount
School books and stationery	300
Transport to school (including school bus)	1,750
Medical / Dental	0
Extra Curricular Activities	4,000
Entertainment / presents	0
Holidays	0
Clothing / Shoes	1,000
Insurance premia	N/A
Other Transport	500
Uniform	250
Total monthly expenses for the child	HK$7,800

School fees

33.  I am not inclined to release the father from his undertaking to pay for S’s school fees. He can plainly afford to pay for these in their entirety (as opposed to a percentage of the cost) and this is not an expense that should fall on Mr B’s shoulders. The mother’s income is minimal compared to that of the father (HK$15,000 per month compared with over HK$190,000 per month) and in such circumstances I do not think it reasonable to expect her to contribute towards this cost or to the costs set out in paragraph 31 above. I accept that the mother is contributing towards S’s financial needs by providing her with housing, holidays, presents and other entertainment.

Conclusion

34.  In conclusion then the father’s undertaking as set out in paragraph E (i) contained in the court order dated the 4 March 2015 shall continue. The father shall be released from his undertaking in paragraph E (ii) of the same order. Order 2 contained in the court order dated the 4 March 2015 shall be varied to the extent that the Respondent father shall pay periodical payments for the child of the family S, in the sum of HK$16,000 per month until S reaches the age of 18 years or ceases full time education.

Should this new figure be backdated?

35.  The order shall be backdated to the 1 June 2017 – i.e. the month after the mother stopped paying any form of rent and shortly after the father issued his summons.

Costs

36.  Given that neither party has been wholly successful, and notwithstanding the difficulties with some of the mother’s evidence, I shall make an order nisi to be made absolute in 14 days’ time that there shall be no order as to costs.