LHC v. KHS

FCMC 3343 / 2015

[2018] HKFC 23

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES

NUMBER 3343 OF 2015

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

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

__________________

RULING
(Costs of Specific Discovery)

__________________

1.  Before me is the question of costs of the petitioner’s summons dated 4 August 2015 for specific discovery against the respondent.

2.  For convenience, I shall continue to refer the petitioner wife as “P” and the respondent husband “R” in this Ruling.  

3.  Since I have already set out the background of the parties in the previous Rulings dated 7 August 2017, I would not rehash the same here.  It is only necessary for me to set out the chronology of events relevant to P’s summons.

Chronology of Events

4.  It should be recalled that at the beginning P petitioned for divorce on 4 January 2014 (“the 1^st petition”) on the ground of 2-year separation.

5.  On 12 March 2014 the parties exchanged their Form Es. 

6.  Then with the leave of the court, on 20 March 2015 P commenced another petition for divorce (“the 2^nd petition”) on the ground of 2-year separation and unreasonable behaviour on the part of R.  The 1^st petition was stayed but the ancillary relief proceedings continued under the 2^nd petition.

7.  In both petitions it was pleaded that the separation date was March 2003.  

8.  On 12 May 2015, P filed her 1^st Questionnaire (“the 1^st Questionnaire”) on R’s Form E.  In response, R filed his Answers on 9 June 2015 (“R’s Answers”).

9.  P was not satisfied with R’s Answers.  This prompted her to take out the present summons.   The application was contested and the parties exchanged their affirmations.  There was however never any determination by the court on this summons, the reason being that subsequently leave was granted on 2 February 2017 for P to have her summons withdrawn with the costs issue to be resolved by the court.

10.  At about the same time, as far as the main suit is concerned, the court was informed during the 1^st Appointment hearing of 16 November 2015 that P had agreed to one-year separation as from at least 4 January 2014 as the ground for divorce (“the Main Suit Agreement”) and for this purpose a consent summons would be prepared.  Eventually, it was not until some 15 months later on 22 February 2017 that the consent summons was filed.   I need to mention this development because the Main Suit Agreement bears some significance to Ms Chong’s arguments.

11.  The decree nisi was finally granted on 4 January 2018.

Applicable Legal Principles

12.  Counsel have no argument over the applicable legal principles.  The summons for discovery is an interlocutory proceedings and so Order 62, rule 3(2A) of the Rules of the High Court (“RHC”) governs the position.  Sub-paragraph (2A) provides that,

If the Court in the exercise of its discretion sees fit to make any order as to the costs of or incidental to any interlocutory proceedings, it may, subject to this Order, order the costs to follow the event or make such other order as it sees fit.

13.  Thus, “costs to follow the event” is no longer the prescribed usual order but is instead just an option as regards costs in interlocutory proceedings: Hong Kong Civil Procedure (2018) (Vol 1), §62/3/3B.  

14.  The court is required to take into account, where appropriate in the circumstances, the following special matters set out in Order 62, rule 5 of RHC,

(aa)   the underlying objectives set out in Order 1A, rule 1;

(a)   any such offer of contribution as is mentioned in Order 16, rule 10, which is brought to its attention in pursuance of a reserved right to do so;

(b)   any payment of money into court and the amount of such payment;

(c)   any written offer made under Order 33, rule 4A(2);

(d)   any written offer which is expressed to be "without prejudice save as to costs" and which relates to any issue in the proceedings, but the Court may not take the offer into account if, at the time it is made, the party making it could have protected his position as to costs by means of a sanctioned payment or a sanctioned offer under Order 22;

(e)   the conduct of all the parties;

(f)   whether a party has succeeded on part of his case, even if he has not been wholly successful; and

(g)   any admissible offer to settle made by a party, which is drawn to the Court's attention.

(2)   For the purpose of paragraph (1)(e), the conduct of the parties 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.

 (emphasis added)

15.  As said by To J in §19 of Melvin Waxman v Li Fei Yu (unreported, HCA 1972/2012, 11 September 2013), in the exercise of its discretion, the court may take the issue-based approach or may take into account merit of the parties’ case or the possible outcome of the action.  The circumstances of interlocutory proceedings are so numerous that it is impossible to make any general rule.  Costs to follow the event and costs be to the successful party’s costs in the cause are obvious options.

16.  As regards the onus of proof, again I need to refer to what To J said in §20 of Melvin Waxman v Li Fei Yu, supra:

“20. As for the onus of proof, I think it is the same post-CJR as it was pre-CJR. It must be the successful party’s burden to satisfy the court as to the type of costs order it is entitled. To begin with, the successful party is assisted by the general rule of costs to follow the event. By the mere fact of being successful, the successful party has discharged the evidential burden of showing it is entitled to costs. Thus, effectively, the evidential burden is on the unsuccessful party to adduce sufficient evidence or argument that some other or lesser order is appropriate, such as no order as to costs, costs be to the successful party’s costs in the cause or costs to the unsuccessful party. In the absence of evidence or convincing argument to the contrary, the successful party would also have discharged the legal burden. Costs to follow the event would be the appropriate order to make. If the unsuccessful party is able to discharge that evidential burden, it will be the legal burden of the successful party to show that he is entitled to the costs order which he seeks. In reality, having heard the interlocutory application, it would be quite obvious to the court what costs order would best serve the justice between the parties without relying on the burden of proof.”

(emphasis added)

Parties’ Stance

17.  Ms Chong, on behalf of R, argued that, prior to P’s present application, the discovery R made had already provided sufficient information to ascertain his assets, liabilities and lifestyle, etc and to enable the court to exercise its power under section 7 of the Matrimonial Proceedings and Property Ordinance (Cap 192). Specifically, the period within which R was asked to produce his documents was unduly lengthy.  Hence, the discovery sought was irrelevant, unnecessary and oppressive and could not be for the fair disposal of the parties’ disputes or for the purpose of saving costs. Yet, P unreasonably proceeded with the summons. When she came to realize that she had little prospect of success, she withdrew the application. On that basis, Ms Chong contended that since it was an outright withdrawal on the part of P, “costs follow the event” should apply unless she can persuade the court otherwise. 

18.  Mr Hariman, who appeared for P, argued that “costs follow the event” does not apply to the present case.  He argued that some other or lesser order is appropriate.  He relied on sub-paragraphs (e) (the conduct of all the parties) and (f) (whether a party has succeeded on part of his case, even if he has not been wholly successful) of Order 62, rule 5, RHC to say that the proper costs order should be no order as to costs; alternatively, it should be in the cause of the ancillary relief proceedings.

19.  Before I come to parties’ arguments, it is necessary for me to deal with the general principles regarding discovery and to give an overview of P’s summons.

The general principles

20.  Order 24, rule 7, RHC is applicable to matrimonial proceedings by virtue of Rule 3 of the Matrimonial Causes Rules (Cap.179A). I believe the relevant legal principles are not in dispute. They have been set out by the Court of Appeal in Paul’s Model Art GMBH & Co. KG v. UT Limited [2006] 1 HKC 238, at para 24,

1.  There is no jurisdiction to make an order under Order 24, rule 7 for the production of documents unless:

(a)  There is sufficient evidence that the documents exist which the other party has not disclosed;

(b)  The document or documents relate to matters in issue in the action;

(c)  There is sufficient evidence that the document is in possession, custody or power of the other party.

2.  When it is established that those three prerequisites for jurisdiction exist, the court has a discretion whether or not to order disclosure.

3.  The order must identify with precision the document or documents or categories of document which are required to be disclosed, for otherwise the person making the list may find himself in serious trouble for swearing to a false affidavit, even though doing his best to give an honest disclosure.  (see Berkeley Administration Inc v. McClelland [1990] FSR 381).

(emphasis added)

21.  In the context of matrimonial proceedings, Rayden and Jackson on Relationship Breakdown, Finances and Children (July 2016) has this to say,

[13.104]

In financial remedy proceedings, disclosure and discovery begins with service of the Form E and the documents which are required to be attached to the Form E, and any other documents necessary to explain or clarify any of the information contained in the Form E. Thereafter, disclosure and discovery is by means of a questionnaire served in advance of the First Appointment and considered by the court at that appointment, and, if the court gives permission, by further questionnaire at a later stage of the proceedings.  Questionnaires can, like interrogatories, request information as well as seek production of documents. As part of its case management role, the court should regulate the extent of the discovery of documents so that the exercise is proportionate to the issues in question, and to ensure that the discovery process does not become a fishing expedition approved by the court.

The Summons – An Overview

22.  P’s summons consisted of 5 Paragraphs.

Paragraph 1

23.  Paragraph (1) requests for the production of a long list of documents, altogether 10 items –

(a)  the bank statements of R’s Bank of China account in the Mainland;

(b)  the documents relating to a MI Limited owned and controlled by R;

(c)  the documents relate to the sale proceeds of a property in Royal Ascot;

(d)  the documents relate to the source of funding for the purchase of a property registered in the name of R’s mother;

(e)  the financial statements pertaining to R’s investments and/or securities account;

(f)  the financial statements pertaining to R’s insurance policies;

(g)  the financial statements pertaining to R’s MPF account;

(h)  R’s banks statements;

(i)  R’s credit card statements; and

(j)  R’s in-and-out records issued by the Immigration Department.

24.  At the beginning, both parties had their own application for discovery which came before me for callover on 21 September 2015.  At that time, I commented that their summonses were too wide in ambit and lacked precision in respect of some of the items and I repeated the same remarks in the hearing of 16 November 2015.  I urged the parties to consider amending their application.

25.  Subsequently, R took appropriate actions in respect of his summons which has since been disposed of.  As for P’s summons, she never took heed of my comments.  As I see it, P’s summons was pregnant with problems.  By way of an example, under the Form E a party is merely required to produce his bank statements in the past 12 months.  At the time of filing the Form E, the parties were still under the 1^st petition which was taken out on 4 January 2014.  In her summons, P asked for the production of “copies of all bank statements”, “copies of all financial statements pertaining to investments and/or securities accounts”, “copies of all financial statements pertaining to insurance policies” and “copies of all financial statements pertaining to R’s MPF account” and “copies of all credit card statements” as from January 2010 up to the date of the summons (ie 4 August 2015).  I questioned why P saw the need to trace all these documents 4 years back (as from January 2010).  P’s only reason as set out in her supporting affirmation of 3 August 2015 was that January 2010 was the time when the parties’ relationship really broke down. Apart from this allegation, there was no specific allegation of fact that P wished to prove or further inquiry that P wished to make arising from the financial statements already disclosed by R.

26.  With respect, this is not the criterion generally endorsed.  Each case must depend on its own facts.  There is simply no ground of justification on why disclosure could justly commence as from the time when the relationship broke down.  In this regard, it should be borne in mind that at that time P still pleaded in her petition for divorce that she separated with R in March 2003. Even if P had an application under section 17 (Avoidance of Transactions) of the Matrimonial Proceedings and Property Ordinance, (Cap 192) in contemplation, this would not have been a justification for disclosure to commence as from P’s time, for the reason that there would be a presumption against the disposer if the disposition was made less than 3 years before the application for ancillary relief. Besides, P never said there are matters raising suspicion or concerns or there are special circumstances that warrant an extended period of disclosure.

27.  Another striking feature is that some of the requests are apparently too board, imprecise or unnecessary.  Item (b) requests for “all profit and loss accounts, balance sheets, auditor’s reports, bank statements and a list of assets and liabilities for and in respect of” the said MI Limited.  Essentially, what P asks is for all the accounting documents of MI Limited.  I am not quite sure whether P requested these documents for the purpose of doing the auditing again.  If that was her intention, I must say there is no justification for her to do so.  There is no valid explanation from P as to why the audited reports would not have served the purpose.

28.  Item (c) asks for “all documents including but not limited to bank statements pertaining to details, whereabouts and application of sales proceeds arising and received from the sale of the Royal Ascot property by MI Limited”; and similarly, Item (d) asks for “all documents pertaining to the source of funding” of R’s mother’s property.   I have no doubt that the request is too board and imprecise; and as such, it may amount to being oppressive. Further, I do not think item (c) is necessary because it seems to me clear that all P wants to know is the whereabouts of the balance of proceeds of sale after a portion of them have been utilized into the purchase of another property.  This question can property be dealt with in P’s 2^nd Questionnaire which forms part of her summons.

29.  Item (g) asks for all financial statements pertaining to R’s MPF account.   It is trite that R would not be able to cash his MPF until turning 65.  This request seemingly does not serve any particular purpose.

30.  Item (j) relates to the main suit and was subsequently withdrawn.  It is not necessary for me to give any comments.

Paragraphs 2 and 3

31.  Paragraph 2 of the summons is to seek an order for R to produce “written confirmations issued by HSBC, Citibank, Bank of China and China Construction Bank confirming the exhaustive list of all types of bank accounts, investments and securities accounts and credit card accounts which R holds or held solely and/or jointly with others in Hong Kong and/or the People’s Republic of China including those accounts already closed”.

32.  Alternatively, under Paragraphs 3 of the summons, if R is unable to provide any of these confirmations under paragraph 2, he is to file and serve an affirmation stating “whether such document(s) or category(ies) of documents are, or have at any time been, in R’s possession, custody or power; and if the same or any of them have been, but are not now in R’s possession, custody or power stating when R parted with them and what have become of them with detailed reasons”.

33.  The problem with these 2 paragraphs is that, as far as the confirmation letters are concerned, it is certainly not her case that the letters were in existence at any time or in R’s possession, custody or power.  Further, as I see it, it is highly questionable as to whether any bank would be willing to provide such a written confirmation.  At the very least, I have not seen one before.  It is too to be noted that P requires the confirmation to cover two jurisdictions and there is no limitation in time.  The implication is that R might even have to go back to years well before January 2010.  As set out in [20] above, the court order must identify with precision the documents or categories of documents which are required to be disclosed, for otherwise the person giving discovery may find himself in serious trouble for swearing to a false affidavit, even though doing his best to give an honest disclosure and discovery should not be oppressive.  I have no doubt that request is oppressive.

Paragraphs 4 and 5

34.  Paragraphs 4 and 5 are to seek an order for P to file and serve a 2^nd Questionnaire and for R to give the Answer within a prescribed time.  I will deal with the 2^nd Questionnaire below: [45] to [62].

Parties’ Arguments

35.  I now turn to parties’ arguments.

P’s Grounds

(1) Whether P has succeeded on part of her case, even if she has not been wholly successful

36.  Mr Hariman submitted that P’s summons has never been heard.  It cannot be said with any degree of certainty that everything P sought for would have been allowed or rejected.  He submitted that in fact, as a result of the application P obtained many documents that she had asked for.  It was after she had taken out the application that R made disclosures in a bit by bit manner. Significantly, the first disclosure was given by R on 15 December 2015, the day following he filed his affirmation in opposition to the application. That was followed by further disclosures on 23 January 2016, 8 April 2016 and 29 April 2016.  That, Mr Hariman argued, was clearly a concession on the part of R.  If there were no application, there would not have been the disclosures. Though not all the documents P asked for were provided, on any view P had some success.  It was upon these further disclosures that P decided not to proceed with the remainder of the summons.  Therefore, it was not an all-out loss or withdrawal.  The fair view is there was no overall victor.  

37.  Ms Chong did not deny the further disclosures that R made as outlined by Mr Hariman.  In response, Ms Chong submitted that it was in view of P’s change of stance in arriving at the Main Suit Agreement with R and in order to save costs and unnecessary arguments, R went beyond the 12-month period as required under Form E by providing some of the statements and documents requested under Paragraph 1.    

Analysis

38.  The undisputed fact is that subsequent to P’s summons and despite his opposition, from 15 December 2015 to 29 April 2016 R made a series of disclosures of documents covering item nos (a), (b), (e), (f), (g), (h) and (i) of Paragraph 1.  Without descending onto the minutiae, it can be seen that many of these documents were of 2012 and some were as early as of January 2012. On Ms Chong’s contention that it was after the parties had reached the Main Suit Agreement that R provided the documents, with respect, I fail to see how this would have impact on the disclosure exercise that ought to have been carried out diligently by the parties.  By his conduct R had tacitly agreed to make disclosure beyond the 12-month period.  If these documents and statements are irrelevant, disproportional, unnecessary and fishing as contended by Ms Chong, the provisions of these documents would serve no purpose other than lading the court with excessive information, prolonging these proceedings and depleting parties’ resources. 

39.  It is apparent from R’s affirmation that while on the one hand, P’s application would be strenuously resisted; on the other, he was willing to make some concession.  I have no doubt the proper and the preferred way to deal with disclosure is for the parties to engage in realistic and reasoned dialogues on why the documents concerned are needed.  If the view taken is that the documents are irrelevant or unnecessary, that should be drawn to the attention of the court and, if necessary, for determination, otherwise, there would be a proliferation of documents to be used in trial. 

40.  Again, without dwelling into the details and in any event my attention was not drawn to any particular documents during the argument, as I see it, many of these documents such as those relating to R’s MPF account and betting accounts are of very marginal relevance.  Ms Chong initially explained that the disclosure was to make P “happy”.  Then she added that all these documents were provided out of goodwill and to save argument; and the documents would help the parties to decide how the division of the assets could be made.  If the disclosure was simply for the purpose of making P “happy”, it must have been wrong for R to have done so because the result would be the inclusion of useless documents in the trial bundles.  Doing so would be a waste of time and costs for which R should be penalized.  If the disclosure was made for the purpose of assisting the parties in the division of their assets, I agree that P at the very least has achieved some success.   

(2) Conduct of the parties

41.  Mr Hariman argued that it was after R had filed his affirmation in opposition that he started to make disclosures bit by bit; there was no explanation why he did so.  In contrast, P was only able to evaluate her position after she had had a sight of the documents disclosed and she acted reasonably by withdrawing the summons. 

42.  Though Ms Chong did not expressly address this point, I note R made his position clear in his affirmation in opposition of 14 December 2015 that in order to save time and money from being wasted on unnecessary arguments, he was willing to accommodate P’s request but it took time and money for him to prepare the documents.  He would in due course serve her with the additional documents.

43.  Cleary, all these arguments advanced by the parties under this and the earlier ground (ie whether P has succeeded in part) centre on Paragraph 1 of the summons only; the same cannot be said for other Paragraphs.  I consider that proper analysis cannot be done without giving due consideration to the remaining Paragraphs of the summons.  What I have in mind is I need to consider whether it was reasonable for P to have raised the remaining Paragraphs including the 2^nd Questionnaire: Order 62, rule 5(2)(a), RHC.

Paragraphs 2 and 3 of the Summons

44.  I have already made the point that Paragraphs 2 and 3 are devoid of merits.  I am sure that they should not have been raised or pursued.

Paragraphs 4 and 5 of the Summons

45.  I will now deal with P’s 2^nd Questionnaire that constitutes Paragraphs 4 and 5 of the summons.  At issue is whether it was reasonable for P to have raised the questions.  Since I am not dealing with the substantive application I would adopt a broad brush approach without venturing into a detailed analysis of the merit (or the lack of it) of each and every question.

46.  As said, the 2^nd Questionnaire was precipitated by R’s Answers.  The Questionnaire contains 8 questions.

Question 1

47.  Question 1 is on the nature and categories of expenses that R said to have paid out of his Bank of China account in the Mainland. This account was not disclosed in his Form E and was only disclosed in R’s Answers upon being so asked by P.  Mr Hariman informed the court that since R had provided the relevant bank statements under Paragraph 1(a) of the summons, P did not pursue this question.

48.  Given that R claimed to have retired since December 2007 and in his Form E he disclosed no matters or business that required any regular payment of expenses in the Mainland, I incline to agree that P was justified in raising this question.

Question 2

49.  This question relates to a family company in the name of MI Limited of which both P and R used to be its directors.

50.  It is not in dispute that MI Limited was used for the purpose of asset holding and rental income.  The company sold a property in Royal Ascot (“the Royal Ascot Property”) for $12,380,000 in around December 2010 and made use of part of the proceeds of sale in the purchase of another property in Lohas Park (“the Lohas Park Property”) in September 2011 for $5,792,000, leaving a balance of $6,588,000.  P asked the whereabouts of the balance.

51.  In fact, P had earlier on in her 1^st Questionnaire enquired about the proceeds of sale of the Royal Ascot Property.  R’s answer was evidently evasive for he only explained that $5,792,000 was used for the purchase of the Lohas Park Property.  It would be obvious to anyone that with this answer a sum of as much as $6,588,000 remains unaccounted for.  Probably, R realised this and he further referred to the fact that P at that time was also a director of the company and she was well-conversant with the major decisions and books of the company. In response, P said despite being a director of MI Limited, it was R who was in charge of all the selling and buying decisions.  She denied being well-conversant with its books and R never bothered to explain to her what she was signing.

52.  Lam J (as he then was) said the following in L v L [2006] 1 HKFLR 121; (HCFC No. 1 of 2003, date of judgment: 18 November 2005),

197. …The party who gives disclosure also carries the obligation to present the information in a way that could be readily comprehensible to his opponent.  Straightforward and direct answers could have been given by the Wife to questions like how much has been invested into a business and what were the sources of fund.  A good litmus test for distinguishing a bona fide fulfillment of the duty to give disclosure from an attempt to obfuscate is to ask whether the answer or the material can on its own meaningfully assist in informing others as to the means of that party.  I regret to say that having regard to the way in which the Wife had given disclosure of her means throughout the course of these proceedings, it is clear to me that she deliberately chosen not to give meaningful disclosure of her means.

198. It is high time that litigants in matrimonial proceedings and those advising them should appreciate that affirmation of means and answer to questionnaire are not a game of hide and seek.  Too much legal costs and judicial time had been spent on such wasteful exercise.  As stressed by Mr Mostyn, the onus falls squarely and fairly on a party to give full and frank disclosure of his or her own means.  To adopt a wait and see approach with a hope that the opponent might fail to ask the right question is a tactic to be deplored.  That by itself is a breach of the positive duty to give disclosure.  As Coleridge J put it recently in J v V [2004] 1 FLR 1042, “all cards must be put on the table face up at the earliest stage if huge costs bills are to be avoided.”

(emphasis added)

53.  The question is a simple and direct one.  In my view, P was well justified to have asked this question and this question ought to be answered.  It is no good for the other party to say that the questioner should be aware of the answer or to ask the questioner to dig out the answer from the documents supplied by him.

Question 3

54.  Question 3 is in respect of a property in Shenzhen (“the Shenzhen Property”) owned by a Madam Su.  P claimed R had been maintaining an improper relationship with this lady but R said she was just the wife of one of his friends.  In R’s Answers he denied having any proprietary interest in the property.  Indeed, the effect of his answer is that he knew nothing about this property, be it the date of the purchase or its price.  One of the questions being asked under this heading is whether R provided any assistance, be it financial and/or otherwise, to Madam Su in the purchase of the Shenzhen Property.  Before me are the evidence adduced by P showing that R, together with Madam Su, were the occupants of this property.  Added to this is the evidence that R was in possession of the access key card to this property.  The implication of course is that he had (or still has) free access to this property.  It is also to be recalled that there were photographs in P’s previous affirmation showing R went out with Madam Su in such a manner and body gesture that indubitably called for enquiry into their relationship.  I am aware that R gave some explanations in his affirmation in opposition dated 14 December 2015 which may or may not be true and on which for the present purpose it is not necessary for me to give any views.  It suffices for me to say that, on the evidence before me, it cannot be said that this question is not justifiable.  P’s question on whether R provided any assistance in the purchase of the Shenzhen Property is for information which may lead to a line of inquiry which would disclosure evidence.  P is not fishing: Re State of Norway’s Application [1987] QB 433, at p 482.

Question 4

55.  Question 4 relates to a property purchased in the name R’s mother.  In her 1^st Questionnaire, P had already asked about the source of funding for the purchase of this property.  R’s answer was again evasive and he just said the sources of funds for the purchase do not concern the current proceedings and further that his mother had executed a will on 21 April 2015 giving the property to her grandson (ie the parties’ son).   P therefore found it necessary to repeat the same question in Question 4 by asking whether R provided any assistance, be in financial and/or otherwise, to his mother in the purchase.

56.  The property was purchased way back in June 2008.  This alone, without more, would not be sufficient to justify the question. However, what followed the purchase was that, according to P, the mother executed a will in June 2012 bequeathing the property to R.  Both P and R were present at the time of execution of the will. Hence, this property could be a financial resource that R may have in the foreseeable future.  I believe P is well aware of the answer and the answer must be in the positive in that it was R who provided the purchase money.  If this statement comes from P this would merely be an assertion on her part but if this comes from R, this would be an admission.  Considering the assertion that there was a will of 2012 and that a new will was executed in the middle of the divorce proceedings in June 2015, the circumstances would have justified P raising this question.  At any rate, this question requires a simple and straightforward answer only.

Question 5

57.  This question deals with R’s betting account maintained with the Hong Kong Jockey Club from January 2013 to January 2014.  Mr Hariman said P did not insist on this question because relevant statements had been supplied by R on 23 January 2016.  I have already given my view that these statements, which touch upon R’s spending pattern, are of very marginal relevance.

Question 6

58.  This question repeats the same question raised in P’s 1^st Questionnaire to which R did not give his answers.  This is on R’s deposits and withdrawals of substantial sums of money ranging from $57,000 to $3,000,000 from May 2010 to January 2015.  Mr Hariman informed the court that P chose to deal with these transactions in the trial.

59.  I cannot accept Ms Chong’s submission that P can employ an accountant to analyse the transactions.  As can be seen from the paragraphs that I quoted from L v L, supra, in [52] above, this is the wrong approach.  I accept that some of deposits or withdrawals may be too stale for them to have been raised but the same cannot be said for the more recent ones.  In my view, sums of substantial amount that apparently were not day-to-day transactions and that resulted in significant change in assets would justify raising questions.

Question 7

60.  This question is in respect of R’s credit card liability of $669,707 that he owed to Citibank.  In R’s Answers he said this was the result of an accumulation of credit card debts over the years.  P asked which credit cards were involved and their numbers.  Again, Mr Hariman said P did not insist on an answer at this stage and would pursue it in trial.

61.  Leaving aside the question of why R, as a retiree, would have accumulated credit card liability of such an extent, I consider this question is legitimate and well justified.  R could have easily provided an answer.

Question 8

62.  This question is on R’s monthly expenditure, specifically, on R’s alleged travelling expenses of $3,000, trips to Taiwan and the monthly insurance premium.  Given that this case is not a ‘big money’ case, it cannot be said that P’s question is unnecessary, irrelevant or excessively oppressive.

The Appropriate Costs Order

63.  I have come to the conclusions that:

(1)  P has achieved some success;

(2)  P’s summons was desultory; specifically, some of the requests are too wide in ambit and lack precision; and some are unnecessary, irrelevant and oppressive; and

(3)  The questions in the 2^nd Questionnaire are largely justified.

64.  The ultimate question is what the appropriate costs order should be on the basis of these conclusions.  When approaching this question, I need to remind myself of “the long-established principle that costs are determined not by dividing litigation into quantifiable subjects and figures, like a profit and loss account, but rather by way of overall impression”: per Hartmann J (as he then was) in §22 of F v F (No 2) [2003] 3 HKLRD 976.

65.  I do not consider it is apt for the costs to be in the cause of the ancillary relief as contended by Mr Hariman.  As the learned author of Hong Kong Civil Procedure (2018) commented, “Costs in the cause” is an inappropriate order because there is no certainty that the order for disclosure will lead to a claim or cause against the respondent: §24/7A/10.  Equally, I am not persuaded that “no order as to costs” is appropriate.  I believe that the appropriate order should be one that reflects the court’s disapproval over the haphazard summons prepared by P.  Taking all the matters in a round, I believe the proper order should be one for P to bear half of the costs and as for the other half, there should be no order as to costs.

Orders and Conclusion

66.  For the above reasons, I give an order that the petitioner do pay the respondent half of the costs of her summons and that there be no order as to costs for the other half; with counsel certificate, and if agreement cannot be reached, to be taxed on party and party basis.  As for the costs of the arguments, I also give the same order, by way of an order nisi.

67.  Throughout the last couple of years, despite my repeated exhortations, the parties have been fighting over satellite litigations.  Inclusive of this Ruling, I have already handed down 5 Rulings, of which 4 are mainly on costs, not to mention the other countless rulings that I gave during the many hearings when the parties came before me.  Rather than focusing on pushing the ancillary relief forward with a view to having a Financial Dispute Resolution hearing or to trial as soon as practicable, the parties (and, I believe, their legal representatives as well) are apparently obsessed with the determination of winning over the other side on any issues, no matter big or small, that came before them.  It is not without regret to see that as of now, the parties are nowhere nearer to the resolution of their financial disputes than they were 2 years ago.  As I see it, the parties could have adopted a more objective and realistic approach in dealing with their disputes.  Both have retired and have been living on the family assets amassed during their heyday.  It is not necessary for me to remind them that all the legal costs incurred would, in one way or the other, have to be borne by the parties out of their matrimonial assets.  It is hopeful that this Ruling should finally clear the way for the parties to move forward to resolving the financial dispute between them.

FCMC 3343/2015

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES

NUMBER 3343 OF 2015

____________

____________

FCMC 87/2014

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES

NUMBER 87 OF 2014

____________

____________________

RULING
(Costs of Main Suit)

____________________

1.  This is my Ruling on the costs of the matrimonial cause in FCMC 87/2014 (“the 1^st petition”) and FCMC 3343/2015 (“the 2^nd petition”).  Both proceedings are between the same parties. 

2.  For convenience, I shall refer the petitioner wife as “P” and the respondent husband “R” in this Ruling.

Factual Background Relevant to the Costs Issues

The 1^st Petition

3.  P was from Taiwan and R a local Chinese.  They married in Taiwan in December 1989 and thereafter P moved to live in Hong Kong.  The couple has 2 children; a son now aged 26 and a daughter, now 23 years old.

4.  On 4 January 2014, P petitioned for divorce on the ground that the parties had been living apart for a continuous period of at least 2 years since March 2003.  She pleaded that although the parties were living at the same address, they lived in separated households.  They slept in separate rooms, did not cook, clean or eat together; and they did not talk to each other.  Further, R stayed 4 nights per week in an address in Shenzhen with a Madam So.

5.  These allegations were disputed by R.  In his Answer, he denied that their marriage had broken down irretrievably. He further denied that the parties had separated for at least 2 years as alleged.  His pleading was drafted in a way more like a witness statement than what a pleading should have been in accordance with Order 18 of the Rules of the High Court (“RHC”).  This should not have been the case but regrettably this has become rather prevailing as a practice.  It made any reader difficult to discern what the issues in dispute are.  Anyway, it seemed to suggest that as at the date of the petition the parties were still living as husband and wife. 

6.  On 12 August 2014 P applied to amend her petition.  On the 2 years’ separation, she sought to specify that R stayed “4 days and 3 nights” per week in Shenzhen (and not “4 nights”).  She also sought to add a new ground of unreasonable behaviour on the part of R. She wished to rely upon the following 4 particulars:

1.  R maintains improper relationship with other female;

2.  R uses abusive language to insult P when she asks for the monthly expenses;

3.  Since around 2010, R stays away from the matrimonial home for 4 days and 3 nights almost weekly; and

4.  From around 2009 to 2012 R wanted P to purchase “Viagra” from Taiwan on his behalf whereas the parties’ sexual life had ceased over 10 years.

7.  P’s application for amendment was staunchly opposed.  I will come to R’s grounds of opposition in due course.  At this juncture, I only need to mention that in the hearing for amendment (“the Amendment Hearing”) on 18 February 2015, at the suggestion of the court, the parties were able to come to a practical solution.  Consequently, with the leave of the court, P withdrew her petition and lodged a new petition based on 2 grounds, namely, (1) 2-year separation; and (2) R’s unreasonable behaviour.  All the parties’ documents relating to ancillary reliefs were to be transferred to the 2^nd petition. There was also an order that the costs of the summons including costs reserved be in the cause of the main suit of the fresh petition, with counsel certificate.

8.  The costs of the main suit in the 1^st petition have not been formally disposed of. This is the first costs issue that the court has to deal with.

The 2^nd Petition

9.  As a sequel to the 1^st petition, P issued the 2^nd petition on 20 March 2015, again, on the ground of 2-year separation since March 2003 and the unreasonable behaviour of R.  The contents are essentially the same as those in the 1^st petition save and except 2 extra paragraphs in relation to R’s unreasonable behaviour (being paragraphs (6) and (7)). 

10.  Not surprisingly, this Petition invited an Answer and Cross-Petition on 21 April 2015.  Contrary to what he had pleaded previously, R admitted that for the matters pleaded in the Cross-Petition the marriage had irretrievably broken down and averred that the parties had separated as from 4 January 2014 (ie the date of the 1^st petition).  R further cross-petitioned divorce on 2 grounds. The first being one-year separation since 4 January 2014 with the consent of P and the second being the unreasonable behaviour of P.  He set out P’s unreasonable behaviour under 5 headings, viz, (1) sexual relation, (2) P’s relation with his mother, (3) unreasonable finance demands, (4) denial of R’s loans and (5) P’s behaviour problems, extending to 5 pages out of a total of 7 pages.

11.  P responded by filing a 4-page Answer to Cross-Petition on 6 May 2015, bulk of which was her reply to R’s allegations of unreasonable behaviour.

12.  That was not the end of the matter. What followed was R’s 4-page Reply on 20 May 2015.

13.  During the 1^st Appointment hearing of 16 November 2015 Mr Hariman, on behalf of P, informed the court that P had agreed to one-year separation and for this purpose a consent summons would be prepared.

14.  There was however no consent summons.  Instead, there was a long lapse of 15 months.  Eventually, by their consent summons filed on 22 February 2017, P agreed to amend her petition so that she relies on one-year separation as from at least 4 January 2014 as the ground for divorce.  She also agreed to withdraw her Answer to Cross Petition. Conversely, R agreed to consent to divorce on the ground of one-year separation and withdraw his Answer and Cross Petition and his Reply.

15.  Unfortunately, the parties were unable to agree on the costs of and incidental to the cause of the 2^nd petition.  This is the second costs issue that the court has to deal with.

Legal Principles

16.  In Hong Kong, the basic principle is that costs are in the court’s discretion: Order 62, rule 3, RHC.

17.  In general terms, apart from children’s cases, the starting point on costs in matrimonial and family proceedings, as they are in civil litigations, remain to be “costs follow the event”: Re Elgindata Ltd (No. 2) [1992] 1 WLR 1207; Gojkovic v Gojkovic(No 2) [1991] 2 FLR 233; see also Order 62, rule 3(2) & (2A), RHC.  That said, it has been opined by the Court of Appeal that because of the special dynamics of family litigation (eg where the case involved children, or where financial resources were inadequate to meet the needs of both parties, etc), the discretion may be broader than in civil matters generally: L v C, (unreported; CACV 169/2006, 9 March, 2008), at §23. 

18.  Broadly speaking, in the exercise of its discretion in civil cases including matrimonial and family cases, the court will have to take into account, where appropriate in the circumstances, the special matters set out in Order 62, rule 5 of RHC.  It is not necessary for me to set out the special matters here.  

The Parties’ Case in the 1^st Petition

P’s Case

19.  It has been submitted by Mr Hariman that for the reason that the 1^st petition was essentially replaced by the 2^nd petition, the issue in dispute, ie whether the parties had separated for at least 2 years as pleaded in the 1^st petition, had yet to be determined in trial.  Indeed, at that point no evidence had been filed nor any submission had ever been made in this regard.  As such, neither party should be considered as successful; so the proper costs order should be no order as to costs.

R’s Case

20.  Ms Chong, counsel for R, disagreed.  She argued that R should be given the costs of the 1^st petition.  Ms Chong placed great reliance on the alleged inconsistencies regarding the breaking down of the parties’ relationship as said by P in her various affirmations.  She drew my attention to the following inconsistencies.

21.  The first is P’s affirmation dated 4 August 2015.  When trying to justify her discovery claim against R dating back to as early as January 2010, P said, at §20, that it was around January 2010 that her relationship with R really broke down.  She repeated this in her affirmation dated 8 January 2016: §4.  This affirmation was filed in opposition to R’s application for disclosure against her. 

22.  Ms Chong submitted that these assertions are clearly inconsistent with what P has pleaded in the 1^st petition that she had separated with R as from March 2003.  This shows P was willing to twist the fact in order to suit her purpose.

23.  Ms Chong also referred me to P’s affirmation of 22 April 2016.  That was filed in opposition to R’s application for an injunction against the use of his personal documents allegedly obtained unlawfully by P.  When P had to explain how she was able to get hold of the documents she affirmed that she and R shared the master bedroom of the former matrimonial home since they moved in until around February 2014.  Again, this is in stark contradiction with what she pleaded in the 1^st petition that the parties slept in separate rooms and is another salient example that she was prepared to twist the fact according to her need. 

24.  It has been argued by Ms Chong that the date of separation is a pivotal averment in the 1^st petition since the pleaded ground for divorce was 2-year separation without consent.  Yet, P contradicted herself in her subsequent affirmations.  All versions as to the date of separation were made under oath but all versions could not be true at the same time.  P must have lied on the crucial fact of the date of separation.  The litigation conduct of the parties is one important factor that the court should take into account in exercising discretion on costs.  Putting forward false evidence or false case is a major litigation misconduct.  Such misconduct is serious enough even to deprive a wholly successful party of his costs.  She referred me to Hong Kong Civil Procedure (2017), §62/2/7; Hung Fung Enterprises & Others v The Agricultural Bank of China [2012] 3 HKLRD 679, §97; Ho Shu Kwong Wilson v Chiang Chun Yuan alias Paul Chiang [2002] 3 HKLRD 419, §5; and Big Island Construction v Wu Yi Development Company Ltd & Others [2014] 2 HKLRD 1054, §§231, 234, 236, 239 & 240.

Discussion – the 1^st Petition

25.  As said, leave was granted for P to withdraw the 1^st petition and lodge the 2^nd petition.  The starting point is, in my view, to ask what is the “event” of the cause in the 1^st petition?

26.  Ms Chong argued that far from being a winning party, P is in fact a losing party in that she withdrew the 1^st petition.  I disagree.  In order to explain why I have come to this view it is necessary for me to revert to what happened in the Amendment Hearing.

27.  As said above, P’s application for amendment was strenuously opposed.  In her written submissions for the Amendment Hearing, Ms Chong argued that the proposed amendments related to unreasonable behaviour, which was not pleaded in the original petition and was thus a new cause of action for divorce. Such proposed amendments were not mere modification, addition to, deletion or substitution of the averments of the original cause of action (ie 2-year separation).   On that basis, she seemed to have argued that P should not be allowed to add a ‘new cause of action” (ie unreasonable behaviour) by way of an amendment.  In the course of argument, Ms Chong seemed to have retracted somewhat and agreed that P was entitled to plead “unreasonable behaviour” with supporting particulars of facts that occurred prior to the date of the petition by way of amendment.  As for those particulars of facts that happened after the 1^st petition, because of the principle of “relation back” these have to be dealt with by way of a supplemental petition.  Yet, she maintained that in any case the particulars of facts proposed to be pleaded were so scanty and the alleged use of abusive language was merely an isolated incident of minute gravity that they disclosed no reasonable cause of action.

28.  During the Amendment Hearing I reminded the parties of the relevant provisions in the Matrimonial Causes Ordinance (Cap 179) (the “MCO”).  Section 11 of the MCO provides that the sole ground for presenting a petition for divorce shall be that the marriage has broken down irretrievably.  Section 11A(2) then goes on to say that:

(2) The court hearing a petition for divorce shall not hold the marriage to have broken down irretrievably unless the petitioner satisfies the court of one or more of the following facts-

(a) that the respondent has committed adultery and the petitioner finds it intolerable to live with the respondent; 

(b) that the respondent has behaved in such a way that the petitioner cannot reasonably be expected to live with the respondent; 

(c) that the parties to the marriage have lived apart for a continuous period of at least 1 year immediately preceding the presentation of the petition and the respondent consents to a decree's being granted; 

(d) that the parties to the marriage have lived apart for a continuous period of at least 2 years immediately preceding the presentation of the petition; 

(e) that the respondent has deserted the petitioner for a continuous period of at least 1 year immediately preceding the presentation of the petition.

29.  Thus, it has always been said that there is only one ground for divorce - that the marriage has broken down irretrievably. A petitioner may obtain a decree of divorce by proving one of the five facts set out in the provision.  “Unreasonable behaviour” itself is not a “cause of action” as such contended for by Ms Chong.  To me, it is a misconception to say that “unreasonable behaviour” is a cause of action akin to a cause of action in contract or in tort.  On that analysis, subject to any other valid objections R might have such as delay I have no doubt that P was entitled to add “unreasonable behaviour” to the 1^st petition and plead those particulars which happened prior to the petition.  As for those particulars of facts since the date of the 1^st petition, she could plead them by way of a supplemental petition. 

30.  Further, I indicated in the Amendment Hearing that I disagreed with Ms Chong that the particulars of facts were insufficient and it was unhelpful to import “no reasonable cause of action”.  Specifically, I pointed out the allegation that R maintains an improper relationship with other female which, according to P’s supporting affirmation of 26 September 2014, happened since 2009 should be grave enough, not to mention the allegation of using abusive language to insult P when she asks for monthly expenses.  The court would have regard to the whole history of the relationship.  Nevertheless, this would have to be decided in trial. 

31.  At the same time, Mr Tang, solicitor for P in the Amendment Hearing, relied upon a few paragraphs in §10.12 of Rayden & Jackson on Divorce and Family Matters (18^th Edn) to support his client’s application.  It is not necessary for me to dwell into these paragraphs because given R’s stance as it was in the hearing, it was clear that P was entitled to at least some of the proposed amendments.

32.  It was against this backdrop that the court made the observation that there could be 3 options available for the parties.  Option 1 would be for the parties to engage in full arguments on whether P was entitled to add the “unreasonable behaviour” ground and all the particulars of facts (whether before or after the 1^st petition) by way of amendment.  Option 2 would be for P to amend the 1^st petition by including “unreasonable behaviour” and those particulars that occurred before the 1^st petition and to plead those post-1^st petition particulars by way of a supplemental petition.  Lastly, option 3 would be for P to withdraw the 1^st petition and start a fresh petition containing both 2-year separation and unreasonable behaviour.  Eventually, both parties chose option 3 to resolve their differences; hence the directions of the court as set out in paragraph 7 above were given.

33.  Therefore, whatever the respective levels of enthusiasm, the decision to dispose of the 1^st petition in the manner described above was a joint one.  That was seen as a practical way out.  I agree with Mr Hariman that the 2-year separation ground was never ventilated and tested.  It remained a live issue in the 2^nd petition and therefore would still require adjudication by the court.  In her affirmation in support of the amendment application, P explained why she did not rely on “unreasonable behaviour” when she took out the 1^st petition was because she did not wish to embarrass R in eyes of their 2 adult children.  That was done at the instigation of R but then in view of R’s adamant opposition, the unreasonable behaviour ground turned out to be necessary.  Again, whether this assertion is true or not has not been tested.  If P’s version is true, it would mean the amendment was occasioned by R.  As such, it must be correct that neither party could be considered as a winner or a loser.  That is the “event” of the 1^st petition.

34.  Further, the reality is the litigation had never been disposed of at that point but in actuality it was being incarnated in the form of the 2^nd petition.  For all these reasons, I gave an order that the costs of the amendment summons including costs reserved to be in the cause of the main suit of the fresh petition. 

35.  All the affirmations that Ms Chong relied upon were post withdrawal of the 1^st petition.  Whilst I do not wish to disparage Ms Chong’s submissions regarding P’s inconsistent affirmations, I must say they have no relevance to how and why the 1^st petition was withdrawn.

36.  Now the parties have come to an agreement in the 2^nd petition that they should obtain a divorce on the ground of one-year separation by consent what should be the proper costs order for the 1^st petition?  One-year separation by consent is said to be a non-fault divorce.  As can be seen below (in paragraph 38) Ms Chong also agreed that the costs subsequent to the agreement of the parties should be no order as to costs.   I think this is the correct approach.  For this reason and also for the same reasons that I have said regarding the costs of the amendments summons I have no doubt that the proper costs order should be no order as to costs; and I so order.

The 2^nd Petition

P’s Case

37.  P’s case is simple.  The parties have now agreed to one-year separation with consent.  This is the position that was made clear by P as early as mid to late 2015.  One-year separation with consent is a non-fault divorce and so the normal costs order to be followed is no order as to costs.  Mr Hariman referred me to Family Law and Practice in Hong Kong, at §2.063.

R’s Case

38.  It is clear that R shifted his position.  In her skeleton submissions, Ms Chong said in unambiguous terms that R should have both sets of costs (ie those of the 1^st and the 2^nd petitions).  When it came to the hearing Ms Chong agreed that if both parties agree to divorce the normal costs order should be no order as to costs.  On that basis, she said R is seeking costs of the 2^nd petition including those of the cross-petition up to 16 November 2015 when P agreed to one-year separation only; and each party is to bear his own costs as from 16 November 2015 including those of the consent summons.

39.  I need to mention that upon hearing R’s latest position Mr Hariman spared no time to change his stance by saying, in his reply submissions, that P should have the costs as from November 2015.  The reason being that substantial efforts were made by P unilaterally to try to come up with terms agreeable to both sides but there was no response from R. 

Intervening Events

40.  The following intervening events are pertinent to the matter under consideration.

41.  On 28 February 2015, before P took out the 2^nd petition, R’s solicitors informed P, by way of an open letter, that R would give his consent for divorce on the ground of one-year separation with separation date commencing from January 2014, leaving the matter relating to ancillary relief to be decided by the court.  There was no response from P.

42.  R wrote again on 9 March 2014 that if P failed to give a favourable reply within 3 days, he would withdraw his consent.  There was again no response.

43.  In the interim, the 2^nd petition was taken out on 20 March 2015.

44.  On 8 October 2015 R took out a summons seeking, inter alia, an order that P had an undefended cause to his one-year separation. 

45.  Then on 10 November 2015 R’s solicitors wrote again, by open letter, proposing the following terms:

1.   Parties to agree on divorce on one-year separation with consent counting from 4 January 2014;

2.   Parties to pay their own legal costs in respect of the main suit in the 1^st petition;

3.   P to pay the costs of R in the main suit of the 2^nd petition.

It was stated in the letter that the proposal would lapse within 3 days.

46.  What followed was, as said above, the concession made by P that she agreed to one-year separation during the First Appointment hearing of 16 November 2015. Given this concession, R’s application of 8 October 2015 became unnecessary and was adjourned sine die.

Discussion

47.  Ms Chong argued that by the time P filed the 2^nd petition it was clear that the marriage had broken down irretrievably and that the parties had separated for one year since 4 January 2014.  The marriage could have been dissolved by consent on one-year separation.  P should have acted reasonably and settled the main suit amicably with R by filing a joint application to divorce on the ground of one-year separation. 

48.  In spite of R’s proposal of 28 February 2015 P chose to ignore it and proceeded to file her fresh petition on 20 March 2015.  She withheld her consent until after substantial costs had been incurred and after R had taken out a summons for an order that P had an undefended cause to his one-year separation that she finally conceded.  Such attitude and conduct defy the underlying objectives as set out in Order 1A, RHC.  All the costs on the main suit in the 2^nd petition could have been avoided should P have acted reasonably by accepting R’s proposal.

49.  Ms Chong referred me to what Hon Cheung JA said in SJH v RJH [2012] 4 HKLRD 308, at §11(7),

“…As both parties are now of the same view that the marriage has been irretrievably broken down, the Court in exercising its divorce jurisdiction in a modern setting, will be loathed to allow the parties to use valuable court time to litigate on a matter which has no impact whatsoever on the divorce itself and which should be dissolved as quickly and painlessly as possible. As Ormrod LJ observed in Grenfell v Grenfell [1978] 1 All ER 561 at 566 that,

‘There is no point, as I see it, in a case like this in conducting an enquiry into behaviour merely to satisfy feelings, however genuinely and sincerely held by one or other of the parties. To do so would be a waste of time of the court and, in any event, would be running, as I think, counter to the general policy or philosophy of the divorce legislation as it stands today.  The purpose of Parliament was to ensure that where a marriage has irretrievably broken down, it shall be dissolved as quickly and as painlessly as possible under the Act, and attempts to recriminate in the manner in which the wife in this case appears to wish to do should be, in my judgment, firmly discouraged.’”

(emphasis added)

50.  Ms Chong also emphasized P’s litigation misconduct that she gave inconsistent versions regarding the date of separation. 

51.  I agree with Ms Chong that it achieved no purpose for P to insist upon the 2-year separation and the unreasonable behaviour of R.  What P should have done was to accept the proposal well before she took out the 2^nd petition. If that had happened, the parties would have obtained a divorce fast and painlessly simply on the ground of one-year separation.  To this, all Mr Hariman could say is that at that time counsel had not been retained yet.  I am not satisfied with the answer.  P was at all times legally represented.  She should have been able to act reasonably and sensibly. 

52.  However, my agreement with Ms Chong stops at here and goes no further.  If what R had filed, in response to the 2^nd petition, were a neat and tidy Answer and Cross-Petition on the ground of one-year separation only, I would be in total agreement with Ms Chong.  Ms Chong’s argument that it achieved no purpose for P to insist upon 2-year separation and the unreasonable behaviour of R and her reliance on SJH v RJH, supra, is a double-edged sword – it cuts equally deep into R.  If one-year separation would be sufficient to do the trick, then equally it was utterly unnecessary and a waste of costs for R to have cross-petitioned on the ground of P’s unreasonable behaviour thereby generating substantial costs in pleadings.  As I see it, that part of the pleading served no purpose other than further exacerbating the rancour against each other.

53.  In Ho Shu Kwong v Chiang Chun Yuan [2002] 3 HKLRD 419, it has been said by Woo JA (as he then was), at 427E-H, that a wholly successful defendant should be given his costs unless there was evidence that he: (a) brought about the litigation; (b) had done something connected with the institution or the conduct of the suit calculated to occasion unnecessary litigation or expenses; or (c) had done some wrongful act in the course of the transaction of which the plaintiff complained of; see also FBC Construction Co Ltd v Lee Ben [2014] 2 HKLRD 1054, at §§ 237-238. I consider (b) is relevant here. Whilst the contents of the 2^nd petition were well within anticipation, the same could not be said for R’s unreasonable behaviour claim.  Without descending to the minutiae, the impression I gather is that the costs occasioned by R’s unreasonable behaviour claim should be at least more or less the same as those occasioned by the 2^nd petition, if not more.

54.  I have not lost sight of the argument that P has apparently given some inconsistent statements in her affirmations regarding the date of separation.  I say “apparent” because these statements have not been tested.  The court has yet to hear the oral testimonies of the parties.  I am sure that if the parties are not able to settle the ancillary relief matters, the date of separation would certainly be an issue that required determination by the court.  Nevertheless, with the conclusion that I have come to, I do not consider these inconsistent statements are relevant to the issue of costs here.  They simply have no bearing on the one-year separation. 

55.  For the above reasons, I am driven to the conclusion that the fair and proper order for the costs of the main suit up to 16 November 2015 should be no order as to costs.

56.  I agree with Mr Hariman that after the parties had agreed on the proper course to be taken on 16 November 2015, the costs incurred thereafter were exchanges between the parties over the procedures and the amendments ought to be made and the issue of costs.  From the correspondences that I was referred to during the hearing, it seems clear to me that during that period of time there were discussions between the parties on how the agreement could be implemented and how the costs were to be disposed of.  Specifically, there were discussions on whose pleadings should be amended or withdrawn; and eventually, it was agreed that amendment is to be made to the 2^nd petition.  I can see that during that time there were seemingly more initiatives from P’s side and there was some lapse of time before R responded but I do not see this a “misconduct” on the part of R.  It is clear to me that the fair and proper costs order as from 16 November 2015 should also be no order as to costs.

Orders

57.  For the above reasons, I give an order that there be no order as to the costs of and incidental to the cause in FCMC 87/2014 and FCMC 3343/2015.

Costs of the Argument

58.  As for the costs of the argument, P has been successful in defending R’s claim for costs.  I see no reason why P should not be given the costs, with counsel certificate; and I so order.

Mr Wayne Hariman, instructed by Gilbert Tang & Co, Solicitors, appeared for the petitioner

Ms Sezen Chong, instructed by K P Lam & Co, Solicitors, appeared for the respondent

FCMC 3343 / 2015

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES

NUMBER 3343 OF 2015

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

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

____________________

RULING
(On Costs)

____________________

The Application

1.  This Ruling is a sequel of my earlier Ruling handed down on 4 May 2016 (“the Judgment”) by which I dismissed the petitioner wife’s application for maintenance pending suit for the benefit of the parties’ daughter and gave an order nisi that the petitioner is to bear the respondent’s costs of her application.  The petitioner now applies, by way of summons dated 2 June 2016, to vary the costs order nisi.  Her primary position, as appeared on the summons, is that it should be no order as to costs.  

2.  For convenience I shall continue to refer the petitioner as “P”, the respondent “R” and the child “YY”. I shall also adopt the same nomenclature and abbreviations used in the Judgment.  As I have already set out the background to P’s original application, the parties’ arguments and my reasoning in the Judgment, I am not going to repeat the same here.  This Ruling has to be read together with the Judgment.

The Legal Principles

3.  Initially, Ms Kwong, counsel for P, developed her arguments upon the principle that although costs is generally a matter of court’s discretion, where cases involving children, the starting point would be no order to be made as to costs unless there are exceptional circumstances to justify a departure.

4.  I agree this is the general position: for children’s cases normally there should be no order as to costs save when one party has been unreasonable or reprehensible in the conduct of the litigation, as parents should not be deterred from putting cases concerning children before the courts: see R v R (Costs and Child Case) [1997] 2 FLR 95, Re G (Costs:  Child Case) [1999] 2 FLR 250, H v H, (unreported, CACV 42/2002, 6 September, 2002).  Yet, the crucial question is whether the present application is one that the above general position should apply.  During the hearing I indicated that I take a different view.  My view is that the present application does not fall within the “children’s cases” category, if I may conveniently call it.  

5.  It is important to note that all the authorities referred by counsel are dealing with the future arrangement of children. R v R (Costs and Child Case), supra and Re G (Costs:  Child Case), supra are both on the costs of residence order and locally, S v S (unreported, HCMP 5547/1999, 22 June 2000) and H v H, supra are on custody, care and control.  As I see it, in so far as the discussions relate to costs in these authorities, they should be understood against the subject matter before the court.  In the present case, the underlying application is one for maintenance under section 5 of the Matrimonial Proceedings and Property Ordinance(“MPPO”) (Cap 192) for the benefit of the parties’ child.  This is an application for ancillary relief, the subject matter of which is starkly different from those in the authorities. 

6.  It appears that the general position as contended by Ms Kwong is also not the English position.  Jackson’s Matrimonial Finance (9^th Ed) said the following as regards the costs of proceedings under Schedule 1 to the Children Act 1989:

“Costs

10.54   Costs are governed by FPR 2010, Pt 28 and PD 28A.  Although FPR 2010, 28.3 embodies the ‘no as to costs’ (sic) principle that applies to many financial applications in family proceedings, this rule does not apply to proceedings under Schedule 1 to the Children Act 1989.  Paragraph 4.2(b)(i) of PD 28A expressly confirms this.  Consequently, the court may at any time make such order as to costs as it thinks just and Pts 43 and 44 (except rules 44.3(2) and (3)) of the CPR apply.  It is suggested that the guidance in Judge v Judge and Baker v Rowe is likely to be of relevance, notwithstanding the fact that neither of these cases involved an application under Schedule 1 to the Children Act 1989 and both were decided at a time when the Family Proceedings Rules 1991 applied.  In effect, the Court of Appeal in both of these cases stated that the judge starts with a clean sheet and that there is no general rule as to how the discretion to award costs should be exercised.  However, the fact that one party has been unsuccessful and must therefore usually be regarded as responsible for the generation of the successful party’s costs is likely to be the decisive factor, subject to any countervailing considerations.”

7.  The present application is an interlocutory application.  The relevant rules can be found in Order 62, rule 3, Rules of the High Court (“RHC”), specifically Order 62, rule 3(2A) which deals with interlocutory proceedings.  As I have already discussed the relevant legal principles in another judgment (dated 5 February 2016) when I dealt with the specific discovery sought by R, for the sake of completeness, I only need to set out the discussions in §§ 23 to 27 of that Judgment,

“23. I now come to the issue of costs.

24. It is trite that the issue of costs is a matter of discretion for the court. The discretion is a wide one and of course must be exercised judicially. In ancillary relief cases, it has been said by the Court of Appeal that because of the special dynamics of family litigation, the discretion may be broader than in civil matters generally: Z v X & C, (unrep., CACV 166/2011, 8 March, 2013) at § 10.

25. As far as the general principles are concerned, the relevant rules can be found in Order 62, rule 3, RHC. Sub-paragraphs (1) to (2A) of the rule state as follows:

(1) Subject to the provisions of this Order, no party shall be entitled to recover any costs of or incidental to any proceedings from any other party to the proceedings except under an order of the Court.

(2) If the Court in the exercise of its discretion sees fit to make any order as to the costs of or incidental to any proceedings (other than interlocutory proceedings), the Court shall, subject to this Order, order the costs to follow the event, except when it appears to the Court that in the circumstances of the case some other order should be made as to the whole or any part of the costs.

(2A) If the Court in the exercise of its discretion sees fit to make any order as to the costs of or incidental to any interlocutory proceedings, it may, subject to this Order, order the costs to follow the event or make such other order as it sees fit.

26. Sub-paragraph (2A) was introduced in the Civil Justice Reform in 2009. Thus, under the post CJR regime, the principle that “costs to follow the event” is no longer the prescribed usual order but is instead just an option as regards costs in interlocutory proceedings: Hong Kong Civil Procedure 2016 Vol 1, § 62/3/3B. The present position in this regard has been succinctly summarised by Hon To J in his judgment in Melvin Waxman v Li Fei Yu (unreported, HCA 1972/2012, 11 September 2013), which I gratefully adopt.

19. Summing up on the post-CJR position, I think the court has much wider discretion as to costs in interlocutory proceedings. Unlike other proceedings, the general rule of costs following the events do not apply. The court is entitled to take into account all the circumstances of the case, including those set out in rule 5, to make such order as it thinks fit. In the exercise of its discretion, the court may take the issue-based approach or may take into account merit of the parties’ case or the possible outcome of the action. The circumstances of interlocutory proceedings are so numerous that it is impossible to make any general rule. Costs to follow the event and costs be to the successful party’s costs in the cause are obvious options.

27. Further, in the exercise of its discretion, the court will have to take into account, where appropriate in the circumstances, the special matters set out in Order 62, rule 5, RHC,

(1) The Court in exercising its discretion as to costs shall, to such extent, if any, as may be appropriate in the circumstances, take into account-

(aa) the underlying objectives set out in Order 1A, rule 1;

(a) any such offer of contribution as is mentioned in Order 16, rule 10, which is brought to its attention in pursuance of a reserved right to do so;

(b) any payment of money into court and the amount of such payment;

(c) any written offer made under Order 33, rule 4A(2);

(d) any written offer which is expressed to be "without prejudice save as to costs" and which relates to any issue in the proceedings, but the Court may not take the offer into account if, at the time it is made, the party making it could have protected his position as to costs by means of a sanctioned payment or a sanctioned offer under Order 22;

(e)the conduct of all the parties;

(f)whether a party has succeeded on part of his case, even if he has not been wholly successful; and

(g) any admissible offer to settle made by a party, which is drawn to the Court's attention.

(2) For the purpose of paragraph (1)(e), the conduct of the parties 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.” (emphasis added)

8.  In addition to the above, I would respectfully refer to what Mr Justice To said in § 20 of Melvin Waxman v Li Fei Yu, supra, regarding the burden of proof:

“20. As for the onus of proof, I think it is the same post-CJR as it was pre-CJR. It must be the successful party’s burden to satisfy the court as to the type of costs order it is entitled. To begin with, the successful party is assisted by the general rule of costs to follow the event. By the mere fact of being successful, the successful party has discharged the evidential burden of showing it is entitled to costs. Thus, effectively, the evidential burden is on the unsuccessful party to adduce sufficient evidence or argument that some other or lesser order is appropriate, such as no order as to costs, costs be to the successful party’s costs in the cause or costs to the unsuccessful party. In the absence of evidence or convincing argument to the contrary, the successful party would also have discharged the legal burden. Costs to follow the event would be the appropriate order to make. If the unsuccessful party is able to discharge that evidential burden, it will be the legal burden of the successful party to show that he is entitled to the costs order which he seeks. In reality, having heard the interlocutory application, it would be quite obvious to the court what costs order would best serve the justice between the parties without relying on the burden of proof.” (emphasis added)

9.  When I made the order nisi, I was adopting an issue-based approach and I was conscious of the options available to me under Order 62, rule 3(2A), RHC.  The evidential burden is on P, the unsuccessful party, to adduce sufficient evidence or argument that some other or lesser order is appropriate.

Discussion

10.  P’s initial position that the proper costs order should be no order as to costs upon the basis that her application is one of “children’s cases” must fail in light of the applicable legal principles that I have discussed above.  By the time when it came to the hearing, Ms Kwong conceded that P should only bear 1/3 of R’s costs, the remaining 2/3 should be no order as to costs.

11.  I have not been updated on YY’s present situation, specifically on her education in the UK.  In the absence of any up-date, it is safe to assume that she has not resumed her studies.  The implication is that YY, now 23 years old, does not fall within the ambit which allows the court to grant maintenance in her favour: section 10(3), the MPPO; and § 22 of the Judgment.

12.  Ms Kwong put forward the following arguments.

(1) P has a Reasonable Case

13.  Ms Kwong submits that P has a reasonable case which goes to the best interest and welfare of YY. Every step was taken to ensure it was YY who received any benefit.  However, R was not cooperative when he was first asked to contribute YY’s living expenses in Hong Kong, resulting in P having to take out the present application.

14.  It has been submitted on P’s behalf that she had a genuine and legitimate expectation that R would continue to support their daughter because YY relied entirely upon her father before she returned to Hong Kong.  Had P not persisted with the application, R would in all likelihood not have made any financial contribution or undertaking for YY.  Ms Kwong refers me to the fact that R did not give any constructive reply despite upon repeated written requests from P’s solicitors.  This was the very reason for P to have taken out her application in mid February 2016.  That said, Ms Kwong concedes that upon her return to Hong Kong YY would still have some of the monies that were remitted to her.  She also reminds me that R also resisted at first to pay any amount in the call-over hearing of 1 March 2016 and it was only by the court’s order that R paid $5,000 per month as YY’s interim interim maintenance.  R’s subsequent proposal on 21 March 2016 to give YY a monthly subsidy of $3,000 for 3 months only was also entirely insufficient.  It was only until one week before the substantive hearing that R counter-proposed to give a monthly subsidy of $4,000 for another 6 months. Hence, it was P’s persistence that forced R to give the undertaking, thus her application might not be that wholly unsuccessful.  She got something anyway.

15.  Ms Kwong therefore contends that the application is not one that should never have been made or it was hopeless from the outset.  P did not go beyond the ambit of what was reasonable to pursue the application. 

16.  I agree P managed to convince the court that YY fell within the ambit of section 10(3), the MPPO and did succeed in getting something – though something that fell far short of what she had asked for.  It follows that her application was not one unreasonably taken out.  This is one of the factors that I need to take into consideration in the exercise of the discretion: Order 62, rule 5(1)(f), RHC.

(2) R was not Cooperative

17.  Ms Kwong complains that R was not cooperative throughout and that his counter-proposals came too late; otherwise the parties would have the chance to settle the matter earlier. 

18.  With respect, I disagree.  It has to be borne in mind that P’s final open offer before the hearing was $15,000 and that R’s last proposal was flatly rejected by her. Given the huge disparity between the parties’ respective positions, I doubt very much whether they would have any chance of settling the matter earlier.  I agree with Ms Chong that there was no way that P’s case, namely, asking for an interim maintenance initially at $22,050, subsequently reduced to $18,000 and further down to $15,000, had any reasonable prospect of success.  

19.  I said in the Judgment that I erred in favour of YY that it was her intention to resume her studies in London and it was open to her to do so.  I also accepted that if YY had continued her studies in London, R would still have continued to support her.  I therefore found that the requirement under section 10(3)(a) of the MPPO that she would be receiving instruction at an educational establishment had been satisfied: § 27 of the Judgment. At the same time, I took the view that it was perfectly realistic for her to seek employment: § 39 of the Judgment.  In the call-over hearing on 21 March 2016, R, through his counsel, informed the court that he would be willing to give YY a financial subsidy of $3,000 per month until she found a job and be financially independent.  In his 6^th Affirmation dated 21 March 2016, he reiterated his offer; and depending on the progress of her job hunting, he was willing to review and renew the financial subsidy.  In my view, these proposals, with a view to assist YY to achieve financial independence, cannot be said to be unreasonable.  It was also with this in mind that I agreed with R’s proposal that $4,000 per month for another 6 months should be sufficient in the interim before she returned to the UK:  § 40 of the Judgment.  It is clear to me that P should at least have accepted the open offer that was conveyed to her on 8 April 2016.  This is a relevant factor under sub-paragraph (g) of Order 62, rule 5(1), RHC.  I am also entitled to take P’s failure to response and to engage in serious negotiations into consideration: sub-paragraph (e) of Order 62, rule 5(1), RHC.

(3) P has no improper conduct

20.  Ms Kwong also submits that there was not any improper conduct on P’s part.   It may well be the case but equally there was not any improper conduct on the part of R either.

(4) Other factors

21.  Ms Kwong urges me to consider P’s financial situation.  She is entirely dependent on the interim maintenance of $18,500 per month to meet her daily needs.  However, as I said in the Judgment I have reasons to believe that P did not give a full and frank disclosure of her finance.  I also found she grossly inflated the figures: §§ 32 & 33 of the Judgment. 

22.  Finally, I need to mention that Ms Chong argues that P was not acting out of her genuine concern for the welfare of YY but out of her selfish desire to drag the daughter into this litigation so as to penalize R.  I must say with the evidence before me and without hearing the oral evidence of the parties, at the present moment I am not able to come to this conclusion.

The Appropriate Costs Order

23.  The ultimate question is what the proper costs order should be.  I agree with Ms Kwong that it was not unreasonable for P to have taken out the application but unfortunately, she exaggerated YY’s expenditure and seemingly failed to give a full and frank disclosure of her finance.  Most importantly, she failed to take a realistic view of the matter and failed to engage in any serious negotiations with R. She also failed to accept R’s offer of 8 April 2016.  The offer was not a complicated one entailing a review of the minutiae of evidence.  By the time of the hearing on 12 April 2016, P should have had sufficient time to consider the same.  In failing to accept the offer, P would have to face the adverse consequences in costs.  As said above, I consider the two offers that R previously made were also worthy of consideration.  The combination of all these factors leads to me to the conclusion that a fair and proper costs order would be for P to pay R’s costs as from 12 April 2016.  As for the costs prior to 12 April, 2016, the proper costs order should be no order as to costs.

Orders

24.  For the reasons aforesaid, I am prepared to vary the costs order nisi as follows:

1.   The petitioner do pay the respondent’s costs of this application as from 12 April 2016, with counsel certificate; and

2.   There be no order as to costs, including costs reserved, of this application prior to 12 April 2016.

25.  As for the costs on the variation of the order nisi, for the reason that P is successful in her application, though not to the extent that she asked for, I consider it is fair that P is to have the costs, with counsel certificate.  All the costs are to be taxed on party and party basis, if not agreed.

FCMC 3343 / 2015

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES

NUMBER 3343 OF 2015

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

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

__________________

RULING
(Specific Discovery and Costs)

__________________

Introduction

1.  Before me is a summons taken out by the respondent husband on 8 October 2015 for a couple of matters:-

1. The vacation of the petitioner wife’s Notice of Intention to Proceed with an Application for Ancillary Relief registered at the Land Registry against a property (“the Property”) owned by the respondent husband’s company so that the respondent may liquidate the Property for needy cash;

2. The trial of a preliminary issue;

3. Specific discovery of the petitioner wife’s medical expenses;

4. Specific discovery of the petitioner wife’s medical condition;

5. Leave to file and serve his 2^nd Questionnaire; and

6. Leave for the parties to revise and provide an updated Form E

2.  I will refer the petitioner wife as “P” and the respondent husband “R” in this Ruling.

3.  When it came to the argument hearing, most of the differences were resolved. 

4.  First, at the invitation of the court, the parties were able to come to an agreement that the Property is to be sold in open market after which each party is to have $1.5 million out of the proceeds of sale and the balance will be paid into court pending the determination of the ancillary relief claim or until further order of the court.  By consent, the court ordered that the Notice be vacated from registration on 2 February 2016.

5.  Secondly, with the further disclosure by P subsequent to the taking out of the summons, R chose not to pursue further with paragraphs 3 and 4. 

6.  Thirdly, notwithstanding that there were 14 questions on R’s 2^nd Questionnaire, the parties were able to narrow down their differences to one question only. 

7.  Fourthly, upon the court’s indication that it might be more prudent for the parties to up-date their financial situation by way of an up-dated Form E upon a failed FDR and before trial, Ms Chong, counsel for R, agreed to have the application adjourned so that the court may revisit it later as and when necessary.

8.  Finally, as for paragraph 2 (ie the trial of a preliminary issue), it has already been adjourned sine die by the court in the call-over hearing of 16 November 2015 with costs reserved.  Now with the concession made by P, there is actually no need for R to proceed with the matter.

9.  Thus, what remain are essentially the outstanding question on R’s 2^nd Questionnaire and the issue of costs.  It turned out that the main battle field is on the issue of costs.

Background

10.  P was from Taiwan and R is a local Chinese.  They married in Taiwan in December 1989 and thereafter P moved to live in Hong Kong. The couple has 2 children; a son now aged 25 and a daughter, now 22 years old.

11.  On 4 January 2014, P petitioned for divorce on the ground that the parties had been living apart for a continuous period of at least 2 years immediately preceding the presentation of the petition, namely since March 2003.  This was disputed by R who claimed they only lived apart from each other at a much later date, so much so that the period of separation is less than 2 years.

12.  With the leave of the court, P then withdrew her petition on 20 March 2015 and lodged a new petition based on 2 grounds, namely, (1) 2-year separation; and (2) R’s unreasonable behaviour.  In response, R cross-petitioned for divorce based on one-year separation since 4 January 2014 with consent and the unreasonable behaviour of P. 

13.  The matter as it now stands is that P has agreed to divorce on the ground of one-year separation with consent.

The Outstanding Question on R’s 2^nd Questionnaire

14.  I now turn to the outstanding question on R’s 2^nd Questionnaire.

15.  R’s case is that P has an interest in a Taiwan Property that was purchased in the name of her brother back in 1984 but she failed to disclose this in her Form E dated 12 March 2014.  P’s reply, in her Answers dated 9 June 2015, was that she has no proprietary interest in the Taiwan Property.  She further disclosed that she had previously acted as連帶保證人 and權利人in respect of a bank loan taken out by her brother which affected the Taiwan Property.  However, such is no longer the case as repayment of the bank loan was already made in full.  In support of her answer, she provided a legal opinion from her lawyer in Taiwan.

16.  The parties do not have the English translations for連帶保證人and權利人 nor has the legal opinion elaborated on what they actually mean.  On the face of the words, it seems to me that the literally meaning of these two terms are somewhat similar to our concepts of “joint-guarantor” and “right-owner” respectively.  Anyway, dissatisfied with her reply, R continued to press on with 6 questions in his 2^nd Questionnaire: -

1. Concerning Answers 6-11, it was stated that the Petitioner had no proprietary interest in the Taiwan Property and that she only acted as 連帶保證人 and 權利人 in respect of a bank loan taken out by her brother which affected the Taiwan Property.  A legal opinion of (the Taiwan lawyer) was annexed in proof (Annex 1). As revealed from the legal opinion, the bank loan taken out by the Petitioner’s brother in 2008 (year 97 in Taiwanese calendar) was TW¥ 2 million and that the Petitioner acted as guarantor for the loan. In return, the brother assigned the security right in the Taiwan Property, which was enforceable up to a value of TW¥ 5 million, to the Petitioner.

2. Please state on what documents or information that (the Taiwan lawyer) rendered the legal opinion. Please provide the documents.

3. Please state whether the Petitioner provided any (1) income proof and/or (2) asset proof to the bank so as to act as guarantor for the loan of  TW¥ 2 million. Please provide a copy of such income/asset proof.

4. Please state whether the Petitioner pledged with the bank any (1) deposits and/or (2) valuables and/or (3) title deeds of land as security for the loan. Please provide copies of documentation relating to the pledge.

5. Please state the date when did the brother pay off the loan. Please provide copies of documentation relating to the repayment of the loan.

6. Please provide copies of the loan agreement, guarantee agreement, assignment whereby the brother assign the security in the Taiwan Property to the Petitioner and all other documents relating to the Petitioner’s guarantee of the loan.

17.  In her affirmation dated 11 December 2015 P confirmed that she has no proprietary interest in the Taiwan Property.  She further explained that her role as a連帶保證人ie joint guarantor (my own English translation) rendered her a joint debtor so she was given a lien / security interest of TW¥ 5 million by her brother on the Taiwan Property, which could be exercised in the event of non-payment of the loan of the part of the brother; in which event, she would be entitled to take out a mortgage / charge up to TW¥ 5 million on the property to secure repayment of the loan.  As the loan was repaid to the bank in around April 2012, the lien in her favour needed not be exercised and was discharged.

18.  During the hearing, Ms Chong revised Question 6 and agreed to drop the remaining questions.  The revised question is,

6. Please provide copies of the loan agreement in which the petitioner acted as the joint debtor and any annexure to the agreement (if any) in the 2008 transactions (serial no 26) and the 2012 transactions (serial no. 28).

19.  The serial numbers are the numbers recorded at the Taipei Land Registry which apparently show there were 2 transactions.  To this, Mr Hariman, counsel for P, maintained that there was one transaction in 2008 only and he confirmed that P agrees to produce the relevant loan agreement.  This may well be the case that there was only one transaction but in my view, this has to be clarified.

20.  Mr Hariman emphasizes that P was not a guarantor but merely a joint debtor and on that footing, he elaborates in his written submissions that R’s application is misconceived.

21.  To me, the terminology is immaterial. What is material is what actually happened in the transaction and what P’s role was.  I find there is some force in R’s argument that for the reasons that P was not habitually resident in Taiwan nor did she have any active employment in Taiwan or elsewhere, it would not be reasonable for the bank to have accepted her, whether as a joint-debtor or a guarantor, for the loan.  The question is whether P charged any of her assets to the bank in this loan transaction in order to enjoy the TW¥ 5 million lien / security over her brother’s property, bearing in mind that the original loan amount was for TW¥ 2 million only.  It may well be that there was none but it is quite logical for R to have some reasonable suspicion that the only way P could have satisfied the bank as good security for the loan was that she had substantial assets in Taiwan so that her involvement stood as a better security; and these assets have not been disclosed.  If there was any security, the same should have been recorded in the loan agreement.  For this reason, I prefer R’s revised question no 6 and I will give an order accordingly.

22.  Finally, Mr Hariman, on behalf of his client, also agreed to give an answer to confirm whether she has any other bank accounts in Taiwan apart from the Sunny Bank of Taiwan (Question no 11).  I will also give an Order accordingly.  According to R’s case, P in fact has two other bank accounts in Taiwan.  There is also some evidence that the Sunny Bank account aside, P has at least another bank account with the Cathay United Bank.  All these have yet to be confirmed by P.  In this regard, I need to remind P that she has to give a full and frank disclosure of her financial situation.  If any of the additional account has been closed, she should also provide the particulars including the date of closure.

The Costs

23.  I now come to the issue of costs.

24.  It is trite that the issue of costs is a matter of discretion for the court.  The discretion is a wide one and of course must be exercised judicially.   In ancillary relief cases, it has been said by the Court of Appeal that because of the special dynamics of family litigation, the discretion may be broader than in civil matters generally:  Z v X & C, (unrep., CACV 166/2011, 8 March, 2013) at § 10. 

25.  As far as the general principles are concerned, the relevant rules can be found in Order 62, rule 3, RHC. Sub-paragraphs (1) to (2A) of the rule state as follows:

(1) Subject to the provisions of this Order, no party shall be entitled to recover any costs of or incidental to any proceedings from any other party to the proceedings except under an order of the Court.

(2) If the Court in the exercise of its discretion sees fit to make any order as to the costs of or incidental to any proceedings (other than interlocutory proceedings), the Court shall, subject to this Order, order the costs to follow the event, except when it appears to the Court that in the circumstances of the case some other order should be made as to the whole or any part of the costs.

(2A) If the Court in the exercise of its discretion sees fit to make any order as to the costs of or incidental to any interlocutory proceedings, it may, subject to this Order, order the costs to follow the event or make such other order as it sees fit.

26.  Sub-paragraph (2A) was introduced in the Civil Justice Reform in 2009.  Thus, under the post CJR regime, the principle that “costs to follow the event” is no longer the prescribed usual order but is instead just an option as regards costs in interlocutory proceedings: Hong Kong Civil Procedure 2016 Vol 1, §62/3/3B.  The present position in this regard has been succinctly summarised by Hon To J in his judgment in Melvin Waxman v Li Fei Yu (unreported, HCA 1972/2012, 11 September 2013), which I gratefully adopt.

19. Summing up on the post-CJR position, I think the court has much wider discretion as to costs in interlocutory proceedings.  Unlike other proceedings, the general rule of costs following the events do not apply.  The court is entitled to take into account all the circumstances of the case, including those set out in rule 5, to make such order as it thinks fit.  In the exercise of its discretion, the court may take the issue-based approach or may take into account merit of the parties’ case or the possible outcome of the action.  The circumstances of interlocutory proceedings are so numerous that it is impossible to make any general rule.  Costs to follow the event and costs be to the successful party’s costs in the cause are obvious options.

27.  Further, in the exercise of its discretion, the court will have to take into account, where appropriate in the circumstances, the special matters set out in Order 62, rule 5, RHC,

(1) The Court in exercising its discretion as to costs shall, to such extent, if any, as may be appropriate in the circumstances, take into account-

(aa) the underlying objectives set out in Order 1A, rule 1;

(a) any such offer of contribution as is mentioned in Order 16, rule 10, which is brought to its attention in pursuance of a reserved right to do so;

(b) any payment of money into court and the amount of such payment;

(c) any written offer made under Order 33, rule 4A(2);

(d) any written offer which is expressed to be "without prejudice save as to costs" and which relates to any issue in the proceedings, but the Court may not take the offer into account if, at the time it is made, the party making it could have protected his position as to costs by means of a sanctioned payment or a sanctioned offer under Order 22;

(e) the conduct of all the parties;

(f) whether a party has succeeded on part of his case, even if he has not been wholly successful; and

(g) any admissible offer to settle made by a party, which is drawn to the Court's attention.

(2) For the purpose of paragraph (1)(e), the conduct of the parties 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.(emphasis added)

28.  Put in board terms, Mr Hariman’s submissions are that as far as R’s application for specific discovery is concerned, P was accommodating in the provision of answers and documents and as regards the Property, she was always amenable to the sale of it.  Ms Chong’s counter-arguments are that R was justified in taking out the applications, that he won on some of the issues and that he also acted reasonably in not pursuing the rest of them.

Discussion

29.  As regards paragraph 1 of the application, ie the vacation of the Notice, as early as in his affirmation dated 9 October 2015, R already offered to undertake to sell the Property in open market at market price to independent third party purchaser and to hold the sales proceeds on account for P and him pending the final determination of these ancillary relief proceeding.  He offered to keep P informed of the sales transaction and serve her with all the sales documents.  If the Court deems necessary, he can also pay the sales proceeds into court after deducting the necessary transaction costs and reserving a portion for the interim living expenses for him, P and his household pending the determination of ancillary relief application.

30.  In response, P, in her affirmation dated 11 December 2015, apart from raising various doubts over R’s assertion regarding the state of the Property and his financial situation, she however said that should R furnish further information, documentary evidence and details before the substantive hearing, she reserved her right to reconsider the position.  She also mentioned that the proceeds should be paid into court and on the basis of fairness, any payment out made to R should be matched by an equivalent payment out to her.  R, in his affirmation dated 11 January 2016, acceded to P’s requests for information of the sale and for payment of the sale proceeds into court.

31.  Despite the apparent propinquity of the parties’ position, it was somewhat unfortunate that no agreement was reached before the hearing.  As said, it was only at the court’s invitation that the parties finally managed to come to a solution.  I consider it was reasonable for R to have taken out the application and the parties’ respective stance cannot be regarded as unreasonable.  It was probably due to the mistrust that P had towards R that there was no fruitful solution prior to the hearing.

32.  Paragraphs 3 and 4 of the summons are on P’s alleged medical expenses.  The request was made against P’s allegation that she needs $12,800 per month for her medical care.  R considered that P had been exaggerating her medical needs.  In my view, in light of the apparent exorbitant amount, it was not unreasonable for R to have taken out such a request for further details such as the prescriptions for such medication, the type and quantity of the medication and the duration of time that such medication could last.  P subsequently produced further documentary documents on her medical expenses.  It is quite clear that after then what R was chasing after was the prescriptions issued by a Chinese medicine practitioner (“CMP”) in the name of Mr Shum who had for some time been consulted by P and for which P had incurred substantial sums of money.  With the bulk of the documentary evidence subsequently disclosed, I consider it was sensible for R not to have pursued the matter further in the hearing.  Before I leave this matter, I need to mention that it is hard to believe P did not have CMP Mr Shum’s prescriptions though I do not take the view that these documents are significantly material.  R had been to Mr Shum for consultation and he was given the prescription.  I think I am also entitled to take notice that the common practice in Hong Kong is for patients to be given their prescriptions upon consultation. There is nothing to suggest that Mr Shum’s practice deviated from the common practice.

33.  However, one of his requests was for medical reports of P’s medical conditions to be compiled by all the practitioners from whom P sought consultation from 1 January 2012 to date.  I reckon that there are altogether 5 professionals: a medical doctor, a clinical psychologist, a neuro-psychologist, a psychological counsellor and a Chinese medicine practitioner.  Clearly, the reports have to be compiled by the professionals concerned upon the instructions from P; in other words they are yet to be created.  There is nothing to suggest that these reports are already in existence.  I wonder how they could be regarded as in the possession, custody or power of P. 

34.  Further, R, in paragraph 4 of his summons, also asked for an affirmation from P to explain her medical conditions.  R has now withdrawn his application and so I do not have the benefit of arguments from counsel, nevertheless I do not consider such additional evidence is necessary at this stage.

35.  I now turn to R’s 2^nd Questionnaire.

36.  I have already dealt with the questions in relation to the Taiwan Property.  I consider it was quite reasonable for R to have put forward questions in this regard though the questions could have been better framed and their numbers reduced.  On P’s side, it was not until the hearing that Mr Hariman agreed to produce the loan agreement.  As I said, this issue warrants some clarification.  R should be considered a winning party in this respect.

37.  As for the bank accounts in Taiwan, the Sunny Bank account was not disclosed in her Form E dated 12 March 2014.  It was only after R had raised the matter in his Questionnaire dated 12 May 2015 that P admitted this in her Answers dated 9 June, 2015.  Despite her assertion that the account was opened before she married and was dormant for many years, the entries from the bank passbook reveal that there were frequent deposits and withdrawals before her Form E. The earlier bank statements that she produced in her affirmation of 11 December 2015 also show that there were a couple of transactions every year since 2011. It is also striking to note that subsequent to her Form E she deposited TW¥ 160,000 (or about $37,900) into this account on 30 May 2014.  Her affirmation evidence is that she made use of the withdrawals from this account for her daily expenses and mandatory payments whenever she was back in Taiwan.  Given all these, it is hard to believe that she could have forgotten about this account at the time of her Form E. 

38.  Further, R’s affirmation evidence is that P in fact has at least 2 other bank accounts in Taiwan.

39.  Thus, I consider it was justified for R to have asked the questions.

40.  As for the other questions in relation to P’s loan of $560,000 owed to her sister, her withdrawals from the Sunny Bank account, the source of the deposit of TW¥ 160,000 on 30 May 2014 and her National Health Insurance system, P gave her answers in her affirmation of 11 December 2015 subsequent to the summons.  Whilst the alleged loan is of material relevancy, I do not think the same can be said of for the others. 

41.  With all these discussions, the conclusion I can come to is that by and large R is justified in taking out most of the items in the summons and is successful in a good portion of them, either by way of an order from the court or by a substantive response from P.  This is a special matter that the court may take into account: Order 62, rule 5(1)(f), RHC.  He acted quite sensibly in not pursuing the other items, some of which, even if pursued, such as paragraph 4 of the summons, would have been failed.  It is not necessary nor is it possible for me to make a scientific stock-taking by itemizing the successful ones and the withdrawn ones in terms of their extensiveness of the evidence adduced or the time spent.  Mr Hariman emphasizes that P had been accommodating and amenable in responding to R’s summons.  I accept that it was case after the taking out of the summons; and this conduct is also a matter that the court may consider in the circumstances:  Order 62, rule 5(1)(e) and (2)(b) and (d), RHC.  Likewise, the conduct of R as discussed above would also have to be put into the balance.  Last but not least, P was not truthful in respect of her bank account in Taiwan.  Taking all the above into consideration and doing the best I can, I consider it is fair that R is to get two/third (2/3) of the costs in respect of paragraphs 1, 3, 4 and 5 of his summons. 

Orders

42.  For the reasons aforesaid, I give the following orders:

1. The petitioner do file and serve her answers to question no 6 (as amended) and question no 11 of the respondent’s 2^nd Questionnaire within 14 days.

2. Two-third of the costs in respect of paragraphs 1, 3, 4 and 5 of the respondent’s application be paid by the petitioner in any event with counsel certificate, to be taxed if not agreed.