AK v. MYNT

FCMC16285/2017

[2020] HKFC 28

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES

NUMBER 16285 OF 2017

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REASONS FOR D E C I S I O N

(Transfer of Proceedings to the Court of First Instance)

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1.  The procedural history of the present case can be gleaned from the Respondent’s Concise Statement of Issues and Chronology lodged with the court on 13 January 2020.

2.  By a summons dated 23 December 2019, the respondent husband (‘Husband’) made an application for an order for the transfer of these proceedings to the Court of First Instance. In his 7^th Affirmation filed on 2 January 2020, the Husband set out the reasons why he sought the transfer. The parties are in agreement that the present case should be transferred to the Court of First Instance in view of the complexity of the legal and factual issues involved, as well as the size of the parties’ assets. The solicitors for the Husband has procured a consent summons filed on 14 January 2020 for the court’s consideration and perusal.

3.  This is a long marriage with two children both being adults and financially independent, the only outstanding issue is the competing ancillary relief application made by the parties. It is accepted that the total value of the undisputed matrimonial assets is in the region of HKD255 million. However, it is the petitioner wife’s case that certain assets in the form of overseas trusts worth USD69 million and are held for the benefits of the respondent husband and other family members are nuptial in nature and in the circumstance the petitioner wife has taken out an application under s.17 of the Matrimonial Proceedings and Property Ordinance (Cap. 192) (‘s.17 Application’) to set aside those overseas dispositions. It is accepted that there is a complex foreign element in the ongoing s.17 application that is vehemently opposed by the Husband.  In view of parties’ positions and arguments in relation to the overseas trusts, the capital value of the assets involved and the high complexity of the factual and legal issues involved, I accept that these proceedings are suitable to be dealt with in the Court of First Instance.

4.  Accordingly, it is ordered that:

(1)  This cause be transferred to the Court of First Instance pursuant to Rules 32 and 80 of the Matrimonial Causes Rules and Practice Directions 15.4. The transfer is to be take effect after the pronouncement of the Decree Nisi;

(2)  The Wife is to lodge the First Directions Hearing Bundle 14 days after a new case number has been notified, but not 14 days before the First Directions Hearing;

(3)  There be no order as to costs of the summons dated 23 December 2019 and the consent summons dated 14 January 2020 and all costs reserved of the proceedings be determined by the Court of First Instance.

5.  When ordering transfer, by consent I also give the case management direction that the parties shall jointly appoint Schweizerische Stiftung für Edelstein-Forschung via Christie’s test the following jewellery forthwith upon the parties’ agreeing to sell the pieces in Christie’s main auction or online sale in May 2020:-

(i)  Ruby Collection comprising a ruby and diamond ring, necklace and earrings (including the origin and treatment);

(ii)  8.01 Fancy yellow diamond VS1 diamond ring;

(iii)  Diamond and synthetic s-stene ring; and

(iv)  OBC 2.55ct (I/VS) diamond and diamond dress ring.

All the testing costs including but not limited to shipping and insurance costs of shipping be borne by the parties equally.

FCMC 16285 / 2017

[2019] HKFC 280

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES

NUMBER 16285 OF 2017

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J U D G M E N T
(Costs)

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1.  On 10^th January 2019 the Petitioner/Wife (“W”) applied by summons (“the Discovery Summons”) for orders requiring the Respondent/Husband (“H”) to discover and produce documents relating to his accounts with the Bank of China (“BoC”) and HSBC (paras 1 and 3), “all relevant documents and correspondence” relating to a mortgage of the property situated at J8 Grenville House, 1 Magazine Gap Road, HK (“Grenville House Property”) (para 2) and copies of all tenancy agreements for H’s place of residence from 13^th December 2017 to date (para 4).  The Grenville House Property is the former matrimonial home of the parties.

2.  By further summons filed 8^th April 2019 (“the Banker’s Books Summons”), W applied for orders enabling access to and inspection of the documents held by BoC relating to H’s accounts. Paragraph 1 of that summons sought the same documents as paragraph 1 of the Discovery Summons. 

3.  Both summonses were originally set down for argument on 17^th January 2020.  On 26^th August 2019 the Court gave a direction under Order 1B r1(2)(b) expediting the hearing to 18^th October 2019.

4.  On 16^th October 2019 a consent summons was signed by W and the BoC (which had, by order dated 13^th June 2019, been granted leave to be joined as Intervener) resolving the Banker’s Books Summons.  The terms of the consent summons provided for W to be at liberty to inspect and take copies of the bank’s records in relation to H’s accounts including (para 2) “any documents submitted by or on behalf of [H]” to BoC and “any records of information and representations given by or on behalf of [H]” to BoC in connection with the mortgage taken by the bank over the Grenville House Property.  The consent summons further provided for the costs of the Banker’s Books Summons and consequential costs to be paid by W to BoC.  Upon the filing of the consent summons, on 17^th October 2019, an order in terms of the consent summons was made, and BoC was excused from attending the hearing.

5.  In W’s Skeleton Submissions dated 30^th September 2019, W stated that she was satisfied with the documents disclosed by H in response to paragraphs 1, 3 and 4 of the Discovery Summons and would not be seeking any order relating to those paragraphs, but wished to continue with paragraph 2.  In fact, at a hearing on 21^st June 2019, the Court had already made an order that there be “No order” on paragraphs 2 and 4 of the Discovery Summons, leaving only paragraphs 1 and 3 to be argued at the contested hearing.  The decision not to pursue the remaining paragraphs 1 and 3 therefore had the effect that W was no longer seeking any order on the Discovery Summons.  At the hearing on 18^th October 2019, the Court was asked to make, and did make, an order that there be “No order” on paragraphs 1 and 3 of the Discovery Summons.  This had the effect of disposing of the Discovery Summons, leaving only the issue of costs. 

6.  W sought her costs of the Discovery Summons, and in addition, asked for a further order that H reimburse her for the costs of the Banker’s Books Summons including the costs which, pursuant to the consent order on that summons, she will be required to pay for the inspection and copying of the banker’s records held with BoC.  Both parties agreed that this question can be reserved and be dealt with later.  This matter is not one which can properly form part of the question of costs of the Discovery Summons.  I will simply note that the W intends to claim her costs of and incidental to the Banker’s Books Summons as part of her costs of these proceedings.

7.  Mr. Lai for the Petitioner submitted that although the application was not ultimately pursued, W should have her costs of the Discovery Summons at least up to the point when it became clear that the BoC indicated its consent to provision of documents from its records in relation to the loan to H.  He submitted that in all the circumstances the most appropriate order for the hearing itself was No Order as to costs. 

8.  Mr. Chan for the Respondent sought costs of the hearing, saying that it could and should have been avoided, given the earlier order of 21^st June 2019 which disposed of paragraphs 2 and 4 of the Discovery Summons and the subsequent decision announced in W’s Skeleton Submissions not to pursue the remaining relief in paragraphs 1 and 3.  He also sought on H’s behalf costs of the summons itself, on the ground that it had been prematurely filed and H had already indicated his willingness to provide disclosure to W of all relevant documents.  In the alternative, he argued that W should be deprived of her costs from the time when it became clear that H had provided to W either in correspondence from his solicitors (JML) or through exhibits to his affirmations, everything in his possession, custody or power and there was nothing more he could supply. 

9.  Order 62 rule 3(2A) of the District Court Rules provides that:

If the Court in the exercise of its discretion sees fit to make an 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.

10.  Rule 3(2A) was introduced as part of the Civil Justice Reform package and implemented a change in the approach to costs orders on interlocutory applications, so that the principle that costs should follow the event would no longer be the usual order but would be one of the factors to be considered in the exercise of the discretion under O. 62, r 3.  The Court is also required to consider the reasonableness of the conduct of the parties, including for example whether it was appropriate for a party to pursue an application, having regard to the underlying objectives in Order 1A rule 1 of the Rules: see Hong Kong Civil Procedure, 2019, Vol 1, para 62/3/3B.

11.  The genesis of both summonses was the disclosure by H in a letter dated 12^th December 2018 from JML to those acting for W (OLN) that he had taken out an “all-monies” mortgage on the Grenville House Property during the previous month, and that the sum of nearly HK$62 million had been drawn down and deposited into an account with BoC he had opened for that purpose.  A copy of the bank’s facility letter dated 19^th November 2018 and a repayment schedule dated 29^th November 2018 were provided with the letter from JML.

12.  This disclosure prompted W’s request through OLN for the monies to be held in escrow. Upon H’s refusal to agree, W obtained an interim injunction, by ex parte application, on 21^st December 2018.  The same day OLN notified JML of the injunction and requested documents including those relating to the BoC loan.  BoC was also notified by OLN of the injunction and in response advised W of other accounts held with the bank in H’s name.

13.  On 3^rd January 2019 OLN wrote to JML repeating the request for documents and expanding it to other documents relating to the previously undisclosed accounts.  The letter also commented upon H’s failure to disclose the existence of the BoC account in his Form E. On 8^th January 2019 JML replied, noting that the account did not exist when the Form E was filed and that H had never banked with BoC until the loan was taken out.  No additional documents were attached with that letter nor were any promised by it. In particular, the letter did not say that H was actively seeking documents from the banks, including BoC or would do so without delay and supply them to W once obtained. 

14.  No further inter-solicitor correspondence took place before the Discovery Summons was filed on 10^th January 2019.

15.  On 11^th January 2019 the Court extended the interim injunction.  Leave to appeal against that extension was refused by this Court on 11^th March 2019 and on 23^rd May 2019 by the Court of Appeal.

16.  On 25^th January 2019 H filed an affirmation (his 4th) in response to the Discovery Summons.  This was filed prior to the return date of the summons, and not pursuant to any order of the court or, as far as can be ascertained, any agreement between the parties.  He indicated in the affirmation that he would not oppose the summons, save as to costs: paragraph 4.  He exhibited 3 letters each dated 16^th January 2019 to BoC, HSBC Private Bank (Suisse) SA, and to HSBC in which he asked for documents relating to his accounts including records of enquiries made by him or instructions given by him in respect of his accounts with each of the banks.  He further exhibited those documents he had already obtained from HSBC on 22^nd January 2019, and a copy of the tenancy agreement for his apartment.

17.  W filed an affirmation (her 9th) on 21^st February 2019, which was principally in support of the continuation of the interim injunction but also responded to H’s 4th affirmation.  She commented on the materials provided by H to that point, and stated what remained outstanding, including “any pre-mortgage application communication record” (paragraph 8).

18.  On 11^th March 2019 the Discovery Summons was before the Court.  At that hearing the following exchange took place between the counsel for the parties:

MR TODD: Your Honour, I think that despite the controversy that there has been between our notes, I think the only real issue that we have is interpretation of the discovery summons that the wife has.  My learned friend said that they’re just dealing with HSBC.  We need them to confirm that there is nothing else from the Bank of China, if that’s what the position is, because we’ve asked for those attendance notes and when I was on my feet a moment ago I was emphasising it’s those attendance notes the Bank of China have is something that one might apply for under a banker’s books application.  And if they’re not going to say, “Well, there aren’t any and they’re not available”, they need to know that we will be seeking third party discovery against the Bank of China, but it is something that they should deal with in the first instance.

MR J CHAN: Well, I can confirm that we don’t have those.  We can write again to the Bank of China to ask but we don’t have them.

MR TODD: I’m grateful.  So if that can be formally recorded that that is the position and then we will simply have to deal with the Bank of China ourselves.  (Core Bundle 200T to 201H)

19.  On 25^th March 2019 OLN wrote to BoC referring to documents requested from H but, as asserted, not supplied by him, and requested that the bank provide them. 

20.  On 8^th April 2019 W filed the Banker’s Books Summons. 

21.  Also on 8^th April 2019 H affirmed his 6th affirmation attaching a number of exhibits, including further documents relating to the mortgage and his accounts with BoC: exhibits MYNT-6-9 to MYNT-6-12. 

22.  On 13^th June 2019 the parties attended on the first return date of the Banker’s Books Summons.  Directions were given for W, H and BoC to file further affirmations on that summons. 

23.  On 4^th July 2019 a senior partner in OLN filed an affirmation deposing to what documents were likely to be in the possession of the BoC including documents supplied by H to the bank when he applied for the loan.  One of the aspects of these proceedings is the extent to which certain off-shore trusts of which H is a beneficiary may constitute a “financial resource” to which he may look.  It is apparent from the papers and the parties’ submissions that at least part of the motivation for both summonses was the desire by W to obtain evidence of the representations made by H to the BoC of his financial position at the time he applied for the loan, including whether he disclosed to the bank the existence of these trusts and his interest in them. 

24.  In response to this further affirmation, the Principal of JML filed an affirmation on 25^th July 2019 in which it was asserted that having regard to H’s earlier promise to provide such further documents if and when they became available to him, the Banker’s Books Summons was premature.  It was stated that “the Respondent has already produced all the documents requested by the Petitioner”. 

25.  On 13^th September 2019 the solicitor for BoC, Mr. Ng made an affirmation which included a revised proposed wording of an order the BOC would agree to.  This then formed the basis for the consent Order on the Banker’s Books Summons.

26.  In matrimonial finance litigation both parties are under a duty of providing full and frank disclosure of their respective financial position.  The MCR and Practice Directions provide for structured opportunities to comply with this duty post-Petition, including the Form E Financial Statements and Answers to Questionnaires. Neither of these formalities detract from what is a continuing duty owed by each party to the other, and to the Court, to make full disclosure:  L v L [2006] HKFLR 121, at [198] (Lam J as he then was); GW v RW (Financial Provision: Departure from Equality) [2003] 2 FLR 108, at [17] (Mostyn J).  JML’s letter of      12^th December 2018 disclosing the existence of the loan acknowledged this continuing obligation: see third paragraph thereof. 

27.  The disclosure by H of what on any analysis is a substantial loan secured against the former matrimonial home justified the making of immediate enquiries by OLN for details and documents.  There was some delay on H’s part in responding to the request for documents over and above those supplied with the 12^th December 2018 letter.  H asserts, in his 6th Affirmation, that there was “insufficient time” from the initial request for documents in OLN’s letter dated 21^st December 2018 until 10^th January 2019 when the Discovery Summons was filed.  It is understandable that H was occupied with other matters, including a response to the injunction leading up to the further hearing on 11^th January 2019, but the need for urgency in responding to W’s request for further documents must have been apparent to him.  At the very least it was open to H to instruct his solicitors to communicate to W that he would supply all relevant documents in his possession in relation to the BoC loan and supply others when these became available and to say that he would take immediate steps to obtain them.  There was sufficient time for him to do so, even taking into account the intervening Christmas/New Year holidays.  He did not.  In my view W’s Discovery Summons was not premature or filed without good reason. 

28.  The question is then whether it was reasonable for W to continue pursuing her Discovery Summons to the point of only abandoning it at the hearing on 18^th October 2019.  By this time H had filed three affirmations in response to the summons and deposing (twice himself and once through his solicitor) that he had disclosed all documents he had or could obtain from BoC.  After the hearing on 21^st June 2019 – when “No Order” was made on paragraphs 2 and 4 of the Discovery Summons – W was no longer pursuing H for anything other than entries in banker’s records, and when BoC’s solicitor’s affirmation dated 13^th September 2019 was served on her, she was assured she would be able to obtain those she was still seeking directly from the BoC.  There would seem to be no reason why she could not, allowing for a reasonable period to consider and take appropriate advice, say 14 days, have announced her intention not to pursue any further order on the Discovery Summons and seek H’s consent to the vacating of the hearing on 18^th October 2019, at least insofar as argument on the Discovery Summons was concerned.  It is of note that the substantive paragraphs of the consent summons (and consent order) on the Banker’s Books Summons are identical to those proposed by Mr. Ng in his affirmation on behalf of BoC (para 6 thereof).

29.  In my view, after obtaining the offer from the BoC which ultimately resolved the Banker’s Books Summons in the precise terms proposed by the bank, W should not have continued with her Discovery Summons to the point of only withdrawing it at the hearing fixed for its argument.  The ‘event’ – the ultimate non-pursuit of the Discovery Summons – should properly be reflected in the order as to costs.

30.  I therefore make an order that the costs of the Discovery Summons up to 27^th September 2019, being 14 days after the filing and service of the affirmation of Ng Kwok Wing dated 13^th September 2019 be paid by the Respondent to the Petitioner and that the costs of the Discovery Summons thereafter, including the costs of the hearing on 18^th October 2019, be paid by the Petitioner to the Respondent.  In both cases, such costs be taxed in default of agreement.  There will be certificate for counsel.   

FCMC16285/2017

[2019]HKFC222

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES

NUMBER 16285 OF 2017

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D E C I S I O N
(Application for joinder)

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1.  On 25 May 2018, the petitioner wife (‘W’) took out a summons pursuant to s.17 of the Matrimonial Proceedings and Property Ordinance, Cap. 192 (‘MPPO’) for setting aside dispositions by the respondent husband (‘H’) of assets worth about US$69 million.  The assets are in the form of overseas trusts held for the benefits of H and his family members.  By the summons dated 7 March 2019, W applied to join the trustees in these proceedings.  Up to date, the trustees have not responded to W’s summons.  Despite that it is accepted by all parties that it is unlikely that the trustees will submit to the jurisdiction of the Hong Kong court, the said oversea trusts being not governed by Hong Kong laws, by consent, an order was made on 30 July 2019 for the joinder of the trustees.

2.  This is the hearing of N, A and E’s (‘the intended interveners’) application by the summons dated 4 March 2019 for leave to intervene in these proceedings.  N is H’s youngest sister.  A and E are his nephew and niece respectively.  The alleged interests of the intended interveners under the various overseas trusts are detailed in their supporting affirmations.

3.  W opposed the intended interveners’ application.  It is accepted by all parties that the targeted trusts are discretionary trusts.  Mr. Todd QC appearing for W argued that the intended interveners being mere objects of the power have no interest in the trusts as recognised in law or in equity.

4.  In contrast, it is Mr. A. Chan SC appearing for the intended interveners’ contention that given there are potential conflicts between H and the other beneficiaries and plainly their interest will be prejudiced by W’s s.17 application, and further considering that the trustees are unlikely to play any role in these proceedings and as a result the interests of the beneficiaries will not be adequately represented and that the court will not have the benefit of submissions from any party interested in the trusts but not a party to the marriage, it is necessary and important that there is independent representation of the trusts from the beneficiaries.

5.  Mr. J. Chan appearing for H is neutral to the intended interveners’ application, while he agrees with the interveners that H cannot be expected to take care of the beneficiaries’ alleged interests.  He gave the following example to illustrate H’s position: if W succeeds in varying the trusts so as to provide for her ancillary relief, the more comes out of the trusts, potentially the less H will have to provide out of his assets for W, but the more the other beneficiaries will suffer due to depletion of the trusts.

6.  Order 15 rule 6 (2) provides:

Subject to the provision of this rule, at any stage of the proceedings in any cause or matter the Court may on such terms as it thinks just and either of its own motion or on application—

(a) order any person who has been improperly or unnecessarily made a party or who has for any reason ceased to be a proper or necessary party, to cease to be a party;

(b) order any of the following persons to be added as a party, namely—

(i) any person who ought to have been joined as a party or whose presence before the Court is necessary to ensure that all matters in dispute in the cause or matter may be effectually and completely determined and adjudicated upon, or

(ii) any person between whom and any party to the cause or matter there may exist a question or issue arising out of or relating to or connected with any relief or remedy claimed in the cause or matter which in the opinion of the Court it would be just and convenient to determine as between him and that party as well as between the parties to the cause or matter.

7.  My attention was particularly drawn to the following applicable legal principles.

8.  The party to be added should be directly affected in his legal or financial rights, not only by any order made but also by, as widened by sub-para (ii), any question or issue arising out of or relating to or connected with any relief or remedy claimed: Idmiston Ltd v Asian Master [1998] 1 HKC 588 [see at 594H] and there is a need for preventing the same related or connected issues being tried again with possible different results [see at 595F-G]

9.  The second limb requires there to be some interest in the matter by the would be intervener which is directly related to the subject matter of the action and a mere commercial interest in its outcome is not enough: Man Whi Chung v Man Ping Nam [2003] 1 HKC 549

21. As regards the alternative basis for joinder set out in O 15 r6(2)(b)(ii) (limb (ii)), which confers on the court a wider jurisdiction to allow joinder, the correct interpretation of this limb has been set out in a passage from Kerr LJ’s judgment in Sanders Lead Co Inc v Entores Metal Brokers Ltd  [1984] 1 WLR 452, 460D-H, as was accepted by the local Court of Appeal in Wong Chun Loong Tony v Ada Ltd[1991] 1 HKC 86, 94D-I:

In my view, the rule requires some interest in the would-be intervener which is in some way directly related to the subject matter of the action. A mere commercial interest in its outcome, divorced from the subject matter of the action is not enough. It may well be impossible, and would in any event be undesirable, to attempt to categorize the situation in which the interests of would-be interveners are sufficient to satisfy the requirements of the rule. The authorities show that the existence of a cause of action between the intervener and one of the parties is not a necessary prerequisite for this purpose. But they also go no further than to show that there must be some direct interest in the subject matter, such as an alleged infringement of a patent, trademark or copyright with which the intervener is concerned (see Tetra Molectric Ltd v Japan Imports Ltd [1976] RPC 547 and Rexnord Inc v Rollerchain Distributors [1979] FSR 119) though even in such cases the interest of the intervener must raise an existing issue and not merely a contingent one: see Spelling Goldberg Productions Inc v BPC Publishing Ltd [1981] RPC 280. Another illustration is provided by cases where the intervener can show that he will in some way be compelled to ‘foot the bill’ depending on the outcome of the action: see Gurtner v Circuit [1968] 2 QB 587, 595, though I bear in mind that the wording of RSC O. 15 r 6(2) was then much narrower than it is now. However, as Mr Hirst rightly conceded, no case has gone so far as to allow intervention by someone who is only a creditor, or alleged creditor, with no more than a creditor’s commercial interest in the outcome of the action, and in my view it makes no difference whatever that the creditor in question is one who has obtained a Mareva injunction whose fate may in some way depend on the outcome.

10.  A plaintiff should not have to be vexed against his or its will by having to face more than one opponent at trial, thus adding to the time and expense of action: Chong Kai Man v Kwan Yau Hang [2013] HCA 1298/2011, 30 September 2013, per Hartmann DHCJ

[2] The fundamental purpose of the order is to ensure that, on the one hand, there is not a proliferation of actions arising out of a single cause and at the same time, to ensure that an action brought by a plaintiff should not be overburdened by the adding of layers of a dispute, thereby turning a clearly defined cause of action into something far greater and, in practice, amorphous.

[3] In any application of this kind, a balance must be struck between a plaintiff and the intended intervener as to their proposed interests, it being remembered that a plaintiff should not have to be vexed against his or its will by having to face more than one opponent at trial, thus adding to the time and expense of action.

11.  If the court is to have jurisdiction under (b)(ii) it is necessary that the question or issue mentioned in (b)(ii) should be common to (1) the intervener and a party to the cause or matter and (2) the parties to the cause or matter: Wong Chung Loong Tony v Ada [1991] 1 HKC 86              

(1) Order 15 r 6(2)(b)(ii) requires some interest in the would-be intervener which is in some way directly related to the subject matter of the action. A mere commercial interest in its outcome, divorced from the subject matter of the action, is not enough. Sanders Lead Co Inc v Entores Metal Brokers [1984] 1 WLR 452 applied.

(2) For the purpose of O 15 r 6(2)(b)(ii), there must exist between the would-be intervener and any party to the cause or matter a question or issue arising out of, or relating to, or connected with any relief or remedy claimed in the cause or matter which the court considered it would be just and convenient to determine as between the would-be intervener and that party, as well as between the parties to the cause or matter.

12.  The existence of a legitimate interest is only a minimum threshold for the making of an order for intervention and it is most certainly not the case that if a legitimate interest exists, an order will automatically follow: Wing Mou Construction Co Ltd (in liquidation) v Cosmic Insurance Corporation Ltd (HCCT 40/2001, 6 June 2002) at §15(4)-(6) per Ma J (as he then was)

15. In my judgment, it is unnecessary, at least in the present case, to try to resolve what theoretical differences there may be between the two sub-rules in circumstances where the relevant party seeking relief is already a third party in the action. However, I make following observations which are pertinent to the present summons :

(1) The object of both Order 15, rule 6(2)(b) and Order 16, rule 4(4) is to ensure that all relevant matters in dispute in the action can be effectively adjudicated upon by the court and that all relevant parties are before it. There is no material difference between the two provisions. Under Order 15, rule 6(2)(b), the court can "on such terms as it thinks just" permit a person to be joined as a defendant thereby allowing that person to participate (to whatever extent permitted by the court) in the action. Under Order 16, rule 4 (4), the court allows a person who is already a third party to participate in the main action between the plaintiff and defendant, again "on terms as may be just" or "as may be just". In this latter regard, a third party may even be permitted to defend the action against the plaintiff either alone or jointly with any defendant.The concern that somehow an application under Order 16, rule 4(4) might be more restrictive than one under Order 15, rule 6(2)(b) is not well-founded. In my view, although I do not have to decide this issue, the court's power is the same and where a person is already a third party in the action, any application to participate in the main action should be made under Order 16, rule 4(4) and not under Order 15, rule 6(2)(b).

(2) All persons who have a legitimate legal or financial interest in the outcome of the matter in dispute are relevant parties. Thus, where the proprietary or pecuniary rights of a person are affected, this is enough. For example, the Motor Insurers' Bureau is sufficiently interested in an action between an injured person and the driver of the relevant motor vehicle where it is at risk ultimately of having to pay in respect of a judgment against the driver (see Gurtner v. Circuit [1968] 2 QB 587; Chu Yuen-wah v. Lee Kwok-kee [1995] 2 HKLR 280) or a surety for the liabilities of another person is also sufficiently interested (see In re Idenden [1970] 1 WLR 1015). A person may be a relevant party even though the plaintiff has no cause of action against him : see TSB Private Bank International v. Chabra [1992] 1 WLR 231, at 237C, 238C-H.

(3) Where a person is already a third party in the action, in most if not all cases, that person will by definition already have a legitimate interest in the outcome of the main action between the plaintiff and the existing defendant.

(4) However, it should be borne in mind that the existence of a legitimate interest in the outcome of proceedings is only the minimum requirement that has to be shown before a court can be required to make an order under either Order 15, rule 6(2)(b) or Order 16, rule 4(4). This I believe to be the effect of these two sub-rules. Both are couched in permissive terms. It is a fallacy to suppose that once a legitimate interest is demonstrated, then it follows that an order under one of these provisions will be made. The court still retains a residual discretion to decide whether or not the order sought should be made.

(5) The exercise of the court's discretion in any given case depends on a number of factors. Of course, the court must first identify exactly the ambit of the order sought before considering what are the relevant factors going towards the exercise of discretion. No exhaustive list of factors can be enumerated but I would suggest the following will regularly feature : the individual prejudice to the parties in the event an order is or is not made, the stage that the action has reached when the application is made, any delay in making the application and any delay that may be caused should an order be made. What weight the court will give to any particular factor will depend on the precise form of the order or orders sought.

(6) Ultimately, the discretion is exercised bearing in mind the object of the two sub-rules I have earlier set out and, as with any exercise of discretion by the court, orders should only be made where necessary, just and convenient.

13.  Mr. A Chan did not try to gainsay the above legal principles, but he stressed that the court’s power to join parties is broad and robust, and the court’s attitude to joinder is permissive, to enable an effectual adjudication to be made concerning all matters in dispute, and that all persons who have a legitimate legal or financial interest in the outcome of the matter are relevant parties even though the plaintiff has no cause of action against them, and while a mere commercial interest is not enough, it suffices that the applicants possess some legal interest which is, in some way, directly related to the subject matter of the action.  In his submission, despite that the intended interveners are mere objects of the power, just stepping back and looking at it as a common sense, clearly one can see that the outcome of the section 17 will affect the intended interveners in a real way, inasmuch as if the trusts are set aside, there will be nothing left to be distributed, and therefore the intended interveners must be regarded as having a legitimate legal or financial interest in the outcome of W’s s.17 application.  Mr. A Chan sought to convince the court that going on the test propounded by Mr. Justice Ma as set out in Wing Mou at §15(1)-(2) in the above, the intended interveners are relevant parties as they have a legitimate legal or financial interest in the outcome of the matter in dispute.  Mr. A Chan further referred the court to Tchengguiz-Imerman (Application for Joinder) [2014] 1 FLR 865 as direct authority for the intended interveners’ application in the present proceedings.  In that case, Moylan J decided that the joinder of adult beneficiaries of a trust would assist in the investigation and resolution of the issues in circumstances where the overseas trustees, although joined, were - with the approval of the local court - not participating in proceedings.  He suggested that the present application is also supported by DR V GR (Financial Remedy: Variation of Overseas Trust) [2013] 2 FLR 1534, in which Rule 9.11 of the English Family Procedure Rules 2010 was discussed.

14.  In addition, I was taken to Lewin on Trusts, 19th ed. §39-073, pp.1889-1890 which provides: -

An object of a discretionary trust or fiduciary power has no right to the present or future entitlement to trust income or capital, where contingent or defeasible, unless and until the discretion is exercised in his favour.  Such an object does, however, have a right to require the exercise of discretion in the case of a discretionary trust and a right to require the consideration of an exercise of discretion in the case of a fiduciary power, and though that right gives the beneficiary no more than an expectation of benefit, it is an expectation which is protected by the right conferred on the beneficiary and to that extent is more than a mere hope.  The traditional approach of the court is to draw a line between discretionary trusts and fiduciary powers.  Objects of discretionary trusts had locus standi to seek a removal of trustees who failed to give due consideration to an exercise of their fiduciary powers, but none to seek any other kind of relief, with possible exception of a claim to enforce an exercise of the power in special circumstances.  In our view, following the decision of the Privy Council in Schmidt v Rosewood Trust Ltd, locus standi does not depend on the distinction between discretionary trusts and fiduciary powers. And objects of both discretionary trusts and fiduciary powers have locus standi to seek relief for the protection of their rights, though the court has a discretion to determine what relief, if any, should be granted.

15.  In the premises, Mr. A Chan differed from Mr. Todd’s argument that the intended interveners have no interest in the trusts as recognised in law or in equity.  Despite Mr. A Chan’s able argument to the contrary, I prefer Mr. Todd’s contestation that that the intended interveners may in the trustees’ absolute discretion be given something does not give them any right of value, notwithstanding that they might have a right to require the exercise of discretion.  As expounded in Lewin above, that right gives the beneficiary no more than an expectation of benefit and they have no right to the present or future entitlement to trust income or capital, where contingent or defeasible, unless and until the discretion is exercised in his favour.  After having carefully considered, I do not accept Mr. A Chan’s argument that the intended interveners have a legitimate legal or financial interest in the outcome of W’s s.17 application.

16.  After having carefully considered, I accept Mr. Todd’s submissions that Merman (relied on by the intended interveners) is different from the present case in the facts.  I also take notice that the discussion on the Rule 9.11 in DR V GR (relied on by the intended interveners) has little relevance to the present application.  Rule 9.11(1) provides: 

Where an application for a financial remedy includes an application for an order for a variation of settlement, the court must, unless it is satisfied that the proposed variation does not adversely affect the rights or interests of any child concerned, direct that the child be separately represented on the application.

No child was involved in the present application.

17.  Even if the intended interveners had an interest, that is only the first hurdle, they have to show it is relevant in the interests of economy of litigation that they should be joined.  The Family Court’s jurisdiction is limited to claims between the parties to a marriage.  The intended interveners’ interest, as opposed to those of the trustees cannot be lawfully invalided by the Family Court.  Their interests in the trusts, if any, are not engaged in these proceedings.  For my part, having taken the view that the intended interveners do not demonstrate sufficient interest which is directly related to the subject matter of the action, I also take the view that the intended joinder is not required in the interests of economy of litigation. 

18.  Mr. J Chan argued that the beneficiaries are entitled to tender their own evidence and make representations on issues such as whether or not the trusts are ‘nuptial settlement’ and the nature of the trusts.  Mr. A Chan submitted that as a matter of both common sense and fundamental fairness that these proceedings have to include the perspective the beneficiaries of the trust if they want to be heard. I have taken the view that the joinder of the intended interveners is not required.   Having that said, I take notice that the evidence of the intended interveners can still be tendered as witnesses, despite that both E and A in their affirmations have already deposed that they have only limited information about the trust, if they wish to be heard, even though they are not joined as parties.   

19.  In conclusion, it is ordered that the intended intervener’s application by the summons dated 4 March 2019 be dismissed. 

20.  Looking at the matter in the round, presently I do not see any reason why costs should not follow the event.  Apparently, W is the successful party.  It is therefore ordered nisi that the intended interveners shall pay W’s costs of this application, with certificate for two counsel, including reserved costs, payable forthwith.  By and large, H is neutral in the proceedings.  I propose to make the order nisi that there be no order as to costs among W, H and the intended interveners.  The above order nisi becomes absolute unless a party has applied for varying the order within the next 14 days.

Mr. Richard Todd QC and Ms. Madeleine Booth instructed by Oldham Li & Nie for the petitioner

Mr. Jeremy Chan instructed by Johnathan Mok Legal for the respondent

Mr. Abraham Chan SC instructed by Howse Williams Bowers for the intended interveners

FCMC16285/2017

[2019]HKFC166

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES

NUMBER 16285 OF 2017

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DECISION
APPLICATION FOR INDEMNITY COSTS

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Introduction

1.  This is the hearing of the petitioner wife (‘Wife’)’s following applications for :-

(1)   Costs of the Wife’s summons dated 21 December 2018 on indemnity basis to be assessed summarily;

(2)   Costs of the respondent husband (‘Husband’)’s summons dated 4 January 2019 on indemnity basis to be assessed summarily; and

(3)   The Wife’s summons dated 8 April 2019 for an order that the costs order nisi dated 11 March 2019 be varied to read as costs of the Husband’s summons dated 24 January 2019 be paid by the Husband to the wife forthwith, with certificate for two counsel, to be summarily assessed.

2.  In April 1979, the parties were married.  In December 2017, the Wife issued the petition for divorce on unreasonable behaviour ground.  She also applied for ancillary relief.   

3.  On 25 May 2018, the Wife took out a summons pursuant to s.17 of the Matrimonial Proceedings and Property Ordinance, Cap. 192 (‘MPPO’) for setting aside dispositions by the Husband of assets worth about US$69 million.  The assets are in the form of trusts held by the Husband or his family members. 

4.  On 12 December 2018, the Wife was informed by the Husband that in November 2018, a mortgage was taken out by the Husband unilaterally on what the Wife said to be the matrimonial home of the parties (‘the property’) for the sum of about HK$62 million.  On 21 December 2018, the Wife applied on an ex parte basis for an injunction order restraining the Husband from disposing of the mortgage monies.  On the same day, I granted an interim injunction order. 

5.  On 21 December 2018, the Wife took out the summons for the continuation of the injunction order.  On 4 January 2019, the Husband took out the summons for the discharge of the injunction order dated 21 December 2018.  On 11 January 2019, I gave the direction that these applications were to be heard together on 21 June 2019.

6.  On 24 January 2019, the Husband applied for leave to appeal against the injunction.  On 11 March 2019, I refused the Husband’s application.  In my Judgment dated 11 March 2019, I made the order nisi that the Husband do pay the Wife’s costs of the summons dated 24 January 2019 with certificate for two counsel.  On 23 May 2019, the Court of Appeal refused the Husband’s application for leave to appeal before the Court of Appeal.

7.  Mr. Jeremy Chan counsel appearing for the Husband did not resist order for costs on a standard basis in respect of the Wife’s summons dated 21 December 2018 and the Husband’s summons dated 4 January 2019, but he contended that it was not appropriate to make an order for costs on an indemnity basis.  Mr. Chan’s also maintained that no order for summary assessment of the costs of the Wife’s summons dated 21 December 2018 and the Husband’s summons dated 4 January 2019 should be made, though he accepted that an order could be made for summary assessment of the costs of Husband’s summons dated 24 January 2019. 

8.  There are then two issues to be determined namely (1) Should costs be awarded against the Husband on a standard basis or on an indemnity basis? (2) Should summary assessment be ordered?

Discussion

Indemnity costs

9.  About the Wife’s summons dated 21 December 2018 and the Husband’s summons dated 4 January 2019, Mr. Chan contested that an indemnity costs order was not appropriate because in the 3^rd letter dated 18 June 2019[1] from the Wife’s solicitors, it was already said they were prepared to accept costs to be paid by the Husband and to be taxed if not agreed on a standard basis.  Mr. Richard Todd QC replied that the Wife’s offer actually included two conditions: - (1) her costs to be taxed if not agreed on a standard basis; and (2) summary assessment, and since the Husband refused to accept summary assessment, the offer in a package was fallen through.  After having carefully read the said letter, I agree with Mr. Todd’s reply.

10.  The time for the Wife’s application for variation of the costs order nisi already expired on 25 March 2019 and no application was made, but in spite of that I am satisfied that the court still has jurisdiction to review the order dated 11 March 2019 in view of the fact that up to-date, the said order has not been perfected.  A judge is only functus after the order in question has been perfected, see In re L [2013] 1 WLR 634.

11.  I now turn to the merits of the Wife’s applications.

12.  Costs are in the discretion of the court.  Order 62 r. 5(1) provides for the underlying objectives set out in Order 1A r. 1 to be considered.  Under Order 62 r. 28(3) the court may award costs on an indemnity basis.  Mr. Todd referred me to Choy Yee Chun (The Representative of the state of Chan Pui Yiu) v. Bond Star Development Ltd [1997] H.K.L.R.D. 1327.  The legal principles on indemnity costs as summarised by the case can be seen in the commentary of Hong Kong Civil Procedure 2019, 62/App/12 :

“The Court of Appeal in Choy Yee Chun (The Representative of the state of Chan Pui Yiu) v. Bond Star Development Ltd [1997] H.K.L.R.D. 1327, CA reviewed the cases and summarised the law as follows. A taxation of the successful party’s costs on an indemnity basis could properly be ordered where the proceedings were scandalous or vexatious, or had been initiated or prosecuted maliciously, or for an ulterior motive, or in an oppressive manner. Any proceedings instituted or prosecuted in such circumstances as to constitute an affront to the court could properly be the subject of a direction for the taxation of the successful party’s cost on the indemnity basis. However, the circumstances in which an indemnity award might properly be madewere not restricted to circumstances beyond the requirement that taxation on an indemnity basis must be “appropriate”. The principle for the award of an order of costs on an indemnity basis applied equally to those who not only instituted proceedings but who defended them. If a plaintiff had been forced to institute proceedings by the defendant whose conduct had been not only hostile in the normal litigious sense, but oppressive and with base ulterior motive, and if the pursuit of a defence constituted conduct which was part of an oppressive game plan, then invocation of the power to award costs on an indemnity basis might well be justified”.

13.  Another leading authority in this subject is the Judgment of the Court of Final Appeal in Town Planning Board v Society for Protection of the Harbour Limited (2004) 7 HKCFAR 114 where the Court of Final Appeal said :-

(1)   The Court had a broad discretion to determine how costs should be paid and whether indemnity costs should be ordered.

(2)   The successful party would usually recover more of his costs under an indemnity award than under a party and party award, and in that sense the former might be perceived as achieving a fairer result for the successful party in circumstances such as the present.  However, the Judge right considered that the existence of such difference between the two types of award was not on its own a sufficient basis for awarding indemnity costs and that the successful should show that the case had special or unusual features for such an order to be made.

(3)   An award of indemnity costs was not confined to cases brought with an ulterior motive, for an improper purpose, or where there was some deception or underhand conduct on the part of the losing party.  It was undesirable to attempt to define the circumstances in which such order would be made, and the discretion was not to be fettered beyond the requirement that indemnity costs much be “appropriate”.

(4)   The attributes of the parties and the character of the proceedings were not irrelevant to the exercise of the discretion to award indemnity costs.  The grounds for making such an order must be connected with the case and might extend to any matter relating to the litigation and the parties’ conduct in it, and also to the circumstances leading to the litigation, but no further.

14.  In addition, I have been referred to the more recent case of Huge Dragon Corp Ltd v Lung Mun Oasis (IO) [2014] 3 HKLRD 286.  In that decision, the Court of Appeal ruled that indemnity costs were warranted in case of withdrawal of unmeritorious application for leave to appeal to Court of Final Appeal :

(1)   The court’s discretion to order indemnity costs should not be fettered or circumscribed beyond the requirement that taxation on an indemnity basis must be appropriate.  This was the case here, as D’s application for leave to appeal was entirely devoid of merit and should never have been launched.

(2)   D’s contention that it had to take out the leave application to preserve its rights pending legal advice from senior counsel was not a valid ground to resist an indemnity costs order.  Such advice was unnecessary to illustrate that no point of great or general importance could in this case possibly arise; and that no exceptional circumstances existed which would trigger the “otherwise” ground.

15.  With these legal principles in mind, reference should be made to the Court of Appeal’s Decision dated 23 May 2019 in particular the following:

a)    The secrecy of the Husband’s action and his refusal to accept the Wife’s proposal to restrain the use of the mortgage monies justified an ex-parte application by the Wife.

b)    The mortgage of a matrimonial home clearly affects the interest of the Wife in the eventual distribution of family assets.  The dispute whether the property is a matrimonial home is clearly a triable issue. The mortgage is an encumbrance on the property causing the rights of the Wife to be affected by the interest of a third party, namely, the mortgagee bank. The problem will become acute if the Husband chooses to default on the repayment of the mortgage and the bank seeks to enforce its rights.  The Husband had glossed over the problem when he said that he has a right to choose which of his assets is to be dealt with by him.  The Wife is well justified to apply for an injunction in the circumstances of the case.

c)    There is no reasonably arguable point on material non-disclosure by the Wife in terms of the reason which caused the Husband to take out the mortgage.

d)    There is no absolute requirement that the Wife must provide undertaking as to damages.

16.  In my Judgment dated 11 March 2019, the key considerations that provide support for the grant of the injunction order include : (1) the Wife has a good arguable case; (2) there are assets within the jurisdiction; (3) the balance of convenience is in favour of grant; (4) there is high risk of dissipation; (5) I have rejected the Husband’s allegation of material non-disclosure. 

17.  Mr. Todd submitted that in the present case, the events leading to the injunction were particularly egregious and in what was already fraught litigation, and the Husband’s high handed actions engendered an atmosphere of distrust and a sense that the Husband had tried to make himself judgment-proof.  Mr. Todd contended that following Choy Yee Chun, the circumstances in which indemnity costs might be awarded was not confined to affronts to the court.  The test was solely whether it was appropriate, and the court’s discretion should not be fettered beyond that.

18.  I take notice that there is no ruling of actual dissipation of family assets on the part of the Husband, or that the Husband is guilty of egregious conducts.  At the same time, I take the view that the Husband’s appeal leave application dated 24 January 2019 cannot be said to be totally devoid of merits.  In the present case, broadly speaking, it seems to me that this is a situation where the parties each had a genuine case and each simply fought their corner hard.  I also do not lose sight of that not long after the Court of Appeal’s decision on the Husband’s application for leave to appeal before the Court of Appeal was handed down, the Husband chose to concede to an order that his summons dated 4 January 2019 be withdrawn and the injunction be continued until further order of the court with costs be paid by the Husband to the Wife.  Looking at the matter in the round, I do not regard that an order for indemnity costs of the Wife’s summons dated 21 December 2018 or the Husband’s summons dated 4 January 2019 is appropriate, nor should the costs order nisi dated 11 March 2019 be varied to read as costs of the Husband’s summons dated 24 January 2019 be paid on an indemnity basis.

19.  It may be pertinent to mention that Mr. Chan also took issue with the Wife’s summons dated 8 April 2019 that: - (1) It was late; (2) No time extension was applied for, nor did the Wife ask for leave to file the said summons out of time; and (3) It did not ask for indemnity costs, nor was there any application for amendment of the said summons to add the request for indemnity costs.  Mr. Chan emphatically contended that the Wife should not be allowed to make a request through the ‘backdoor’.  Mr. Todd disagreed that the said summons was defective, and he further relied on that in any event, under Order 3 r. 5 the court may give an order for time extension and under Order 2 r. 1, the court may waive irregularity.  Order 2 r. 5 provides for the circumstance to be considered on an application for relief from any sanction imposed for a failure to comply with any rule.  It is however unnecessary for me to deal with the parties’ disputes in this regard, taking into consideration my decision in the above paragraphs. 

Summary assessment

20.  The Wife’s application for an order such that the Wife’s costs of the said summonses shall be summarily assessed and to be paid forthwith is within the court’s purview under O.62 r. 3 (2A) and Order 62 r. 9A of the Rule of the High Court, applicable by virtue of r. 3 of the Matrimonial Causes Rules, Cap. 179A.  I take notice that the commentary of Hong Kong Civil Procedure 2019, 62/9A/1 provides as follows:

“… Recommendation 88 of the Working Party on Civil Justice Reforms states:

The court should, whenever appropriate (whether as a response to an unwarranted application or unwarranted resistance to an application, with a view to saving costs or otherwise), make a summary assessment of costs when disposing of interlocutory applications.”.

21.  I have carefully considered Mr. Chan’s arguments as set out in the paragraphs 6 to 9 of his Skeleton Submissions.  I take the view that the costs of the said summonses are in no way substantial or complex and that having an assessment of the sum of costs payable in a summary and broad-brush way, rather than through the process of taxation, is an efficient, expeditious and costs effective way for the fair disposal of the matter.  In the circumstance, I find that summary assessment is appropriate for the present cases.

In Conclusion 

22.  It is ordered that :-

(1)   Save for the respective provisions in the paragraph 7 of the order 11 January 2019 that was amended by the order dated 30 January 2019 and below, the Wife’s summons for injunction granted on 21 December 2018 and ordered to continue on 11 January 2019 be continued until further order of the court;

(2)   The Husband’s summons dated 4 January 2019 be withdrawn;

(3)   Subject to the costs order nisi in the paragraph (23) below, costs of the Wife’s summons dated 21 December 2018 and the Husband’s summons dated 4 January 2019 be paid by the Husband to the Wife, with certified for counsel, to be summarily assessed;

(4)   The Wife’s costs granted as an order nisi on 11 March 2019 for opposing the Husband’s appeal leave application dated 24 January 2019 with certificate for two counsel to be summarily assessed;

(5)   The Wife do file and serve her Statement of Costs within 14 days from the date of the order to be made;

(6)   The Husband do file and serve his list of objections to the Statement of Costs within 14 days thereafter;

23.  The Wife fails in her application for indemnity costs and the Husband fails in his resistance to summary assessment of the costs of the Wife’s summons dated 21 December 2018 and his summons dated 4 January 2019.  Taking a broad brush approach, I make the costs order nisi that there be no order as to costs of: - (1) today’s hearing; and (2) the Wife’s summons dated 8 April 2019 for the variation of the costs order nisi.  The costs order nisi becomes absolute 14 days after the order is made unless a party has applied to the court for varying the order.

24.  I take this opportunity to express my gratitude for Mr. Todd and Mr. Chan’s assistance to the court throughout these proceedings.

FCMC16285/2017

[2019]HKFC62

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES

NUMBER 16285 OF 2017

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J U D G M E N T
(Application for leave to appeal)

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1.  The application before the court is for leave to appeal from the order dated 11 January 2019 on the grounds set out in the Draft Grounds of Appeal of the respondent dated 24 January 2019.

2.  This was a very long marriage.  On 4 April 1979, the petitioner wife (W) (now aged 62) was married to the respondent husband (H) (now aged 69) in Hong Kong.  The parties have cohabited at an apartment unit in the mid-levels (“the Grenville House”).  There were two children of the family now living who are both over the age of 18 and financially independent.  On 13 December 2017, W issued the petition for divorce on unreasonable behaviour ground.  She applied for ancillary relief on the same day.    

3.  H has disclosed in his Form E the existence of 9 trusts in which he has varying interests.  However, W became aware of the existence of at least 30 trusts into which substantial assets were settled.  W believed that the said trusts were either directly or indirectly under the control of H for the benefit of himself and his immediate family members.  W was of the belief that assets were settled into the said trusts with the intention of defeating her financial claims in the divorce proceedings.  On 25 May 2018, W took out a summons pursuant to s.17 of the Matrimonial Proceedings and Property Ordinance, Cap. 192 (“MPPO”) for setting aside dispositions totally amounting to USD68,745,365.8 made by two of the said trusts and together with setting aside 20 trusts set out in the schedule 1 annexed thereto.  Since the said s. 17 application, the parties have become entangled in protracted disputes about discoveries.  The next call-over hearing of W’s summons dated 25 May 2018 was fixed to take place on 11 March 2019 for further directions. 

4.  On 12 December 2018, W was informed by H’s solicitors (“JML”) that he unilaterally took out a mortgage in November 2018 (the facility letter being dated 19 November 2018) (“the Mortgage”), secured against the Grenville House for “all monies” in the sum of HK$61,999,999 (“the Loan Monies”).  On 18 December 2018, W’s solicitors (“OLN”) requested H to give an undertaking to put the Loan Monies into an escrow account which could only be accessed with W’s consent.  By way of letter dated 19 December 2018, JML refused.  On 21 December 2018, upon W’s ex parte application, I granted an interim injunction order restraining the disposition of the Loan Monies, which said order would remain in force until 11 January 2019, unless previously varied or discharged. 

5.  On 21 December 2018, W took out the summons for the continuation of the interim injunction order until further order.  On the same day, OLN wrote to JML notifying them of the interim injunction order, and requested copies of documents relating to the Loan Monies and the Mortgage and relevant correspondence exchanged between the mortgagee bank and H.  JML did not comply with W’s said request.  On 4 January 2019, H took out the application for the discharge of the interim injunction order dated 21 December 2018.  On 10 January 2019, W took out the application for the specific discovery of the above-mentioned documents.  W believed that the specific discovery is required to ascertain the impact of the Mortgage on matrimonial assets.  It was W’s position that the interim injunction order should continue until further order, and certainly until H discloses all documents relevant to the Mortgage. W’s inter-parte summons dated 21 December 2018, H’s summons dated 4 January 2019 and W’s summons dated 10 January 2019 were all fixed to be heard at the same time on 11 January 2019, with 15 minutes reserved.

6.  It was simply unrealistic to expect the court to substantively dispose of the parties’ summonses in 15 minutes.  At the end, on 11 January 2019, it was ordered that the hearing of W’s summons dated 10 January 2019 be fixed at 2:30 p.m. on 11 March 2019, with 1 hour reserved, and it is further ordered that : -

(i)  W’s summons dated 21 December 2018 and H’s summons dated 4 January 2019 be heard together at 10:30 a.m. on 21 June 2019, with 1 day reserved;

(ii)  Interim injunction order that will remain in force until 21 June 2019, unless previously varied or discharged; 

(iii)  This order does not prohibit H from spending HK$320,000 per month towards monthly mortgage repayment and HK$200,000 per month on legal advice and representation;

(iv)  H’s affirmation in reply within 28 days;

(v)  W’s further affirmation in reply 28 days thereafter;

(vi)  No further affirmation without leave.

7.  On 24 January 2019, H took out the application for leave to appeal from the interim injunction order dated 11 January 2019 on the grounds set out in the attached Draft Grounds of Appeal.  On 18 February 2019, W lodged her skeleton submissions in opposition for leave to appeal.

8.  H has set out 6 grounds of appeal.

Ground (1): The interim injunction ought to have been set aside on the ground of W’s failure to give notice to H

9.  I accept W’s submissions that the fact that the injunction order was obtained without notice does not give rise to an argument that it should be set aside.  It was necessary for W to apply the injunction order without notice, otherwise the purpose of the injunction order would have been frustrated.  The Loan Monies, having deposited into H’s sole account, could have easily and instantaneously been transferred out by H and completely removed from W’s reach.  In any event, the interim injunction order dated 21 December 2018 was already expired on 11 January 2019, and the interim injunction order dated 11 January 2019 was granted after an inter-parte hearing on the same day.  Ground (1) does not have a reasonable prospect of success.

Ground (2): W’s failure to demonstrate that H was about to make any disposition of the loan monies with an intention of defeating her claim for ancillary relief

Ground (3): taking into account the fact that H might have other resources as evidence of dissipation

10.  I deal with Grounds (2) and (3) at the same time.  I take into consideration: -

(1)  In §4 and §5 of H’s 3^rd Affirmation, he stated that the Grenville House was not the matrimonial home of the parties, and that W had no beneficial interest in the Grenville House.  W disclosed in her Form E filed on 5 February 2018 that her net worth was HK$154,228,368, of which HK$80,000,000 being her 50% interest in the Grenville House.  H disclosed in his Form E filed on 5 February 2018 that his net worth was HK$190,231,360, of which $142,460,000 being his 100% interest in the Grenville House, plus trust interests to be ascertained.  In both parties’ Form E, the Grenville House was categorised as the matrimonial home and was the biggest asset in the marital pot.  Apparently, W’s beneficial interest or claim to the Grenville House is a live issue to be determined.  Accordingly, I do not accept H’s submissions that W has failed to make out her case for any beneficial interests in the Grenville House.  

(2)  It is beyond dispute that there was unilateral alteration of the status quo in that H took out the Mortgage without W’s knowledge or consent. 

(3)  H secretively converted equity in a shared asset into fungible monies which he deposited into his sole account.

(4)  W was kept in the dark for about a month.

(5)  H refused to give the undertaking requested by W.  

(6)  Despite that H claimed that it was necessary for him to mortgage the Grenville House to deal with his liquidity difficulties, the evidence shows that H had other resources to meet his financial needs.

(7)  The loan amount loan was far in excess of any amount H claimed was needed.

11.  After having carefully considered, I take the view that: -

(1)  H’s surreptitious behaviour suggests dishonest intent.

(2)  Looking at the evidence before the court in the round, W has a good arguable case on her claim that the Mortgage was taken out with an intention of defeating W’s claim for financial provision.

(3)  As pointed out by W, H plainly has other assets which can be used to meet his needs.  Clearly the balance of convenience is in favour of re-granting an interim injunction order.

(4)  In view of that the Loan Monies was deposited into H’s sole account and as such could have easily and instantaneously been transferred out by H and completely removed from W’s reach, there is a real risk of dissipation.

12.  Further, W obtained the interim injunction order dated 11 January 2019 under s.17 of the MPPO.  As such, there is a statutory presumption that the disposition of property is done with the intention of defeating the applicant’s claim for financial provision. Throughout H’s 3^rd Affirmation, he attempted to justify the Mortgage as being necessary for his liquidity difficulties.  W took issue on his alleged liquidity difficulties.  Regardless of W’s arguments, H’s justification, even if accepted, do not support the procuring of a loan far in excess of his needs.  Having carefully considered all evidence, I take the view that H has failed to rebut or disprove the statutory presumption.

13.  Grounds (2) and (3) do not have reasonable prospect of success.

Ground (4) Material Non-disclosure

14.  As said in the above, the interim injunction order dated 11 January 2019 was granted at an inter-parte hearing.  Anyway, I was apprised of the background and relevant facts of the case in granting the two interim injunction orders respectively dated 21 December 2018 and 11 January 2019.  Ground (4) does not have reasonable prospect of success.

Ground (5) Undertaking to damages

15.  There is no requirement that an undertaking as to damages be given in an application made by a spouse in matrimonial proceedings unless specifically required by the court: Will v Will [1993] 2 HKLR 398, 405 (Fuad VP) (CA).  I do not see that an undertaking is required in the circumstance of the case.  Ground (5) does not have reasonable prospect of success.

Ground (6) Oral leave application

16.  I see no reason why there should be a departure from the rule that an application for leave to appeal shall be by way of summons and the practice that the Draft Grounds of Appeal shall be lodged with the court at the time of the filing of the summons.  Ground (6) is wholly unmeritorious.

17.  The substantive hearing of W’s summons dated 21 December 2018 and H’s summons dated 4 January 2019 is fixed to take place on 21 June 2019, when the court will decide whether the injunction order dated 11 January 2019 should be continued.  The court could, after all the evidence is in, if it considers it right to do so, vary or discharge the injunction order.  For the present purpose, I take the view that H’s grounds of appeal repeat the same arguments put forward at the hearing on 11 January 2019.  I have already considered and dealt with them.  There is no reasonable prospect of success in any of the Draft Grounds of Appeal.  Nor is there any other reason in the interests of justice that the appeal should be heard.  Section 63A(2) of the District Court Ordinance provides that leave to appeal shall not be granted unless the intended appeal has a reasonable prospect of success or that there is some other reason in the interests of justice that the appeal should be heard. It is ordered that H’s summons dated 24 January 2019 for leave to appeal be dismissed.

18.  It is clear that W is the successful party of this application.  I see no reason why costs should not follow the event.  It is ordered nisi that H shall pay W’s costs of the summons dated 24 January 2019, and there be certificate for two counsel’s attendance.  The costs order nisi becomes absolute 14 days after the order is made unless a party has applied to the court for varying the order.

FCMC16285/2017

[2019]HKFC17

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES

NUMBER 16285 OF 2017

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RULING ON COSTS

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1.  This is the hearing of the respondent husband (“H”)’s application for costs of his application for the direction that an independent appraiser/valuer (“SJE”) be jointly appointed by the parties to conduct inspection of the parties’ 4 landed properties situated in Hong Kong and overseas in the presence of the parties legal representative or their appointed overseas agent so that an inventory of antique furniture and valuable personal items can be complied with photograph taken on each and every one of them (H’s Application”). 

2.  H’s application was considered by the court at the First Appointment hearing on 21 May 2018.  At that hearing, the petitioner wife (“W”) questioned the family court’s jurisdiction in ordering the SJE to conduct personal inspection in the subject landed properties since two of them were situate in the US (the “Jurisdiction Issue”).  In response to W’s question, the court adjourned the hearing of the Jurisdiction Issue to 24 October 2018 for argument, with two hours reserved. Directions were also given for W to lodge and serve her submissions and list of authorities by 10 October 2018 and H to lodge and serve his submission and list of authorities in reply 7 days thereafter. 

2. On 25 May 2018, W took out a summons pursuant to s.17 of the Matrimonial Proceedings and Property Ordinance, Cap. 192 to set aside a number of trusts of which H was the settlor and/or the beneficiary (“s. 17 Application”).  On 30 July 2018, the hearing of the s.17 Application was adjourned to 24 October 2018 for further directions, with 1 hour reserved.  On 14 September 2018, W filed her 2^nd Affirmation together with a schedule purportedly setting out the value and location of the antiques and valuable personal items that she believed were owned by herself.  W did not file the submissions and list of authorities in accordance with the court’s directions.  On 11 October 2018, H’s solicitors (“JML”) asked for the submissions and list of authorities.  On 12 October 2018, W’s solicitors (“OLN”) replied that since W filed her 2^nd Affirmation on 14 September 2018 providing the schedule of antiques and valuable person items, argument on the Jurisdiction Issue was no longer necessary.  ONL further confirmed that in the event H still insisted on a joint inspection in the 2 US landed properties, W was willing to consent to H’s proposed directions and suggested the parties to deal with the matter by consent.  ONL further proposed that the hearing dated 24 October 2018 should be kept for the s.17 Application and as such the duration of the hearing should be shortened to one hour.  On 19 October 2018, JML replied by alleging that the schedule provided in W’s 2^nd Affirmation were incomplete, self-contradictory and insisted H would consent to W’s above proposal only if W agreed to make a further verifying affirmation addressing H’s queries, and that unless and until W gave details of all her valuable possession and antiques, they would need to proceed with the upcoming hearing.  A draft consent summons containing H’s proposed directions to OLN was enclosed with JML’s letter dated 19 October 2018.  By letter from ONL to JML dated 22 October 2018, W denied the alleged non-disclosure and provided explanations and clarifications to answer H’s queries.  On the same date, OLN informed the court that W was agreeable to the appointment of the SJE and there was no longer the need to deal with the Jurisdiction Issue.  At the beginning of the hearing on 24 October 2018, a consent order was made in relation to the appointment of the SJE.  Both parties took issue on the question of costs.  Directions were given for the disposal of the question of costs on the papers then.

Legal principles

4.  The court has a wide discretion as to costs.  For the purpose of an interlocutory application, the relevant provisions in the Rules governing the exercise of discretion as to costs are Order 62 rules 3(2A) and 5.  The effect of Order 62 rule 3(2A) as explained in Melvin Waxman & Another v Li Fei Yu & Another [2013] 6 HKC 424 is that an order the costs follow the event is no longer a general rule in determining the costs of an interlocutory application, though it remains an option.  In considering the appropriate order the court must have regard to the underlying objectives of CJR: Order 62 r.5 (1)(aa).  One of these objectives is the discouragement of unnecessary or unmeritorious applications: see HK Civil Procedure at 62/3/3B.  When dealing with costs orders, under Order 62 rule 5(1) the court may take into account, among other things, the conduct of the parties and any admissible offer to settle made by a party, which is drawn to the court’s attention.  Rule 5(2) provides that conduct for this purpose includes (a) whether it was reasonable for a party to raise, pursue or contest a particular allegation or issue; (b) the manner in which a party has pursued or defended his case or a particular allegation or issue; (c) whether a claimant who has succeeded in his claim, in whole or in part, exaggerated his claim; and (d) conduct before, as well as during, the proceedings.

Issues

5.  Applying the above legal principles, I take the view that the main issues are : -

(i) The merits;

(ii) Who can be regarded as the successful party; 

(iii) Conduct of the parties; and

(iv) Any admissible offer to settle made by a party, which is drawn to the court’s attention.

Merits

6.  I take the strong view that W’s challenge is unmeritorious.  H’s Application ought not to have been controversial. 

Who can be regarded as the successful party

7.  The starting point is that jurisdiction is something that the court either has or does not have, and jurisdiction cannot be conferred on the court by agreement made between the parties.  When W conceded the order she must be taken to have conceded that her previous assertion that the court had no jurisdiction was simply wrong.  I take the view that H should be regarded as the successful party. 

Conduct of the parties

8.  I take into consideration the following : -

(i) The challenge was unmeritorious and was unreasonably pursued as it was clearly provided under Practice Direction 15.11 that the court shall in the First Appointment give directions as to valuations of asset.;

(ii) Despite that W went further to deny it was her request for a substantive hearing on the Jurisdiction Issue, it was W who initially wished to question the court’s jurisdiction to order joint inspection of antiques and valuable personal items located out of the jurisdiction that led to a 2-hour hearing been fixed for argument. 

(iii) It was not until 12 October 2018 that OLN replied that since W filed her 2^nd Affirmation, argument on the Jurisdiction Issue was no longer necessary.  There was a delay of almost 5 months for the directions for inspection and appointment of SJE, which could otherwise have been given in May 2018.  

Any admissible offer to settle made by a party, which is drawn to the court’s attention

9.  I take notice that on 12 October 2018, OLN replied to JML that argument on the Jurisdiction Issue was no longer necessary and confirmed that in the event H still insisted on a joint inspection in the 2 US properties, W was willing to consent to H’s proposed directions and suggested the parties to deal with the matter by consent, and by the letter dated 22 October 2018, W furthermore provided explanations and clarifications to answer H’s queries on disclosure.  On 22 October 2018, OLN sent a letter to the court informing the court that W was agreeable to the appointment of the SJE and there was no longer the need to deal with the Jurisdiction Issue.  The matter was finally disposed of by consent order on 24 October 2018.

Conclusion

10.  I take notice that W’s challenge was unmeritorious and unreasonably pursued, that H is successful in his application, and W’s conduct set out in the above.  Looking at the matters in the round, I regard it is reasonable and just to make the order that W shall pay H of the costs of H’s Application from 21 May 2018 up to and including 12 October 2018, including all reserved costs, to be taxed if not agreed.  I take notice that the parties could have dealt with the Jurisdiction Issue by way of consent summons by as early as 12 October 2018, and that eventually, H’s application was disposed of by consent.  In the premises, I take the view that there should be no order as to costs after 12 October 2018.  I take the view that the complexity and difficulty arising from the present cause or matter are within the competence of solicitors.  I do not give certificate for counsel’s attendance.  Neither party is wholly successful in the costs argument, in a broad-brush way, I make no order as to costs of the costs argument.