WW v. LPQ formerly known as LLN and LSM AND OTHERS

FCMC 8485 / 2019

[2024] HKFC [29]

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES NO.8485 OF 2019

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J U D G M E N T

(MPS/LITIGATION FUNDING)

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The Application

1.  The 1^st Respondent (“R1”) applies by Summons dated 25 January 2024 for MPS/litigation funding to enable her to re-engage solicitors and counsel for the remainder of this Trial of the parties’ respective claims for ancillary relief.  The Trial has been adjourned to 19^th June 2024, with 20^th, 21^st and 24^th June 2024 reserved.

2.  The Trial was scheduled to be heard over four days, from 16^th to 19^th October 2023.  It could not be completed within the time allotted, and was adjourned part-heard to 22^nd January 2023, with 23^rd to 26^th January 2023 also reserved for its completion. 

3.  R1 was represented by solicitors and counsel in the lead-up to the October Trial and at that hearing.  On the first day of the Trial, R1 unsuccessfully applied for an adjournment of the trial and this application took most of the first day to be addressed.  The commencement of R1’s oral evidence did not start until the 17^th October 2023 and was not completed until 19^th October 2023. 

4.  It was not the only reason the Trial could not finish in four days, as the Order of 19^th October 2023 (“19^th October Order”) adjourning the Trial makes clear.  This Order also granted leave for the parties to file further evidence relating to the Section 17 application, on R1 and the 2^nd Respondent (“R2”)’s competing assertions as to their authorship of trademarks previously registered in the name of a company, LS, and for Single Joint Experts to be appointed to value LS and seven landed properties in Hong Kong and the Mainland.      

5.  R1 had been granted litigation funding for the Trial by a Judgment and Order dated 13^th January 2023 (“January 2023 Order”) of His Honour Judge I Wong.  This was in anticipation of and intending to cover R1’s legal expenses for a four-day Trial, which had originally fixed by Order dated 14^th December 2022 for hearing on 25^th April 2023 with 26^th, 27^th April and 2^nd May reserved.  The Trial could not proceed on those days, and was ultimately re-fixed for the October dates. 

6.  Having regard to the adjournment of the Trial and the fixing of five more days for its completion, and taking into account the additional steps to be undertaken in between, the 19^th October Order further provided that, in the event R1 wished to make a further application for litigation funding, she must do so within 14 days.  The Court made this direction having heard from R1 during cross-examination that she had spent well in excess of the amount of litigation funding provided by the January 2023 Order: her estimate was that she had spent approximately $900,000, having instructed two firms of solicitors following Wong J’s Ruling.  She said further that she still owed her solicitors money for work they had already done.  

7.  R1 did not file any application for MPS/litigation funding within the 14 days.  Her former solicitors required their bill to be paid and to be placed in funds before they did any further work on the case.  Nor did R1 make her own further application for litigation funding, that is, until the present Summons was filed on 25^th January 2024.   

8.  R1 applied for legal aid on 3 January 2024.  That application is still pending: the Legal Aid Department has requested further information from R1.  I note that this is not her first application for legal aid to fund these proceedings – a previous application made was refused.  

9.  R1’s solicitors had applied on 3^rd November 2023 by Summons pursuant to Order 67 for an Order that they had ceased to act for R1.  That application was not heard until 22^nd January 2024, on the first day of the resumed Trial.  I heard the application on 22^nd January 2024 and granted the Order on the same day.    

10.  R1 has therefore been acting in person since 23^rd January 2024.  On the afternoon of 22^nd January 2024, after I had released her solicitors, she exhibited considerable emotional distress.  She asked to use the bathroom, and I learned shortly thereafter that she had collapsed, and, with the assistance of the Court staff, who rang for an ambulance, she was taken to the Ruttonjee Hospital, and admitted.  In the circumstances, on the morning of 23^rd January 2024, I adjourned the Trial for two days to 25^th January 2024, and directed that R1 provide information on her medical condition by the next day, which she did.   

11.  On 25 January 2024, R1 was in attendance, and after hearing from her and Mr. Hart for the Petitioner (“P”), R2” and the 3^rd Respondent (“R3”), I granted leave for her to file a Summons seeking further MPS/Litigation Funding, and gave directions for it to be heard and determined on an urgent basis.  The reason for this was to enable the Trial to proceed, potentially, on additional dates in the remaining temporary judicial appointment of myself, that is through to 9 February 2024. 

12.  A litigant in person who is fully fit, physically and mentally, is often at a disadvantage to one who is represented by able lawyers, particularly at a Trial, with all the complexities and challenges that involves.  In matrimonial litigation, with the attendant emotional strain, the challenge is particularly acute.  A self-represented litigant who has health issues, is at a further disadvantage.  I am in no doubt that if R1 is to present her case properly, she will greatly benefit from legal representation.     

13.  Having heard argument on the urgently filed application on Friday 26 January 2024, I directed the parties to file/lodge further documents relating to their respective financial positions, and this was done.  The Summons was adjourned to Tuesday 30 January 2024 for further consideration.  At that point, the Court had confirmed that the Trial (which should have been completed by the Friday 26 January 2024, all being well) would continue on 30^th and 31^st January with 1^st, 2^nd, 5^th and 6^th February reserved.

14.  During the hearing on 26 January 2024, the Court asked R1 to make urgent efforts to contact solicitors who might be available and willing to assist her in the remaining dates of the Trial.  I accept that this was asking a lot, but I had very much in mind that she had not acted promptly in applying either for private litigation funding or legal aid to secure representation for herself for the resumption of the Trial.  It is in all parties’ interests that this case be heard and determined as efficiently as possible.  It is very clear that the prolongation of this litigation is causing considerable emotional and physical stress to the parties, particularly P and R1.  There must be finality for the good of all concerned.    

15.  Upon resuming on 30 January 2024, R1 informed the Court that she had made some efforts, but all the lawyers she had contacted told her they were not available on the remaining days of the Trial and could not therefore assist.  

16.  As R1 had not been able to find solicitors (and counsel) who might have been willing to step in and represent her for these remaining dates, the Summons became, at that time at least, completely academic, and I adjourned it sine die.

17.  The Court proceeded with evidence from the two SJEs on 31^st January and 1^st, 2^nd February 2024.  R1 was in attendance on each of those days and was able to put her case to the two experts, with the assistance of the Court. 

18.  The remaining days of the Trial, namely 5^th and 6^th February 2024, were to be used to complete the evidence, with R2 to give his evidence first, followed by P.  I reserved 7^th February 2024 in case two days was not enough.  Again, my decision to continue with the Trial was with the ultimate aim of completing the evidence.  I reassured R1 that I would render all appropriate assistance to her when the evidence was presented.

19.  On 5^th February 2024, when R2 was due to go into the witness box, R1 again exhibited considerable distress, and made certain statements that she saw little point in continuing with the matter and that she wanted to harm herself.  She complained about much of the affirmation evidence being in English and that it was too much to ask her to represent herself in these circumstances.  She repeatedly said that she had no money and urged the Court to grant her maintenance for her own living expenses.  She confirmed that she wanted to seek urgent medical attention for her mental stress. The case was adjourned to the morning of 6^th February 2024 to allow her to do so, on condition that she provide the Court with a medical certificate.  The Court then directed that further submissions would be heard on the Summons for the following day, 6^th February 2024.

20.  R1 was absent on the morning of 6^th February 2024, but attended in the afternoon.  I had already assured her that I would not be hearing any evidence from the remaining witnesses in her absence.  R1 supplied the Court with a medical certificate which stated that she had been diagnosed with depression and had been admitted to hospital on 5^th February, and requested time to deal with this condition, asking that the Trial be adjourned for at least 2 months for her to receive proper treatment.  

21.  On 6^th February 2024 I completed hearing submissions of the parties on the Summons.  I then reserved my judgment, indicating that it would be handed down shortly.  I then adjourned the Trial to 19^th June 2024. 

Prior applications for litigation funding

22.  This is now the third application by R1 for litigation funding in these proceedings for dissolution of her marriage of some 25 years with P (marriage 1993, first Petition 2018).  They have two adult sons.     

23.  By Summons filed 30^th January 2019, R1 sought MPS for herself and to provide for litigation funding.  By Order dated 23 July 2019 (“July 2019 Order”) she was granted MPS of $60,000 per month for her personal expenses and litigation funding of $50,000 per month from 1 August 2019.   An amount of $660,000 for both personal expenses and litigation funding for the period 1 February 2019 to 1 July 2019 was also ordered to be paid by P, but this was reduced on appeal by the Court of Appeal by Order dated 14 January 2020.  The Court of Appeal maintained both the monthly figures of $60,000 per month personal expenses and $50,000 per month for litigation funding, but specified that the latter should be up to the FDR or further order, whichever is earlier. 

24.  The (unsuccessful) FDR took place on 29^th July 2021. The litigation funding of $50,000 per month then ceased to be payable.

25.  On 28 October 2020 P applied by Summons (“Variation Summons”) to vary both of the monthly sums, specifically for the figure of $60,000 to be halved to $30,000 and the litigation funding to cease.  He took no further steps to pursue the application, however.  It is accepted by Mr. Hart that the P has not made payments in accordance with the Orders of this Court and the Court of Appeal for MPS for the R1’s personal expenses, there is a very considerable amount due, which R1 is seeking to enforce by a further Judgment Summons.  P’s argument is that he is simply not in a position to pay this overdue maintenance.  

26.  On 7 November 2022, R1 reapplied by Summons for litigation funding, to cover the Trial, seeking a sum of $1,100,000.  That was opposed, and that Summons and P’s Variation Summons were heard together by Wong J on 14^th December 2022.  On 10 January 2023, Wong J delivered a Ruling dismissing the Variation Summons and allowing R1’s Summons, awarding $500,000 to R1 for her costs of the Trial, payable by 4 monthly instalments of $125,000 each (“January 2023 Order”).  This was based on an estimation provided by R1’s then counsel of the combined costs of the PTR, scheduled for 13 March 2023, and the Trial itself of $430,000, with the balance of $70,000 intended to fund further mediation: see the Ruling, para 51.   

The Law 

27.  Jurisdiction to award maintenance pending suit to a spouse is provided for in section 3 of the MPPO.  The words “pending suit” mean that by definition, such orders are limited to the time it will take for the divorce proceedings to be determined.

28.  It has long been recognized that an application for MPS can include litigation funding: KGL v CKY [2003] 2 HKLRD 301; HJFG v KCY [2012] 1 HKLRD 95.  As the Court of Appeal has said in the appeal from the July 2019 Order, the burden is on R1 to show that she cannot reasonably procure legal representation from her own resources or through publicly-funded assistance, and this includes demonstrating that she cannot deploy her assets either directly or as a means of raising finance for legal representation at a level apt to the proceedings: see Reasons for Judgment and Decision on Costs, §20. 

29.   The Court is required to be satisfied that the contribution to legal costs is reasonable, and this includes some analysis of the purposes for which it is sought and an estimate of the likely expense, with breakdown: see HJFG v KCY, at §79.  

Analysis

30.  In this case R1 did not provide a breakdown, but the Court has very much in mind that the previous estimate for a four-day Trial hearing plus PTR was a combined figure of about $430,000: see Ruling of Wong J, at §51.  It was on this basis that the learned Judge awarded $500,000, which as I say included an allowance for costs of mediation. 

31.  I have referred above to the difficulties confronted by unrepresented litigants.  It is relevant in this case that if R1 was to continue unrepresented, she would, I expect, feel very much that she is alone in the Court and without any support, facing the other parties, who are all represented. This is compounded by the fact that the proceedings are heard by a monolingual judge, in English, a language in which she is not fluent: most of her written evidence is in Chinese, and many of the other parties’ evidence is in English. Mr. Hart has told the Court that P will be giving his evidence in English and even if I were to direct that the English affirmations be translated into Chinese, that would not alleviate all of the difficulties R1 would face in cross-examining him effectively. 

32.  Fairness requires the Court, certainly in cases where there is a degree of complexity – and this is one such case – to ensure “equality of arms”: HJFG v KCY at §123.

33.  R1 has twice satisfied the Court that she is deserving of litigation funding and that P should provide her with such support, to the FDR (the combined effect of the July 2019 Order and the Order of the Court of Appeal) and then to the conclusion of the Trial (the January 2023 Order).  

34.  I am satisfied, for the following reasons, that her financial position since the January 2023 has not improved. Indeed, it would appear to have significantly worsened.  The documents provided by her included updated bank statements, statements of credit card accounts, and statements of her insurance policies.  The overall picture is of a party who has all but exhausted her available resources.  To the extent that she has equity in assets, it is not reasonable to expect her to deploy these assets to meet her legal expenses.     

35.  As I have noted, in early January 2024, R1 applied for legal aid and her application is pending. Mr. Hart, for P, R2 and R3, suggested that this was a delaying tactic – something done merely to attempt to delay the Trial set to resume on 22^nd January 2024 – by the automatic statutory stay.  That stay was promptly lifted by the Court.  

36.  During an exchange with Mr. Hart on 6^th February 2024, he further accepted that the prospects of R1 being successful in her application for legal aid were slim. I have therefore proceeded on this basis. 

37.  Mr. Hart’s submission on this Summons was that R1 had not demonstrated that she does not have the resources to cover further legal costs, based on the documents exhibited to her affirmation in support.  He submitted that R1 was guilty of non-disclosure on her previous application which led to the January 2023 Order, and that this misrepresentation of her financial position was continuing.  He further submitted that the Court should not make the Order sought as R1 had not produced the names of potential solicitors and the fees they would charge.  He finally submitted that P simply did not have the financial resources to be able to pay for R1’s legal costs. 

38.  In my view, at least on the broad-brush analysis, which is central to rulings on applications for maintenance pending suit, I am not in a position to conclude that R1 is deliberately hiding financial resources which can and should be applied towards obtaining legal representation. 

39.  Mr. Hart referred to statements produced by R1 of her account with the Bank of China, which he said had not been disclosed by her prior to the January 2023 Order.

40.  These accounts show that for many years R1 has been engaged in foreign exchange speculation.  She was cross-examined by Mr. Hart on these contracts on 17^th October 2023.  What was put to her was that she had engaged in margin trading in Japanese Yen, using a very significant amount of the family savings.  This speculation has not been successful, indeed quite the opposite.  According to those BOC bank statements, the net loss is some HK$14 million.  I note that during his questioning of R1 on 17^th October 2023, Mr. Hart did not suggest anything other than that the investment had been a loss: what was put to her was that this investment was made without any consultation with P, who, he said, had no knowledge of it.  Specifically, it was not at any stage of the cross-examination suggested by Mr. Hart to R1 that if she closed the forex contracts, she could recoup what is left of that investment and apply that towards paying lawyers for the remainder of the Trial.

41.  R1 confirmed that one source of funding of her own expenses, given P’s non-payment of the $60,000 maintenance for so many years, and for her lawyers was to obtain loans against her insurance policies.  There are three of them, all with HSBC.  The latest available annual statements issued by HSBC were provided by R1 and these confirmed that R1 has obtained substantial loans against the surrender values of each of the policies.  According to her Form E dated March 2023 but filed April 2023, these loans totalled approximately HK$4,677,000, with the remaining surrender value of the three policies, net of repayment of the loans, of approximately HK$668,000. 

42.  The latest statements of the policies show that the loan balances have increased and the remaining surrender values correspondingly have decreased since her last Form E, and significantly so.  For two of the policies the latest statements were to April 2023 and for the third, to September 2023.  The net figure – the remaining surrender value – is likely to be even less now, as further interest will have accrued, and it is doubtful whether HSBC would be prepared to advance any further sum or sums to R1 against the surrender values of the policies. 

43.  The Court was also provided with bank statements including credit card statements of R1 and her companies. These further demonstrate that her financial position has not improved since the January 2023 Order.

44.  R1 produced accounts from her former solicitors TCW (who were acting for her from January 2023 to September 2023) and CSC (September 2023 to January 2024).  Mr. Hart submitted that these demonstrated significant overspending on lawyers well beyond the amount awarded by the January 2023 Order.  There is no doubt that R1 did spend much more than the $430,000 allotted for the PTR/Trial, and she accepted this when she gave evidence in October 2023.   Whether or not this was necessary and reasonable remains in doubt.  In particular, there is a question whether her switch from TCW to CSC, and a change of counsel, were justified.    

45.  Nonetheless, I am satisfied that R1 is not able, from her current resources, to meet reasonable legal expenses so as to re-engage lawyers for the remainder of the Trial.  

46.  On the question of P’s capacity to pay, Mr. Hart submitted that he has no such capacity.  His income from his work as a director of LS is modest: HK$20,000 per month plus HK$30,000 housing allowance, and his only other income is $11,900 per month rent from one of his properties.  He gives his total monthly expenses as HK$85,243, however I note that his general expenses are confined to management fees of $2,147, and the remainder are his personal expenses and $10,000 which he pays to one of the sons as lunch/pocket money.  

47.  In dismissing the Variation Application, Wong J did not accept P’s assertion that his financial position had changed considerably for the worse since the July 2019 Order: see Ruling, §§29 - 43.  At §43 he found that P’s disclosure was “obviously deficient”.

48.  Despite this Ruling, P has not made any further payment of the arrears of maintenance for spousal support due under the July 2019 Order. 

49.  I provided P with an opportunity to file an affirmation updating his financial position since January 2023 and to explain why his position was that the Ruling was incorrect in the conclusions it reached (no appeal was made from the Ruling). 

50.  P filed two further Affirmations on R1’s Summons, his 20^th and 21^st. 

51.  In his 20^th Affirmation, P says

(1)  His level of debt has increased: the loan from LS has increased by $500,000 since his last Form E which was filed 26^th January 2023, and he has loans from his son of $480,000 and the HSBC of $500,000.

(2)  His income has remained the same.

(3)  In September 2023 he remarried, and has paid a dowry to his wife’s family, on which HK$55,000 is still outstanding.

(4)  In December 2023 his father passed away and he has shoulder the funeral and burial expenses of HK$50,000 (funeral) and costs of the grave of between HK$300,000 and $1,000,000.

52.  In the same Affirmation, P then confirmed what Mr. Hart had told the Court on 25^th January 2024: that Mr. Hart’s firm is not being paid for the work on this case and has not been paid since Mr. Hart was first engaged.  P then says that in fact Hart Giles had initially paid the deposits required by the SJEs before they commenced work, HK$80,000 to Mr. McDonagh (the expert engaged to value LS) and HK$30,000 to Mr. Chan (the property expert).   He was able to repay HK$80,000 with assistance of a loan from LS. 

53.  In his 21^st Affirmation, P provided an explanation of some of the deposit entries in the updated bank statements he had supplied with his 20^th.  These show he has received additional support from his wife, whom he married last year. 

54.  Significantly, P provided a further update on the present value of his insurance policies.  As with R1, the P has several (x3) insurance policies, with significant surrender values.   The updated cash/surrender values are:

(1)  Policy 1 (Jade) increased from US$170,580 to present value of US$416,562 as at 26^th January 2024

(2)  Policy 2 (Whole Life) increased from HK$1,039,735 to present value of HK$1,825,403 as at 26^th January 2024

(3)  Policy 3 (Whole Life) decreased from HK$1,198,478 to HK$687,478 as at 26^th January 2024.   

55.  P explains at paragraph 9 of this Affirmation that: 

“When I bought these insurance policies, I thought the only usage was when I die my sons would be benefitted. I did not know they could be used for getting loans from banks nor the true meaning of cash value or surrender value. When I saw R1’s form E of 2023, she borrowed over HKD 4.6M from the bank using the policies, I asked my bank if I could do the same. It was the time I was ordered to pay HKD 500,000 to R1 as litigation funding and I had no money. Bank said yes and I borrowed HKD 500,000 from HSBC. This was the reason why I have an increased of loan from a bank of HKD 500,000.”

56.  I have considered P’s paragraph by paragraph response set out in his 21^st Affirmation to §§24 – 43 of Wong J’s January 2023 Ruling.  Wong J had found that P had not explained a rapid deterioration in his bank balance, and that this was sufficient to dispose of his Variation Application (Ruling, para 31).  He went on, however, to test the veracity of P’s case against some basic figures he had provided, and in essence, found that this explanation did not make sense as “allowing for one moment that the husband’s financial situation as claimed by him were true, even on his own version, there should be a shortfall of $1,396,000 or thereabouts. However, his evidence is that as at the date of the hearing he still had $446,266 in his bank accounts.  These figures do not tally with his version; his version is not internally consistent.” (Ruling, para 40).

57.  On this, P’s explanation was that “[t]he shortfall was principally because Mr. Hart did not get paid”.  I confess I cannot understand this.  Wong J’s table at §38 of the Ruling included a figure of HK$1,388,000 being costs paid to his former solicitors, not to Mr. Hart’s firm: see §37.    

58.  In any event, I find that it is not necessary for me to determine whether the explanation now provided by P in the 21^st Affirmation – which essentially disagrees with this part of the January 2023 Ruling – is correct. 

59.  In my judgment, P does have the capacity to meet a reasonable award of litigation funding for the 1^st Respondent’s future legal fees, should she re-instruct solicitors and counsel for the Trial in June 2024.  The current surrender value of his insurance policies, against which he can raised further funds is in excess of HK$5,000,000.  Mr. Hart fairly conceded that P could obtain such further loan facility from HSBC on one or more of these policies in the event that the Court found in favour of R1 on this Summons. 

60.  During submissions on 6^th February 2024, Mr. Hart proposed that P might be able to raise money on properties held by LS, but that this would only be possible if R1’s Form A Notices currently registered on the titles to these properties are removed. I have concluded that P will not need to do this to raise a reasonable amount for litigation funding.  

61.  The remaining question is how much I should award.  Mr. Hart suggested a figure of HK$200,000. 

62.  In my view that is insufficient.  I have seen her former solicitors’ fees and those of counsel.  CSC’s costs for the October 2023 Trial were $413,866, but this included the services of a senior partner, two other solicitors and a trainee solicitor.  Counsel fees amounted to $360,000 but this included two counsel who attended all four days of the hearing.      

63.  The January 2023 Order budgeted, broadly speaking, $400,000 for the 4-day Trial, to include Opening Submissions and all other pre-trial steps.  I have to consider that it is likely R1 will engage solicitors not previously involved in this matter, either because her previous solicitors will require their outstanding accounts to be paid before agreeing to be re-engaged, or for other reasons. 

64.  I have expressed my views that in this case it is vital that R1 obtain legal representation.  It is easy to anticipate that without the benefit of advice and representation of experienced lawyers in the lead-up to and during the third tranche of the trial in June 2024, there will be further costly disruptions, and the potential derailing of the Trial once again. 

65.  I will grant the 1^st Respondent the sum of $500,000.  If that errs on the generous side, this can be redressed when it comes to the final judgment.  It goes without saying that in ruling on claims for ancillary relief, the Court factors in payments made on an interim basis by one party to the other, including payments for litigation funding.  In matters of complexity and prolixity, such funding can be very considerable.  By the conclusion of this case P will have advanced substantial sums pursuant to the three orders of this Court, and the Court of Appeal.  These sums will be taken into consideration and form part of the Courts consideration when it comes to deliver Judgment on the claims. 

66.  My Order will be as follows:

                   UPON the 1^st Respondent’s Summons seeking litigation funding filed 25^th January 2024

                   AND UPON READING the Affirmation of the 1^st Respondent filed in support, together with documents sent to the Court by emails dated 29^th January 2024 and further financial documents lodged on 29^th January 2024, and further upon reading the 20^th and 21^st Affirmations of P

                   IT IS ORDERED that

(1)  P do provide maintenance pending suit/litigation funding to R1 in the sum of $500,000.

(2)  On or before 31 March 2024, R1 is to instruct solicitors for the remaining dates of the Trial, namely 19^th, 20^th, 21^st and 24^th  and to the filing of Closing Submissions and Replies. 

(3)  The sum will be payable in three instalments of $200,000, $150,000 and $150,000 all to be paid directly to R1’s solicitors client account, by P either directly or through Hart Giles. 

(4)  The first payment of $200,000 to be paid within 7 days of the receipt by Hart Giles of the R1’s solicitors Notice to Act.

(5)  The second payment of $150,000 is to be paid on or before 15^th May 2024, and the third payment of $150,000 on or before 31^st May 2024.  

(6)  Costs of the Summons be reserved.    

67.  So that it is clear, unless otherwise ordered, none of the $500,000 is to be paid by the newly instructed solicitors to any third party, other than to counsel engaged for the remaining days of the Trial.  For the avoidance of any doubt, this means that the R1 cannot use any of this sum to pay an outstanding amount due to her previous solicitors.  In the event that she re-instructs her previous solicitors, they are not to apply any of the $500,000 towards their outstanding fees, or disbursements, or any counsel fees which may still be outstanding from work performed prior them ceasing to act. 

68.  Further, the R1 must work within the budget of $500,000 which is intended to cover all solicitors and counsel work through to the end of the proceedings, including final written submissions.  The newly instructed solicitors and counsel are also expected by the Court to work within that budget, so that R1 is fully represented to the end of these proceedings.    

FCMC 8485/2019

[2023] HKFC 9

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES

NO. 8485 OF 2019

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______________________________________________________

R U L I N G

(Variation of Interim Maintenance and Legal Costs Provision)

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1.  This is the 1^st respondent’s application dated 7 November 2022 for litigation funding in the sum of $1,100,000 (“Application for Litigation Funding”). This sum is to cover the costs as from the application up to the conclusion of the trial of the ancillary relief, including the wife’s section 17 application.

2.  Another application I have to deal with is the petitioner’s application for variation of the interim maintenance (“the Variation Application”) taken out on 27 October 2020.

3.  In this Ruling, I shall refer to the Petitioner as “the husband” and the 1^st respondent as “the wife”.

4.  It has been said by the Court of Appeal that reasons for decision on interlocutory application can be brief: Tsang Wing Kwai v Tsang Wing Fai [2018] 5 HKLRD 350, [2018] HKCA 759, at [31]. The following are the reasons for decision.

Legal Principles on Variation

5.  The husband’s application is made pursuant to section 11 of the Matrimonial Proceedings and Property Ordinance (Cap 192) (“MPPO”). The relevant legal principles can be summarized as follows,

1.  The court has a wide power to deal with the orders that fall within the scope of s 11 of MPPO.

2.  In an application under s 11, the court shall have regard to all the circumstances of the case and is entitled to look at the matter afresh. In doing so, the court is entitled to look at all the relevant matters set out in section 7 of the MPPO: see HCTT v. TYYC [2008] HKFLR 286, [2008] 5 HKC 86 at [15].

3.  Any change in any of the matters to which the court was required to consider when making the original order is one of circumstances to be considered: AEM v VFM [2008] 3 HKLRD 36, [2008] HKFLR 106, at [14.5].

4.  The original order is one of the matters that the court should consider. The court should pay due regard to the basis and intended effect of the original order and there should not be a radical departure from the approach taken by the parties. Ultimately, how much weight should be given to the original order must depend on the circumstances of the case. Lapse of time and whether there has been a material change in the circumstances are matters that the court need to consider: AEM v VFM, at [14.8].

5.  Although the jurisdiction to vary is untrammelled, normally the earlier order would not be varied unless there has been a material change in the circumstances: HCTT v. TYYC, at [16].

6.  Where a consent order is the subject of an application for variation, the application is not a venue for the parties to have second thoughts about their settlement. An application for variation should not be pursued when in substance the grounds advanced tantamount to re-argument of the issues: HCTT v TYYC, at [49].

6.  The order the husband now seeks to vary is a Maintenance Pending Suit (“MPS”) order. The Court of Appeal in S v C[2021] HKCA 1372, CAMP 243/2021 (date of Judgment: 21 September 2021) said the following,

7. It is important to note that MPS is an interim measure, intended to be temporary, and subject to adjustments in the final orders to be made in the determination of ancillary relief. Overall fairness can be achieved at that point by giving credit and set‑off if there is found to have been any overpayment or underpayment in the interim. In other words, an order for MPS does not finally determine the rights and obligations of the parties, and since it involves simply the payment of money, its effects may in general be redressed by monetary relief at the end. This explains why in relation to MPS the courts “take a broad view” of the parties’ finances rather than engage in any detailed investigation, adopt a “broad brush” approach, and seek to arrive at “rough and ready” conclusions (see Rayden and Jackson on Relationship Breakdown, Finances and Children at §11.78; HJFG v KCY [2012] 1 HKLRD 95, §§32-38). Appeals should be rare and the parties should be encouraged instead to focus on, and bring about as early as practicable, the final resolution of their dispute. As has been said in Wong Kar Gee Mimi v Severn Villa Ltd [2012] 1 HKLRD 887 at §30 (albeit not specifically with regard to MPS), even if the threshold of reasonable prospects is met, the court may nonetheless in its discretion refuse leave to appeal in the interests of procedural economy and proportionality. For my part, I consider that leave to appeal from MPS orders should generally not be granted unless there is some special reason why the matter cannot or should not be left to the ancillary relief stage such as serious hardship caused by the order to a party. I can see none here based on the admissible materials, and on this ground alone I would dismiss the application.

7.  I am aware that Hon G Lam JA said the above in the context of an appeal against a MPS Order, nevertheless, his observations are, in my view, pertinent to the present application, specifically when the trial of the ancillary relief has already been fixed to commence on 25 April 2023 (with 4 days reserved).

8.  Further, it is trite that, in application of this kind, a broad brush approach should be taken. It is unnecessary to conduct a minute examination of the evidence.

Background

9.  The following events are relevant.

10.  On 23 July 2019, HH Judge CK Chan made an order that the husband is to pay a MPS in the sum of $60,000 per month, plus a litigation funding of $50,000 per month, starting from 1 August 2019 until further order of the court. There was also an order backdating the MPS and litigation funding, resulting in a lump sum of $660,000 payable by the husband (“the Original MPS Judgment”). See: WW v LLN formerly known as LSM[2019] HKFC 188, FCMC 2996/2018.

11.  On 25 March 2020, the Court of Appeal allowed the husband’s appeal in part. The Court of Appeal reduced the backdated sum to $155,000. While the amount of litigation funding in the sum of $50,000 per month remained unchanged, the duration of the order was limited up to FDR only. It is significant to note that the MPS in the sum of $60,000 was undisturbed. See: WW v LLN (No 2) [2020] 2 HKLRD 487, [2020] HKCA 178.

12.  Shortly thereafter on 27 October 2020, the husband took out the Variation Application seeking to have the MPS varied down from $60,000 to $30,000 per month and the litigation funding be reduced to zero.

13.  The husband ceased paying MPS and litigation funding as from 1 November 2020.

14.  On 3 December 2020, the wife took out a judgment summons against the husband for the arrears of MPS and litigation funding.

15.  On 23 June 2021, HH Judge CK Chan fixed the FDR to be heard on 29 July 2021. At the same time, the learned judge ordered that all outstanding applications be adjourned sine die and to be restored after the FDR hearing.

16.  On 29 July 2021, the FDR failed to achieve any settlement. The litigation funding of $50,000 monthly ceased to be payable. On the same date, HH Judge CK Chan ordered that all outstanding applications, if any, are to be adjourned to 31 August 2021 at court no. 9.

17.  On 31 August 2021, the wife’s judgment summons was heard before Deputy Judge Doris To. The learned judge made the following orders:

(1)  The husband is to pay $100,000 before 31 October 2021 and thereafter $50,000 for the arrears;

(2)  The judgment summons be adjourned sine die; and

(3)  The Variation Application be adjourned to court no 9.

18.  It is significant to note that the husband took no further steps in respect of the Variation Application. As such, legally speaking, the original MPS order in the sum of $60,000 per month continues to be valid and subsisting up to this date. The husband has failed to honour his obligation under the order.

19.  At the mention hearing of the wife’s Application for Litigation Funding, Mr Hart drew the court’s attention to the Variation Application which remained stagnant. As the 2 summonses are effectively two faces of same coin, I allowed them to be dealt with together.

The Original MPS Judgment

20.  It is worthy to note what HH Judge CK Chan said at paras 25 and 26 of his Judgment,

25. I note from neither the husband’s affirmation in opposition (Bundle A1/19-25), nor his solicitor’s written submissions, there is any claim that he is not in a financial position to pay the MPS as claimed. In other words, the husband’s ability to pay is not a central issue in this application.

26. At the same time, I also note that there is no evidence, nor claim from the husband that the wife is having a good income source. Instead, the husband’s main objections are that the parties have already agreed on the separation of their finances long ago and there have never been any regular payments of $120,000 from him to the wife as maintenance…

21.  When considering the wife’s application for litigation funding, the only main issue in dispute was whether the wife could use the UK property for raising litigation funding. The learned judge considered that a broad brush approach should be taken such that whether or not the UK property is in fact belonged to the 2 sons should be left to be determined at trial. The Court of Appeal did not find the learned judge was erroneous in adopting this approach.

The Variation Application

22.  I shall deal with the Variation Application first.

23.  I have already referred to the legal principles and the Original MPS Judgment. I agree with Mr Wong that the important issue in the present application is whether there has been any material change of circumstances, and if so, what has changed, since the Original MPS Judgment.

The Husband’s Financial Situation

24.  The husband, in essence, said there was a change in his financial situation. In his supporting affirmation dated 27 October 2020, he said due to the failing business of his company, LS, his director’s fee has been reduced from monthly sum of $100,000 to $20,000 as from October 2020. On the top of this $20,000, he has been in receipt of housing allowance of $30,000 and rental from his property in Tung Chung Industrial Building, totalling $62,700 per month. He also said his bank balances were only about $106,000: see para 8(a) and (b). In his affirmation in reply dated 22 November 2022, he referred to the rapid depletion of his cash at the time: see para 6.

25.  In response, the wife said in her affirmation dated 24 February 2021 that before the husband’s petition for divorce, the liquid assets at his disposal exceeded $10,000,000. The husband’s deposit in his HSBC-513-888 account were $8,806,000 and $7,435,000 as at 30 January 2019 and 30 August 2019 respectively but the amount dropped to $2,008,000 on 29 April 2020 and further down to $170,000 on 30 September 2020.

26.  There was also another HSBC-045-888 account that had $4,948,000 and $3,090,000 on 15 January 2018 and 16 September 2018 respectively. The husband did not update the latest situation of this account in his supporting affirmation. The wife claimed the husband had transferred his monies away from his bank accounts to some undisclosed accounts: see paras 11 – 13.

27.  In reply, in respect of the HSBC-513-888 account, the husband said the following at para 17 of his affirmation dated 8 March 2021,

“I have already produced all relevant bank statements for scrutiny by (the wife) and her legal advisers. Although (the wife) makes a number of general complaints and criticisms based on the bank balances …, she has not raised any specific queries regarding any of the transfers. If I am given sufficient notice to do so by the Court, I am happy to offer my time to explain and crystalize the litigation.”

28.  In respect of the HSBC-045-888 account, the husband said it was a joint account between him and their younger son. He said “funds from different accounts were being moved around by (him) as (his) financial situation required”: para 18. The husband did not dispute that the account balance was reduced to zero. But he said it did not mean “all accounts were deposited with millions all the time”. He said, “I had in the year 1998 millions of dollars in my other bank accounts, but they are not relevant to this case.”: see para 20.

29.  I must confess I do not understand what the husband tried to say. The husband’s reply reminds me of what Hon Lam J (as he then was) said in L v L [2006] HKFLR 121,

197. I do not wish to rehash all the details set out in the chronology of non-disclosure prepared by the solicitor for the Husband. The manner in which the Wife chose to deal with request for information regarding KH in her answer of 11 May 2004 and then supplied bundles of documents in October 2004 for those advising the Husband to digest was singularly unhelpful. Given the level of professional advice the Wife could have obtained if she so wished, I find it hard to believe that she could not provide a more intelligible and meaningful answer in a timely and orderly manner. 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)

30.  The duty to give full and frank disclosure of one’s financial situation is onerous. It is an absolute and continuous duty: see Rayden and Jackson on Relationship Breakdown, Finances and Children, at [13.101]. He (or she) has to present his financial information in an intelligible and meaningful manner. In my view, it is wholly inadequate for the husband to say by just one stroke of sentence that it was “due to the failing business of his companies” and that he has already produced all relevant bank statements for scrutiny by the wife. In this connection, it has to be reminded that on the husband’s own admission, revenues from Watsons for the sale of LS’s products were diverted to the 3^rd respondent. Not only that the husband is the one in the best position to explain, he has a duty to do so. To provide the wife with all the bank statements and wait to see whether she was able to ask the right questions on particular transfers is a deplorable “catch me if you can” tactic. It is incumbent upon the husband to explain, with sufficient particularities, where the $5,100,000 in his bank account have gone.

31.  For these reasons, I agree with Mr Wong that the husband failed to explain the rapid deterioration in his bank balance. This point alone is sufficient for the disposal of the Variation Application.

32.  I take one step further by testing the veracity of the husband’s case against some basic figures provided from his side.

33.  The husband said in his affirmation dated 27 October 2020 that he still had about $106,000 in his banks.

34.  At para 21 of his affirmation dated 22 November 2022, the husband explained how he was able to survive under the stringent financial situation. He said he had sold a Mainland property (the Yorkshire Property), surrendered one of his insurance policies for $900,000 and borrowed $300,000 from his company LS.

35.  The Variation Application was taken out on 27 October 2020. Thus, from October 2020 up to the date of the substantive hearing, there was a lapse of about 24 months. At the hearing, Mr Hart conceded that:

(1)  the husband’s monthly receipt was about $62,700; this included director’s fee of $20,000, housing allowance of $30,000 and rental income. This gives a figure of $1,504,800 over 24 months; and

(2)  the husband’s monthly expenses were about $79,700 per month; hence, a total of $1,912,800.

36.  Although I have some reservations as to whether the husband’s monthly needs are under-estimated, for the present purpose I shall adopt this figure.

37.  It was further agreed by Mr Hart that during these 24 months, the husband paid $1,388,000 to his former solicitors and $800,000 to the wife pursuant to the order dated 31 August 2021 by Deputy Judge Doris To.

38.  I set out the above figures in the following table.

From November 2020 to the date of hearing (24 months)		HK$	HK$
Receipts
	Director’s fees, housing allowance and rental income	1,504,800
	Insurance policy	900,000
	Loan from LS	300,000	2,704,800
Expenses
	General and personal expenses	(1,912,800)
	Legal fees	(1,388,000)
	Arrears paid to the wife	(800,000)	(4,100,800)
Net			(1,396,000)

39.  I have not included the sale proceeds of the Yorkshire Property which, according to the husband, was sold in August 2020 for RMB798,000 for the reason that when the husband said by the end of October 2020 he had $106,000 only, the necessary implication must be that he had either included whatever balance it was in the said $106,000 or had already spent all.

40.  Therefore, allowing for one moment that the husband’s financial situation as claimed by him were true, even on his own version, there should be a shortfall of $1,396,000 or thereabouts. However, his evidence is that as at the date of the hearing he still had $446,266 in his bank accounts. These figure do not tally with his version; his version is not internally consistent.

41.  It should not be forgotten that the husband is a business man. He was and is a shareholder and director of LS. I agree with Mr Wong that the director’s fee, and indeed, other payments or dealings between him and LS, may be subject to manipulation. As a matter of fact, the husband’s credit card bill of about $40,000 to $50,000 per month were paid by LS.

42.  With the conclusion that I have come to, it is not necessary to come to any conclusion on whether the husband made some transfers to his mother and to two other ladies as alleged in para 14 of the wife’s affirmation dated 23 February 2021. It is also not necessary to come to any conclusion as to whether the husband should be able to make use of his insurance policies for some extra cash.

43.  On the above analysis, I regard the husband’s disclosure is obviously deficient. His assertion of financial difficulty is a mere say-so on his part. I shall make robust assumptions about his ability to pay and err in favour of the wife. The Variation Application should accordingly be dismissed.

Litigation Funding

44.  The English Court of Appeal in Currey v. Currey [2007] 1 FLR 946, set out certain guiding principles on how legal funding as interim maintenance may be granted. The principles set out there have been cited and relied upon in the courts of Hong Kong. Hon B Chu J has helpfully summarised these principles in WGL v ASB (Decision (Litigation Funding) [2013] HKFLR 391,

6. …

(i) A fundamental requirement is that the applicant has to supply a sufficiently detailed breakdown of anticipated costs;

(ii) The overarching enquiry is into whether the applicant for a costs allowance can demonstrate that he/she cannot reasonably procure legal advice and representation by any other means, and the enquiry will include:

• To the extent that the applicant has assets, the applicant has to demonstrate that they cannot reasonably be deployed, whether directly or as the means of raising a loan, in funding legal services;

• Whether the applicant cannot reasonably procure legal services by the offer of a charge upon ultimate capital recovery;

• Whether there is public funding available to the applicant as would furnish the applicant with legal advice and representation at a level of expertise apt to the proceedings.

(iii) In the broad exercise of discretion, satisfying the above condition alone may not be sufficient, and a judge may consider that other factors must come into play, including that :

• The subject matter of the proceedings;

• The reasonableness of the applicant’s stance in the proceedings, insofar as it can safely be assessed at so early a juncture;

• The period over which an allowance for legal costs is to be paid, and that applicants should not therefore expect that an order that the allowance be paid until the final determination of all proceedings will be the inevitable order.

45.  The burden is on the wife to demonstrate that she cannot reasonably procure legal representation by any other means.

46.  The husband put up all the grounds he could think of, leaving no stone unturned. He referred to the fact that the wife’s application for legal aid was unsuccessful, that she failed to give full disclosure of her bank accounts statements which are paying her credit card bills by auto-pay, that her spending pattern is extravagant and that she failed to produce her income from dealings with the China Resources Corporation, that she is a successful business woman and that she has the money. The husband also doubted how much the wife could actually obtain by surrounding her insurance policy with HSBC.

47.  On the evidence before me, I am not convinced that there has been any substantial change in the wife’s financial resources since the Original MPS Judgment. As referred to above, the only ground of objection advanced by the husband before HH Judge CK Chan was whether the wife could resort to the UK property for funding but this was rejected.

48.  I accept that the wife failed in her legal aid application because of the monthly sum of $50,000 received from the husband and the value of her insurance policy. I further accept that she cashed $390,000 by surrendering her insurance policy for fuelling this litigation. The money is on the verge of exhaustion and she has no other means of raising legal costs.

49.  The husband complained that the wife has been obfuscated and delayed the proceedings. The fact is at least since the case was docketed at my court, the wife was acting in person until recently in September 2022 when her solicitors entered into appearance. In any event, the wife is seeking legal costs that allow her to move on from here to trial.

50.  For the above reasons, I see no reason why the husband should not continue to pay interim maintenance by way of litigation funding.

51.  Mr Wong fairly accepted that the wife needed about $430,000 to fuel her 4-day trial (including Pre-trial Review). I consider this is a reasonable figure. Considering that the parties have agreed to engage in mediation, I round the figure up to $500,000 to include the extra costs arising from mediation.

52.  I would urge the parties to engage in mediation in a serious and candid manner. I am sure both would be greatly benefited in terms of time and the preservation of their family assets if an amicable settlement is achieved, not to mention the mental stress that they have to endure during the process. Lastly, the parties are reminded that litigation misconduct may result in costs being awarded against him/her on indemnity basis: see Town Planning Board v Society for Protection of the Harbour Ltd (No 2) (2004) 7 HKCFAR 114, L v C [2007] 3 HKLRD 819, and ML v YJ (No 2) (Stellar Contribution) [2009] HKFLR 122, Hashen v Ali Shayif [2009] 2 FLR 896 and 陳及胡[2018] HKFC 144, FCMC 12002/2014.

Orders

53.  There are about 4 months to go before the trial. The husband should pay the litigation funding of $500,000 by 4 instalments of $125,000 each. The 1^st instalment is to be paid within 7 days of this Order and the subsequent instalments on the 1^st day of each and every succeeding month until full payment. In other words, the 4^th instalment is payable on 1^st April 2023.

Costs

54.  The husband failed in both applications. He should pay the wife the costs of the applications to be summarily assessed. The relevant directions will be given at the Pre-trial Review hearing of 13 March 2023.

Mr Hart Giles, of Hart Giles, Solicitors, appeared for the petitioner

Mr Joseph Wong, instructed by H.Y. Leung & Co., LLP, Solicitors, appeared for the 1^st respondent

2^nd and 3^rd respondents are excused