B, L v. K, WS

FCMC 17190/2014

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES

NUMBER 17190 OF 2014

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RULING
(Leave to appeal)
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Introduction

1. This is an application by a Respondent husband for leave to appeal against my judgment of the 13 April 2015 which was essentially an application by the Petitioner wife for maintenance pending suit and litigation funding. He also asks for a stay of execution as follows:

1. There be a stay of paragraph 2 of the Judgment and Order of Her Honour Judge Melloy made on 13 April 2015 (“the Order”) and that the Respondent be released from providing the undertakings stipulated at paragraphs (e) and (f) of the Order until such time the Respondent’s application for leave to appeal the Order is determined;

2. Paragraph 2 of the order states that:

2. The sum of US$300,000 shall be paid to the petitioner’s solicitors by the Respondent as litigation funding, such sum to be paid within the next 28 days.

3. Whereas paragraphs e) and f) confirm:

(e) that he [i.e. the Respondent] will maintain until further order the Petitioner’s subsidiary credit cards without any further reduction in the combined total level of credit currently standing at HK$220,000 per month:

1) AE Company Corporate Card

2) Citibank Octopus Visa Card (xxxx-xxxx-xxxx-6266)

3) Citibank Rewards Master Card (xxxx-xxxx-xxxx-9168)

4) HSBC Visa Platinum Card (xxxx-xxxx-xxxx-1843)

f) Or in the alternative that he will provide cash/credit card provision up to a maximum of HK$220,000 per month.

Background to the litigation

4. By way of background I should add, as stated in paragraph 3 of the judgment:

3. This application differs from the norm in that it is brought in the shadow of an argument concerning a pre nuptial agreement (PNA) entered into by the parties on the 14 February 2007. The parties subsequently married in August 2007 and had two children who are now aged 5 and 3 years old respectively. The divorce petition was issued on the 15December 2014 and the decree nisi was pronounced on the 2March 2015. On the 6 March 2015 the husband issued a summons, which has become known in England and Wales as a Crossley application, in which he asks that the Petitioner show cause why she should not be bound by the PNA. That hearing will hopefully come back before me for determination in September. This hearing is to determine the financial arrangements between the parties in the meantime.

5. I should say at the outset that I accept entirely that the whole area of nuptial agreements – both pre nuptial and post nuptial is a developing one and that guidance is somewhat limited. There is a also a question about the extent to which a court should be bound by a Pre Nuptial Agreement (PNA) pending a Crossley application – or in the event that there is no such application pending either a Financial Dispute Resolution hearing or a trial on ancillary relief. Having said that I do not accept, for reasons that I will go into below, that this is necessarily a suitable case to go up to the Court of Appeal.

The law

6. As both parties have rightly pointed out the appropriate test when seeking leave to appeal is set out in statute and can be found at s 63A District Court Ordinance, Cap 336. This states that either the appeal must have a reasonable chance of success or that there is some other reason in the interests of justice why the appeal should be heard.

7. It follows that generally speaking the Court of Appeal is unlikely to interfere with the exercise of a judge’s discretion unless it can be shown that she (or he as the case may be) has clearly exercised her discretion incorrectly i.e. that it was exercised according to a mistake of law, or she had misunderstood the facts, or she had taken into account something that was irrelevant or “the exercise of the discretion was ‘outside the generous ambit within which a reasonable disagreement is possible”.

Stay of execution pending appeal

8. As Mr Coleman SC pointed out reference can also be made to the principles applicable to a stay of execution as set out in Star Play Development Limited v Bess fashion Management Co Limited [2007] 5 HKC 84 as necessary. I will not however repeat the same here.

The Grounds of Appeal

9. The husband asks that the appeal be allowed generally because:

2. On the Husband having offered and having paid to the Wife the sum of US$300,000 as an advance capital payment:

(1) The Husband be released from providing the undertakings stipulated at paragraph (e) and (f) of the Order; and

(2) Paragraph 2 of the Order be set aside;

10. However as will be noted from the transcript, the husband did not argue at the maintenance pending suit hearing that he should be released from his undertakings, given earlier that day, to inter alia maintain the wife’s subsidiary credit cards up to a combined total of HK$220,000 per month, because he had paid or was prepared to pay US$300,000 as an advanced capital sum to the wife. The offer to pay a US$300,000 capital sum to the wife came right at the end of the hearing after the submissions had effectively closed. Mr Barnes for the husband put it thus:

MR BARNES: … my learned friend hasn’t completed his response to my submissions, so, and I do ask for the court’s indulgence to make these three further points.

First is that, in light of the respondent’s offer, revised offer, to advance US$300,000, which will be taken into account and the court will ultimately decide whether that is applied against her capital sum – it’s a question of discretion, without prejudice to the claims of either side – the wife’s claim for litigation funding cannot succeed.

11. The offer was made in the context of a discussion about litigation funding – given that the husband had originally offered to advance the wife US$100,000 for that purpose on the premise that it be deducted from any capital sum that she might receive at the end of the day. The point made was that the wife’s claim for litigation funding could not succeed in the event that the husband advanced her US$300,000. There was no further mention of his undertaking.

12. The husband then paid the sum of US$300,000 to the wife directly after the judgment was handed down on the 13 April 2015 when it was ordered, as I have said, that he pay US$300,000 to the wife’ solicitors as litigation funding.

13. The husband paid the US$300,000 to the wife “as advance capital to use as she wishes …” on the premise that she agree to his request that he be released from his undertakings to provide the credit card provision pending the outcome of the appeal. Solicitors for the wife said in their letter of the 28 April that this:

“… purports after the event to impose a condition that such sum be treated as an advance on our client’s capital entitlement”.

They added:

“… we made it clear that our client did not accept your client’s offer to make a payment on such a condition. That condition remains unacceptable and it is formally rejected again”.

14. I would agree with their assessment of the situation. It seems to me that it ill becomes the husband to attempt to change the goal posts after the event and to then use that as a basis for an appeal. He did not argue at the maintenance pending suit hearing that a capital advance of US$300,000 would be in lieu of the provision of credit to the tune of HK$220,000 per month on the wife’s subsidiary credit cards. That line of argument has only been advanced post judgment.

Specific grounds of appeal

15. I do not intend to go through each and every point – however it seems to me that the following is of particular relevance.

1. The learned Judge erred in law and fact in her approach to the parties PNA

(8) … the learned Judge failed to order that any maintenance ordered (or to be provided by the Husband’s agreements as to credit card spending and the provision of the capital sum) must be without prejudice as to whether it be set off against the final award;

16. It seems to me that this is a moot point. As Mr Barnes rightly pointed out (see paragraph 10 above) it almost goes without saying that as a maintenance pending suit order/interim maintenance order is broad brush by definition, it is capable of being varied either upwards or downwards. It would not be usual to specifically state that any award “is without prejudice as to whether it be set off against a final award” – although that is always a possibility.

2. The learned Judge further erred in law in finding that the wife “will have an arguable case” on the PNA

17. At paragraph 6 of the judgment I said as follows:

The prenuptial agreement

6. Given the time constraints it has not been possible for the wife to file an affidavit in response to the husband’s affidavit on the Crossley application. Thus I do not know as yet what her case is on the PNA. I should add however that on the face of it this case is clearly not comparable to BN v MA [2013] EWCA 4250 (Fam), an English case which both sides referred me too during the course of this hearing. I will come to that case again later. It is also of note that the parties entered into this PNA a long time before the recent decision in our Court of Final Appeal namely SPH v SA [2014] 17 HKCFAR 364.

18. I added at paragraph 14:

14. I should add that in this instance I have formed no such view. [ie a definite initial view of the wife’s claim]. Putting it as neutrally as I can, and bearing in mind the fact that as I have said I have yet to see any evidence from the wife on the Crossley application, it seems to me that this wife will have an arguable case on the PNA. I have no doubt that arguments will inter alia be raised in relation to the “fairness” of the document. Thus it seems to me that the appropriate approach in the circumstances is that the terms of this order should be as close to the PNA as fairness dictates in the circumstances.

19. I am not convinced that a reference to the wife having an “arguable case” in this context of itself constitute a valid ground of appeal.

3. The learned Judge erred in making any award of MPS to the Wife

20. Although it is true that the wife did not provide a detailed budget of her expenditure, sufficient information had been provided in order to proceed with her application. It is of note that the husband did not seek to adjourn the matter on that premise. It was suggested during this hearing that I should have done so of my own motion. This seemed to me to be quite an extraordinary suggestion in the circumstances. In any event as I have already said, given that maintenance pending suit orders are by their very nature broad brush any over payment or underpayment can be dealt with at the end of the day by way of set off as necessary. In the context of this case, in the event that the PNA is upheld it would be possible to offset any maintenance payments for the wife against her lump sum award of US$850,000 on the premise that it is found that she is only entitled to a lump sum of US$850,000 and no maintenance at all for herself.

4. The learned Judge erred in her contradictory approach to the PNA

21. This point relates to the issue of the children’s maintenance vis a vis the order made. This was fully canvassed in the judgment and necessary adjustment would be anticipated in due course.

5. The learned Judge erred in law in awarding the sum of US$300,000 to the wife as MPS for her own legal costs.

22. Please see the comments made in paragraphs 9 – 15 above. MrColeman S.C said that it was wrong in principle to make such an order when it would not be possible for the husband to recover a like amount in costs in the event that he is vindicated. Whilst I would accept that is likely – it seems to me that that same principle applies in all cases where there is an order for litigation funding. To the best of my knowledge (and I stand to be corrected on this) I am not aware of any case where that argument has been successfully used as a basis for not making an order for litigation funding.

23. Further it was suggested that it was wrong of me to state that the order was not subject “to any caveats”. That was said in the following context:

Overarching enquiry

38. I also accept that in considering this matter overall that it would be entirely reasonable for the husband to provide the wife with litigation funding. Thus the offer of US$300,000 is accepted – but this is not subject to any caveats. This will also be subject to the normal undertaking that the sum of US$300,000 shall be paid directly to the wife’s lawyers. I should add that it is accepted that this sum is likely to take the wife up to and including the Crossley application. Depending on the outcome of that hearing the issue of litigation funding will most probably need to be considered again.

24. In other words I did not accept that the condition precedent should be specifically made part of the order i.e. that this sum should be off set against the wife’s capital sum – come what may. Certainly it is within the discretion of the court – but the court should not be bound by such an order. Again I do not accept that this is an appealable point.

Conclusion

25. Whilst as I have said I accept entirely that the whole area of nuptial agreements is a developing area of the law in Hong Kong, I do not agree that the husband has identified a point worthy of going up to the Court of Appeal at this stage of the litigation. It will be for him to convince the Court of Appeal that I am wrong in this. In the meantime both of the husband’s summonses dated the 27 April 2015 do stand dismissed. Costs be to the Petitioner wife to be taxed if not agreed on a party and party basis. There shall be a certificate for all counsel involved.