RMH v. GY

FCMP 38 /2020

[2024] HKFC 19

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MISCELLANEOUS PROCEEDINGS

NUMBER 38 OF 2020

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RULING

(Costs (Guardianship of Minors Ordinance (Cap 13))

(By Paper Disposal)

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1.  By a Judgment dated 10 October 2023 ([2023] HKFC 204, FCMP 38/2020)  (“the said Judgment”), I ordered that, in addition to various undertakings to be given by the respondent father on the payment of school fees and medical expenses, he is to pay a monthly sum of $250,000 for the maintenance of his son, referred to as “W” throughout.

2.  I also directed parties to lodge and serve their written submissions on costs.

3.  Prior to the said Judgment I had already handed down a Judgment on Interim Maintenance and Litigation Funding (“the Interim Maintenance Judgment”)  on 30 December 2020 ([2020] HKFC 275)  and a Judgment on Legal Costs Funding (“the Legal Costs Funding Judgment”)  on 11 June 2021 ([2021] HKFC 109).

4.  This Ruling deals with the issue of costs.

5.  I shall adopt the same nomenclatures used in the said Judgment; and this Ruling should be read in conjunction with it.

The Parties’ Stance

6.  The mother seeks all the costs of the proceedings leading up to the said judgment, to be taxed if not agreed.  On the other hand, the father seeks no order as to costs, including all costs reserved, save and except the question of costs for which the father should be awarded.  At a glance, this seems to be a concession on the part of the father.  However, it is significant to note that, for reasons only known to the father, there is no mention in any part of Ms Irving’s submissions as to how the legal costs provision of $2,210,000 already paid by the father is to be dealt with.  On the face of it, the corollary is that if the court is to accede to the father’s position, the mother must return the money.

The Mother’s Grounds

7.  Briefly put, the mother’s grounds are as follows:

(1)	Legal proceedings were necessary because the father stopped / failed / refused to pay maintenance for W, whilst also using withholding of W’s maintenance to exert financial control over the mother.
(2)	There was no alternative route that would have saved costs; there was never any reasonable proposal that could have been properly accepted. There were simply no without prejudice correspondence.  The open proposals of the father were never near the interim maintenance and/or the said Judgment.  There were no proposals or offers whatsoever (whether reasonable or unreasonable)  from the father for undertakings and ongoing maintenance so as to dispense with the need for trial.
(3)	There is a huge wealth disparity between the father and the mother.  To ask the mother to bear “several million” in costs is nowhere near the same thing as asking the father to bear the same literal figures.  While the mother has had to borrow from GB and her grandmother, to the father, being a Forbes billionaire, “several million” is a “drop in the ocean”.
(4)	The true “claimant” is W, and these proceedings are for the benefit of W alone.

The Father’s Grounds

8.  Again, briefly stated, the father relies upon the following grounds:

(1)	The mother is hoping to use the costs procedure to “share” the father’s wealth.
(2)	The mother was entirely unreasonable in her approach to the proceedings.   Regardless of the wealth of the father, the quantum sought by the mother was entirely unreasonable, excessive and disproportionate to a proper claim for the benefit of a child of 4 to 5 years old.  Many items were inflated and/or unsupported by evidence.  It was only after the first day of trial that the mother reduced the claim by more than half.  The mother also used funds for purposes other than assigned by the court.
(3)	The mother was also unreasonable in the conduct of the proceedings.  She was not honest with the financial support from GB and she failed to disclose material information including the non-disclosure of her having obtained a California Real Estate license.

The Applicable Legal Principles

9.  The basic principle is that costs are in the court’s discretion: Order 62, rule 3, Rules of the High Court / District Court.

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

11.  In the exercise of its discretion in civil cases including matrimonial and family cases, the court will have to take into account, where appropriate in the circumstances, the special matters set out in Order 62, rule 5.

12.  Where arrangement of minors under the Guardianship of Minors Ordinance (Cap 13)  is at issue, the starting point remains to be no order as to costs.  As regards financial arrangement, neither counsel has referred me to any judicial authorities specific to such kind of application.  In Hong Kong, the authorities suggest that the courts continue to apply the principle of costs follow the event as the starting point; for instances, see WGL v ASB (Child Maintenance under the GMO) [2013] HKFLR; NAL v PKW, FCMP 273/2013 (date of judgment: 16 April 2015); and QMY v GSS (Maintenance – GMO; Issue Estoppel) [2020] HKFLR 474.

13.  In England and Wales, application for maintenance under Schedule 1 of the Children Act 1989, (the equivalence of the present proceedings)  is “excepted proceedings” and does not fall within the general rule of no order as to costs principle under Rule 28.3 of the Family Procedure Rules (2010)  and costs remain in the discretion of the court: see Rayden and Jackson on Relationship Breakdown, Finances and Children at [17.212] - [17.230]. 

14.  There have been some debates in England and Wales on whether the principle of costs follow the event continues to apply to “excepted proceedings”.   The outcome of such debates are of little relevance to us as we do not have “excepted proceedings” in Hong Kong.  Yet in the course of such discussion, Mostyn J made a relevant remark in KS v ND [2013] EWHC 464 (Fam)  at [19] that, in Schedule 1 proceedings the mother in effect makes her application in a representative capacity for the child.  He was therefore doubtful whether the principle of costs follow the event should apply.  In the learned judge’s opinion, the court should start with a “clean sheet”, a term used by Wilson LJ (as he then was)  in Baker v Rowe [2010] 1 FLR 761, at [53].

15.  In the present case, neither party seeks to argue that he/she is the overall winner and hence, the principle of costs follow the event should apply in his/her favour; to that extent, in my view, the court may start with a “clean sheet” and the matters to be considered are the special matters set out Order 62, rule 5.   It is not necessary to set out the special matters here.   At the end of the day, it is a balancing exercise; and a broad-brush approach is all that is required: see F v F (No 2) [2003] 3 HKLRD 976, at [22]; and Re N (Payments for Benefit of Child: Costs) [2009] EWHC 484 (Fam), [2009] 2 FLR 687, at [27].

Discussion

16.  As I said at [174] of the said Judgment, in terms of items awarded and issues determined neither party can be said to be an overall “winner”.  

17.  I ruled against the father on the nature of the parties’ relationship. Specifically, I ruled that there was not any mutually beneficial arrangement or agreement that the mother was to save and that the trip to LA was not good.  I also ruled that the father grossly understated his expenditure.   On the other hand, the father was successful in resisting the mother’s claim for a Country Club membership and for a lump sum payment; specifically in this regard I agreed with the father that there were substantial sums unaccounted for on the part of the mother.  I also agreed with the father that the mother could have used the proceeds of sale of the Range Rover in the purchase of another car in LA.

18.  As regards the mother, she was successful in the claim for her holiday expenses, child-minding fees and carer’s allowance.  I also ruled in favour of the mother that she and W should continue to remain at the Montana Property. At the same time, I found the mother overspent and spent money on purposes not assigned for.

19.  Both parties were discredited as a witness.  The mother grossly inflated her figures and she deliberately concealed having obtained a California Real Estate license and being an “associate” of a Real Estate Agency. The father played the same trick by grossly understating his monthly expenditure, thereby was not truthful about his own standard of living.  There was distasteful and unnecessary allegation that the mother was a sex-worker.

20.  The father complains that the mother did not make any realistic proposals.  In my view, it was not a unilateral responsibility.  There was nothing to prevent the father from making his own realistic proposals by way of open or without prejudice proposals.  As it transpired, there was no Calderbank Offer from either side.

21.  As I said at [29] of the said Judgment, both parties exceled in the exercise of producing rival budgets: the mother significantly over-pitched and the father was at the far end of the other side.   The father bickered over an item as little as a monthly sum of USD97.36 renter’s insurance.  He initially insisted on imposing a ceiling or a range within which school fees were payable notwithstanding that the schools had already been identified.  It was only on the 7^th day of the trial (30 November 2022)  that the father agreed to cover W’s psychiatric and psychological expenses, where required.  He cut off the mother’s finance and hence, the maintenance of his own son, when he saw their relationship was gone.  He made himself clear in the witness box that he was willing to be generous if the mother was honest and they were in a relationship. 

22.  If I stop here, I would decide that the proper order is no order as to costs.  However, as rightly pointed out by Mr Chan, the huge wealth disparity between the father and the mother must be a factor that carries some weight. 

23.  Furthermore, as I said at [27] of the Legal Costs Funding Judgment ([2021] HKFC 109), the proceedings were brought for and on behalf of W and for his benefit only: see also KS v ND, supra, at [19].  Though I do not entirely agree with Mr Chan, I can see there were grounds justifying the mother taking out the proceedings. On that view, the father should be responsible for the costs of the proceedings. 

24.  That said, I need to consider that all along the issue in dispute is on quantum only.  I acknowledge that given the allegations of the parties and the fact that the mother and W were residing in a different country, the factual issues called for determination were not that straightforward.  I also take into account that, for reasons only known to the mother, her present legal team is already the third team. Needless to say, extra costs were involved in the changes. Unnecessary costs were spent in preparing the accountant’s report, referred to as the PWC Report in [46]-[47] of the Interim Maintenance Judgment, too.  At the same time, as I have elaborated above, both parties in one way or another had culpable conducts in the litigation that unnecessarily led to the escalation of costs.  Considering all these matters in the round, as the docket and trial judge, I consider it is just and fair that the father is to pay 60% of the mother’s costs. The legal costs provision of $2,210,000 already paid by the father shall be taken into account.

Order

25.  Therefore, the order I make is that, subject to previous orders on costs, which should not be affected, the father is to pay 60% of the mother’s costs (including the question of costs and all costs reserved), to be summarily assessed.