WM v. CNK

FCMP 19/2012

[2020] HKFC 225

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MISCELLANEOUS PROCEEDINGS NO. 19 OF 2012

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Mode of Hearing:  By Way of Written Submissions

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D E C I S I O N

(Variation of Costs Order Nisi)

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1.  This is a hearing (by way of written submissions) on the Applicant (“the father”)’s application for variation of the costs order nisi made after a contested hearing on the variation of the child’s maintenance.

Background

2.  The child (“M”) was born outside wedlock.  In a consent order dated 17 July 2013, the father and the Respondent (“the mother”) reached an agreement on the maintenance of M, inter alia, that:

(1)  The father undertook to purchase a property (with certain conditions on size, price, location, etc.) for the mother, M and a domestic helper to live in rent free until M reaches the age of 18 or when he leaves Hong Kong for overseas tertiary education or when he finishes tertiary education in Hong Kong.

(2)  The purchase will take place before the end of 2017, at the latest.

(3)  The father shall pay the monthly maintenance of $48,000 for M commencing 1 August 2013 until the mother commences full time employment or 30 December 2014, whichever is earlier, after which the maintenance payable will be reduced to $38,000 per month until the purchase of the property for the occupation of the mother and M.

(4)  After the mother and M move into the property purchased by the father, the maintenance payable will be further reduced to a monthly sum of $23,000 until M reaches 18 or finishes secondary education.

3.  The father did not honour the full terms of the agreement by firstly reducing the amount of maintenance payable and secondly, by failing to purchase a property for the mother and M’s occupation.  On 9 November 2016, the father issued a summons seeking to release him of the undertaking to purchase a property and a downward variation of the maintenance payable for M.  His final position on M’s maintenance was that he asked for it to be reduced to a monthly sum of $13,000.

4.  On 29 March 2018, the mother also issued her summons for an upward variation of the maintenance for M.  She asked for the maintenance to be increased to a monthly sum of $41,300.

5.  After a contested hearing lasting for 3 days, this court handed down its judgment on 20 September 2019 in which:

(1)  The consent order on M’s maintenance was varied to the effect that the father shall pay M’s maintenance at the rate of $29,000 per month; and

(2)  The father’s undertaking to purchase a property for the mother and M’s occupation was to be discharged.

6.  The above orders were made in addition to other undertakings given by the father among which the most important one was for the payment of M’s school fees.  At the time of judgment, M’s school fee and related expenses were in the monthly sum of about $8,500 and therefore, the total sum payable by the father towards the maintenance of M was at the rate of $37,500 per month.

7.  At §§65-66 of the judgment, I granted an order nisi that the father shall pay the costs of the mother, including all costs reserved with certificate for counsel:

“Costs

65. The father succeeds in discharging the undertaking on the purchase of a flat for M, whilst the mother succeeds in achieving an upward variation of the maintenance payable by the father (although the father is currently paying $32,000 per month, that is inclusive of M’s school fees). It may not be easy to decide who the winner is concerning these 2 applications.

66.  Be that as it may, I note that there is a vast disparity between the financial abilities of the parties.   Furthermore, it was the father who has unilaterally breached all his undertakings and the orders on maintenance in the Consent Order without the prior approval of the court.  Those actions should not be condoned.  In order to show this court’s disapproval of those breaches, and after considering all the circumstances of this case, in particular, the vast disparity of the parties’ financial abilities and for the protection of M’s best interests (any requirement for the mother to pay costs or share part of the costs would effectively mean that those costs have to be paid out from M’s maintenance), I have decided to exercise my discretion in favour of the mother in awarding her costs in these 2 applications, including all costs reserved with certificate for counsel.  This will be an order nisi to be made absolutely after the expiry of 14 days from the hand down of this judgment. “

8.  On 24 October 2019, the father issued his summons for variation of the costs order nisi. Although it was not stated in the summons how he would like the order nisi to be varied, it is clear from counsel’s submissions that the father is now asking for an order that each party is to pay his own costs.

9.  In view of the mother’s objection, I order that the application is to be dealt with by way of written submissions.  I also directed that a hearing bundle to be prepared by the father, which was only made available on 9 October 2020. After full consideration of the parties’ submissions, I now give my decision on the father’s application for variation of the costs order nisi.

Legal Principles

10.  In considering the issue on costs, the starting point must be O.62 r.3 (2) of the Rules of District Court (“RDC”):

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

(underline added)

11.  Three things are clear from the above rule:

(1)  Costs are awarded at the court’s discretion;

(2)  The starting point should be costs to follow the event; and

(3)  The starting point can be deviated from if there are special circumstances to justify such deviation.

12.  It is recognised that the court’s discretion on costs is even wider in family matters.  I was referred to the case of HK v BD [2011] HKFLR 66 in which Hartman JA (as he then was) said at §78 of the judgment:

“78. In family matters, as in all civil proceedings, the basic principles are that costs are in the discretion of the court but that costs should follow the event except when it appears to the court that, in the circumstances of the case, some other order should be made. In family matters, because of their particular dynamics, the exercise of discretion is broader-based than in other civil proceedings. However, as was observed by Butler-Sloss LJ in Gojkovic v Gojkovic [1992] Fam 40, there still remains the necessity for some starting point. That starting point, as we have indicated, is that costs prima facie follow the event.”

13.  Although HK v BD actually concerns with matrimonial proceedings, there is no dispute that the same principles are equally applicable to family proceedings.  

Discussion

14.  In his written submissions, Mr. Egerton for the father tried to convince the court that the costs order nisi in favour of the mother should be varied to one that each party is to pay his own costs. Counsel relies on 2 main grounds, namely that neither party could be regarded as an overall winner in their respective application, and that the mother has failed to disclose her re-marriage until a very late stage (§32 of counsel’s submissions).

15.  In terms of whether there was a clear winner, I must agree with counsel that there was no clear or obvious winner in the parties’ respective application.  The father succeeded in getting a release from his undertaking to purchase a flat for the accommodation of M, but failed in his application for a downward variation of M’s maintenance.  The mother succeeded in getting an increase in M’s maintenance, but not at the level as she has originally sought.  Therefore, there is a prima facie case for the father to argue that there should be no order as to costs as neither party can be regarded as the overall winner of the applications.  This fact was duly recognised in §65 of the judgment.

16.  Be that as it may, in §66 of the judgment, I have also taken into account 2 important factors, namely the unilateral breach of the consent order by the father and the vast disparity between the financial capability of the parties.

17.  The unilateral breach of the consent order was in 2 ways.  Firstly, the father failed to honour his undertaking in the purchase of a property for M’s occupation.  But as pointed out by counsel, the deadline for the purchase of property was at the end of 2017.  The father has already applied for the discharge of the undertaking in November 2016, which application was eventually approved by this court.  I accept that the father should not be criticised in failing to honour that undertaking.

18.  However, the same cannot be said of his unilateral reduction of M’s maintenance from $38,000 to $32,000 since February 2015, which was requested to be further reduced to $13,000 per month at trial. Although to be fair to the father, his offer of $13,000 was in addition to his undertaking to pay M’s school fees, which stood at about $8,500 per month. This has the effect of uplifting his overall offer to $21,500 per month.  But this was still far below the final award of the court at $37,500 per month ($29,000 + $8,500 = $37,500).

19.  On the other hand, the mother’s latest offer was $41,300, which was much closer to the final award of $37,500.  Therefore, in terms of reasonableness, I found the offer of the mother much more reasonable than that of the father.  The father’s unilateral reduction of M’s maintenance should not be condoned.

20.  Furthermore, in reading the father’s submissions, there was no submission on the costs order’s financial impact on the welfare of M as compared to that of the father, if there was indeed no order to be made on costs.  If one should read §66 of my judgment, one would notice that I have taken into account the vast disparity of the financial capability of the parties before I exercised my discretion in favour of the mother, which was in effect a discretion in favour of M.  The father was a CEO of a listed company in Germany, earning a very good income and having assets in the sum of at least $16,000,000.  According to counsel at trial, his ability to pay the sum as claimed by the mother was not in issue.  On the other hand, the mother was living with and being financially supported by her present husband who was a rank and file police officer only with a regular income.   If this court should order each party to bear his own costs, this would mean that the mother has to pay her costs which I believe would not be insubstantial.   This will have an extreme adverse impact on the financial well-being of M as it is likely that a few years’ of his maintenance may be depleted just in paying his own costs of this litigation.   After considering counsel’s submissions, I still maintain my view the court’s discretion on costs should be exercised in favour of the mother, and through her in favour of M, under the overall circumstances of this case.

21.  Another ground of the father’s submissions was the mother’s failure to disclose her re-marriage until a very late stage.  It was the father’s contention that the mother had deliberately concealed this information and the fact that the accommodation of M had already been provided for.  This was a litigation conduct that needs to be taken into account. Therefore, it was counsel’s submission that the court’s discretion on costs should not be exercised in favour of the mother.

22.  I note that during cross examination, questions were put to the mother that when the parties were discussing the terms of settlement in about July 2013, she had failed to disclose her intimate relationship with her present husband or that she might even be contemplating re-marriage at that time.  That was denied by the mother.  At §31 of the judgment, I have refused to come to a conclusion that the mother was deliberately concealing her relationship with her present husband simply based on the proximity of time between the consent order and the mother’s re-marriage.

23.  Despite such conclusion, the father still pursued his criticism on the mother’s non-disclosure of her re-marriage until it was found out by him at a later stage.  According to him, the non-disclosure of this important piece of information, not only at the time of consent order but at any subsequent point in time, was a deliberate concealment of the fact that M’s accommodation had already been provided for, which in turn had caused both parties to have incurred unnecessary costs in the litigation.

24.  I note that a similar question was put to the mother on 29 August 2018, i.e. the last day of trial, alleging that she had failed to disclose her re-marriage in her correspondence in 2015 when the issue of M’s German passport was raised.  The mother replied that she did not know there was a need to tell the father of her re-marriage, as she would not have expected the father to tell her about his re-marriage.  She said she was just following the court order and there was nothing therein to require her to tell the father about her re-marriage.

25.  I find the mother’s answer being reasonable and I am not prepared to come to a conclusion that there was any non-disclosure of the mother’s re-marriage, and even if there was one (which is not my finding here), it was done deliberately.

Conclusion

26.  Based on the above discussion, I still maintain my view that despite the fact there was no clear overall winner in the litigation, the facts that the mother’s offers, though not entirely successful, were much more reasonable than that of the father and most importantly, in view of the vast disparity of the parties’ financial capability, there was ample justification in exercising the wide discretion of this court on costs in favour of the mother and in turn, in favour of M.  The costs order nisi made on 20 September 2019 is hereby made absolute.

Costs of this application

27.  As the father failed in his application for variation of the costs order nisi, the costs of such application are to be given to the mother, with certificate for counsel.

Representation: