VH nee N v. YH AND ANOTHER

FCMC 1075/2013

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES

NUMBER 1075 OF 2013

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R U L I N G
(Costs)

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Introduction

1.  This is an application to determine two sets of interlocutory costs within matrimonial proceedings. The first relates to an ex parte injunction obtained by the petitioner wife on the 1 February 2013. This injunction was served on the 1^st Respondent husband on the 5 February 2013 and compromised by means of a consent summons following a further urgent hearing when the husband asked for the order to be discharged. This hearing took place on the 8 February 2013. The consent summons was filed later on the same day following the hearing. On that occasion I reserved costs for argument. In addition the husband asks for the costs arising out of an inter partes summons issued by him on the 23 July 2013 when he sought to stay the Hong Kong proceedings pending resolution of parallel proceedings issued by the wife in Israel. The husband says that this application would not have been necessary had the wife been more reasonable in this respect. The parties also compromised this aspect of the case by way of a consent summons dated the 14 August 2013. They agreed that costs of this application should also be reserved, and that both matters should be considered after resolution of the duplicate proceedings in Israel.

The issue

2.  The issue then is what orders should be made for costs in relation to the injunction proceedings and the husband’s summons dated the 23 July 2013?  The husband argues that the appropriate order is that costs should be to him in any event and that given the circumstances consideration should be given for an immediate order as to costs. In the event that it is considered appropriate he also asks for a summary assessment of costs. The wife for her part asks that there be no order as to costs.

Background

3.  This case concerns a marriage between two Israeli Jews, who came to Hong Kong from Israel in July 2000. The husband is involved in the diamond trade and he has a small limited company in equal partnership with a third party in both Hong Kong and Israel. He was originally in business with the wife’s brother and brother in law, who apparently have competing business interests. The wife is a preschool teacher and she works for an international school in Hong Kong. The parties have three children – two elder ones now aged nearly 25 and 20 respectively – both of whom are said to be currently working with the father. There is a third child R who is 10 years of age.

4.  The marriage broke down at the beginning of 2013 due to the husband’s infidelity with the 2^nd Respondent and the wife subsequently issued parallel proceedings in both Hong Kong and Israel. It would be fair to say that the wife appears to have initially taken a very aggressive approach to the litigation.

The law

5.  It is unusual in my experience for applications to be made for costs in interlocutory summonses in matrimonial proceedings, were those summonses have been successfully compromised.

6.  The law can be found in Order 62 of the RHC and Order 29 rule 1 paragraph 55 of the RHC.

7.  Counsel for the wife reproduced Order 62 in so far as it is relevant to the facts of this case as follows:

“… 5(1) The Court in exercising its discretion as to costs shall, to such extent, if any, as may be appropriate in the circumstances, take into account…

(e) the conduct of all the parties;

(f) whether a party has succeeded on part of his case, even if he has not been wholly successful…

(2) For the purpose of paragraph (1)(e), the conduct of the parties includes –

(a) whether it was reasonable for a party to raise, pursue or contest a particular allegation or issue;

(b) the manner in which a party has pursued or defended his case or a particular allegation or issue;

(c) whether a claimant who has succeeded in his claim, in whole or in part, exaggerated his claim; and

(d)conduct before, as well as during, the proceedings.”

(emphasis added)

8.  Order 29 rule 1 paragraph 55 adds on the issue of interlocutory injunctions:

Costs on an application for an interlocutory injunction―The court has a broad discretion as to costs.  In an interlocutory matter, costs to follow the event is but one option (O.62, r.3(2A)).  It has for many years, been the normal practice for a successful plaintiff granted an interlocutory injunction to be granted his costs in the cause and for a successful defendant to be granted his costs in the cause.  But the rationale of that practice is perhaps not clear and the courts are showing a greater willingness to depart from it, see e.g. the discussions as to costs reported in Steepleglade Ltd v. Stratford Investments Ltd [1976] F.S.R. 3 and Bonnie Blair Ltd v. Whitmore Ltd (unrep., DCCJ 1871 of 2011, [2012] H.K.E.C. 1178).  In Bushbury Land Rover Ltd v. Bushbury Ltd [1997] F.S.R. 709, CA, the court, in refusing leave to appeal, said the judge had not erred in principle in awarding a defendant his costs in any event.  Where a party has acted improperly or is in some way to be penalised, or the application is totally baseless, the court may consider an immediate order as to costs (Korea Exchange Bank (Hong Kong Branch) v. SSCP Holdings (Hong Kong) Ltd (unrep., HCA 146/2013), [2013] H.K.E.C.996). Where an ex parte injunction is discharged for material non-disclosure, the usual order is for costs to the defendant.  There is, however, no general rule that costs ought to be on an indemnity basis, though an order on this basis would be usual where the non-disclosure was deliberate or seriously culpable (Velatel Global Communications Ltd v. Chinacomm Ltd (unrep., HCA 1978/2011, [2013] H.K.E.C. 358)).  When deciding on costs, the court should consider the merits of the injunction application, and not the possible outcome of the hearing of the substantive matter (Mendlowitz & Associates Inc v. Winner International Group Ltd (unrep., HCA 574/2009, [2010 H.K.E.C. 733]).  Where a plaintiff seeks an interlocutory injunction but decides, after seeing the defendant’s evidence, not to proceed with the application for interlocutory relief, it may be a proper exercise of the court’s discretion to award the defendant his costs of the application in any event and, in appropriate circumstances, to order taxation of the costs forthwith (Kickers International SA v. Paul Kettle Agencies Ltd [1990] F.S.R. 436; Korea Exchange Bank (Hong Kong Branch) v. SSCP Holdings (Hong Kong) Ltd, above).  For non-disclosure but regranted on terms see Liu Xian Feng v. Liu Bo [2005] H.K.E.C. 1196, for costs on an injunction discharged.

9.  Both parties have referred me to a number of cases on point. In particular reference has been made to the analysis provided by the Hon Madam Justice Queeny Au-Yeung in Korea Exchange Bank (Hong Kong Branch v SSCP Holdings (Hong Kong) Ltd (unrep., HCA 146/2013, 26 June 2013, which reiterates and reaffirms the legal principles as follows:

The legal principles

10. The court has a broad discretion as to costs.  In an interlocutory matter, costs to follow the event is but one option: Order 62, rule 3(2A), Rules of the High Court.

11. For an interlocutory injunction, where a party has acted improperly or is in some way to be penalized, or the application is totally baseless, the court may consider an immediate order as to costs: King Fung Vacuum Ltd v Toto Toys Ltd [2006] 2 HKLRD 785, at para 27:

“… The traditional order on interlocutory injunctions has been that the successful party in any application for an interlocutory injunction would have his costs in the cause. Following the American Cynamid decision, the practice has frequently been to make both parties costs, costs in the cause. There is no justification if one applies American Cynamid principles for giving the successful party his costs in any event, or worse still an immediate order as to costs, unless of course, that party has acted improperly or is in some way to be penalised. It could be, for example, that if a plantiff seeks an interlocutory injunction and the application is totally baseless and does not even establish, for example, that there is a matter fit to be tried, that the court would then consider that such an order might be made. But those would be very special circumstances. Normally an order of either costs in the cause, or perhaps the successful party’s costs in the cause would be appropriate.

12. It is not necessarily the case that costs should be in the cause. The court is entitled to look at the merits of the injunction at the time of its application. In Mendlowitz & Associates Inc v Winner International Group Ltd & another, HCA 574/2009, 14 May 2010, Au J has this to say:

“28. I do not think it is now right to say that as a matter of principle, the costs of an interlocutory injunction should be in the cause unless there is justification for its departure. The Court is entitled to and should look at the merits of the injunction itself as at the time of the application to decide what should be the proper costs order for that application in all the circumstances, which do not necessarily depend on the outcome of the trial.

10.  With respect I agree.

11.  Counsel for the wife also helpfully referred me to a number of other cases in his submission where he said as follows:

10.The significant differences between interlocutory costs on the one hand, and final costs on the other hand, after CJR, have most recently been helpfully explained by To J in Melvin Waxman & Anor v Li Fei Yu & Anor (unreported, HCA 1972 of 2012, 11^th Sep 2013, para 11 to 13), as follows:

“… The amendment to rule 3(2) and the introduction of rule 3(2A) specifically applicable to costs in interlocutory proceedings makes it clear that the legislative intent was to distinguish between costs in interlocutory proceedings and costs in other proceedings. Under the new rule 3(2), the general rule of costs to follow the event is preserved for costs in proceedings other than interlocutory proceedings. But a different approach is provided under the new rule 3(2A) for costs in interlocutory proceedings. Under this new rule, the court may order costs to follow the event or make such other order as it sees fit. The court is no longer required to apply the general rule of costs following the event except in special circumstances, though that principle remains as one of the options. The court may make such other order as it sees fit.” (emphasis added)

12.  Again I accept what counsel has said in his submission.

Decision

13.  Bearing in mind the above legal principles I have therefore decided to make an order that the costs of the injunction proceedings namely the wife’s inter partes summons dated the 4 February 2013 and the husband’s inter partes summons dated the 7 February 2013 shall be to the husband in any event, such costs to be taxed on a party and party basis if not agreed. These costs shall be paid at the conclusion of the ancillary relief proceedings.

14.  In so far as the husband’s inter partes summons dated the 23 July 2013 is concerned I shall make an order that the wife shall pay 50% of the husband’s costs of and occasioned by the summons, such costs to be taxed on a party and party basis if not agreed. These costs shall also be paid at the conclusion of the ancillary relief proceedings.

The injunction proceedings

15.  I accept that the wife’s application for an injunction was very aggressive, draconian in nature and oppressive. There was very little in the way of actual evidence to support what she said in her first affidavit filed in support of her ex parte summons. At the return hearing it was clear that the evidence that she had could not be substantiated and that there was little basis for the injunction sought. I accept that the application was fuelled by both anger and hurt, which in turn led to the wife being overly suspicious and speculative. This is not a sufficient basis for an injunction. It is also something which family lawyers need to guard against.

16.  I also do not accept the line of argument advanced by counsel for the wife – namely that the practicalities of the situation are such that the wife should not be expected to pay, because she does not currently have the funds to pay. The wife chose to take the action that she did. She was ably represented by family law specialists at the time. There are risks and potential cost consequences for taking such action. She ultimately reached a compromise with the husband – but not without significant costs being expended by the husband, prior to an agreement being reached.

17.  In a similar vein it has also been suggested that there should be no order as to costs given that the parties eventually reached consensus. I have noted from the transcript that this was only after a very firm warning was given from the bench and that I made it clear that any future injunction order would also need to include an undertaking as to damages from the wife. I do not accept in these circumstances, where the wife could have chosen to take a different approach but chose not too and the husband had no alternative but to spend a significant amount in legal costs in order to ensure that the injunction was discharged, that it is appropriate for there to be no order as to costs.   

18.  I have also noted that the wife did not in the first instance disclose that the husband was in direct competition with both her brother and brother in law. I accept that this amounts to deliberate non disclosure.

19.  For the avoidance of doubt I accept that in considering an application for costs in injunction proceedings consideration also needs to be given to the situation that existed at the time that the injunction was sought. Attempts have been made to paint the wife as an innocent bystander of her husband’s affair. Reference has been made to e-mails that were never produced in evidence – or even during the hearing on costs. For the avoidance of doubt these cannot be relied upon now in an argument on costs. I am however asked to imagine it all from the wife’s perspective and to accept that in such circumstances the wife did not act “unreasonably” or “irrationally”. With respect I do not agree. Whilst I appreciate that the wife was understandably very upset when she realized that the marriage was over, that is not justification in itself for taking the action that she did with such minimal evidence in support.

20.  Thus I will depart from the more traditional order that costs be in the cause. Instead as I have said I will make an order that costs be to the husband to be taxed if not agreed on a party and party basis. I accept that given that the wife is short of funds that there would be no sense in making a “forthwith” order. Costs shall therefore be paid by the wife to the husband from her share of the assets at the end of the ancillary relief proceedings.     

The summons dated the 23 July 2013

21.  Solicitors for the husband have explained the background to their application as follows:

26. At the same time as issuing the application for injunction in Hong Kong, P [the wife] issued parallel proceedings in Israel, and an application for an Anton Pillar order thereby causing the R1 [the husband] and his business partner in Israel to incur the increasing costs of running not only two proceedings, but also two sets of injunction applications simultaneously in separate jurisdictions both of which severely affected their business activities.

27. By agreement in or around 20 March 2013, both parties agreed to defer proceedings in both jurisdictions of Hong Kong and Israel to facilitate settlement negotiations.

28. However, on 4 July 2013, P [the wife] sought to resume and restore proceedings in both HK and Israel on the basis that settlement negotiations had failed.  On 9 July 2014 P’s [the wife’s] solicitors wrote to R1’s [the husband’s] solicitors requiring attendance to fix a date for First Appointment.

29. On the same day, R1’s [the husband’s] solicitors wrote to P’s [the wife’s] solicitors setting out very clearly the facts that:

(a) P [the wife] was at the same time seeking to progress her divorce in Israel together with her application for ancillary relief, and

(b) P [the wife] was claiming in Israel that Hong Kong was not the appropriate forum.

(c) Warning that it would be necessary to issue a summons if she continued to try and set down a further First Appointment and that that we would seek the costs of doing so.

(d) On 12 July 2015[2013], despite this letter the date for First Appointment was nevertheless set down by P’s [the wife’s] solicitors for 5 September 2013.

30. R1 [the husband] was therefore obliged to file his summons and affidavit on 23 July 2013 seeking to stay the Hong Kong proceedings pending the resolution of the Israeli proceedings.

31. R1 [the husband] was obliged on 12 August 2013 to file a note for the call over hearing which date had been moved at the request of P and was listed for 15 August 2013.

32. Eventually on 13 August 2013 P [the wife] agreed to stay the proceedings in Hong Kong. However, P [the wife] wanted no order as to costs of the summons to stay, despite having incurred R1 [the husband] the costs of attending court to fix a First Appointment date on 12 July and the subsequent costs of drafting a summons and affidavit setting out the reasons for stay, and a note for court in support of the stay.

33. By Consent Order dated 15 August 2013, in addition to the stay of Hong Kong proceedings, in respect of which the costs were reserved for argument, the costs hearing for the ex-partes injunction was also adjourned to be considered after the resolution of the duplicate Israeli proceedings.

Restoration of Proceedings in Hong Kong

34. In or around July 2014, R1 [the husband] was informed by his legal advisers in Israel that P’s [the wife’s] proceedings were struck out of the Rabbinical Court in Israel with costs to be determined.

35. With no action taken by P [the wife] in respect of the restoration of her proceedings in Hong Kong, R1 [the husband] issued a summons on 20 August 2014 returnable on 10 September 2014 to lift the stay.

36. In an effort to save costs, R1’s [the husband’s] summons sought at the same time to put in place a First Appointment hearing with directions in respect of exchange of Forms E, Forms J, draft Questionnaires prior to that hearing.

37. Despite seeking not to have a hearing on the lifting of the stay, P [the wife] did not agree to the proposed directions in the summons, and in particular did not want the issue of the costs of the discharge of the ex-partes injunction nor the costs of the stay application to be dealt with until the final hearing of AR and so both parties had unnecessarily to attend that hearing.

The costs of duplicate proceedings

38. R1 [the husband] seeks his costs incurred in these proceedings as a result of P [the wife] insisting on continuing duplicate proceedings in Hong Kong, whilst at the same time claiming in her Israeli proceedings that Hong Kong was not the appropriate forum. …

39. The case of W v W (Financial Relief: Appropriate Forum) [1997] 2 F.C.R, at paragraphs E – H of page 671, Holman J pointed out that whilst it is not for the Court to decide which party would do better in which jurisdiction, the issue is that “where spouses or former spouses are litigating about the division of their assets and, directly or indirectly, almost certainly paying for the litigation out of those very assets, the financial drain and the emotional strain are both intolerable”.

22.  The difficulty I have is that given that the wife’s approach in issuing proceedings in both jurisdictions cannot be criticized per se, that it might have been more sensible for this aspect of costs to be dealt with at the end of the proceedings and for costs initially to have been reserved in the normal way. The problem is that having issued proceedings in both Hong Kong and Israel the wife then suggested that Hong Kong was not the appropriate forum to deal with the matter. This was neither a logical nor sensible move. She also refused to deal with the matter until just before the return hearing date. Costs were expended as a result. I have been referred to the without prejudice save as to costs letter from the wife’s solicitor dated the 13 August 2013 – which put forward very sensible proposals, albeit very late in the day. It was suggested in that letter that the issue of costs on the injunction should be adjourned with liberty to restore. This was not an unreasonable request – although I accept that the husband may have been concerned that this aspect of the case should not get “lost” in the litigation.  

23.  Given all of the above and the fact that I am being asked to determine these costs now, I will exercise my discretion and make an order that the wife do pay 50% of the husband’s costs arising out of the summons dated the 23 July 2013. Again these costs are to be taxed on a party and party basis if not agreed and shall be paid at the end of the ancillary relief proceedings.

Costs

24.  50% of the costs of this application shall also be to the husband given that he has been largely but not wholly successful. Again these costs shall be taxed on a party and party basis if not agreed and paid at the end of the ancillary relief proceedings.

Conclusion   

25.  This matter is shortly to come back before the court. I would ask in the circumstances that the parties attempt to proceed in a less aggressive manner, with a view to resolving matters as quickly and as fairly as possible.