WONG v. YIP

[English Translation – 英譯本]
CACV 254/2013

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 254 OF 2013

(ON APPEAL FROM MATRIMONIAL CAUSES NO 5031 OF 2009)

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JUDGMENT

Hon Chu JA (giving the judgment of the Court):

1. With leave granted by Hon Yeung VP on 26 November 2013, the respondent Mr Yip appeals against 2 costs orders made by Deputy District Judge S Lo (“trial judge”) on 12 December 2011 and 9 October 2012.

FCMC 5031/2009

2. The background and facts of the case relevant to the present appeal can be summarized as follows.

3. The respondent and the petitioner Ms Wong got married on 1 December 1998 and had 2 children of the marriage.  On 28 April 2009, the petitioner filed a petition for divorce (FCMC 5031/2009).  On 17 December 2009, the court granted a decree nisi of divorce.  On 3 March 2010, by consent of both parties, the court ordered that custody of the 2 children be granted to the petitioner with reasonable access to the respondent.  On 24 December 2011 the court made the decree of divorce absolute.

4. The respondent was granted legal aid soon after the commencement of divorce proceedings, namely on 11 December 2009.  Following the granting of the custody of the children, the petitioner, too, was granted legal aid on 25 March 2010.  The Legal Aid Department discharged on 15 June 2010 the respondent’s legal aid certificate.  At that time the petitioner was still proceeding with her application for ancillary relief.

5. On 25 November 2011, the petitioner’s application for ancillary relief was heard before the trial judge.  The respondent was absent from the hearing.  On 12 December 2011, the trial judge handed down his judgment, ordering that the matrimonial home be sold and after deductions for relevant expenses, half of the proceeds thereof be distributed to the petitioner; and that from the remaining half, after deductions for outstanding management fees, rates and government rent, if any, one million dollars be paid into court as living expenses for the 2 children until they attained the age of 18 or completed full-time education, $77,000 also be paid into court as two-thirds of the fees for orthodontic treatment for the daughter, and the remaining amount be distributed to the respondent.  The trial judge also ordered that the respondent was to pay 1 dollar a year to the petitioner as nominal maintenance and to pay the petitioner’s costs of the application for ancillary relief.

6. The respondent applied for legal aid again on 28 December 2011.  He also took out a summons on the following day, namely 29 December, applying to the trial judge for an appeal against the ancillary relief order dated 12 December 2011.

7. On 13 February 2012, the respondent was granted a legal aid certificate.

8. On 7 June 2012, Messrs Tsang, Chan & Woo, which were assigned by the Legal Aid Department to act for the respondent, took out 2 summonses for him: one for applying to set aside the ancillary relief order dated 12 December 2011 on the grounds that the respondent was absent from the hearing and there was new evidence in the case; the other one for applying for leave to file 3 affidavits in support of the summons applications.

9. On 29 June 2012, the 3 summonses were heard before the trial judge, who adjourned the 3 summonses to 9 October 2012 for argument.

10. On 17 September 2012, the Director of Legal Aid assigned Messrs Foo and Li to represent the respondent in place of Messrs Tsang, Chan & Woo.

11. On 9 October 2012, the 3 summonses were heard before the trial judge again.  Solicitor for the respondent informed the judge that the respondent agreed to withdraw the 3 summonses and [submitted] that there should be no order as to the costs of the applications.  However, solicitor for the petitioner applied for an order that the respondent was to pay the petitioner’s costs incurred as a result of his summons applications before he was granted legal aid again.  The respondent opposed the application and pointed to the fact that the trial judge had indicated at the hearing on 29 June 2012 that both parties were to bear their own costs because they were both on legal aid.  Finally the trial judge allowed the respondent to withdraw the 3 summonses and ordered that “As to costs of the present applications, the respondent shall pay the petitioner’s costs incurred prior to 13 February 2012 and there be no order as to costs incurred thereafter.”

12. On 29 January 2013, acting in person, the respondent took out a summons applying to the trial judge for leave to appeal out of time against the said costs order dated 9 October 2012.

13. On 9 April 2013, the respondent’s application was heard before the trial judge.  Both parties were unrepresented.  On 22 April 2013 the trial judge handed down his decision, refusing the respondent’s application and ordering him to pay the petitioner’s costs of the application in the amount of $200.

14. On 6 May 2013, the respondent commenced proceedings in the High Court (HCMP 963/2013), applying to the Court of Appeal for leave to appeal against the costs orders of the trial judge.  On 26 November 2013, Yeung VP granted leave to the respondent to appeal against the 2 costs orders dated 12 December 2011 and 9 October 2012.  The respondent accordingly issued a notice of appeal of the present appeal on 29 November 2013.  The respondent subsequently took out a summons on 23 December 2014, applying to introduce new evidence during the appeal, namely the documents in Part F (pages 72-91) of the appeal bundle.

Application for adducing new evidence

15. We first deal with the respondent’s application for adducing new evidence.  Among the new evidence sought to be adduced by the respondent are documents already filed in FCMC 5031/2009, which are not new evidence.  These documents include the respondent’s notice of application for legal aid (page 72), the respondent’s legal aid certificates (pages 79 and 80) and the notices of payment into court by Messrs Foo and Li upon sale of the matrimonial home and the receipts issued by the court (pages 83-88).  The respondent can, without the leave of the court, refer to these documents during the appeal.  As regards the remaining documents (pages 73-78 and 89-91), they are mainly correspondence between the Legal Aid Department and the respondent concerning contribution towards his legal aid and costs settlement, and letters to the respondent from Messrs Foo and Li.  There is no direct connection between them and the core issues of this appeal and they do not have any material effect on the outcome of the appeal.  Therefore, they do not fulfil the legal requirements for adducing new evidence at an appeal set out in Ladd v Marshall [1954] 1 WLR 1489.  We do not allow the respondent to refer to the said documents during the appeal.

Grounds of appeal

16. In the notice of appeal, the respondent adopted the statement previously filed in HCMP 963/2013 for the application for leave to appeal.  In that statement, the respondent put forward the following arguments:

(1)  Although solicitors for the petitioner stated that they had notified the respondent many times of the hearing date by mail and had repeatedly tried to contact the respondent, it was true that he did not receive the letters concerned.  Hence, he was unaware of the hearing date of the application for ancillary relief and was absent from the hearing.

(2)  The respondent did not receive a copy of the order dated 9 October 2012.  He learnt that the 3 summonses were withdrawn only when he subsequently enquired of the court staff.

(3)  At the hearing on 29 June 2012 the trial judge said that as both parties were receiving legal aid, they were to bear their own costs. However, at the hearing on 9 October 2012 the trial judge granted the application of the solicitor for the petitioner and ordered the respondent to pay costs.

(4)  The solicitor for the petitioner sought to recover costs of $140,000 odd from him.  However, the respondent, being unemployed, lived on Comprehensive Social Security Assistance and the costs were beyond his means.

17. The petitioner opposed the appeal and filed 2 written submissions dated 30 April 2014 and 2 February 2015 respectively.  The petitioner was late on the day of the present appeal hearing.  When she arrived at court, the hearing had already concluded.

Reasons for judgment of this court

18. The respondent’s appeal was against the 2 costs orders.  Decisions on costs are decisions made by exercising the discretion of the court.  It is trite law that the Court of Appeal is normally slow to overturn a decision made on an exercise of discretion.  It is only in exceptional circumstances, such as where the trial judge departed from a legal principle, misapprehended the facts, took into account irrelevant matters or his decision exceeded the scope of reasonable exercise of discretion, that the Court of Appeal would interfere.

19. In respect of the costs order dated 12 December 2011, the trial judge did not state the reasons for his decision in the judgment.  Similarly, solicitor for the petitioner merely sought to recover costs of the application for ancillary relief in the written final submission without advancing any specific grounds.

20. The respondent submitted that he was not aware of the hearing date, so he was absent from the hearing.  The petitioner took issue on it.  Whatever be the reasons for the respondent’s absence from the hearing, it did not constitute any compelling ground of appeal against the said costs order.

21. As can be seen from the judgement dated 12 December 2011, the trial judge found that assets owned by both parties were limited and their matrimonial home was the only family asset that was required to be dealt with by the court.  Having considered the petitioner’s evidence on living expenses and financial needs of the family and the children and her proposals about arrangements for the matrimonial home and about division of the proceeds from the sale of the matrimonial home, the trial judge made ancillary relief orders with respect to the petitioner and the children.  As the respondent was absent from the hearing, he did not make any proposals about arrangements for ancillary relief. However, he had previously filed a Financial Statement (Form E), in which he gave an account of his family and personal expenses, which the trial judge had also taken into consideration.

22. In our view, given the nature of an application for ancillary relief, the decision made by the trial judge as to ancillary relief arrangements cannot simply be taken as a result from which the petitioner emerged as the victorious party and the respondent as the losing party, so that the principle of “costs follow the event” should be applied accordingly.  Although the respondent had been absent from the hearing since his legal aid certificate was discharged on 15 June 2010 with the result that the hearing of the ancillary relief application was adjourned and refixed, at no stage did the respondent actively defend the petitioner’s application.  Also, there is nothing in the judgment which suggests that there were special reasons or factors in the case so that the respondent should be liable for the costs of the petitioner’s application.  On the contrary, it appears from the evidence before the trial judge that apart from the matrimonial home and the Mandatory Provident Fund account, the respondent did not have many assets and his earning capacity and income were both low.  Moreover, he was eligible for legal aid.  In the absence of any reason given by the trial judge and taking into account the above circumstances of the case, we are of the view that the trial judge did not properly exercise his discretion in ordering the respondent to pay the petitioner’s costs of the ancillary relief application.  This costs order made by the trial judge should be set aside and changed to be an order that there be no order as to costs.

23. As regards the order dated 9 October 2012, we must first point out that the respondent was only granted leave to appeal against the costs orders.  The part concerning the withdrawal of the 3 summons applications is beyond the scope of the present appeal.  Therefore, it is unnecessary for this court to deal with the respondent’s submission on whether the 3 summonses were withdrawn of his own accord or without his knowledge.  Suffice it for us to point out that the respondent attended the hearing on that day and the hearing was conducted in Chinese.  The respondent ought to know that his solicitor told the trial judge that the respondent, after discussion with his solicitor, decided to withdraw all the applications.

24. With respect to the reasons for making the costs order dated 9 October 2012, the trial judge said the following in his decision dated 22 April 2013:

“5. The respondent did not give any explanation for the delay in his supporting affidavits. He only contended that as both parties were on legal aid at that time, I should make no costs order in respect of the costs of the 3 summonses. In fact, at the hearing on 9 October 2012 he was represented by solicitor Chan [transliteration]. I discussed in detail with solicitor Chan and solicitor Liu [transliteration] for the petitioner with regard to the costs of the 3 summonses. Solicitor Chan also agreed with the costs order made by me. The transcript of the relevant part of the proceedings is as below:

…

6.  Put simply, as to the costs of the 3 summonses I found that the respondent had to pay the petitioner’s costs incurred prior to 13 February 2012 and there be no order as to costs incurred thereafter. The reason is that the respondent was not on legal aid when he issued the 3 summonses and he was granted legal aid only on 13 February 2012.  Therefore, he should pay the petitioner’s costs incurred prior to 13 February 2012 and I made no order as to costs incurred thereafter.”

25. The general principle of litigation is that if a party to an action, after making an application by summons, decides to withdraw his application, the other party is entitled to recover costs from him.  Subject to the court ordering the party making the application to pay costs to the other party, such application for withdrawal will normally be granted.

26. In the case where the litigant is on legal aid, section 19(1) of the Legal Aid Ordinance, Chapter 91, Laws of Hong Kong, provides that a court may make an order for costs in favour of or against an aided person in the same manner and to the same extent as it may make an order for costs in favour of or against any other person.  In other words, a court may order an aided person to pay costs.

27. However, at the same time, section 19(1) provides that where a court makes an order for costs directed against an aided person, such an order may only be enforced against the aided person and the Director of Legal Aid to the extent permitted by section 16C of the Ordinance.  Furthermore, section 16C(1)(a)(ii) provides that in the case of an aided person not covered by the Supplementary Legal Aid Scheme, he shall not be liable for costs in excess of his contribution.  Section 16C(1)(c) also provides that where a court makes an order for costs against an aided person in favour of a person who is also receiving legal aid, neither such person shall be liable for such costs in excess of his contribution.

28. It can be seen from the above provisions of the Legal Aid Ordinance that as a matter of principle, the fact that a litigant is an aided person is not a decisive factor when the court is considering making a costs order.  This is so even when both parties are receiving legal aid.  It is only that when a costs order is enforced, if the paying party is an aided person, he is not liable for costs in excess of his contribution.  That being the case, in cases where both parties are aided persons, it is possible that the court will not make any order as to costs because ultimately, most of the costs of both parties will be borne by the Director of Legal Aid and will be paid out of public revenue.  Of course, in the case where the paying party is awarded a sum by the court in the proceedings, that sum is still subject to the first charge of the Director of Legal Aid, out of which the Director of Legal Aid may pay costs which, pursuant to the court’s costs order, is required to be paid to the other party to the proceedings.

29. In the light of the above legal principles, when the respondent applied to withdraw the applications after taking out the 3 summonses, the trial judge, in allowing the withdrawal, could order him to pay the petitioner’s costs incurred as a result of the applications.  Although the respondent was an aided person at the hearing on 9 October 2012, the trial judge could still, in principle, order him to pay the petitioner’s costs.  Moreover, even if the petitioner was also on legal aid, in principle, the trial judge could still order the respondent to pay her costs.  As the respondent was not on legal aid from 29 December 2011 when he issued the first summons to 13 February 2012, section 16C(1)(c) of the Legal Aid Ordinance was not applicable. If the respondent was ordered to pay costs, his liability would not be restricted to his contribution prescribed upon subsequent grant of legal aid to him.  Therefore, the situation whereby the costs incurred by the petitioner during such period that were in excess of the respondent’s contribution were shifted to and be borne by the Director of Legal Aid would not arise. Hence, on the basis that the respondent decided to withdraw the applications by summons after making such applications, the trial judge ordered him to pay the petitioner’s costs incurred prior to the grant of legal aid certificate to him.  This decision did not go against the established principles governing costs.

30. However, the respondent submitted that at the hearing on 29 June 2012 the trial judge expressly stated that as both parties were on legal aid they should bear their own costs.  The transcript of the audio recording of the hearing on that day shows that discussion between the trial judge and solicitors for the parties regarding costs was as below:

“COURT : Yes, it is because today, bothparties are already granted aid by the Legal Aid Department.

MS LIU: Yes.

COURT :  Yes.  As to costs, it seems that you cannot seek to recover them from the other party.

MS LIU:  We would have reservations about this.

COURT :  You have reservations?

MS LIU:  Yes.

COURT :  Why?

MS LIU:  Of course, I do understand that ...

COURT :  In these 3 applications, for costs incurred after he was represented by the Legal Aid Department -- of course prior to his application for an appeal, at the moment when he filed it, he was not represented by the Legal Aid Department.

MS LIU:  Right.

COURT :  However, when the Legal Aid Department stepped in, you cannot ask for costs incurred thereafter because you are all on legal aid.  How can the Legal Aid Department be ordered to pay costs to the Legal Aid Department, right?

MS LIU:  Of course, as the family in the present case has assets, although he is granted aid by the Legal Aid Department, there is a chance that in the end both parties willretainsome property.  Of course, I also understand that in the case where the respondent is an aided person, under the law, we, being the applicant, in fact, cannot recover costs from the other party. However, actually this application was not made by us but by Mr Yip’s party.  Thus, if you are referring to the Legal Aid Ordinance, to my knowledge, it does not stipulate that I cannot recover costs from an aided person in the case where he is the party who has made an application.

MR KWAN:  I have reservations about Ms Liu’s submission in this regard because I will -- in a moment cite a paragraph, a -- a paragraph in Halsbury’s Laws of Hong Kong which touches on -- that is touches on, this -- this situation.

COURT :  That means both parties are on legal aid?

MR KWAN:  Both parties, that means, in fact, all -- it sets out 4 or 5 situations, then, after the 4 or 5 situations, what will be the case in all other situations.

COURT :  Yes.

MR KWAN:  Yes.

COURT :  Of course, as regards costs, I remind Ms Liu, I mean, ...

MS LIU:  Mm.

COURT :  ... that is to say, under these circumstances, I mean,  I am inclined to -- I mean we haven’t discussed it in detail, but I am inclined to...

MS LIU:  Yes.

COURT :  … I agree with Mr Kwan.  Normally, the court deals with it in this way: when the Legal Aid Department steps in and represents the respondent in a case, in respect of the costs incurred and occasioned thereafter, probably, on most occasions, there won’t be any order as to costs.

MS LIU:  Right, right.

COURT :  Yes, so that means you people have to think about it carefully. ...

MS LIU:  Understand.

COURT :  ... Yes, in such circumstance it is different from the earlier situation in which the respondent was unrepresented or not represented by the Legal Aid Department and you people had the opportunity to recover costs from him, and the costs might be recovered, could be recovered from the portion of the assets distributed to him.  It is different.

MR KWAN:  Understand.

MS LIU:  Yes.

COURT :  Yes, now you cannot recover them, right?

MS LIU:  Right.

COURT :  It is public revenue that is used for payment for the clients of the two of you, right?

MR KWAN:  Understand.

COURT :  That is, Mr Kwan, you people also have to understand that, yes, you people are seeking leave to appeal.  Even if the court grants you leave to appeal, you still have to go to...

MR KWAN:  Have to go on to do other things, yes.

COURT :  … the Court of Appeal to attend a hearing for argument.

MR KWAN:  Understand.

...

COURT :  Yes, that is in this regard, if the Legal Aid Department continues to represent the respondent, a huge sum of legal fees will be incurred at the Court of Appeal in the future. …

MR KWAN:  Understand.

COURT :  … At that time you people, being solicitors, cannot represent them.  They have to be represented by counsel.  The amount of counsel fees will be astronomical.

MR KWAN:  Understand.

COURT :  The amount will be astronomical, and if there is no order as to costs, there is a legal, first charge, right?

MR KWAN:  Understand.

COURT :  For the flat, there is no escape.  In fact, it will not be hopeless for the legal fees incurred by the Legal Aid Department because there is a flat.  If it is sold, both the respondent and the petitioner willget a share of the proceeds whether the appeal is allowed or not.Even now, according to my earlier decision, the respondent will get a share of the proceeds, right?

MS LIU:  Yes.

MR KWAN:  Yes.

COURT :  Is that right?  Your legal fees for representing the respondent can also be charged to it …

MR KWAN:  The portion of …

COURT :  … The portion after sale in the future, …

MR KWAN:  Mm.

COURT :  … There, it seems it amounts to several hundred thousands, right?

MS LIU:  Yes.

COURT :  Therefore, Mr Kwan, that means you need to think about it, even if you hope for the best, you in the future, the costs of today, the costs incurred at the Court of Appeal in the future, all the costs added up, even if there is no costs order, as you people are on legal aid, the several hundred thousands to which he might be originally entitled might be gone because it is subject to a first charge.

…

COURT :  The assets of the family are so few, in fact they may all be consumed in the legal fees.

MR KWAN:  Understand.

…

COURT :  However, if, in the future, because it is subject to a first charge and the amount involved in the first charge is so great that it consumes the whole of the family asset, even the sum originally set aside by the court for the 2 children to lead a normal life is gone, …

…

COURT :  The 2 children still need to endure many more years before they grow up.  They will lead a very hard life, but the family originally has an asset which could have enabled them to lead a slightly better life, right?

MR KWAN:  Yes, you’re right.

COURT :  However, nothing can be done about it.  Yes, they need to continue to be on Comprehensive Social Security Assistance because when the litigation is concluded, even if the court makes no order as to costs, the two of you, solicitors, the 2 solicitors’ firms or the counsel engaged in the future will consume the family assets completely.”

(Emphasis added.)

31. The above discussion between the trial judge and the solicitors for both sides, the underlined parts in particular, basically illustrates the legal principles stated in paragraphs 25 to 28 of this judgment.  When the trial judge mentioned therein that the courts would normally make no order as to costs, his wording was: “when the Legal Aid Department steps in and represents the respondent in a case, in respect of the costs incurred and occasioned thereafter”. Following that, the trial judge also pointed out that such situation was “different from the earlier situation in which the respondent was … not represented by the Legal Aid Department” and the petitioner “had the opportunity to recover costs from him, and the costs might be recovered … from the portion of the assets distributed to him”. Moreover, the trial judge had, before that stage, mentioned twice that the order that there be no order as to costs referred to the costs incurred after the respondent was represented by the Legal Aid Department and after the Legal Aid Department had stepped in.

32. The trial judge was not saying that as both parties were on legal aid at the hearing, with regard to all the costs of the 3 applications by summons made by the respondent, there should be no order as to costs and parties were to bear their own costs. Hence, what the trial judge said in relation to costs order at the hearing on 29 June 2012 was not inconsistent with the costs order he subsequently made on 9 October 2012. In our judgment, the ground of appeal advanced by the respondent, which was based on the remarks made by the trial judge at the hearing on 29 June 2012 that both parties were to bear their own costs, fails.

33. The respondent also submitted that the petitioner’s costs were beyond his means.  It was clearly stated in the letters of the solicitor for the petitioner dated 28 November 2012 and 5 February 2013 that the petitioner, pursuant to the costs order dated 9 October 2012, sought costs of $5,850 from the respondent, namely costs incurred between 29 December 2012 when the respondent took out the first summons to apply for an appeal and 13 February 2012 when he was granted a legal aid certificate.  Furthermore, the fact that the costs were beyond the respondent’s means did not constitute any compelling ground of appeal against the costs order.

34. We hold that the respondent’s appeal against the costs order dated 9 October 2012 fails.

Costs

35. The respondent sought to recover costs of the present appeal from the petitioner.  In our judgement, given that the respondent’s appeal is only allowed in part, the appropriate costs order is there be no order as to costs.

Conclusion

36. In the light of the above analysis and reasons, we make the following orders:

(1)  The respondent’s appeal against the costs order dated 12 December 2011 is allowed.  The costs order is set aside and in its place it is ordered that there be no order as to costs of the application for ancillary relief.

(2)  The respondent’s appeal against the costs order dated 9 October 2012 be dismissed.

(3)  There be no order as to costs of the present appeal.