CD v. LWS

FCMC 1803/2019

[2020] HKFC 206

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES NO. 1803 OF 2019

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J U D G M E N T
(VARIATION OF MPS)

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Introduction

1.  This is a hearing of the Respondent (“the wife”)’s application for an upward variation of the previous maintenance pending suit (MPS) order dated 23 January 2018 under FCMC 11625/2017 (which order was re-granted by this court on the same terms on 29 August 2019 in this case) (“the MPS Order”).  Besides the undertakings given by the Petitioner (“the husband”) in the MPS Order, the wife is now asking for the MPS to be increased from a monthly sum of $50,000 to $200,000.  In addition, she also asks for a monthly sum of $200,000 as legal costs provision up to FDR or until further order of the court.

2.  The husband objects and asks for the wife’s applications to be dismissed.

Background

3.  The parties were formally married in 2013.  There is dispute on when their spousal relationship actually began but for the purpose of the present application, I do not think that is material and therefore I will not delve into that dispute. 

4.  Within wedlock, a daughter (“E”) was born in 2014.  She is now 6 years old and is under the care of the wife.

5.  The wife filed a petition for divorce based on behaviour in 2017 (FCMC 11625/2017) but the parties later agreed to dissolve their marriage on a more amicable ground of 2-year separation.  As a result, the husband filed the present petition (FCMC 1803/2019) on 19 February 2019.  A decree nisi of divorce was granted on 29 August 2019.

6.  For the daughter, the parties have come to an agreement on joint custody, with care and control to the wife and reasonable access to the husband.

7.  The parties have also come to an agreement on MPS and in the MPS Order, the husband has given undertaking to make the following payments:

(1)  2 domestic helpers’ salaries;

(2)  Insurance of the wife and E;

(3)  School fees of E;

(4)  Extra tuition fees for a native English teacher for E for not more than $3,200 per month;

(5)  Reasonable and necessary medical and dental expenses of E upon production of receipts of not more than $5,000 per month (unless any excess is agreed by the husband);

(6)  Extra-curricular activities for E of painting and lego and to pay for any other additional ECA upon mutual agreement of the parties;

(7)  Mortgage payment of a flat at Dragons Range, No. 33 Lai Ping Road, Shatin (“the Dragon Range flat”); and

(8)  The wife’s supplementary credit card of Hang Seng Bank including the monthly expenses of the Hong Kong Jockey Club.

8.  In addition to the above undertakings, the husband also agreed to pay MPS at the monthly rate of $50,000 commencing 1 February 2018.  Although not expressly set out in the MPS Order itself, there is no dispute that the wife was also allowed to receive rental payments from 2 landed properties totalling $46,800 per month at the time of agreement.  It is common ground that the rental payment received have now been increased to $51,000.  In other words, the wife is currently receiving a monthly sum of $101,000 towards the interim needs of herself and E.

9.  On 13 May 2020, the wife issued a summons for the variation of the MPS Order from $50,000 to $200,000 per month.  In addition, she also asked for legal costs provision in the sum of $200,000 per month until FDR or further order of the court.  As the parties failed to reach any agreement at the call over hearing, directions were given for the application to be dealt with on paper with judgment to be reserved which I now give. 

The Legal Principles

10.  In considering an application for variation, the test to be applied is set out in section 11 (7) of MPPO:

“(7) In exercising the powers conferred by this section the court shall have regard to all the circumstances of the case, including any change in any of the matters to which the court was required to have regard when making the order to which the application relates and, where the party against whom that order was made has died, the changed circumstances resulting from his or her death.”

According to the said provision, the court, in considering such an application for variation, has to consider all the circumstances of the case and in particular, any changes in the matters to which regard has been made in reaching the original order.

11.  In the case of AEM v. VFM[1], Cheung JA has explained the modern approach in dealing with such an application at paras 14.4-8 of the Judgment:

“4.  The modern approach, as required by section 11(7), is for the Court to consider all the circumstances of the cases. The Court is not required to proceed from the starting point of the original order but look at the matter afresh: Flavell v. Flavell [1997] 1 FLR 353 at 357B following Lewis v. Lewis [1977] 1 WLR 409 and Garner v. Garner [1992] 1 FLR 573.

5.  Any change in any of the matters to which the Court was required to consider when making the original order was one of the circumstances to be considered.

6.  Almost invariably, an application to vary an earlier periodical payment order will be brought on the basis that there has been some changes in the circumstances since the original order was made, for example, continuing inflation; the increased costs in supporting a growing child and that one party may be more adversely affected than another by the increase in the costs of living: Garner v. Garner.

7.  An increase in the wealth of the husband was a relevant factor to be taken into account: Primavera v. Primavera [1991] 1 FLR and Cornick v. Cornick (No. 2) [1995] 2 FLR 490.

8.  At the same time the basis and intended effect of the original order are relevant factors to which the Court on variation should pay regard and there should not be a radical departure from the approach taken by the parties themselves when they had entered into an agreement embodied in a consent order: Boylan v. Boylan [1988] FLR 282.”

12.  As to the weight to be attached to the original order, Tang VP (as he then was) said in the case of HCTT v. TYYC [2008] 5 HKC 86 at paras 15-16:

“15.  But as Garner v. Garner [1992] FLR 573 shows that does not mean that the earlier order, whether made by consent or not, carries no weight. How much weight should be given to the earlier order must depend on the circumstances. Cazalet J said in the English Court of Appeal:

“Almost invariably, an application to vary an earlier periodical payment order will be brought on the basis that there has been some change in the circumstances since the original order was made; otherwise, except in exceptional circumstances, the application will, in effect, be an appeal. If an order is not appealed against, or is made by consent, then the presumption must be that the order was correct when made. If it was correct when made, then there will usually be no justification for varying it unless there has been a material change in the circumstances. However, because of the impact of continuing inflation, because children grow older and cost more to support and because, for example, the cost of living in its increase may hit one party harder than another, it will usually follow that, if time has passed, there will inevitably have been changes in the circumstances, of the parties concerned.

Following  Lewis v. Lewis, by which decision this court is bound, a court on the hearing of an application to vary is fully entitled to look at all the relevant matters set out in s.25 of the Matrimonial Causes Act 1973.  On occasions, the court may be slow to accede to an application to vary a consent order; not least because the parties’ solicitors might otherwise be deterred from either seeking to negotiate such a provision or to achieve finality.  Another factor which may influence a court will be the time that has passed since the original order was made.  If an application consequent on an order is brought very soon after that order has been made, the court, in normal circumstances, is likely to attach more weight to the earlier order than if it had been made some years previously.  Likewise, the court would expect to pay full regard to any special terms agreed between the parties at the time the original order was made- as, for example, when endorsements on briefs or contemporaneous correspondence show that an agreed order has, for some particular reason, been set at an artificially low figure.  Shortly stated, the court must decide what weight it should attach to the original order and all the surrounding circumstances.  However, once an application to vary is before it, the court is fully entitled to make an order considering all the circumstances afresh, paying such regard to the older order as may be appropriate.”

16.  Thus, although the jurisdiction to vary is untrammelled, normally the earlier order would not be varied unless there has been a material change in the circumstances.”

13.  Although the above 2 cases actually concern with an application to vary periodical payment orders, I am satisfied that the same principles should also apply to variation of MPS orders.  Therefore, I shall bear the above principles in mind when I come to consider the facts of this case.

The Case of the Wife

14.  According to the wife, she is now facing a dire financial situation in view of the speed and magnitude of the legal battles raised by the husband.  She has set out her interim needs at a monthly rate of $293,484 (A/33, §25), but as some of those outgoings have already been covered by the husband’s undertakings (amounting to $140,254), what she actually has to pay is $153,230 per month:   

Items	Average per month
Meals at home	$18,000
Meals out of home	$18,000
2 domestic helpers	$11,000
2 domestic helpers’ insurance, medical and food	$600
Utilities charges	$3,850
Household	$4,000
Management fees for 2 properties	$5,622
Properties agent commission	$1,062
Refurbishment expenses	$1,866
Pets	$1,500
Contact lens	$530
Newspaper and magazine	$517
Medical for wife (physiotherapy)	$6,000
Foot or body massage	$2,280
Facial massage	$4,000
Medical for weight loss programme	$2,500
Hairdressing	$2,500
Clothings	$15,000
Handbags	$15,000
Shoes	$5,000
Entertainment	$6,000
Travelling to Korea, Thailand, Singapore and Japan	$20,000
Donation	$570
Property tax	$8,333
Total:	$153,230

15.  Upon reading the terms of the MPS Order, it seems that the husband has already undertaken to pay for the 2 domestic helpers’ salaries.  If one should deduct that sum of $11,000 from the above table, the wife’s present expenses should be $142,230.  But in the wife’s supporting affirmation (A/32, §24), she said that despite the husband’s said undertaking, he has only paid for 1 domestic helper’s salary.  There was no explanation on why she still claimed for 2 domestic helpers’ salaries in the above table, if only one is outstanding.  In any event, the husband has to honour his undertaking, or otherwise the wife is entitled to proceed to enforcement, including proceedings for committal.  As it is a matter of enforcement, I will leave the 2 domestic helpers’ salaries in the above table out of my following discussion.

16.  From the other parts of the wife’s affirmation, she was saying that the family used to enjoy a luxurious way of life, and their monthly expenses during marriage were set out in §19 therein (A/28-29) amounting to a monthly of sum of $570,761.  I do not intend to set out all those items (altogether 36 items) herein as I have no intention to lengthen this judgment unnecessarily.  But it seems that some of those items may not be appropriate for a consideration of MPS, for example, there was an item for mah-jong entertainment at $45,000.  There were 3 separate items for travelling to destinations like Korea, Thailand, Singapore, Japan, Macau, China and Europe with a total monthly outgoing at $34,137.  In view of the present public health situation, these outgoings are no longer

relevant, as far as MPS is concerned.

17.  In addition to the claim of $153,230 per month in paragraph 14 above, the wife has also stated in §34 of her affirmation (A/38) that she needs a monthly sum of $51,666 for a car with chauffeur:

Additional item of a car
Car ($800,000/10 years/ 12 months) a 7-seater car such as Elgrand	$6,666
Expenses for using car (Parking, insurance, fuel, etc.)	$20,000
Driver	$25,000
Sub-total:	$51,666

Adding these 2 sums of $153,230 and $51,666 would give us the final figure of $204,896.  That is the basis for the wife to make the present application for an increase of MPS to $200,000 per month.

Discussion

18.  I note that the present level of MPS at $50,000 per month (together with other undertakings) was agreed in 2018.  The essential question to be asked is: Is there any material change of circumstances justifying an upward variation from $50,000 to $200,000 per month?

19.  It seems that the reasons proffered by the wife for the present application for variation can be found in §§35-39 of her affirmation (A/38-40).  Upon a close reading of the evidence, there was not any reference to any change of circumstances since the granting of the MPS Order, except just to say that the present MPS level is not enough. There was a reference to a loss of $700,000 when the wife was cheated in selling her boutique business in May 2017.  But that was before the wife agreed to the MPS Order dated 23 January 2018.  The need for a car with chauffeur is also not something new. 

20.  The wife said at §38 of the affirmation (A/39) that she was advised that she was entitled to:

“…a more decent life style to be provided by [the husband] and not to live on debts like a beggar…”

21.  I must say that the reference to a life of a beggar is, in my view, at least an overstatement, if not an outright exaggeration of the wife’s so called financial predicament.  It is noted that in the wife’s table of expenses set out in paragraph 14 above, there was an item for travelling (to Thailand, Singapore and Japan) at $20,000 per month.  Traveling outside Hong Kong for leisure may be a proper consideration back in 2018, but may not be a necessary item at this moment.  There is also an item for handbag at $15,000 per month.  I am not convinced that the temporary cessation of buying new handbags will put the wife in a dire financial situation.  If one should simply subtract these 2 items at $35,000 and the salaries of 2 domestic helpers at $11,000 (which have already been covered by the husband’s undertakings), totalling $46,000 per month, the needs of the wife will come down to $107,230, which is not far from the current interim maintenance received by the wife at $101,000 ($50,000 + $51,000 = $101,000).

22.  If one should take a global view of the matter, the wife and E are now living in rent free accommodation.  The husband is currently paying a monthly sum of about $140,254 for the various undertakings in the MPS Order and the wife is receiving $101,000 in cash, making it a total of $241,254 of interim financial support being enjoyed by the wife and E.  I think it is rather hard for the wife to raise a case of her being in a dire financial situation under these circumstances. 

23.  Despite what was being said above, I think there is another aspect of the case that I need to take into consideration, i.e. the passage of time.  The MPS Order was made closed to 3 years ago in January 2018.  E has grown and there was inflation as well, justifying some adjustment in the MPS.  I am minded to raise it to $60,000 per month for such purpose, which would include some allowance for the wife and E’s transportation needs as well.  According to the husband, he would not mind the wife and E sharing his chauffeur.  In the circumstances, a small allowance for taxi fares may be justified for those occasions when the sharing of chauffeur is not possible.

Legal Costs Provision

24.  Although the wife’s case for an increase of MPS as discussed above may not be so strong as she might have initially thought, the same cannot be said for her claim for legal costs provision, which is also a form of MPS itself.

25.  I note from the history of this case that the wife first took out proceedings for divorce based on the husband’s behaviours in 2017 (FCMC 11625/2017).  The parties later agreed to proceed on the ground of separation (the present case of FCMC 1803/2019). There have been 10 court appearances so far and we have yet to reach the stage of FDR.  This is highly unsatisfactory.  Although I accept that some of the hearings were necessary for the parties to work out an agreed fact of separation for the divorce, still some of the time has been wasted on unnecessary applications by the husband. 

26.  There was one application by the husband for the return of his watches which were quite valuable.  That summons was dismissed but I accepted that there might be some genuine dispute on those watches and so no adverse cost order was made against the husband.  The same cannot be said of his other summons for the return of his personal items, which I believe were his clothing.  That matter should not have been brought to court and the summons was dismissed with costs.  In view of this, there is some support for the wife’s contention that the husband has been adopting an over litigious approach with a view to drain her financial resources in meeting all these unnecessary interlocutory applications.

27.  There are further allegations by the wife of serious financial non-disclosures by the husband and also the likelihood of joining non-parties to the case.  All these would mean that a huge legal bill is to be faced by the wife which she could hardly afford without the contribution by the husband towards her legal costs. 

28.  I accept this was not a situation envisaged in January 2018, when the MPS Order was first agreed upon, and a legal costs provision for the wife is called for, subject to the satisfaction of the Currey[2] test.

29.  The Currey test is well known and I just repeat here briefly for the sake of completeness:

(1)  That the applicant has no assets, or none that can reasonably be deployed.

(2)  That she can provide no security for borrowing, or none which can reasonably be offered.

(3)  That she cannot reasonably obtain legal services by offering a charge on the outcome of the litigation.

(4)  That she cannot secure publicly funded legal help at a level of expertise apt to the proceedings.

Discussion

30.  As far as the wife’s assets are concerned, there are currently 2 properties being held under her name and it was agreed that the rental income of these properties ($51,000 per month) could be used by the wife as MPS.  However, it is the husband’s case that both properties do not belong to the wife beneficially.  According to him, one of the properties (Dragon Range) was purchased by the husband for investment and the wife’s name was used for stamp duty purpose (A/55, §36).  As for the other property (Eltanin Square Mile), it was held by the wife on trust for the daughter.  Therefore, even in the husband’s own case, the wife owns no valuable assets beneficially herself.

31.  I note that it is part of the husband’s submission that the parties did at one stage negotiate to sell the Eltanin Square Mile property in order to raise funds for the wife’s legal costs.  But if the property belongs to the daughter beneficially, I am doubtful whether the parties could just agree among themselves to make use of the daughter’s property for their own litigation.

32.  There was discussion on selling the watches now held by the wife in order to raise the needed funds. But that may not be a suitable option as the selling of second hand expensive watches would need proper valuation which may not be easy to obtain.  I note that the parties still failed to reach any agreement on the watches’ valuation since the husband’s last application was dismissed on 4 December 2019.

33.  As the wife owns no valuable assets, it is not difficult to come to the conclusion that she could provide no security for borrowing, or none which can reasonably be offered.

34.  According to the wife, she has made enquiries with the Legal Aid Department and was informed that she would not be qualified for legal aid since she owns 2 properties and quite a number of expensive watches.  Despite such information, the wife still made the application on 10 August 2020, which application was, not surprisingly, rejected on 17 August 2020.

35.  For the sake of completeness, I think it is simply not feasible to obtain legal services by offering a charge on the outcome of the litigation, at least not in Hong Kong. I do not think the husband will try to argue otherwise.

36.  All in all, I am satisfied that the wife is entitled to legal costs provision and the issue now is on quantum.

Quantum

37.  In the husband’s submissions, the wife was criticised for not controlling her legal costs to a reasonable level.  According to his calculation, the wife has already incurred $1,250,000 on the main suit alone and she is now asking for another sum of $3,600,000 (18 months at $200,000 each).  He also criticised the breakdown of the wife’s anticipated legal costs to be woefully inadequate.

38.  In quantifying her anticipated legal costs from now to FDR (which is expected in 18 months’ time), the wife has referred to a draft Form H as exhibited in her supporting affirmation (D/189-193).  For part 2 therein, i.e. from now to FDR, the quantifications were:

Solicitors’ Costs  

MPS hearing	$173,770
Discovery	$576,690
Joinder	$243,520	$993,980

Disbursements

For solicitors	$10,000
For forensic accountant	$1,000,000	$1,010,000

Counsel fees	$1,600,000	$1,600,000
	Total:	$3,603,980

My Views  

39.  Despite the wife’s claim that this is a very wealthy family with many complicated issues to be resolved, I am of the view that the wife’s claim of $3,600,000 is well beyond the reasonable bound of interim legal costs to be allowed from now to FDR. 

40.  We have to bear in mind that we are talking about legal costs from now to FDR, which, according to the wife, is likely to take place in 18 months’ time.  I note that the wife first issued her proceedings in 2017, which was more than 3 years ago.  A FDR hearing in another 18 months’ time is not satisfactory at all.  I will expect the FDR to take place sooner rather than later.  In my view, a FDR hearing within 9 months from now is more reasonable.

41.  Furthermore, for the purpose of FDR, full discovery is often not necessary.  There is a claim of $1,000,000 in legal costs for employing a forensic accountant which I believe could wait until after FDR in the event that this case really has to go to trial.  Even for joinder, whether full pleadings before FDR are necessary depends on the circumstances.  I am of the view that the wife should exercise more restraints in her legal expenses before FDR.  Doing the best as I could, I would say a sum of $540,000, payable by $60,000 monthly instalments for a period of 9 months would be reasonable in all the circumstances of this case.

Conclusions on the Wife and the Daughter’s Updated Needs and Legal Costs Provision

42.  As discussed above, I am satisfied that the reasonable monthly needs of the wife and E have increased for a monthly sum of $10,000 (from $50,000 to $60,000) and it is reasonable for her to spend legal costs in monthly sum of $60,000 for a period of 9 months (i.e. $540,000) up to FDR.  The next issue is whether the husband has the ability to pay this additional monthly sum of $70,000 as MPS.

The Husband’s Ability to Pay

43.  In the husband’s Form E (B/16), he stated that he had monthly income of $86,610.42. He also owned 10 companies (B/49) yielding monthly dividend of $828,916.67 (B/17).  This would have given the husband a monthly total income of $915,527.09.  Although the Form E was dated 15 November 2017, I note from the husband’s more updated affirmation in opposition dated 4 August 2020 (A/76-77), there was no updated evidence on his present income, except a general statement that his business has been drastically dropped and he did not have the ability to pay what was asked by the wife without liquidating his assets. 

44.  In his counsel’s submissions (§60), it was submitted that the monthly dividend of $828,916.67 was not actually paid into the husband’s personal bank account but was used to set off his current account with the companies.  If that was the case, it means that the husband would draw monies from the companies for his use first and then pay back with the dividends later declared.  That was no different from the husband receiving the dividends directly form the companies.

45.  The burden is on the husband to prove the deterioration of his financial abilities by providing the necessary evidence.  I am afraid that he has failed to discharge that burden.

46.  As set out in paragraph 42 above, the proposed net increase in MPS is $70,000 per month (from cash payment of $50,000 to $60,000 and legal costs provision at $60,000), which is not a very big sum in view of the overall financial well-being of the husband.  I am satisfied that the husband has the ability to shoulder that additional responsibility for the coming 9 months. 

Order

47.  Based on the above reasons, I would grant an upward variation of the MPS Order that:

(1)  The MPS payable under paragraph 2 of the MPS Order to be increased from $50,000 to $60,000 per month payable on 1^st day of every month starting 1 November 2020 until further order of the court.

(2)  The husband shall pay legal costs provision in the sum of $540,000 by monthly instalments of $60,000 each on the 1^st day of every month starting 1 November 2020 for a period of 9 months.

Costs

48.  Costs to follow event.  The wife succeeds in her application and is awarded costs of the application, including all costs reserved with certificate for one counsel and such costs to be payable forthwith.  I direct that unless the parties shall agree on the quantum within 14 days, such costs will be assessed summarily by this court.  In that event, the wife shall submit her statement of costs (limited to 2 pages at font 14 with double line spacing) within 7 days thereafter and the husband shall submit his written submission on summary assessment (limited to 2 pages at font 14 with double line spacing) within 7 days thereafter.  This will be in the form of an order nisi to be made absolute upon the expiry of 14 days from the handing down of this Judgment.