LYYC v. CHL and CSMS, the Executrices of the Estate of CGSK also known as CSKG, Deceased

HCMP 683/2021

[2022] HKCFI 1431

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 683 OF 2021

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DECISION

(LITIGATION FUNDING)

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Introduction

1.  The Applicant issued her summons on 27 October 2021 for litigation funding (“Summons”)[1] and sought:

(1)  an order that subject to the Applicant’s certain undertakings filed previously in FCMP 223/2017 (“Undertakings”)[2], the Respondents, ie the estate of the Deceased (“Estate”)  to pay a sum of HKD 4,673,225 to the Applicant’s solicitors as litigation funding within 14 days from the date of the order, and for the avoidance of doubt, the interim financial support in paragraph 1(a)  of the Order of Judge Melloy of 20 October 2020 in FCMP 223/2017 (“Melloy Order”)[3] shall continue to be in force (“Relief (1)”);

(2)  the order of this Court of 16 June 2021 made by consent (“Consent Order”)  to stand dismissed (“Relief (2)”).

2.  The Consent Order referred to in Relief (2)  above provides that subject to the Undertakings, the Estate to continue to pay HKD 38,000 per month to the Applicant’s solicitors as litigation funding with effect from 1 June 2021 until trial, and that for the avoidance of doubt, the interim financial support as per Paragraph 1(a)  to continue to be in force.

Relevant procedural matters

3.  The originating summons in these proceedings (“OS”)  was issued in the Family Court on 2 November 2017 under FCMP 223/2017 for financial provision for the Applicant under sections 3, 4 and 7 of the Inheritance (Provisions for Family and Dependents)  Ordinance, Cap 481 (“Cap 481”). On 19 November 2019, the Applicant issued a summons for “interim maintenance payment” pending the final determination of the OS.

4.  Judge Melloy handed down a judgment on interim financial support including litigation funding on 20 October 2020 (“Melloy Judgment”)[4] pursuant to which the Melloy Order was made.  Under paragraph 1 of the Melloy Order, and subject to the Undertakings, the Estate is ordered to pay to the Applicant:

“(a)  HKD 55,000 per month for her interim financial support, such sum to be increased to HKD 92,500 per month with effect from 1 January 2021, to allow for the additional sum of HKD 37,500 per month for the mortgage repayments (“Paragraph 1(a)”);

(b)   HKD 38,000 per month to the Applicant’s solicitors as litigation funding with effect from 1 November 2020 until the financial dispute resolution (“FDR”)  hearing or trial, in the event that there is no FDR hearing[5](“Paragraph 1(b)”).

(emphasis added)

5.  The FDR took place before Judge Melloy on 10 May 2021 but unfortunately there was no settlement.  On the same day, the proceedings were transferred up to this Court by Judge Melloy.

6.  On 10 June 2021, the parties agreed to the terms of the Consent Order and that the Estate was to continue to pay the sum ordered in Paragraph 1(b)  of the Melloy Order for the litigation funding from 1 June 2021 until trial.

7.  After transfer up, the OS was first fixed before this Court on 28 July 2021 for directions (“Directions Hearing”).  It was on that day that a 10 day trial was fixed to commence on 5 December 2022 (“Trial”)  and a pre-trial review hearing (“PTR”)  was fixed on 19 July 2022. Counsel Mr Jeremy Chan appeared for the Applicant and Ms Theresa Chow appeared for the Estate at the Directions Hearing, during which Ms Chow indicated to this Court that Mr Bernard Man SC would be leading Ms Chow at the trial for the Estate.

8.  The Summons was initially fixed for argument on 8 March 2022 but due to a dispute between the parties in relation to the fixing of that hearing date, and due to the then pandemic situation, the hearing date was vacated and the Summons was directed by this Court to be dealt with on papers with directions for the lodging of written submissions.

9.  The Applicant’s written submissions by her counsel Mr Jeremy Chan were lodged on 8 February 2022 and the Estate’s by their counsel Ms Theresa Chow were lodged on 22 February 2022 (referred to respectively as each party’s “1^st Submissions”).

10.  It was pointed out in the Estate’s 1^st Submissions that the Consent Order was arrived at by the parties’ agreement which, as argued on behalf of the Estate, demonstrated the quantum therein was wholly appropriate and just.  The Estate was relying on res judicata and that the Court would be discharged from the duty of further investigating the matter.  It was further submitted on behalf of the Estate that the Summons was an abuse of process referring to Henderson v Henderson (1843)  3 Hare 100.  In order words, it appeared that it was being submitted on behalf of the Estate that the Applicant should be estopped/barred from making any application for further litigation funding by reason of the Consent Order.

11.  In any event, as it was not stated in the margin of the Summons which statutory provisions the Summons was made under[6], this Court was not clear which statutory provision or jurisdiction the Applicant was relying on for seeking Relief (2), namely for a dismissal of the Consent Order.

12.  In light of the above , on 24 March 2022, the Court directed the parties to lodge further written submissions[7].

13.  In response thereto, the Applicant’s solicitors Messrs Withers sent a letter to the Court to say “With the intention of saving both time and costs (this is especially so when the submissions on the upward variation itself was only 5 pages long)  and without going into the merits of whether this Court has to jurisdiction to [dismiss the Consent Order]”, instead of filing further supplemental submissions, the Applicant sought leave to amend the Summons instead.  The Applicant’s solicitors had set out their proposed amendments in their said letter (“1^st Proposed Amendments”)[8].

14.  As pointed out by the Estate’s solicitors Messrs Ip & Heathfield, where in the original Relief (1)  sought by the Applicant, she was seeking a fresh order for legal costs, by the 1^st Proposed Amendments to Relief (1), the Applicant appeared to be seeking an upward variation of the Consent Order.  The Estate’s solicitors pointed out that there would be different facts and legal principles which were relevant in such an amendment, and in light of this, if the Court were to grant leave, there should be further directions for submissions to be lodged.

15.  Messrs Withers then replied by saying they did not agree that there was any distinction between an “upward variation” and a “fresh order”.  This cannot be correct.

16.  Having considered the various exchanges of correspondence between Messrs Withers and Messrs Ip & Heathfield, by a letter dated 31 March 2022, this Court pointed out that the issue raised by the Estate was whether the Court could vary and/or dismiss a consent order under Cap 481 and this Court would need further submissions on this issue.  Having regard to the matter and the imminent ending of GAP, this Court directed the Summons be refixed for a remote hearing[9].

17.  Subsequently, the parties agreed to the Applicant filing an amended summons deleting the Relief (2)  she was seeking, namely the dismissal of the Consent Order (“Amended Summons”)[10]. In other words, the Applicant decided not to seek any amendment to Relief (1), or the “upward variation” as set out in her 1^st Proposed Amendments. 

18.  During the remote hearing, the Applicant made it clear she was seeking a “fresh order”, or a “further order” for legal cost provision and that she was no longer seeking to replace or to vary the Consent Order which should continue as it is, and having taken into account the amounts which would continue to be paid under Paragraph 1(b)  of the Consent Order, the Applicant sought a sum of HKD 4,369,225 or any other sum the Court may determine on top of the monthly HKD 38,000 in Paragraph 1(b)  in the Melloy Order until trial. 

19.  The Estate however complained that the quantum sought by the Applicant at the hearing was again different from that stated in the Amended Summons.  Leave was then granted to the Applicant to re-amend the Amended Summons to reflect the quantum sought or any other sum that the Court may determine (“Re-Amended Summons”).  The Applicant also sought an adjournment and applied for time to lodge reply submissions to the Estate’s Supplemental Submissions.  This was granted.

20.  Counsel Mr Jeremy Chan appeared for the Applicant and Ms Lareina J Chan appeared for the Estate at the remote hearing. 

Discussion

21.  To begin with, I accept that there is a distinction between section 3 of the Matrimonial Proceedings and Property Ordinance Cap 192 (“MPPO”)  in relation to maintenance pending suit and section 7 of Cap 481 in relation to interim orders.

22.  Section 7 of Cap 481 provides as follows:

“7. Interim orders

(1)  Where on an application for an order under section 4 it appears to the court—

(a)  that the applicant is in immediate need of financial assistance, but it is not yet possible to determine what order (if any)  should be made under that section; and

(b)  that property forming part of the net estate of the deceased is or can be made available to meet the need of the applicant, the court may order that, subject to such conditions or restrictions, if any, as the court may impose and to any further order of the court, there shall be paid to the applicant out of the net estate of the deceased such sum or sums and (if more than one)  at such intervals as the court thinks reasonable; and the court may order that, subject to this Ordinance, such payments are to be made until such date as the court may specify, not being later than the date on which the court either makes an order under section 4 or decides not to exercise its powers under that section.

(2)  Subsections (2), (3)  and (4)  of section 4 shall apply in relation to an order under this section as they apply in relation to an order under that section.

(3)  In determining what order, if any, should be made under this section the court shall, so far as the urgency of the case admits, have regard to the same matters as those to which the court is required to have regard under section 5.

(4)  An order made under section 4 may provide that any sum paid to the applicant by virtue of this section shall be treated to such an extent and in such manner as may be provided by that order as having been paid on account of any payment provided for by that order.”

23.  Ms Chan has referred the Court to Weisz v Weisz [2019] EWHC 3101 (Fam), for a comparison of the equivalent of section 7 of Cap 481 and section 3 of MPPO where it was observed that:

“22. I do not accept that the exercise of the discretion [under the equivalent of section 7 of Cap 481 and section 3 of MPPO] is identical. I do not even accept that it is broadly the same, although there are necessarily considerable overlaps. The words “immediate need” seems to me to make it very clear that I have to identify exactly that: an immediate need. Some things which claimants receive in interim periodical payments or maintenance pending suit applications go beyond what might be described as immediate needs. It is not appropriate for me to set out a list of things that might or might not come within that heading. I shall do so only restricted to the specific context of this case.”

24.  What is clear is that section 8 of Cap 481 provides the court with power to vary or discharge an order for periodical payments made under section 4(1)(a)  of Cap 481 only and there is no reference to section 7 for interim orders, whereas the court’s power of variation/ discharge under section 11 of MPPO clearly extends to section 3 of the MPPO.  Mr Chan accepts in his Reply Submissions that the variation power in section 8 of Cap 481 only relates to “final orders” and not to section 7 interim orders.

25.  In any event, what is clear from Mr Chan’s clarification at the hearing is that the Applicant is now seeking a further order under section 7, and not any variation of the Consent Order and the adjusted quantum in the Re-Amended Summons clearly reflects this.  In light of this, the only issue is whether the Court can now a further order under section 7 of Cap 481 in light of the Consent Order. 

26.  Ms Chan has submitted on behalf of the Estate that the phrase “subject to such conditions or restrictions if any, as the court may impose and to any further order of the court” is by reference to other orders the court may make ( including ancillary orders)  along with any conditions or restrictions that may be imposed, and that the legislation does not contemplate many or multiple section 7 interim orders to be made for the same subject matter, one on top of another, as submitted by Mr Chan on behalf of the Applicant.  As such, thus submits Ms Chan, the statute requires the first order to provide that it be “subject to …. any further order of the court” before another application for an additional interim order on the same subject matter would be entertained, and that as neither the Melloy Order nor the Consent Order has stated that the order therein be subject to further order, and are thus intended to be a conclusive legal costs provision until trial.

27.  However, the fact that the Estate has voluntarily agreed to the Consent Order, notwithstanding the Melloy Order has not specifically provided that the order therein should be “subject to any further order”, seems to defeat Ms Chan’s above submission.  By agreeing to the terms of the Consent Order, the Estate has clearly accepted that this Court has the power to make a further order and jursidiction, namely to continue the costs provision in the Melloy Order after the FDR until trial.  Further, on my interpretation and plain reading of section 7, the court is empowered thereunder to make any further interim order after the first interim order.  In any event, Ms Chan has not provided any authorities to support her said submissions and in light of this, I reject this part of her submissions. 

28.  In fact, Paragraph 1(b)  of the Melloy Order clearly provides that the litigation funding of HKD 38,000 per month was to be paid from 1 November 2020 until the FDR hearing or trial, in the event that there is no FDR hearing.  What was contemplated was costs provision only up to the FDR hearing, and if there was no FDR hearing, then up to the trial.  The costs provision clearly did not include the trial itself.  The wording of the Consent Order is similar, in that the costs provision is again expressed to be until trial.  No trial dates had been fixed at the time of the Melloy Order or at the time of the Consent Order.  Had the intention been for the costs provision to cover the Trial, one would have thought the wording would be something along the lines of “until completion of the trial” or “until final determination of the OS”.

29.  I thus find no sufficient evidence, nor anything in Melloy Judgment, to indicate that the costs provision order was intended to be conclusive, or that the intention of Judge Melloy was that the Applicant was not entitled to seek any further costs provision to cover the Trial, which was fixed after the FDR hearing.  There was also no sufficient evidence that it was the parties’ intention and mutual understanding that the Consent Order was to be conclusive and the costs provision was to cover the Trial or that the Applicant was not to be entitled to seek any further costs provision to cover the Trial. 

30.  Ms Chan has further argued that that this Court has no jurisdiction to grant an interim lump sum order and that there is a distinction between “such sum or sums (and if more than one at such intervals” under section 7 of Cap 481 (as an interim order to a section 4 application)  and a “lump sum order” pursuant to the main power under section 4(1)(b)  of Cap 481.

31.  As I understand it, Ms Chan’s argument is that as the word “lump” is missing in section 7, there is no jurisdiction for this Court to grant any interim lump sum.  The authorities relied on by Ms Chan concerned ancillary relief proceedings in matrimonial proceedings.

32.  Apart from drawing an analogy with ancillary relief proceedings in matrimonial proceedings, there are no authorities cited by Ms Chan in support of her argument.  The words “such sum or sums and (if more than one)  at such intervals as the court thinks reasonable” clearly contemplates the ordering of “one single sum” and is in my view, wide enough to cover either a “lump sum” or “periodical payments”.  I do not see that the wording of section 7 as being restricting this Court to only order “periodical payments” in the interim.  

33.  Ms Chan has also argued that sections 7 orders are intended to be interim order made for immediate needs in urgent circumstances until the court is able to determine what order, if any, should be made under section 4 of Cap 481, and that it is for the Applicant to demonstrate a strong prima facie case for provision in the first place and “a very clear case” where the immediate need of financial assistance is shown, referring to ACLS v HSB(T)L [2013] 2 HKLRD 444 (CA)  at paragraph 39 and Yip Wing Ching v Yip Shung Kin & Anor [2020] HKC 180 at paragraphs 26-27.

34.  Ms Chan has also referred to Smith v Smith [2011] EWHC 2133 (Ch)  in which it was held that at paragraph 27 that “a strong case of need should be established, the reason being that the court is effectively pre-empting the final decision.  Were a weak case to be accepted an applicant would be in receipt of monies which it could well be held that that person was ultimately not entitled to and which in the circumstances of most Inheritance Act applications it would be impossible to procure the repayment of”.

35.  The Court has further been referred to T v V [2019] EWHC 214 (Fam), where it was held at paragraphs 16-17:

“There are, certainly as far as this case is concerned, two requirements under [the equivalent to section 7 of Cap 481]. The first… is that the claimant is in immediate need of financial assistance. And the second is that there must be some form of merits test or threshold level as to the claimant’s substantive claim. There is little case law on [the equivalent to section 7] and the test to be applied when an application is being considered. The starting point… is that the [application] is for a mandatory order to pay money which the claimant may ultimately be found not to be entitled to and where there is no possibility of a cross undertaking in damages. It is therefore a very draconian order.”

(emphases added)

36.  As pointed out by Mr Chan, these were issues raised before Judge Melloy.  Suffice to say, Judge Melloy must have accepted that the two requirements were satisfied before making the Melloy Order, and there has been no appeal from the Melloy Order. 

37.  There is no sufficient evidence that there has been any change in the merits of the Applicant’s claim between the time of the hearing before Judge Melloy and the present.

38.  In so far as whether there is any immediate need for any further costs provision, it was submitted by Ms Chan that the Applicant’s liquidity and financial position had improved in the interim and that the Applicant’s net worth is now HKD 18.4m whereas the Estate only held roughly HKD 17m. 

39.  However, the figure of HKD 18.4m includes the Applicant’s Happy Valley Apartment, which is now valued at HKD 26,500,000, but as pointed out by the Applicant, Judge Melloy had accepted that it would not be reasonable to expect the Applicant to sell her only asset at this stage[11].

40.  The Applicant has extended the HKD 7 m loan facility from the Dah Sing Bank on 15 October 2021 secured against the Happy Valley Property[12], and at the time of her 7^th affirmation was about to receive HKD 1.34m out of the loan facility.  According to the Applicant, this was to cover her monthly expenses as the interim financial provision under the Melloy order was insufficient to cover her monthly expenses.  In her 8^th affirmation, she further explained that the sum was meant to be for security and to make sure there is at least some cash available if there is any sudden need of cash (such as medical or dental needs)[13].

41.  The drawing of HKD 1.34m in October 2021 was about a year after the Melloy Order.  On a broad brush approach, Judge Melloy was of the view that as from 1 January 2021 a sum of HKD 92,500 was reasonable[14]. As said, there was no appeal from the Melloy Order.  Mr Chan had submitted that the Applicant’s financial situation had definitely worsened and definitely had not improved. 

42.  The Applicant has said in paragraph 19 of her 7^th affirmation that she adopts the monthly expenses set out in her 6^th affirmation, which was HKD 141,086.50 per month.  This amount had included HKD 44,000 per month for legal fees and she claimed a total of HKD 97,086.50 per month for her own maintenance expenses.  Judge Melloy ordered a sum of a total of HKD 92,500 per month with effect from 1 January 2021.  Therefore, on the Applicant’s own evidence, it would appear that the shortfall was only about HKD 4,600 per month.  Further, according to the Applicant’s 6^th affirmation filed in support of her application before Judge Melloy, as at 20 August 2020, the balance of her bank accounts was about HKD 252,000[15], and according to her 7^th affirmation, as at 25 October 2021, the balance of her bank accounts was about HKD 85,000, ie without taking into account the HKD 1.34m she drew from her loan facility[16].  Thus, before her receipt of HKD 1.34m, the depletion in her banks accounts was about HKD 167,000 in the 14 months between August 2020 and October 2021.  Even if what was ordered by Judge Melloy for the Applicant’s interim maintenance was not sufficient, there was no sufficient evidence that the Applicant would require the entire HKD 1.34m to cover any shortfall in her interim maintenance or for any security for any sudden need of cash. 

43.  The Applicant has also disclosed that she received a BMW X1 car as her 60^th birthday gift in June 2021 from her son-in-law and that the purchase price was HKD 393,174.80 (with a sum of HKD 25,000 contributed by her out of the sale proceeds of her old 2010 BMW 325iA car).  However, it was also the Applicant’s case that she owed her son-in law HKD 2,921,104.45.  Ms Chan pointed out that at the hearing before Judge Melloy, it was the Applicant’s case that she had exhausted her ability to borrow, and in light of this gift from her son-in law, it was thus queried by the Estate as to whether the Applicant had indeed exhausted her ability to borrow at the time of the hearing before Judge Melloy. 

44.  Having considered the above, on a broad brush basis, I am of the view, that the Applicant could come up with at least HKD 1m out of her funds towards her legal costs.  This would however not be sufficient to cover her costs for the Trial.  

Quantum of the legal costs

45.  Prior to the transfer up of these proceedings the main witnesses appeared to be only the Applicant and CSMS, one of the executrices of the Estate.  However, on 24 January 2022 and thereafter there have been no less than 10 affidavits/affirmations filed by different persons on behalf of the respective parties plus an application for joinder.  The PTR is coming up on 19 July 2022.  Having considered the legal team that the Estate is going to have at the Trial, even though Mr Jeremy Chan is an experienced Counsel in this field, I am prepared to accept that for equality of arms, it is reasonable for the Applicant to have two Counsel in her team.

Conclusion 

46.  The amount sought in the Re-Amended Summons is now HKD 4,369,225, with the continuation of the Consent Summons (ie 8 months of HKD 38,000 up to the Trial).  Mr Chan’s request was for his brief to be delivered 10 weeks before the trial, which would be by 19 September 2022. 

47.  Having regard to all said above, I am prepared to order a further sum of HKD 3,350,000 to be paid by the Estate on or before 1 September 2022, to cover the Applicant’s litigation funding for her costs for the Trial until the determination of the OS by this Court.

48.  As for costs, as has been set out earlier, this Court takes the view that it has no power to vary or to dismiss the Consent Order, and in light of this, the Applicant should bear the costs of the amendment of the Summons for the deletion of Relief (2), including all the correspondence to the Court leading up to the consent summons for the Amended Summons.  As for the Re-Amended Summons, as Mr Chan had clarified at the hearing before this Court what the Applicant was seeking, the Re-Amendment Summons was only a technical amendment, and I am of the view that there should be no order as to costs of the Re-Amendment Summons.

49.  As the Applicant is the overall successful party, Relief (1)  in the Amended Summons the Estate should pay the Applicant’s costs of her application save as ordered above.  All costs awarded are to be taxed, if not agreed, on party and party basis.

50.  The above costs orders are orders nisi, which shall be made final after 21 days.