T v. L

FCMC 8460 / 2012

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES

NUMBER 8460 OF 2012

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J U D G M E N T
(Maintenance Pending Suit: Legal Costs)

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The application

1.  This is an application by summons filed on 12 March 2013 by the petitioner wife for maintenance pending suit (“MPS”) pursuant to s.3 Matrimonial Proceedings and Property Ordinance, Cap 192 (“MPPO”) for an interim order that the respondent husband is to pay her a sum of $58,000 per month towards her legal costs in respect of her application for custody, care and control of her daughter, a child of the family.

Background

2.  The background of the parties and the history of the present litigation were succinctly set out in the Judgment (Maintenance Pending Suit) made by Deputy District Judge A. Yim on 13 November 2012 as follows: -

“2. The husband was receiving his secondary education overseas when his parents encountered a fatal traffic accident, he is the only child of his deceased parents and he received income from the estate since then. The husband claimed himself to be unemployed in his Form E. The wife is also the only child of her now separated parents, she was arranged to live with her grandmother in mainland since primary three and remained there until she completed secondary two and a one-year beauty consultant course, thereafter she returned to Hong Kong and started working.

3. The husband is now aged 25 while the wife aged 26, the parties were in their early twenties when they got to know each other in 2008, and they married in January 2009 after the wife found herself pregnant. Their daughter was born in May 2009. During marriage the couple was mainly provided by the estate of the husband’s late parents, while the wife worked briefly as beauty consultant between June 2011 to September 2011 and March 2012 to September 2012.

4. The couple separated in December 2011. The wife issued proceedings based on unreasonable behaviour on the 13 June 2012. The first appointment hearing was fixed on 3 September 2012, the wife issued summons applied monthly maintenance pending suit in the sum of $40,000 on 31 August 2012.

5. On 3 September 2012 I ordered the husband to pay the wife an interim monthly maintenance pending suit in the sum of $9,000 and adjourned the wife’s application for full argument to 12 November. Further, as the couple was not able to agree on the arrangement of the daughter, I also called for a social investigation report (SIR) to be available on the same date. The wife was earning on average $15,000 per month at the time she took out the summons but the SIR revealed that she lost her job shortly after the hearing on 3 September.

6. When the husband prepared his affirmation in reply to the maintenance pending suit application, he was working on the assumption that the wife was gainfully employed and offered to pay the wife monthly maintenance pending suit in the sum of $7,000. Although the husband claimed himself to be unemployed, it appeared in the SIR that the husband would spend about 2 to 3 hours per day in his late parents’ shop looking after the late parents’ business. It is stated in the skeleton submission of the husband that he is learning from his uncle about his deceased parents’ business.

7.  The daughter is being cared by the husband’s maternal aunt since May 2011, the SWO recommended to maintain the status quo.  The wife took out a summons for interim custody, care and control of the daughter after she received copy of the SIR.  And according to her latest affirmation dated 7 November 2012, she is now a part-time shop attendant, earning $30 per hour.”

3.  By the Judgment of Deputy District Judge A. Yim dated 13 November 2012, it is ordered that the husband is to pay the wife a sum of $25,000 per month as maintenance pending suit. The trial of the question of custody, care and control of the child of the family has been set down to start on 22 October 2013, with 8 days reserved. A pre-trial-review was fixed to take place on 27 September 2013.

4.  Ms. Yip for the husband argued that the wife’s application must be refused since she has failed to bring herself within the Currey test. In particular:-

(a) the wife has no difficulty in meeting her legal costs at all;

(b) she has undisclosed assets that she can reasonably deploy, or she can borrow with or without security;

(c) she may well be covered by a Sears Tooth arrangement in respect of her legal costs with the solicitors;

(d) there is no reason why she should not and cannot apply for legal aid;

(e) there is no skeleton bill filed.

5.  Ms Yip very emphatically said that the Currey test has now received confirmation by the Hong Kong Court of Appeal.

The Law

6.  It has been held that an application for MPS can include provision for legal costs. The leading Hong Kong case is KGL v CKY [2003] 2 HKLRD 301. In the present case, counsel for the parties accept that an application for MPS can include the wife’s instant application which is for costs contribution for the trial of the question of custody, care and control much the same as applications for costs contribution for the trial of the question of ancillary reliefs.

7.     Since the English Court of Appeal decision in Currey v Currey [2007] 1 FLR 946, judges in the Hong Kong Family Court have relied on the case as setting out the guiding principles for granting applications for costs contribution as MPS. It has been dubbed as the Currey test.

8.  The Hong Kong Court of Appeal recently examined the application of the Currey test to Hong Kong courts and the principles articulated by Wilson LJ in Currey v Currey were adopted as providing prudent guidance to both judges and practitioners in this jurisdiction in the case of HJFG v KCY [2012] 1 HKLRD 95 at 113-117 in the following manners:

“74. Whatever may have been the position ten years ago, it is no longer disputed that the words of s.3 of the Ordinance are wide enough to empower the Hong Kong courts to include an element towards a party’s legal costs in an order for maintenance pending suit: see KGL v CKY [2005] 1 HKFLR 215.

75. In submitting that, in light of existing authority, the wife had not made out a claim for a contribution towards her costs, Ms Stone relied principally on guiding principles enunciated by Wilson LJ, as he then was, in Currey v Currey [2007] 1 FLR 946.

76. Those principles have been adopted in the Matrimonial Division of the District Court: see H v H (Interim Maintenance) [2007] HKFLR 311. To my knowledge, however, they have not been adopted in this Court or the Court of First Instance.

77. Accordingly, before Poon J, the guiding principles set out in Currey, while of persuasive value, were in no way binding on him.

78. S.3 of the Ordinance, of course, still required the judge to be satisfied that any contribution towards the wife’s on-going legal costs was reasonable. That meant that he had to be able to conduct some analysis of the nature and extent and purpose of the contributions sought. On the part of the wife, that required some breakdown of her anticipated costs.

79. Aside from the fundamental requirement of supplying a sufficiently detailed breakdown of anticipated costs, I am of the view that the following principles articulated by Wilson LJ in Currey should in future be adopted as providing prudent guidance to both judges and practitioners in this jurisdiction.

80. In the view of Wilson LJ, the initial, overarching inquiry should be into –

“… whether the applicant for a costs allowance can demonstrate that she cannot reasonably procure legal advice and representation by any other means.  Thus, to the extent that she has assets, the applicant has to demonstrate that they cannot reasonably be deployed, whether directly or as the means of raising a loan, in funding legal services.”

81. As Wilson LJ pointed out, satisfying that condition alone may not be sufficient. In the broad exercise of discretion, a judge may consider that other factors must come into play –

“The subject matter of the proceedings will surely always be relevant; and, insofar as it can safely be assessed at so early a juncture, the reasonableness of the applicant’s stance in the proceedings will also be relevant.”

82. The period over which an allowance for legal costs was to be paid was also considered by Wilson LJ to be a factor of considerable relevance. Applicants should not therefore expect that an order that the allowance be paid until the final determination of all proceedings will be the inevitable order. It was observed that if the application for an allowance for legal costs was made before the FDR hearing, it may well be wise to order that the costs allowance should fund the applicant only up to that hearing –

“The FDR appointment is a watershed and all reasonable inducements to both parties there to negotiate positively in the light of informal judicial indications should be in place.  The knowledge of a spouse in receipt of a costs allowance that, absent settlement at or in the immediate aftermath of the FDR, she will have to apply for a further allowance, which may or may not be granted, seems to me to amount only to a reasonable inducement, as opposed to improper pressure, to reach settlement.”

83. In this regard, as Wilson LJ pointed out, if the FDR hearing fails, it will be for the new judge, on the basis of material properly before him – for example, rival open offers of settlement – to determine whether a new allowance for legal costs should be granted and, if so, in what amount.

84. Those observations accord with my understanding of the Hong Kong FDR procedures.

85. Wilson LJ spoke of a legal costs allowance being structured, especially as to its duration, so as to best encourage a spouse in receipt of the allowance to act reasonably, looking in good faith to try and reach settlement. In KGL v CKY (page 219), this Court adopted the same fundamental reasoning albeit by reference to the spouse paying the allowance:

“There is no reason why public funds should be expended to fund litigation when there are ample resources available within family funds.  With proposals for more active juridical involvement in pre-trial proceedings to restrict the incidence of costs this is in line with the modern approach.  The court can keep better control of litigation if it's funding is at least in part within its purview.  The party that controls the funds will be less willing to use them on unnecessary interlocutory procedures if he or she will have to provide funding for the other side.”

9.  Perhaps more importantly, it was stated that, at para [37(a)]:

The sole criterion to be applied in determining the application is “reasonableness”, which is synonymous with “fairness”.

10.  I regard that the so-to-speak Currey test should not be taken as an exhaustive test. The only governing principle remains that the court will make such order as it considers reasonable in all circumstances of the case. The conditions in Currey v Currey were adopted by the Hong Kong Court of Appeal as providing prudent guidance to both judges and practitioners in this jurisdiction, but still the court has to consider all other factors that may influence the outcome of the application as well as the interaction between them and the conditions of the Currey test so as to achieve a reasonable and fair result.  

Discussion

Whether the wife has difficulty in meeting her legal costs at all; Whether she has undisclosed assets that she can reasonably deploy or she can borrow with or without security

11.  The husband contended that the wife has no difficulty in meeting her legal costs at all. The wife filed her 3^rd Affirmation which was made on 12 Mach 2013 in support of her application. At para [16], she said she has paid the sum of HK$250,000 to 300,000 to Messrs. Chan & Chan, her former solicitors, including counsel fee of HK$109,000. At para [17], she said that with effect from 25 February 2012, she has changed to her present solicitors. At para [20], she said her up to-date costs including the Child Dispute Resolution hearing are HK$250,000, which includes the fees her attendance of counsel at the hearing. It can be seen from a letter from the wife’s solicitors dated 25 February 2013 that counsel fee for the CDR are HK$80,000.

12.  By a letter from her solicitors dated 27 May 2013, it was said that the wife wrongly believed the invoice was settled by her late uncle who died of a heart attack on 22 March 2013. It now turns out that he did not pay the invoice on her behalf before his untimely and sudden death. The uncle worked for the wife’s present solicitors.

13.  At the end of the hearing of this application, it is directed that: -

(a)  The solicitors for the wife are to on or before 10 June 2013 lodge with the court, with a copy to the other party, a letter from them to Messrs. Chan & Chan, asking for clarification on whether the wife’s legal costs have been paid and their replying letter, if any;

(b)   The husband may file and serve a replying submission on the new evidence within 7 days thereafter, if so advised.

14.  The solicitors for the wife lodged with the court a letter from Messrs. Chan & Chan dated 4 June 2013. By the said letter, it was stated that their legal costs and disbursements in this suit have not been settled. By a letter dated 7 June 2013, the husband asked for confirmation as to whether Messrs. Chan & Chan’s disbursements for the court fee for petition (HK$630), sealed copy petition (HK$56), sealed copy orders (HK$168), application fee and certified fee for marriage certificate (HK$420), company and land search fees (HK$240), copying charges (HK$600) have been paid. By a letter dated 8 June 2013, replying to the solicitors for the husband’s enquiry, the mediator confirmed that the wife has settled his fees (HK$21,750) through Messrs Chan & Chan. By the solicitors for the wife’s cover letter dated 11 June 2013, the wife sent the solicitors for the husband a letter from Messrs Chan & Chan dated 7 June 2013 in which they further stated:

“1. Due to our inadvertence, we omitted to mention that your client did deposit with us costs on account in the sum of HK$30,000 which purports to be partial settlement of disbursements and costs, out of which a sum of HK$21,750 was paid to Messrs Ho & Ip in settlement of mediator’s fees…

2. The papers were released to your client subject to her undertaking to settle our legal costs and disbursements.

3. [the uncle] was not our employee.”

15.  The husband contended that the wife’s evidence should not be accepted as it is full of contradictions and inconsistencies. It was submitted for the husband that it is extremely puzzling why Messrs Chan & Chan would have omitted to mention that the wife has paid HK$30,000 costs on account. It was queried why the wife was able to pay costs on account of $30,000. It was doubted how she funded her deficit way forward; how she is going to pay for her legal costs, past and future. Thereupon, it was argued that either the wife has the means to pay, or she can borrow, or she has an arrangement with her solicitors which she refuses to disclose. Regardless of the husband’s doubts and queries, the bottom line being it is confirmed in writing by Messrs. Chan & Chan that apart from that the wife has paid HK$30,000 costs on account which was applied to settle some of the costs and disbursements, she has not paid their costs and disbursements in this suit. I consider I have to be extremely wary about to disbelieve the said solicitors on the papers. The way I see it, for the purpose of this application, I should accept the confirmation written by Messrs Chan & Chan.

16.  One has to take an overview of this matter. The wife was a beauty consultant before the marriage. In the halcyon days of the marriage, the husband was responsible for all her living and household expenses. After their separation, she resumed working. It was said that since 22 October 2012, the wife has been working as a part-time shop assistant earning approximately HK$8,000 a month. The husband is paying the child’s school fees and an interim maintenance of HK$25,000 per month to the wife. She needs to contribute to the rent and household expenses to her mother at about HK$10,000 per month. She has been living on a meagre salary income. There is not a shred of evidence before me for the purpose of the present application that the wife can in any way amass a fortune. On the other hand, the evidence adduced before this court is that she has no assets. She does not come from a wealthy background, also not is it shown that she has any rich friends or relatives to whom she can turn to for borrowing, except from her late uncle.

17.  After having carefully considered the matter, for the present purpose I do not accept the argument that the wife has no difficulty in meeting her legal costs. Neither has she undisclosed assets that she can reasonably deploy, nor can she borrow with or without security.

18.  Maintenance pending suit applications are approached on a broad-brush basis. Further affirmation evidence will be filed and witnesses will go to the box and be cross-examined during the substantive hearing, when a detailed examination of the party’s financial resources and needs will be taken. With the benefit of further evidence and a detailed examination, the court is entitled to make its conclusion in the matter at the substantive hearing and any under provision or over provision in the maintenance pending suit order may be set off if it is fair and just so to do.

Whether the wife may well be covered by a Sears Tooth arrangement in respect of her legal costs with the solicitors

19.  As stated in the above, the wife’s application is for legal costs of her application for custody, care and control of her daughter. There is no money involved in the outcome of the litigation. It is clear that the wife cannot reasonably obtain legal services by offering a charge on the outcome of the litigation.

Legal Aid

20.  The wife has not applied legal aid. In her 4^th Affirmation, the wife suggested that in the present case, public funds should not be used to pay for her litigation. The wife’s counsel is on the legal aid panel. Ms. Yip argued that there is no reason why she should not and cannot apply for legal aid and obtain the level of expertise apt to the proceedings. In his counter argument, Mr Surman relied on KGL v CKY where Woo JA at 307 stated:

“There is no reason why public funds should be expended to fund litigation when there are ample resources available within family funds.”

21.  Ms Yip responded as follows: -

(a)  First, KGL v CKY is pre-Currey.

(b)   Second, it is well known that the Legal Aid will impose a first charge on the property or amount recovered by the wife in these proceedings: s. 18A Legal Aid Ordinance, Cap. 91. So there is no misuse or abuse of public funds. Quite the contrary, the money will come out of the family funds, namely from the wife’s award of ancillary relief.

(c)  With difference, it is submitted by Ms Yip that the matter has not been thoroughly considered in KGL v CKY. The Legal Aid Ordinance has not been drawn to the attention of the Court of Appeal. At any rate, it is plain that this part of para [21] of KGL v CKY is purely obiter.

22.  To deal with the first and the last point in the above at the same time, against Ms Yip’s argument to the contrary, I take the view that this part of the principle laid out in KGL v CKY has been adopted by Hartmann JA (as he then was) in HJFG v KCY at para [85] (see above), whereas Currey v Currey is not binding on the Hong Kong Family Court.

23.  About the 2^nd point, to put it simply, it is misconceived. This application is not relating to legal costs for ancillary reliefs. So far as to the wife’s application for custody, care and control is concerned, there is no money involved in the outcome of the litigation to which the first charge can be attached. Even more, so is the fact that in matters relating to children in the Family Court, usually there is no order as to costs, which means there will be little chance that the wife can recover her legal costs from the husband, even if she is “successful” in her application.

24.  Above all, it is to be noted that the objective of the exercise is to arrive at a fair decision by reference to what in the circumstance is reasonable. The husband being the sole beneficiary is going to inherit an estate of his late parents estimated by him to be valued in the region of HK$150 million. He is currently involved in the family-owned sports goods business, which is still generating income, and is provided with an average of HK$90,000 per month from the receiver of his late parents’ estate. In addition, he has been taking out loans from his late parents’ company and has free housing. It appears that his drawings from the late parents’ company are regular.

25.  According to the wife,

(a)  she comes from a modest family background;

(b)   she has no means to meet the costs of this action;

(c)  she has no assets;

26.  It is worth reiterating that, during the marriage, the husband was responsible for all living expenses of the wife and household expenses. As stated in the above, orders for MPS cover matters which were not ones of “daily living” and include the costs of the suit itself, which is a pressing need and expense. Given that there are adequate resources available in the family funds, I consider that fairness requires that the wife should be entitled to draw from the resources available within the family funds, just like what happened during the marriage, to meet her pressing need and expense, which include the legal costs for her application for the custody, care and control of the daughter, rather than that her legal costs are to be paid out by taxpayers.

27.  The complexity of the subject matter and the reasonableness of the applicant’s conduct of the proceedings are relevant considerations. Allegedly, it is for the best interest of the child of the family that the wife made the application for her custody, care and control and wants to be fittingly represented with an able and experienced legal team in the upcoming trial to ensure her view will be properly ventilated.

28.  In summary, the above consideration on this application is in favour of the wife.

Skeleton bill

29.  There is no skeleton bill filed for the purpose of the wife’s application. In HJFG v KCY the Hong Kong Court of Appeal stated that:

“122. The issue of a contribution towards the wife’s ongoing legal costs is more difficult to decide, mainly because of the lack of detail supplied by the wife in support of her claim. On behalf of the husband, it has been submitted that, in light of the Currey v Currey principles, I should reject the claim. It is to be reiterated, however, that, no matter how much wisdom is contained in the Currey v Currey principles, they were not binding on the Judge at first instance.

123. While I accept that the evidence as to the issue is not of substance and is justifiably open to criticism, nevertheless what does emerge in my view – sufficiently at least for the purpose of an interim application, one that can be amended if necessary when final determinations are made – is that the wife has either lost or no longer has access to much of her capital base. In the circumstances, it would appear that she will no longer be able to meet her reasonable ongoing legal costs unless some order concerning a contribution to her is made. As to the level of that contribution, I bear in mind that the ancillary relief proceedings are focused on complex corporate structures operating outside of this jurisdiction. That will no doubt add a level of complexity to the proceedings not encountered in other cases. I also take into account that, with the funds available to the marital estate, fairness demands that an attempt should be made to achieve some equality of arms. But that being said, it does not mean that the financial floodgates are to be opened without any reference to what in all the circumstances is reasonable.”

30.  It is clear that this application is only seeking to cover the wife’s counsel fees. In her 4^th Affirmation made on 24 May 2013, she gave an explanation of her choice of counsel, Mr Surman, who also appeared for her at this hearing. I am prepared to hold that, for the present application, a skeleton bill should not be necessary, whilst I am fully aware that usually the applicant is required to supply a sufficiently detailed breakdown of anticipated costs so that the court will be able to conduct some analysis of the nature extent and purpose of the contributions sought. In all circumstances, the amount sought is, in my view, a reasonable and modest request.

The husband’s ability to pay

31.  The estate of the husband’s late parents has not yet been cleared. The husband is receiving in average HK$90,000 per month from the receivers, plus free housing and regular drawings from his late parents’ company. According to the husband’s From E dated 29 August 2012, his general expenses and personal expenses were about HK$13,000 and HK$33,700 respectively. He is also paying HK$25,000 per month as MPS to the wife. At first sight, the husband does not have the cash flow to make any extra MPS exceeding HK$20,000 per month. For the following reasons, however, I take the view that the husband has the ability to pay the said sum of HK$58,000 per month. It is trite that resources may include the husband’s ability to provide money by overdrafts or through loans. Based on the fact that he is the sole beneficiary of the estate of his late parents and that he is receiving substantive monthly payment for maintenance from the receivers and regular drawings from his late parents’ company, if he is ordered by the court to pay HK$58,000 per month as MPS to the wife, I am satisfied on the balance of probabilities that he will be able to obtain loans from his late parents’ company and/or their estate to meet his liability under a court order. 

Conclusion

32.  I consider that an order that the husband is to pay a monthly sum of HK$58,000 to the wife as contribution to the costs for her application for the custody, care and control of the daughter would do broad justice to the situation. The said monthly payments will be paid on account of any sum eventually received when the question of ancillary reliefs is finally determined and on the condition that the said sums are to be punctually paid by the wife to her solicitors on account of her said legal costs. No to mention, the duration of the aforesaid MPS order is to be reviewed upon the disposal of the trial for the question on custody, care and control.

Costs

33.  By the letter dated 27 May 2013, the solicitors for the wife for the first time disclosed that the legal costs of her former solicitors are still outstanding and they were instructed that the wife wrongly believed that the bill was settled when she made the 3^rd Affirmation dated 12 March 2013. The solicitors for the husband responded by a letter of even date requesting a confirmation from Messrs Chan & Chan to be sent to them and stating that they would deliver the brief to counsel for this hearing if they did not receive the same on or before 2 p.m. on 28 May 2013. Such confirmation by way of a letter was not made available to them until 5 June 2013. The question to ask is whether the parties would have been able to reach any sensible compromise and this hearing could have been dispensed with had the confirmation letter been produced as requested. The husband’s opposition to the wife’s present application has been based on the allegation that she has failed to bring her within all of the conditions (a) to (e) of the Currey test as above-mentioned. However, the query upon the payment or non-payment of the wife’s legal costs of her former solicitors only relates to the conditions (a) & (b). In any event, the husband has apparently remained unsatisfied in the face of such confirmation from Messrs Chan & Chan. In my view, it is unlikely that the parties will get rid of this hearing even if the confirmation letter from the wife’s former solicitors is supplied on time.

34.  The wife is successful in this application. Tentatively, I can see no reason why costs should not follow the event. I make an order nisi that the husband is to pay the wife’s costs of this application. The nisi order becomes absolute after 14 days of the date hereof unless a party has applied to vary the order. In view of the parties’ respective financial situation, I consider that it is justified to order that the husband shall pay the aforesaid costs forthwith.

Order

35.  

(a)  It is ordered that the respondent is to pay the petitioner a sum of HK$58,000 per month as maintenance pending suit from 12 April 2013 and thereafter on or before the 12^th date of each succeeding month until 12 September 2013, or further order of the court, on the condition that the said monthly sums are to be punctually paid by the wife to her solicitors on account of her legal costs for the application for custody, care and control of the child of the family.

(b)   The respondent shall pay the outstanding maintenance pending suit for the period from 12 April 2013 to 12 June 2013 in the sum of HK$174,000 by three monthly instalments, the 1^st payment of HK$58,000 on or before 12 July 2013, the 2^nd payment of HK$58,000 on or before 12 August 2013 and the 3^rd payment on or before 12 September 2013.

(c)  It is ordered nisi that the husband is to pay the wife’s costs of this application forthwith, to be taxed if not agreed. The nisi order becomes absolute after 14 days of the date hereof unless a party has applied to vary the order.