CHWS v. LNLAI

FCJA 3385 / 2013

[2018] HKFC 116

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

JOINT APPLICATION

NUMBER FCJA 3385 OF 2013

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Maintenance Pending Suit and
Litigation funding

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Introduction

1.  The 2^nd applicant (“the wife”) filed a summons on 15 February 2016 against the 1^st applicant (“the husband”) for maintenance pending suit (“MPS”), she specifically stated in her summons for an order that the husband “to pay interim maintenance as per verbal and written promises before this proceedings is [sic] finalized”.

Background

2.  The husband and wife were married on 13 September 1990, they have two children, now age 27 and 25. On 11 October 2013, the husband and wife filed a joint application for divorce. A decree nisi was granted on 3 December 2013.

3.  At time of filing the joint application, the husband and wife agreed to a financial arrangement. I am given to understand the wife intends to set aside the said arrangement in the ancillary relief application.   

4.  The husband and wife have acquired two properties for investment: one in Discovery Bay, Hong Kong (the “DB Property”), and the other one in London, UK (the “UK property”). The two properties were leased at time of the this MPS hearing, the respective rental payments are able to cover the mortgage payments.

5.  In absence of an order, the husband has been paying the wife HK$80,000 per month since January 2012. The wife complained the husband had failed to comply with the financial arrangement of an annual increment of 5%, she is seeking an order of an upward revision to HK$467,123.40 per month. The wife is also asking the Court to order such sum be backdated from the date of filing of the joint application.

6.  The monthly payment of HK$80,000 by the husband is meant to be the wife’s daily expenses including mortgage payments for both the DB Property and UK Property. For the fact that both properties were leased successfully, the husband now offers the wife a sum of HK$50,000 as monthly MPS.

The issues of this MPS hearing

7.  The basis of the wife’s application for MPS against the husband is premised on the “written and verbal promise before this proceedings is [sic] finalized”. Nevertheless, the wife proceeded on the basis of her daily needs. I raised this point at the hearing: whether the MPS application is premised on an agreement between the husband and wife or else a “needs case”. The wife acted in person, she replied she could not decide on this point at the hearing.  

8.  Ms Kwan, counsel for the husband did not take issue and had fairly accepted the application should be determined on the wife’s needs.   To be fair and practical, as the husband has already been paying a regular sum to the wife, I should proceed with the wife’s MPS application as a “needs case”.

Legal principles

On interim maintenance

9.  The law is trite.  In this MPS application, the wife has the burden to prove her financial needs which must be immediate, reasonable, and of a recurring nature. Secondly, she has the onus to prove the husband’s ability to pay what she has asked for.  The Court is to take a broad brush approach, not be required to look into the detailed finances of the parties.

10.  The relevant legislation is stipulated in section 3 of the Matrimonial Proceedings and Property Ordinance (“MPPO”) Cap 192,

".... the court may order either party to the marriage to make to the other such periodical payments for his or her maintenance and for such term, being a term beginning not earlier than the date of presentation of the petition or making of the application and ending on the date of the determination of the suit, as the court thinks reasonable."

11.  The factors to be considered by the Court in respect of a MPS application has been summarized by HHJ B Chan in C v F [2006] HKFLR 41 at para 14:

“Although the sole statutory guideline in considering maintenance pending suit is that the award shall be “reasonable”, the Court will nevertheless bear in mind all the factors drawn to its attention relating to the marriage and the parties to it, and perhaps the two most outstanding matters in every case, as in this one, are the standard of living of the parties, and the ability of the husband to pay.”

12.  It is trite law that the proper approach to MPS is set out by the Hong Kong Case presided by Hartmann JA in HJFG v KCY [2012] 1 HKLRD 95 at paragraphs 37 and 38:

“37. The principles that have emerged over time to guide judges in matters of interim maintenance have been fashioned in the main to ensure fairness. This is well illustrated in the judgment of Nicholas Mostyn QC, sitting then as a deputy High Court judge, in TL v ML and Others (Ancillary Relief: Claim against Assets of Extended Family) [2006] 1 FLR 1263, at 1289, in which, having looked at earlier authorities, he derived the following principles that speak specifically to fairness or are based on the need to ensure it.

For present purposes, it is sufficient to cite the relevant principles without citing the judge's reference to the source of those principles:

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

b. A very important factor in determining fairness is the marital standard of living. This is not to say that the exercise is merely to replicate that standard.

c.   In every maintenance pending suit application there should be a specific maintenance budget which excludes capital or long-term expenditure, more aptly to be considered on a final hearing.  That budget should be examined critically in every case to exclude forensic exaggeration.

d.   Where the affidavit or form E disclosure by the payer is obviously deficient, the court should not hesitate to make robust assumptions about his ability to pay.  The court is not confined to the mere say-so of the payer as to the extent of his income or resources.  In such a situation, the court should err in favour of the payee.

38. Finally, it is to be noted that in applications for interim maintenance, when the amount to be paid is for a limited period only and not all of the evidence is necessarily before the court, it is not appropriate, nor indeed in most cases possible, for the court to conduct a detailed investigation into the finances of the parties.  While, in order to determine what is or is not reasonable, some analysis is always required, that analysis can be conducted on a 'broad brush' basis. ”

On litigation funding

13.  HH Judge Grace Chan has succinctly summarized the legal principles on litigation funding in LSDS v. BX (FCMC 8189 of 2017, 22 December 2017) as follows:

“45. It is settled law that the court has the power to include an element for the contribution towards a spouse’s legal costs in an order for maintenance pending suit under section 3 of MPPO (See: KGL v CKY & Anor [2003] 2 HKC 512). The governing authority continues to be Currey v Currey [2006] EWCA Civ 1338, [2007] FLR, which is adopted by the Hong Kong Court of Appeal in HJFG v KCY (surpa) and H v H, FCMC 1969/2007, date of judgment 3/10/2007. The conditions for a costs allowances are as follows:

(1) that the applicant has no assets, or none that can be reasonably deployed; that she can provide no security for borrowing, or none which could reasonably be offered;

(2) that she cannot reasonably obtain legal services by offering a charge on the on the outcome of the litigation;

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

46.   Again in HJFG v KCY (supra) at §80, Hartmann JA (as he then was) stated that there should be an initial and overarching enquiry 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 direct or as the means of raising a loan, in finding legal serves.”

46.   Besides, the applicant spouse is required to provide a sufficiently detailed breakdown of his/her anticipated costs, as explained by His Lordship in HJFG v KCY (supra) at §§78-79 of his judgment.”

The wife’s application & the husband’s views

Rent

14.  The wife submitted she is now paying HK$46,000 rental payment monthly. The husband said the costs on accommodation included the costs of their son. He is willing to pay a portion of the rental payment, he accepts HK$30,000.

Utilities

15.  The wife submitted she is now paying HK$5,500 per month. The husband said he accepts HK$3,552, excluding rates and maintenance of the DB property. The husband remitted funds to UK 5 times for settlement of mortgages, rates and maintenance at time when the UK property has not been leased.   

Food

16.  The wife submitted she is now paying HK$20,000 food expenses. The husband accepts HK$10,875 because the food costs includes both the wife and the son and therefore should be apportioned.

The household expenses

17.  The wife submitted she is now paying HK$12,000. The husband accepts HK$3,584 because the utilities costs of the DB property and the UK property have been double counted.

Car expenses

18.  The wife submitted she is now paying HK$7,115 per month. The husband challenged he should not be paying the penalties. He accepts HK$7,000.

Supplements

19.  The wife submitted she is now paying HK$6,000 per month. The husband challenged the necessity of spending a substantive amount.

Safety box

20.  The husband spotted a difference of wife’s expenses, being HK$115 and HK$1,650 per month.

Charity

21.  The wife submitted she is paying HK$450 as charitable donation per month. The husband challenged this should be excluded as the needs of the wife.

Domestic helper

22.  The wife submitted she is paying, on average HK$5,447 for her domestic helper. The husband said a part time maid should be sufficient if she is now living alone.

Personal expenses & children expenses

23.  The wife claimed HK$31,917 as her personal expenses in her Form E. Although the wife stated a slightly different sum in her 1^st answer to the husband’s questionnaire as compared to her Form E, she adopted HK$31,917 in her written submissions.  Those expenses are namely, (i) meal out of home HK$1,000; (ii) transport HK$500; (iii) clothing and shoes HK$10,000; (iv) personal grooming HK$4,000; (v) entertainment / presents HK$100; (vi) holiday HK$6,500; (vii) medical / dental HK$1,000; (viii) tax HK$3,195; (ix) insurance HK$5,622.

24.  The husband only challenged the wife should not include ornaments (under clothing and shoes) and part of tax payment in sum of HK$266.

25.  The children expenses for insurance premium is HK$3,300 per month. The husband submitted this item should not be included in this application because it is for the benefit of the child, not the wife.

Secretarial assistance

26.  For reason of the wife’s poor eyesight, she requested to employ a secretarial assistant for preparation of documents in this matrimonial proceedings. It will cost her HK$25,000 per month. The husband opposed. Ms Kwan submitted, the wife did not produce concrete evidence of the condition of her eyesight problem. The only medical note found in the evidence was a letter written by the wife’s doctor dated 10 January 2017 that she has been suffering from cataract and not fit for paperwork until she had an operation.

Medical expenses

27.  The wife submitted she is now paying an average HK$22,722.40 per month for medical expenses. The husband opposed. Ms Kwan replied the wife has been seeking medical treatments / advice from 20 odds medical clinics without focus on necessary treatments. Apart from cataract, the wife is unable to give particulars of the exact treatment of her illness.

Legal fees and forensic accountant

28.  The wife said she is in need of HK$300,000 per month under this head. The husband criticized the wife has assets and could not satisfy the Currey test and no budget was proposed.

The husband’s ability to pay

29.  Ms Kwan submitted, the husband is a salaried man, his income is not derived from the profit of the businesses which he participated in, his accommodation and some general expenses are paid for by the employer.The husband deposed an updated expenses, asset and liability schedule in his affirmation. With inadequate income to meet all his expenses, he  resorted to borrowing from two banks but had been turned down by a third one, he had also surrendered two insurance policies and his monthly loan repayment comes up to HK$17,782.  The husband is more than HK$1.2 million in debt.  Ironically, the wife has liquidity in her bank account and a portfolio of securities.

My view

Generally

30.  In determining the wife’s application for maintenance pending suit, I shall adopt a broad brush approach, to consider what is reasonable and fair in the circumstance and not to embark on detailed investigation on the parties’ financial means. It is appropriate to err in favour of the wife when overpayments can be adjusted at time of the ancillary relief hearing. I take into account the husband’s ability to pay and the wife’s needs.

Husband’s disclosure

31.  The wife invited me to find against the husband that he has insufficient ability to pay. The wife submitted the husband is a major shareholder of his group of companies, he deliberately hid his assets and had claimed he has no remuneration as a director of his companies. The wife further said I should not believe the husband’s saying that the companies were held on trust for his family members. The wife relied on a fact that her daily expenses were covered or paid by one of the husband’s company, it would be absurd for a company to settle the daily expenses if the husband played no important part in it.

32.  It was decided in HJFG v KCY, “where the affidavit or form E disclosure by the payer is obviously deficient, the court should not hesitate to make robust assumptions about his ability to pay.  The court is not confined to the mere say-so of the payer as to the extent of his income or resources.  In such a situation, the court should err in favour of the payee”.  I do not find this is a case here. Having considered all evidence and submissions of the parties, I am of the view that the husband had made extensive discovery not only in his Form E.  Despite this, the wife had asked a lot of repeated questions in her questionnaires regarding the husband’s roles in various companies and on funds transfer, this could be gleaned from the number of times the husband’s answer has referred to earlier answers already given and exhibits previously attached.

33.  At this stage, with the voluminous amount of documents produced (more than 10 bundles, more than 3,000 pages) by the husband and the answers given by him in various questionnaires issued by the wife, I can only say the documents disclosed and answers given are not to the satisfaction of the wife, but far from deficient.

34.  I take into account the mode of payment of HK$80,000 by the husband since January 2012 and generally on his disclosed documents which reflected substantive assets. I agree with the wife, be it the husband was earning a monthly salary from his employer, for the fact that the husband’s company is able to pay for his matrimonial expenses throughout the years, the husband must have some important role. To avoid a detailed investigation of the husband’s paying ability, I do not see the husband is out of funds to settle the wife’s MPS as little as HK$50,000 per month. I am satisfied the husband has ability to pay.

Daily and personal expenses

35.  I accept the wife has daily needs. The husband challenged the expenses on rental payment, food and household should be apportioned because the sum provided by the wife includes the costs of their son. I aware the son is expected to stay with the wife at time when he returns from UK, it is impractical to apportion the rent. Rental payment of HK$46,000 is necessary and reasonable.

36.  Nevertheless, the food costs would be lower when the son is not staying with the wife. I have no evidence of the days that the son will be staying with the wife, and I am alerted to the parties’ high standard of living prior to the joint application, I allow a slight apportionment of 30% of food costs (HK$20,000 x 70% = HK$14,000). Maintenance on household items should stand without apportionment, i.e. HK$12,000.

37.  An update to this Court that both the DB property and UK property have been leased. It is appropriate to adjust downwards the utilities from HK$5,500 to HK$3,552.

38.  With regard to car expenses and salary for domestic helper, I consider the wife’s standard of living prior to the joint application, I agree they are wife’s necessity in her daily life. The husband argued he should not be paying the penalties for the wife’s contravention of traffic regulations, I see this is only a minute sum and therefore make no deduction. I allow the sum of the two items in full as stated in the wife’s Form E, i.e. HK$7,115 and HK$5,447 respectively.

39.  The health supplements may be the wife’s choice to keep herself in good health. At this stage, where necessity and reasonableness are concerned, the amount is disproportionate to her daily expenses and is on the high side. It is particularly so when the wife is seeking HK$22,722.40 monthly medical fees. I should discount 50% of the amount (i.e. HK$6,000 x 50% = HK$3,000).

40.  The wife claimed $22,722.40 monthly medical expenses. On her own evidence, it is indisputable that she has numerous medical consultations. Apart from her medical evidence that she has been suffering from cataract, the wife is unable to prove such sum is necessary and reasonable. On a broad brush manner, I allow only 50% of the sum claimed (HK$22,722.40 x 50% = HK$11,361.20).

41.  The wife’s personal monthly expenses HK$31,917.  I agree with the husband that was unnecessary for the wife to spend HK$10,000 for clothes and shoes and $6,500 monthly. They are not necessary and reasonable. I shall adopt a reduction of 50% of the two items. I allow the other in full. i.e. HK$31,917 – [(HK$10,000 + HK$6,500) /2] = HK$23,667.

42.  With regard to safety box, the wife might have maintained it for a long time, I see no reason to disallow HK$115 per month.

43.  It is unreasonable for the wife to seek MPS for charity donations. The expense are far from necessary. I do not allow HK$450.

Secretarial assistant

44.  The wife claimed she has poor eyesight and unfit for paper work, a secretarial assistant is necessary to assist her to do paperwork and to conduct litigation. The wife challenged the husband’s ability to pay. She alleged he was hiding family assets. As at this stage, solely for the MPS application, the husband has produced more than 10 bundles, 3000 pages, including affirmations and exhibits for argument, they are mostly evidence on the companies that the wife has alleged him to have control.

45.  Prior to the analysis of the particulars of the wife’s application of MPS, the wife’s conduct is worth noting. After the wife’s summons was taken out on 15 February 2016, the wife sought leave to amend the summons and to provide supplemental affirmation, but has kept on failing to meet deadlines and resulting in repeated adjournments. She eventually filed her second affirmation on 17 August 2017 (18 months after the filing of her MPS summons).  On 15 September 2017, the wife further filed a summons to join the husband’s sister, brother-in-law, father and mother into the proceedings for determination of certain assets being allegedly held on trust for the husband by all four persons.

46.  Taking into the account the voluminous documents produced in this matrimonial litigation, to some extent, I share her view that this might be a difficult task her. Nonetheless, most of the application were taken out by the wife which resulted in more than 10 bundles, 3,000 pages to peruse. I do not see this is fair and reasonable for the wife to ask for HK$25,000 to engage a secretarial assistant for the sole purpose to do paper work for this matrimonial proceedings. I refuse to allow expenses under this head.

47.  The wife submitted she would engage Messrs. Deloittes to handle the accounting matters. She put forward one fee quote, limited to the mandate in the letter to support her claim for the cost of a forensic accountant at HK$150,000. The sum was meant to be charged on a project base and was one off quote.  The wife had by her own admission at the last hearing that she was engaging Messrs. Deloittes, but has not even submitted proof of her payment to them and what she has incurred at the date of her supplemental affirmation. I find the expenses under this head is too far fetch and should be disallowed.

Litigation funding

48.  The other substantive amount sought by the wife is litigation funding. The wife had been formally represented by different legal firms. At the hearing, she indicated she has sought legal advice. The wife did not provide reasonable legal costs budget. I take into account the wife’s conduct, to have issued numerous summonses, including but not limiting to applications for discovery.

49.  Ms Kwan has rightly relied on the Currey test in deciding when provision of litigation funding is appropriate. The wife is unable to pass the test. The wife has assets that can be deployed. The main assets are the DB property and the UK property. Ms Kwan submitted, the wife has securities of which she as realized some of them in the past. I am not satisfied she can pass the first limb test. The wife did not attempt to obtain legal advices by offering a charge on the outcome of litigation. The third limb of publicly funded legal help is inapplicable in this “big money” case. The provision of legal funding is therefore inappropriate.

Maintenance pending suit allowed

50.  With the reasons foregoing, I allow the MPS in sum of which is particularized as follows:

(i) Rent	$46,000
(ii) Food	$14,000
(iii) Household expenses	$12,000
(iv) Utilities	$ 3,552
(v) Car expenses	$ 7,115
(vi) Domestic helper	$ 5,447
(vii) Supplements	$ 3,000
(viii) Medical expenses	$11,361.20
(ix) Personal expenses	$23,667
(x) Safety box	$ 115
Total	$126,257.20

Backdate

38.   For MPS orders, any underpayment or overpayment can normally be rectified at a final ancillary relief hearing, I aware the husband has already been paying HK$80,000 per month since January 2012, I have no reason not to backdate the variation of MPS to the date of filing the joint application, i.e. 11 October 2013. The difference of MPS should be backdated and shall be counted from the date of joint application, i.e. 11 October 2013, which is 4 years and 10 months from the date of this judgment. The backdated sum should be calculated as (HK$126,257.20 - HK$80,000) x 58 months = HK$2,682,917.60. I anticipate the husband might need time to upfront the backdated amount, I so allow the husband to pay the said sum within 18 months, i.e. by 18 instalments, i.e. (HK$2,682,917.60 /18 = HK$149,050.98 per instalment).

Conclusion

51.  I make the following orders:

(i)   The 1^st applicant (the husband) do pay to the 2^nd applicant (the wife) the sum of HK$126,257.20 per month as MPS commencing from 1August 2018 and subsequent payments on the 1^st day of each succeeding month, until further order of the court.

(ii)   The 1^st applicant (the husband) do pay the 2^nd applicant (the wife) the backdated sum of maintenance pending suit in sum of HK$2,682,917.60 by 18 instalments, i.e. each instalment in sum of HK$149,050.98 on the 1^st day of each calendar month commencing from 1 August 2018 until 1 January 2020.

(iii)   Both the sum of the maintenance pending suit and the backdated amount shall be credited directly into the 2^nd applicant’s (the wife’s) designated bank account.

(iv)   The costs of the 2^nd applicant’s summons filed on 15 February 2016 be reserved.