CLARE BARONESS BAILLIEU v. THE RIGHT HONOURABLE JAMES WILLIAM LATHAM BARON BAILLIEU

IN THE SUPREME COURT OF HONG KONG

DIVORCE JURISDICTION

NO. 3 OF 1994

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RULING

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1. On 13th December 1994, upon the petitioner's application for financial relief, I awarded the petitioner a lump sum of A$350,000 after a hearing lasting 8 days. The petitioner was also to have maintenance at the rate of HK$50,000 per month, pending payment of the lump sum, for a period not to exceed 6 months without further order. The petitioner now asks for her costs of the proceedings for financial relief.

2. The petitioner's application was dated 8th February 1993. On 23rd March, the respondent's solicitors proposed a clean break upon the basis of the transfer to the petitioner of the house in Sydney, thought to have a gross value of approximately A$500,000. In addition, the respondent would make reasonable maintenance payments for a period of 6 months. On 17th April 1993, the respondent filed his affidavit of means. On 14th May, the petitioner's solicitors responded to the proposal. On the basis of the affidavit of means, they thought the respondent to have insufficient means for a clean break settlement, certainly not one without instalment payments. They asked for a further proposal.

3. On 9th July, the petitioner's solicitors, in continuing correspondence, advised that the respondent's solicitors that they did not consider the respondent had made full and frank disclosure of his assets. They took issue on 3 further matters, namely whether the petitioner had a commitment to Hong Kong; whether the petitioner's health prevented her from working; and whether the marriage was a short one. It is fair to record immediately that on these 3 issues together, with the principal issue relating to the trusts, I found for the respondent at the hearing.

4. Continuing the correspondence, on 10th July the petitioner's solicitors advised the respondent's solicitors that a questionnaire was being prepared. They indicated that they were concerned as to whether the respondent could obtain an advance of capital or loan from the family trusts for the purpose of his matrimonial proceedings, and raised queries as to the income from the trusts. They also sought discovery of a variety of documents including the trust accounts from 1984.

5. By letter dated 12th July 1993, the respondent's solicitors made an offer to settle the matter. In essence, the offer was:-

6. Hardly surprisingly in the circumstances, that offer was not immediately accepted. On 20th July, the petitioner's solicitors indicated that they could not properly advise the petitioner until there had been full disclosure of the respondent's financial position as indicated in their letter of 10th July.

7. There followed copious, acrimonious correspondence and unhappy activities by each party. In March 1994, the petitioner changed her solicitors. By letter dated 14th March, her new solicitors indicated the desirability of reaching an amicable settlement and said that the petitioner would be prepared to settle for a sum in a region of A$2.5 million. It should be noted that that was the first indication which the petitioner had given of her position.

8. By letter dated 23rd March 1994, the respondent's solicitors repeated the respondent's previous offer but with costs to date. On 25th March, the petitioner's solicitors said that they were taking instructions. Before the matter was resolved, however, the petitioner ran out of money in May. She applied for legal aid. Legal aid was refused. From the beginning of June 1994, the petitioner was unrepresented until this application for costs.

9. By letter dated 17th June 1994, the respondent made a third offer. The essence of the offer was that the house would be sold and, after deducting the outstanding mortgage and other costs, the first A$500,000 would go to the petitioner, the next A$150,000 to the respondent and any excess would be divided equally. Additionally, the respondent would pay HK$60,000 per month and medical bills for a period of 3 months from the date of any order. After 3 months, the monthly payments would continue but would be deducted from the lump sum of A$500,000. The respondent would pay the petitioner's costs up to 12th July 1993, that is, the date of the first formal offer. A few days later, on 24th June, the respondent filed his first affidavit of means which exhibited an up-to-date valuation of the house being A$700,000. That valuation has never been challenged. It would have provided the sum of A$500,000 upon sale and after all deductions. This offer was repeated on the first date of hearing. It was not accepted.

10. The law in relation to costs in matrimonial proceedings, when an offer has been made but not matched by the award, is now tolerably clear. There is a useful summary by Butler-Sloss L.J. in Gojkovic v. Gojkovic [1992] Fam. 40. After reviewing the cases since Calderbank v. Calderbank [1976] Fam. 93, at page 59, she said:-

11. In the circumstances, the petitioner's application is a bold one. It was fortified by Mr. Glynn on behalf of the petitioner on essentially 3 grounds:-

12. It is right to say at once that the respondent does not seek any order for costs against the petitioner, although it is submitted he is entitled to them. An order that the petitioner pay costs since the date of the last offer would entail her having to find over HK$900,000. The respondent, to his credit, does not want to see the petitioner financially disadvantaged. On his behalf, Miss Mok suggests there should be no order as to costs.

13. It was Miss Mok's submission that all along the respondent has made full and frank disclosure, and promptly and to the best of his ability tried to meet the demands for discovery made upon him. She complained that the requests for discovery in relation to the trusts were far too broad and unlikely to help achieve a settlement: Evans v. Evans [1990] 1 F.L.R. 319. She said that what was required was a broad and general consideration of the resource of the parties: P. v. P. (Financial Provision) [1989] 2 F.L.R. 241. She echoed the concern of Douglas Brown J. in B. v. B. (Discovery: Financial Provision) [1990] 2 F.L.R. 180:-

"at the extensive investigations into financial background which seem to be becoming fashionable".

14. It was not in dispute that the petitioner to all intents and purposes is without means or assets. The respondent on the other hand is well off, having both earned and unearned income and substantial capital. The unearned income derives from that capital which is held in family trusts for inter alios the respondent. The principal issue between the parties was whether or not the respondent effectively exercised control over these trusts and whether he could obtain loans from the trusts which might go towards making financial provision for the petitioner.

15. Discovery was therefore important. In fact, it continued until 2 or 3 weeks before the hearing. I have been taken through the process in detail. I do not propose to rehearse it again. Suffice it to say that it was a running battle.

16. Discovery took place against a background of bitterness, acrimony and mistrust. The correspondence, which I have seen, is littered with complaint and counter-complaint about the ongoing behaviour of each party. In particular, at the beginning of April 1993, the petitioner returned to what had been the matrimonial home in Hong Kong which she had left and took certain documents from the respondent's desk. After copying them, she returned the documents.

17. Then, in about September 1993, the respondent's brother gained access to the house in Sydney and removed the respondent's files. Only a very general explanation of what had been taken was subsequently given by the respondent's solicitors. It was proposed that Mr. Glynn should inspect the documents which had been taken. That proposal was refused. Small wonder, perhaps, that the petitioner was suspicious about what the respondent was trying to hide. That suspicion was perhaps found to be not without justification when the respondent finally had the files brought to Hong Kong in November 1994. In boxes of documents regarded by the respondent and his advisers as irrelevant but to which the petitioner was given access, the petitioner found a letter from the respondent's brother dated 4th February 1993 in which the brother, whom I understand to be a solicitor, sent a cheque to the respondent for sum HK$67,000. The letter contained this passage:-

"If this will be included in your statement of assets then secrete the letter and destroy the cheque and we can deal with the matter later after settlement of the divorce."

18. I was informed during the course of this hearing that the proposal for inspection was rejected on the ground of cost. Ultimately, the documents were, as I said, brought to Hong Kong. Miss Mok complained that this cost HK$300,000. Had inspection of the documents been allowed at the time or had the respondent at least gone an affidavit to explain what had happened, it seems to me that much of the argument over discovery might have been avoided. As it turned out, when a list of documents removed from the house was finally produced, it was clear that there were relevant documents amongst them.

19. Ultimately, I decided that nothing of relevance remained undiscovered and found for the respondent on the trust issues.

20. Following the first offer, as I said, there was much correspondence about discovery. The petitioner was not satisfied with discovery and issued a summons for this purpose on 20th December 1993. That application was compromised, the respondent making further discovery which consisted of confirmation about loans which he had received from the trusts and of copy trust accounts from 1988. The summons was withdrawn with costs to the petitioner whose position was therefore vindicated.

21. Arising out of that further discovery, the petitioner's new solicitors sought yet further discovery by letter dated 11th March 1994 "in order to complete the picture of the trusts". Unfortunately that letter went astray. In the meantime, the second offer was made by the respondent's solicitors. When the muddle over the missing letter was resolved, the respondent's solicitors attempted to grapple with it. Unfortunately, this rather got lost sight of in an exchange of correspondence arising out of a meeting between the parties and, shortly after, the petitioner began to represent herself.

22. At this time, the petitioner's application for financial relief was due to be heard in a District Court on 11th July 1994. However, on 24th June, the respondent filed a third and substantial affidavit of means. Half of the affidavit simply brought the respondent's financial position up-to-date. Half, however, dealt with the trusts and attempted to clarity the summary which the respondent had given in his first affidavit and which he acknowledged might be "an inaccurate over view". As a result, that hearing was adjourned and subsequently the matter was transferred to the High Court.

23. In October, the petitioner, being still concerned that the respondent had not discovered all relevant documents, took out another summons for this purpose. At the same time, the respondent applied for the petitioner to file an updated affidavit of means. On 26th October, Liu J. by consent ordered each party to file a list of documents within 10 days. The petitioner's list shows that she had been in possession of all the documents on which she relied at trial. The respondent's list included documents which the respondent had earlier had removed from the house in Sydney. Additionally, the respondent's solicitors made available for inspection all the documents removed from the house other than those privileged or of a particularly personal nature. The petitioner accepted the offer of inspection and, only two weeks or so before the hearing, had to plough unaided through a large quantity of documents from which emerged the respondent's brother's letter to which I have referred.

24. Shortly before Liu J. made his order, the respondent filed the affidavit of Mr. Richard Court, the company secretary of the principal trustee of the family trusts. In his affidavit, Mr. Court had to correct or clarify 7 matters in relation to the trusts arising in the respondent's latest affidavit of means. Whilst it is fair to recognise that all these matters could have been apparent from a careful reading of the trust documents which were exhibited to the respondent's first affidavit of means, the inaccuracies are symptomatic of what I regard as the respondent's rather relaxed attitude to his obligations in these proceedings.

25. With hind sight, it is clear that the petitioner was disposed of sufficient information to enable her to make a considered decision about all offers made by the respondent. The issues in relation to her remaining in Hong Kong, her health and the short marriage did not require any information from the respondent. As to the trusts, nothing emerged which changed the position taken by the respondent from the beginning. The petitioner was, however, because of the dispute about the respondent's access capital, or at least loans therefrom, entitled to a detailed picture of the trusts' financial position from 1984. That information was not easily forthcoming. And it did not, in my judgment, involve the sort of detailed investigation against which the courts are now tending to set their face. The petitioner was therefore entitled to her concern about the true position, particularly after the removal of the documents from the house.

26. The award which I made to the petitioner was a modest one. It was calculated with some care in order to provide for her on a short term basis. It was certainly not over generous. Only in the most exceptional circumstances, I am satisfied, should such an award be eroded in any substantial way whether by costs, which must necessarily be met from the award, or otherwise.

27. In my view, having regard to the background to these proceedings, there is no question of such exceptional circumstances arising.

28. Accordingly, I make an order that the respondent pay the petitioner's costs up to 9th June 1994, the date at which she became unrepresented.

29. There are apparently 3 sets of costs outstanding. In relation to the application for the adjournment of the hearing in July 1994 and the hearing before Liu J., the costs were reserved. In relation to the application for transfer to the High Court, there was an order for costs in the cause. In all the circumstances, I think the proper order should be no order as to costs between the parties in respect of these 3 items. I make an order nisi to that effect.