W, YC formerly known as W, YC v. T, WK

FCMC 1332/2022

[2024] HKFC 212

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES NO. 1332 OF 2022

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D E C I S I O N
(Variation of Costs Order Nisi)

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1.  I have the following 2 summonses before me:

(1)  The Petitioner (“W”) ‘s summons dated 26 June 2024 in which she asked for the costs order nisi made by this court on 13 June 2024 (in which W was ordered to pay forthwith the costs of both the Respondent (“H”) and Intervener (“F”) in the preliminary issue trial on a party and party basis with certificate for counsel) to be varied so that she only needs to pay 50% of the costs of the preliminary issue trial, including all costs reserved with certificate for counsel, on a party to party basis, to be taxed if not agreed; and

(2)  F’s summons dated 27 June 2024 in which he asked for the costs order nisi to be varied so that he would be given a certificate for 2 counsel.

Background

2.  The costs order nisi was granted after a contested trial of a preliminary issue on the beneficial ownership of a house registered under the sole name of W (“the House”). During the matrimonial proceedings between W and H, F (as the younger half-brother of H) joined in as an intervener and claimed that 84.6% of the House (or any other fair and reasonable share to be determined by the court) was beneficially owned by him under a common intention constructive trust or a resulting trust. H supported such a contention. W’s case was a complete denial. She denied there being any common intention or agreement reached between the parties at all and she also denied F having paid any monetary contribution towards the purchase of the House. She said any money paid by F was something entirely between F and H and had nothing whatsoever to do with the House’s purchase.

3.  After a trial lasting 6 days during which F, F’s mother, H and W all gave evidence. The court’s judgment was handed down on 13 June 2024 in which the court rejected W’s defence entirely. This court accepted that there was a common intention being reached between the parties on the beneficial ownership of the House and F did pay the majority share of the down payment when the House was first purchased. However, this court was of the view that F should also be responsible for part of the outstanding mortgage and so at the end of the day, this court ruled that F was a 65% beneficial owner of the House but he also has to bear 52% of the outstanding mortgage.

4.  As F and H were regarded as the winner of the trial, they were given the costs of the preliminary issue payable by W forthwith with certificate for counsel on a nisi basis. Both W and F were not satisfied with such an order and summonses were issued for its variation.

W’s Summons for Variation

5.  W was represented by Ms. Alison Choy of counsel who was not the trial counsel (W was represented by Mr. Bruce Tse SC leading Mr. Justin Cheung at trial).

6.  In her written submissions, Ms. Choy cited O.62 r.5 of RHC which governs the court’s exercise of its wide discretion on costs. As I understand it, Ms. Choy’s submissions were made broadly on 3 areas:

(1)  F and H were not total winners;

(2)  F and H’s offer for settlement came too late; and

(3)  W’s precarious financial position if she is ordered to pay full costs.

F and H not being total winners?

7.  Ms. Choy submitted that both F and H should not be regarded as total winners in the preliminary issue trial. Their original case of 84.6% beneficial ownership was not accepted by the court. F was only ruled as a 65% beneficial owner and he also has to bear 52% of the outstanding mortgage.

8.  In my view, this submission could be dealt with very shortly. As stated at paragraph 99 of the judgment, F has to come to court before he could get a judgment, be it at 84.6% as originally claimed, or 65% as ruled by this court. If one should read the judgment in more details, one would realise that F and H won in most of the important factual disputes. Most importantly, he was able to convince this court that there was a common intention or mutual understanding that he was the beneficial owner of the Ground Floor and 1^st Floor; he has paid a vast majority part of the down payment pursuant to that common intention (presumably leading him to believe that he was a 84.6% beneficial owner). H only failed to convince this court that he was free from the outstanding mortgage.

9.  On the contrary, W’s case failed miserably at trial and her evidence was totally rejected by this court. Even in view of very clear evidence supporting F’s case in form of contemporaneous WhatsApp exchanges, W had the audacity to say that they were sham conversation merely to placate F’s father. She was not a credible witness.

10.  Overall speaking, I have no doubt in my mind that F and H are the winners of the preliminary issue trial and should be entitled to costs.

F and H’s offers coming too late?

11.  As submitted by Ms. Choy, the first offer to settle were F and H’s open offers filed together with their openings, claiming 78.4% of the House. Only on Day 2 of trial that they put in a without prejudice offer of 65%. Ms Choy submitted that this offer of 65% of beneficial ownership came too late as the trial had commenced and counsel had already been engaged.

12.  I am afraid that Ms. Choy’s criticism of F and H’s offers has lost sight of the fact that there was no reasonable counter offer from W, whether beating the final order or at all. At the end of day, W was the person being held liable as she was holding part of the House as F’s constructive trustee. The fact remains that she has never made any reasonable offer to settle the matter with F, whether on an open or without prejudice basis. Her stance at trial was always that she was the 100% beneficial owner of the House which was flatly rejected by this court. F had no choice but to take out or continue with the proceeding, whether on a 84.7% or 65% ownership basis. This court will not hold against F and H for putting forward their offers only before trial when W, being the liable party, simply refused to put up any reasonable counter offer at all. Under such circumstances, this court is not minded to exercise its discretion to reduce F and H’s entitlement to costs.

W’s precarious financial position

13.  It was submitted by Ms. Choy that by requiring W to bear the full costs, this would put her in a very difficult financial situation. She only had about HK$500,000 left in her bank account and she also had new medical conditions.

14.  In my view, the negative financial impact on a losing party is not difficult to understand. That was why this court encouraged the parties to consider settlement even when the case was already at an advanced stage, hoping that the risk of litigation could be shared between the parties. At least, F did attempt to make an offer which was extremely close to the final order, but W chose not to do so.

15.  I note that this is not a particularly wealthy family. They had to pool their resources together in order to purchase the House. W has the care of the 2 children and the additional costs liability will certainly put further financial pressure on her. But on the other hand, this court also has to bear in mind that F, being the winner of the litigation, is also a person under disabilities. He has severe visual problem and his wife was also suffering from some serious medical conditions. It is obvious that F could not take up regular employment for the rest of his life and has to rely on family support, be it financial or otherwise. That was why the House was purchased mainly from monies contributed by his mother in order to give him some security in his future life. Reducing W’s costs liability will inevitably increase F’s financial burden, who is already required to bear part of the costs on a party and party taxation.

16.  The court is also aware that W was working as a nurse earning respectable income. On the other hand, H was running his own business which was not particularly successful. That was why the House was purchased in W’s sole name in order to get the necessary mortgage and to avoid any potential financial risk due to the failure of H’s business. At trial, W testified that her mother also gave her financial support. Arguably, W’s overall financial position could be regarded as in better shape than that of F and H.

17.  Based on the above discussion, I am not convinced that this is a proper case to exercise the court’s discretion to reduce W’s costs liability as requested. The dispute between F and W has concluded and there is no reason why F should not have his costs to be paid forthwith. W’s summons for variation is dismissed.

F’s summons for variation

18.  F’s summons dated 27 June 2024 seeking certificate for 2 counsel. F was represented by Ms. Christie Lee of counsel, who also appeared in the preliminary issue trial.

19.  Ms. Lee cited the case of Xin Juan Trading Co Ltd v. NPH Petrochemical Ltd (unreported, HCA 18159/1998, 25 September 2000) submitting that the following 3 factors are relevant for considering whether costs for 2 counsel should be allowed:

(1)  The nature of the case and the importance of the matter to client;

(2)  The general importance of the case; and

(3)  Assistance with the proper preparation of the case.

20.  Although the circumstances of Xin Juan Trading Co Ltd v. NPH Petrochemical Ltd may not be entirely the same as our present case, I accept that the factors as stated in the preceding paragraph are relevant considerations.

21.  The preliminary issue trial lasted for 6 days involving not insubstantial amount of evidence. However, one must not lose sight of the fact that the subject matter involves a House with an equity of just a few millions of dollars (the House’s market value was something more than HK$10,000,000 but with a mortgage in the region of about 3-4 million). Bearing the notion of proportionality in mind, I am not convinced that a certificate for 2 counsel should be granted. F’s summons fails.

Conclusion and Orders

22.  Based on the above discussion, both summonses fail and they are dismissed accordingly. The costs order nisi is hereby made absolute.

Costs

23.  There shall be no order as to costs for these 2 summonses.

Representation: