BCJ v. RCS

FCMC 14020/2017

[2021] HKFC 39

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES NO. 14020 OF 2017

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J U D G M E N T

(Application for discharge of injunction order)

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1.  This judgement is concerned with the Petitioner husband (‘H’)’s summons dated 28 August 2020 for the discharge of the paragraph 1 of the injunction order made by Deputy District Judge D. To on 14 April 2020.

2.  The parties were married in 2010 in Hong Kong. H is a pilot of an airline and the Respondent wife (‘W’) was a manager and director of her 50% owned business (‘SLAC’). There are two children of the family (the ‘children’). The older boy was born in 2010 and the younger boy was born in 2012. H petitioned for divorce on behaviour on 27 October 2017. Both parties have re-partnered since separation.

3.  The parties have been entangled in protracted discoveries and disputes on children matters. Upon W’s undertaking not to molest H, the domestic helper and the children and by consent, on 13 February 2018 it was ordered that interim care and control be granted to H with alternate day access to W, and H should pay W interim-interim maintenance at HK$30,000 per month until further order. Upon the parties agreeing and undertaking that they should receive $100,000 per month each for legal costs from the monies held by his former solicitors until further order or agreement and by consent, on 10 May 2018 it was ordered that by way of interim maintenance (‘MPS’) H should pay W $35,000 on 10 May 2018 and thereafter $60,000 per month from 1 June 2018 until further order and that H should continue to pay all children expenses.

4.  The Decree Nisi was granted on 20 June 2018.

5.  By the Recital D of the order dated 24 January 2019 made by HHJ Molley, H gave the undertaking that he would not seek to vary the paragraph 1 of the order dated 10 May 2018 in respect of the MPS of HK$60,000 per month.

6.  According to W’s updated Form E dated 12 September 2019, the total value of her assets was HK$692,019.22, apart from HK$334,817 held on account by her former solicitors for her therapy and the children’s therapy, including HK$37,219.22 in bank accounts, personal items including a 2013 BMW X3, an engagement ring, a 1956 Airstream Overlander Trailer totally valued at HK$654,800, a Breitling watch of unknown value, life insurance policy of unknown value, a superannuation in Australia of unknown value, 50% holding of SLAC of unknown value, and she had total liabilities of HK$1,893,487.75. Her income was HK$20,000 to 30,000 per month and current monthly expenses were HK$126,600 including general expenses of HK$90,400, personal expenses of HK$24,000 and children expenses of HK$12,200 per month. According to her Form H filed on 9 September 2019, W’s costs incurred up to the hearing dated 9 September 2019 were HK$3,543,906.9 and the outstanding legal fees were HK$798,400.

7.  According to H’s updated Form E dated 24 September 2019, the total value of his assets was HK$8,897,234 including value of the US properties of HK$4,744,101, HK$213,912 in bank accounts, STOCKS OF hk$78,665, personal items including A 1985 Mercedes Benz 280SL, a 1956 Airstream Overlander Trailer, a 1973 Royal Enfield Bullet 350, a 2018 Volkswagen Tiguan, two Breitling watches totally valued at HK$467,603, a superannuation in Australia of HK$209,189, MPF of HK$3,183,764 and life insurance policies of unknown value, and he had total liabilities of HK$1,172,390. His average income was HK$243,722 per month and current monthly expenses were HK$444,956 including general expenses of HK$161,684, personal expenses of HK$228,184 and children expenses of HK$55,088 per month. According to his Form H filed on 8 September 2019, his costs incurred up to and including current hearing were HK$3,977,514.

8.  Since around the end of 2019, H has been paying less than what is required under the MPS. By the summons dated 6 February 2020, H made an application for the variation down of the MPS. By an injunction order dated 14 April 2020 made by Deputy District Judge D. To, it was ordered that H be restrained from dealing with a company controlled by H as well as three properties situated in TX, USA (the ‘US properties’) and held by that company. By the summons dated 15 April 2020, H made an application for the order that he be released from his undertaking in the Recital D of the order dated 24 January 2019.

9.  By the consent order dated 27 April 2020 made by HHJ Molley, joint custody and shared care and control were granted to the parties.

10.  Financial Disputes Resolution hearings were held before HHJ Melloy on 14 October 2019, 25 November 2019 and 27 April 2020 respectively and were unsuccessful.

11.  On 21 May 2020, I made the order that the question of ancillary relief be set down for trial before Deputy District Judge Thelma Kwan commencing on 17 November 2020, with 18 to 20 November 2020 reserved and the pre-trial-review hearing be held on 5 October 2020, and that the hearing of H’s summonses dated 6 February 2020 and 15 April 2020 be adjourned sine die.

12.  By the summons dated 28 August 2020, H made an application for the discharge of the paragraph 1 of the injunction order made by Deputy District Judge D. To on 14 April 2020 so that he will be allowed to put the US properties on the market for sale. On the same day, he filed his 15^th Affirmation in support of the above application. According to another Form H, dated 22 May 2020 and exhibited thereto, his costs incurred up to and including the current hearing were HK$3,712,668 and the outstanding legal fees were HK$703,681.7. On 9 September 2020, it was ordered that the hearing of the summons dated 28 August 2020 be adjourned to 16 October 2020 for argument. On 23 September 2020, W filed her 13^th Affidavit in opposition of the above application.

13.  The Memorandum of Notification of W’s application for legal aid was lodged with the court on 24 September 2020 and accordingly these proceedings were automatically stayed until 4 November 2020. On 29 September 2020, I gave the directions that the pre-trial-review hearing dated 5 October 2020 being a milestone date be proceeded as scheduled and the adjourned hearing dated 16 October 2020 be vacated and adjourned to a date to be fixed. On 12 November 2020, W filed her Notice to Act in Person.

14.  On 13 November 2020, H filed his Notice to Act in Person. According to H’s updated Form E dated 13 November 2020, the total value of his assets was HK$8,847,423 including value of the US properties of HK$4,959,419, HK$141,068.33 in bank accounts, personal items including a 1956 Airstream Overlander Trailer, a 1973 Royal Enfield Bullet 350, a 2018 Volkswagen Tiguan, totally valued at HK$320,900, a superannuation in Australia as of 11 November 2020 HK$242,272, MPF as of 13 September 2019 HK$3,183,764 and life insurance policies of unknown value, and he had total liabilities of HK$1,540,668. His average income was HK$144,749 per month, plus housing allowance of HK$88,200 per month and HK$13,720 per month of rental income from the US properties. His current monthly expenses were HK$202,451 including general expenses of HK$47,184 (rent of HK$88,200 per month paid directly by employer), personal expenses of HK$116,180 including the MPS of HK$60,000 per month and children expenses of HK$39,087 per month. On 16 November 2020, H filed his 17th Affirmation being the narrative affirmation in relation to the ancillary relief matters.

15.  Unfortunately, the trial before Deputy District Judge Thelma Kwan was somehow collapsed. By the order dated 17 November 2020 made by Deputy District Judge Thelma Kwan, it was ordered that leave be granted to H to restore two summonses dated 6 February 2020 and 15 April 2020 and pre-trial-hearing be held on 15 January 2021. On 20 November 2020, H filed his 18^th Affirmation in furtherance of the summons dated 28 August 2020.

16.  Apart from ongoing disputes on the ancillary relief matters, the parties continue having sharp disagreements on the issue of access. By the summons dated 10 December 2020, W made an application for further directions on access. On 17 December 2020, it was ordered that Child Disputes Resolution hearing be fixed to take place on 30 April 2020 and an updated Social Welfare Report on access be called for.

17.  On 15 January 2021, it was ordered that the question of ancillary relief and H’s summonses dated 6 February 2020 and 15 April 2020 be set down for trial together commencing on 7 July 2021, with 8 to 9 July 2021 reserved, and pre-trial-review hearing be held on 26 April 2021, and that the summons dated 28 August 2020 (‘the present application’) be disposed of by way of paper disposal. W filed her 15^th Affidavit on 20 January 2021 and H filed his 19^th Affirmation on 16 February 2021.

18.  On 18 February 2021, both parties sent letters to the court making requests for urgent hearings on the issue of access. Leave was given to the parties to have their proposed summonses to be heard on 10 March 2021.

19.  The present application is primarily based on H’s current financial situation. It is not disputed that the US properties are part of the matrimonial pot. However, it is said that it has now come to a point that he can no longer afford to settle the outstanding legal fees in HK$703,681.7 or to have legal representation for the forthcoming ancillary relief trial unless he realises the US properties that are the only liquid and valuable assets left in the matrimonial pot. H recalled that his dire financial situation was not generated by his own making, but due to:

a.  Losing the monthly Pegasus income of HK$40,000 in mid-2018;

b.  Significant reduction in his salary income with further reductions imminent;

c.  W’s unilateral withdrawal of around HK$639,800 from the family funds, including AUD44,000 from the joint ANZ account to her ANZ account in April 2014 and HK$400,000 from H’s HSBC account to her brother’s account in April 2017;

d.  Mounting legal fees as H was forced to deal with various urgent application including W’s garnishee proceedings and injunction applications, H’s application to vary the MPS, H’s application for return of the children who were unlawfully retained by W in Australia between early February and mid-March 2020, and the parties’ numerous applications on the question of access; and that

e.  The MPS of HK$60,000 is clearly unsustainable and will have to be significantly reduced after the divorce.

20.  Allegedly, his financial means have been exhausted, and he has no intention to seek assistance from his new partner to pay for his legal fees.

21.  H is making the present application to realise the US properties to pay his outstanding legal fees and to fund the legal costs of the approaching pre-trial-review hearing and ancillary relief trial as he does not have any capital at his disposal that he can utilise for such purpose. It is worthy of noting that if H is allowed to pay his own costs out of capital, it will reduce the matrimonial pot for distribution. Additionally, provision for legal costs funding will be offset against any final award to a party in the ancillary relief proceedings.

22.  Against such backdrop, W contends that the sale of any or all of the US properties will leave insufficient assets to meet her award for ancillary relief. She has prepared a summary table of the parties’ assets and liabilities showing what assets exist and in whose control they are, exhibited to her 13^th Affidavit. According to W, the parties’ total net assets are HK$5,876,889.9, of which HK$3,565,190 is wholly illiquid, and wholly in H’s control, being his pension/ MPF.

23.  It is pertinent to take notice the parties take issue over the value of W’s 50% interest in SLAC. W’s contention that there will be insufficient assets remaining to meet her award for ancillary relief is an issue primarily arising from the parties’ disagreements over valuation of her 50% share in SLAC. W has recently sold her 50% share and her net position as 50% owner after the sale is said to be likely to be approximately HK$560,000 to HK$580,000. In his 17^th Affirmation, H proposes the valuation of SLAC to be at least HK$8 million, with W’s 50% share being considered at HK$4 million. The parties’ dispute on the valuation of SLAC is clearly a matter for trial. For the present purpose, it suffices to say that W’s valuation, whether it is right or wrong, is plainly arguable. In the premises, I tend to accept W’s contention that the continuation of the injunction order is necessary to protect her ancillary relief claim.

24.  According to her, W has been in a worse financial position since the sale of her interests in SLAC as she is no longer receiving any income from SLAC.

25.  Both parties deny that they have access to third party financial assistance in litigation costs funding.

26.  Both sides have complained about each other’s litigation conduct that have led to protracted proceedings and increased costs. Despite both parties have stated their wishes to resolve matters out of court, nothing has come out of these intentions and various proceedings are ongoing. Both parties have been legally represented. The legal costs that they have incurred are substantial and already amounted to more than HK$7.2 million. That represents a shocking drain on family resources, and clearly the money would have been better used for the children, particularly taking into consideration H having been unilaterally halving the maintenance payments from HK$60,000 to HK$30,000 per month since around the end of 2019.

27.  In LLC v LMWA, LELP [2019] 2 HKLRD 529, the Court of Appeal made the following observations:

30. A characteristic of matrimonial or family proceedings which all those involved in it (parties and those relatives who supported them, lawyers as well as judges) should always be mindful is that the resources

(including both time, monies as well as energy) of the parties should not be disproportionately squandered away in litigation. This is particularly so in cases where there are children in the family. For each $10,000 spent on legal fees, the parties would eventually have $10,000 less to be distributed amongst themselves (in a sharing case) or for maintaining themselves and their children (in a need case). For each hour spent on preparation and attending hearing, the party would have one hour less for rebuilding their lives after divorce or for spending time with their children. Actually, it could probably be worse because in many instances the time and energy spent on litigation would generate ill-feelings and hostilities for which much more time is needed to restore the litigant's peace of mind.

31. Like other places in the world, the divorce rate in Hong Kong is getting higher and higher. The caseload for the Family Court is increasing every year and the cases are getting more complicated. It is not uncommon that matrimonial or family proceedings lasted much longer than they should have and the legal costs incurred by the parties drained away an unreasonably large proportion of the family wealth. Based on our experience on the bench in hearing family cases, there is an urgent need for those practising family law to embrace a more proactive mindset to resolve family disputes through effective and proportionate means. There is also a need for the courts to adopt proactive case management to curtail excesses in litigation which ultimately do not do any good in resolving the matter for the parties.

*541 32. In England, Munby J lamented about similar state of affairs in that jurisdiction in KSO v MJO and MJO (PSO intervening) [2009] 1 FLR 1036. In that case, the original net matrimonial assets were about £770,900, but the parties had paid £276,471 in costs, and £276,989 remained to be paid. In addition, there was a liability for costs of the father-in-law (in the sum of £120,139) whom the wife had joined as a party. The judge ordered the husband to pay the wife one half of the costs she was paying to the father in law. At the FDR, the judge learnt that the family wealth had been so much dwindled that it was insufficient to meet the most basic needs of the parties. Unsurprisingly, the FDR failed to achieve a settlement. Shortly afterwards, the husband declared himself bankrupt and the litigation collapsed under the burden of costs.

33. The observations of Munby J reflecting on the problem of disproportionate family litigation provided much food for thought. At [76]-[81] of the judgment, His Lordship said:

[76] Not for the first time I have here been faced with ancillary relief litigation conducted at ruinous expense to the parties. I should like to think it will be the last time, but I doubt it.

[77] In A v A (No 2) (Ancillary Relief: Costs) [2007] EWHC 1810 (Fam), [2008] 1 FLR 1428, at para [269], I observed that in that case some 41.5% of matrimonial assets of £2,669,715 had gone in costs. I continued at para [270]: "It may be that the "mega" rich can afford to squander grotesque sums in costs. The allusion is, of course, to Moore v Moore [2007] EWCA Civ 361, [2007] 2 FLR 339, at para [6]. Lesser mortals cannot. Costs in too many so-called "big money" cases - in modern conditions many such cases do not in truth involve "big" money at all - are, as here, grossly disproportionate to either the amounts or the issues at stake. I have had occasion before to deplore the expenditure - one is tempted to say the waste - of money in such cases: see, for example, Re G (Maintenance Pending Suit) [2006] EWHC 1834 (Fam), [2007] 1 FLR 1674, at para [46]. Other judges have also expressed their concerns. A very recent example is provided by Wood v Rost [2007] EWHC 1511 (Fam), [2007] All ER (D) 198 (Jun), where, speaking of a case which had been conducted at "vast expense", the Deputy Judge lamented that the late Mr Charles Dickens was no longer alive to write a 21st century sequel to Bleak House. The simile, if I may Page 8 say so, is all too apt. The accusatory finger which in the 19th century was appropriately pointed at the High Court of Chancery is, in the modern*542 world, more appropriately pointed at the Family Division."

[78] Only a few weeks later, in Whig v Whig [2007] EWHC 1856 (Fam), [2008] 1 FLR 453, I had occasion again to lament what I described (at para [88]) as 'ruinously expensive' ancillary relief proceedings. In that case the ancillary relief proceedings had been overtaken by the husband's bankruptcy - on his own petition - and the aggregate costs of both sets of proceedings amounted, as I explained, to more, on the husband's view, than the net aggregate value of the identified family assets and not far short of what the wife said they were worth. I commented at para [5]:

"One wonders with astonishment at what has been going on. One can only speculate as to what anyone thinks they could possibly hope to salvage from this expensive and utterly futile fiasco."

[79] A year earlier, in C v C (Costs: Leave to Appeal), at para [19], I had commented on how costs amounting to no less than £394,275 had been spent in the course of ancillary relief proceedings which had been commenced scarcely 3 months earlier and which had, as to the substance of the matter, not yet progressed very far despite the intensity of the interlocutory skirmishing.

[80] The picture is deeply dispiriting. And it is not as if it is only the adults who suffer from the consequences of such folly. The luckless children do as well. The present case is a sobering, and for me deeply saddening, example. If, instead of spending - squandering - over £430,000 in costs, the wife and the husband had been able to resolve their differences at a more modest and, dare I say it, more seemly level of costs, there might very well have been enough left in the matrimonial 'pot' to house the wife and children and to enable the children to remain at their school, whilst still leaving something more than a mere consolation prize over for the husband. As it is, it is hard to see much being left from the wreck, not least after the trustee in bankruptcy has had his costs, expenses and remuneration. It is difficult not to be reminded at this point of Jarndyce v Jarndyce (see the Appendix). And the wife and the husband - and for this purpose I refer to them as the mother and the father, for that is what they are - are faced now with the wretched and thankless task of trying to explain to their daughters how it has all come to this.

[81] *543 Something must be done about the problems highlighted by this and by too many similar cases. We simply cannot go on as we are. The expenditure of costs on the scale exemplified by this and by too many other such cases is a scandal which must somehow be brought under control.

34. We are sad to say that the lesson has not been learnt in Hong Kong.

I respectfully agree.

28.  Despite that there are disputes over the value of SLAC, that both parties accuse the other party guilty of non-disclosure, that the other party not having used one’s earning capacity to the fullest, and that there are disagreements on the parties’ monthly expenses, this is not a complex case. Nor is there a situation that fairness demands that H be legally represented so as to achieve so called equality of arms, both parties having been acting in person since November 2020. Looking at the matter in the round, I take the view that H should have no real trouble in handling the ancillary relief proceedings personally and continuing acting in person in the coming pre-trial-review hearing and ancillary relief trial.

29.  By reason of matters aforesaid, I dismiss the present application.

30.  Presently, I see no reason why costs should not follow the event. It is therefore ordered nisi that H shall pay W’s costs of the present application, including reserved costs, to be taxed if not agreed. The costs order nisi becomes absolute 14 days after the order is made unless a party has applied to the court for varying the order.