FYK v. HCC

FCMC 7022 / 2021

[2022] HKFC 278

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES

NUMBER FCMC 7022 OF 2021

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JUDGMENT
(Maintenance Pending Suit & Litigation Funding)

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Introduction

1.  This is an application taken out by the petitioner (“the wife”) by way of a summons filed on 29 April 2022 asking the respondent (“the husband”) to pay her HK$25,000 per month as maintenance pending suit (“MPS”) pursuant to section 3 of the Matrimonial Proceedings and Property Ordinance, Cap 192 (“the MPPO”). The wife also seeks HK$10,000 per month as litigation funding.

2.  The husband opposed. He is seeking an order to dismiss the wife’s application.

3.  In short, the husband is saying since the date of separation in July 2021 (and on such date the husband has physically moved out from the matrimonial home), he has been paying the mortgage repayment and utilities bills of the matrimonial home, he also topped up another HK$10,000 per month to the wife. The husband sees the wife’s living expenses are sufficiently covered. For reason the husband has incurred extra costs of living after separation, he was unable to provide the wife with litigation funding.

4.  The main issue here is whether the wife is entitled to MPS and litigation funding, and if so, in what amount.

Background

5.  The parties wedded in 2003 when the husband and wife were respectively in their 40s and 20s. Their 1^st daughter was born in the same year with a younger daughter followed in 2007. After a decade, the wife gave birth to their 3^rd son in 2017 and their youngest daughter in 2018. As at today, the four children are now aged 18, 15, 5 and 4.

6.  The news that the husband was not the biological father of the 3^rd and 4^th children had surfaced in July 2021 after the release of a DNA report. Immediately after this, the husband together with the 1^st and 2^nd daughters moved out from their matrimonial home (sized around 1,100 square feet) to a rented premise less than ½ of the size of the matrimonial home at monthly rent of HK$13,300. The wife has continued to live with the 3^rd and 4^th children in the matrimonial home.

7.  Due to this news, the husband and the elder daughter had developed psychological problem, they sought medical help and are both are on medication.

8.  Shortly after the separation, and on 16 July 2021, the wife petitioned for divorce on ground of one-year consent. The husband has specifically stated in his Form 4 that the 3^rd and 4^th children are not children of the family. Without pursuing any further, decree nisi was granted on 18 January 2022. On 9 June 2022, by consent, sole custody, care and control of the 1^st and 2^nd daughters was granted to the husband with reasonable access to the wife; sole custody, care and control of the 3^rd and 4^th children was granted to the wife with reasonable access to the husband.

9.  The wife did not address the husband’s allegation premised from the DNA report directly. Be that as it may, the wife is not applying for interim maintenance of the 3^rd and 4^th children here.

Financial background

10.  There are two companies jointly owned by the husband and wife. The W Limited, with the wife owning 49% and the husband owning 51%, became the registered owner of their matrimonial home (together with a car parking space) in 2004. At all times, the mortgage repayments came from W Limited at a sum slightly less than HK$10,000 per month. As of now, the matrimonial home is only subject to a minimal amount of outstanding mortgage. By consent and in an order dated 9 June 2022, the parties agreed to sell the matrimonial home (together with a car parking space) no less than HK$12,000,000 and the proceeds of sale (less all costs & disbursement) will be shared equally. As at the date of handing down this judgment, I am not aware of the matrimonial home has been sold.

11.  Another company, MC Limited, a trading company was set up for carrying out family business with the wife also owns 49% and the husband owns 51% of this company. A private vehicle for family use was owned by MC Limited.

12.  Parties divided their role in running the two companies, the wife was responsible to do the accounting works whereas the husband was responsible for the operations. The husband explained his source of income was mainly derived from MC Limited, a company to generate income for the family.

13.  In deciding the matrimonial pot, the wife estimated in her affirmation that W Limited worth HK$5,913,700.43 and MC Limited worth around HK$800,000. The wife says the family assets also includes, the following:

(i)  In 2012, the husband set up a company in mainland YW Limited in Shenzhen for manufacturing goods.

(ii)  In 2016, the husband and his business partner purchased a property in Hong Kong and thereby set up another company S Limited trading as a restaurant. The husband and his partner have equal share of both.

(iii)  The husband has invested in other landed properties in Guangzhou, China.

14.  The wife recalled her expenses were met with the salary from MC Limited, she was paid HK$10,000 in 2004 with gradual increase to HK$15,000 around 2017. Apart from that, the husband gave her a supplementary credit card to use. Normally, she would spend around HK$25,000 to HK$30,000 on her credit card and such sum will be settled by the husband. Since August 2021, not only the husband cancelled the wife’s supplementary credit card, he reduced the monthly maintenance to HK10,000. It makes the wife difficult to meet with regular expenses, and consequentially, she resorted to use her own credit card has started to borrow money from her relatives. Not only this, she also cashed funds in an amount of HK$351,799.94 from 4 insurance policies to cover her daily expenses.

15.  Briefly, the husband opposed by saying the wife should use the family resources more wisely. She could have moved to an alternative accommodation smaller in size for herself, the 3^rd and 4^th children, the matrimonial home can be leased to generate rental income broadly at HK$25,000 per month. The husband was of the view that the wife should have resume working when both the 3^rd and 4^th children can be taken care of by a domestic helper. Even if the wife had refused to do so, the husband is still paying mortgage repayments and utilities bills of the matrimonial home. The husband estimated the wife’s needs shall be less than HK$10,000 per month.

16.  The husband is unsettled by the wife’s conduct. He complained the wife has cashed out HK$270,000 from the 1^st daughter’s insurance policy. The husband was also frustrated to learn the wife has left the accounting work of the family companies unattended leaving the husband to remedy, including paying penalties as high as HK$100,000.

The law

17.  The relevant legislation of maintenance pending suit is stated in section 3 of the MPPO,

".... 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."

18.  The principle for MPS is best illustrated in BC v. MSH (also known as H, MSO) (FCMC 13741/2019, [2021] HKFC 74), HHJ Melloy summarized in paragraph 9 in a way the test approach for both section 3 (MPS) and section 5 (interim maintenance for children) are the same:

“9. The law is well known and not in dispute. Section 5 of the Matrimonial Proceedings and Property Ordinance, Cap 192 states that maintenance for children can be ordered either before or after the granting of the decree for divorce. In the event that an application is made for interim maintenance, the court shall adopt the same approach as when considering an application for maintenance pending suit under section 3 of the same ordinance. Thus the only governing principle is that the court shall make such order as it considers reasonable in all of the circumstances of the case. Consequently, applications such as these are approached on a broad-brush basis. This is because there has been no opportunity to hear the parties in the witness box or to make findings of fact with respect to the issues in dispute. The court needs to look to the needs of the children and the ability of the parents to pay for them from a general perspective only. As far as possible the court should try to look at the reality of the situation, as opposed to the bare assertions made by one or other of the parties. A detailed examination of the parties’ means and their ability to pay maintenance for their children will only be examined in full at a later date at an ancillary relief trial, if there is no agreement in the meantime. If there is found to be any over or indeed any under payment, that can normally be rectified at a later stage.”

19.  The above principles shall be considered with reference to HJFG v KCY [2012] 1 HKLRD 95, where Hartmann JA held 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.”

My view

Maintenance Pending Suit - Generally

20.  With a broad brush approach, the court’s duty is to take into account the parties’ standard of living, to determine a reasonable and fair level of the expenses of the wife in the circumstance.

21.  The parties did not dispute their family is a middle class family.

22.  The amount of MPS the wife is asking for, being HK$25,000, is to be cross checked with the husband’s ability to pay. In doing so, I shall refrain from a 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.

Is the wife’s expenses well covered by the husband’s existing arrangement?

The reasonable needs of the wife

23.  The first thing to determine is the reasonable needs of the wife. The best evidence is what the wife has stated in her Form E filed on 23 September 2021, items of Part 4 are reproduced as follows:

General

Item	Amount
Utilities	$7,000
Food	$18,000
Household expenses	$15,000
Insurance	$150
Domestic helper	$5,100
Total:	$45,250

Personal

Item	Amount
Meals out of home	$5,000
Transport	$600
Clothing/shoes	$3,000
Personal grooming	$3,000
Entertainment / presents	$4,000
Holiday	$4,000
Medical / dental	$1,000
Insurance premia	$3,600
Total:	$24,200

24.  The wife has revised her general and personal needs in her affirmation as follows:

General

Item	Amount
Food and fruit	$18,000
Household expenses	$15,000
Insurance	$150
Domestic helper	$4,630
Total:	$37,780

Personal

Item	Amount
Meals out of home	$5,000
Transport	$600
Clothing/shoes	$2,000
Personal grooming	$1,800
Medical / dental	$1,000
Insurance premia	$3,600
Mobile phone	$374.6
Broadband	$70
Total:	$14,444.6

25.  The wife is now living with her 3^rd and 4^th children with a domestic helper, her general needs shall be (HK$37,780/3) HK$12,593.33. In other words, the aggregate expenses shall be HK$12,593.33 + HK$14,444.6 = HK$27,037.93.

26.  The matrimonial home is around 1,000 square feet with 2 adults and 2 children, I failed to see there are explanation on how household expenses could be as high as HK$15,000. The food costs of the wife are also on the high side, she stated in general (HK18,000/3) HK$6,000 and meals out of home $5,000 making a total of HK$11,000 per month. I am aware the wife has already reduced some of her personal expenses, however, the reasonable expenses of herself shall be further reduced as follows (for easy reading, the amount revised are shown in italic):

General

Item	Amount
Utilities	$5,000
Food	$10,000
Household expenses	$3,000
Insurance	$150
Domestic helper	$4,630
Total:	$22,780

Personal

Item	Amount
Meals out of home	$4,000
Transport	$600
Clothing/shoes	$1,500
Personal grooming	$1,000
Medical / dental	$1,000
Insurance premia	$3,600
Mobile phone	$374.6
Broadband	$70
Total:	$12,144.6

27.  The wife’s reasonable expenses shall be: (HK$22,780/3) HK$7,593.33 + HK$12,144.6 = HK$19,737.93 per month.

Husband’s ability to pay

28.  The wife’s affirmation is to demonstrate the husband has ability to pay for what she has asked for. She believed so by emphasizing the husband was the owner of the family business, he has companies and landed properties which are income generating. In other words, his monthly income HK$41,000 is by no means a true figure.

29.  The husband said he has financial difficulty because the family business is not making a good profit and thus the value of the companies might not be what the wife has estimated. He explained W Company has no substantial business but to hold the matrimonial home and the car parking space; MC Limited and YW Limited did not make profit either because the factories and offices were put to standstill because of the pandemic. The husband was unable to travel frequently to the mainland due to quarantine requirements. Apart from that, the companies have liquidity problems, the husband has ceased receiving salary from MC Limited from April 2020 until March 2021. The husband has advanced a HK$680,000 loan to finance the outgoings expenses of the companies. S Limited was sold in May 2020 for only HK$100,000 because it had been at a loss since 2016 in which the sum was unable to cover the loss incurred.

30.  Neither did the husband make good profit from the rental income of the landed properties, the husband explained he has only HK$12,000.

31.  I am aware the husband has moved out to a rented premise with the 1^st and 2^nd daughters, considering that the monthly expenses of the 1^st and 2^nd daughters already amounted to HK$23,850, he may not have the same financial means to keep up the standard of living of the family prior to separation. Without a detailed examination of the family business financial position, I tend to accept the husband has some difficulty to pay HK$25,000 MPS per month to the wife.

32.  This is particularly so when the family businesses are based on mainland trade. Due to fallout from Covid, it is not surprising that businesses have plunged.

33.  Upon my assessment above, when the husband has been paying the wife HK$10,000 per month, the wife has a shortfall of some HK$9,737.93 to meet her reasonable expenses. Although the wife may be able to earn some income in the future, as at this interim stage, she may be unable to obtain a stable job right away. I see fit for the husband to provide her to an additional HK$5,000 as MPS, making a total of HK$15,000 per month.

The way forward

34.  I agree with the husband that at this difficult point of time, when both of them are struggling financially at present, the wife should have worked with the husband to make full use of the family resources to meet the needs of the parties and all children, including moving to a smaller premise with the 3^rd and 4^th children and attempting to look for at some stable income with her accounting skills.

Litigation funding

35.  The legal principles on litigation funding is well settled. Currey v. Currey [2006] EWHC 1338 is still good law today. This was recently applied in WW v. LNN formerly known as LSM (CACV 524 of 2019, [2020] HKCA 178), the relevant paragraphs of the judgment appeared as follows:

“20. The principles for granting litigation funding are well-established:

(1) In order to obtain litigation funding, the burden is on an applicant to demonstrate that she cannot reasonably procure legal representation by any other means. This includes showing that she cannot secure publicly funded legal help at a level of expertise apt to the proceedings. To the extent that she has assets, the applicant has to demonstrate that they cannot reasonably be deployed, either directly or as the means of raising a loan to fund legal services….

(2) The subject matter of the proceedings and the reasonableness of the applicant’s stance in the proceedings will always be relevant.

(3) The period over which costs allowance is to be paid is also relevant. If the application 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. If the FDR fails, it would be for the new judge, on the basis of the materials properly before him, to determine whether a new allowance for legal costs should be granted and if so, in what amount.

HJFG v KCY [2012] 1 HKLRD 95, §§80-83; Currey v Currey [2006] EWCA Civ 1338.

21. The court should be alert to the risk of injustice arising from irrecoverable and/or unmerited sums paid for litigation funding, which would call for extra caution in the balancing exercise. As stated by Thorpe LJ in Moses-Taiga v Taiga [2005] EWCA Civ 1013, at §20:

“… the whole purpose of alimony pending suit is to sustain the petitioner pending the court’s determination. There is manifestly a risk of unjustified and irrecoverable payments, but that has to be balanced against the risk of a denial of access to justice for the petitioner, if she has not the means to sustain herself and the litigation pending its determination.”

36.  The burden is on the wife to demonstrate she cannot procure legal representation by any other means. I failed to see she has touch upon the requirements of the Currey test in her supporting affirmation filed on 29 April 2022. The wife has simply rounded up at the end of the affirmation that she is in need of funds for legal representation. I have no evidence of whether the wife was eligible for Legal Aid, nor did she state whether her assets could be deployed either directly or as means to raising a loan.

37.  Having said that, in this case I accept the wife is depending on the husband and she was deprived of accessing the bank accounts of the family companies. In such circumstances, it seems to me that the husband should make some provision for the wife’s legal costs from his own savings or bank loan in order to take the matter up to the FDR hearing. In lieu of a monthly contribution of HK$10,000, I shall order the husband to pay the wife’s legal representative a sum of HK$30,000 until the FDR hearing and such sum be directly paid to the wife’s legal representative and to be held on account of costs.

Costs

38.  It seems to me that at the end of the day the wife did not wholly succeed in her application. The order of MPS is very close to what the husband has been paying; in terms of litigation funding, I have only ordered a one-off moderate sum to be paid by the husband to the wife’s legal representative. In such circumstances I shall exercise my discretion to make an order nisi to be made absolute in 28 days that there be no order as to costs of the wife’s summons filed on 29 April 2022, including any costs reserved.

Orders

39.  With reasons of the foregoing, I make the following orders:

(i)  There be an undertaking by the respondent (husband) to the Court and the petitioner (the wife) that he shall cause MC Limited to continue to make mortgage payments for the matrimonial home and to pay for the utilities bills of the same until further order.

(ii)  The respondent (the husband) do pay the petitioner (the wife) maintenance pending suit in sum of HK$15,000 from the 1^st day of January 2023 and subsequent payment on 1^st day of each succeeding month until further order of the court. For avoidance of doubt, the HK$15,000 is all inclusive of payment made by the respondent (the husband) to the petitioner (the wife) on an interim basis.

(iii)  The sum of maintenance pending suit shall be credited directly into the petitioner’s (the wife’s) designated bank account.

(iv)  The respondent (the husband) do pay the petitioner’s (the wife’s) a sum of HK$30,000 by 31 January 2023 as the wife’s litigation funding.

(v)  The sum of litigation funding shall be credited directly into the petitioner’s (the wife’s) legal representative’s designated bank account and to be held as costs on account.

(vi)  There be a costs order nisi that there be no order as to costs of the summons filed on 29 April 2022.

(vii)  The costs order nisi shall be made absolute in absence of application to vary by way of inter parte summons within 28 days from the date of this judgment.