L v. T

CACV 387/2007

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 387 OF 2007

(ON APPEAL FROM FCMC NO. 12816 OF 2004)

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REASONS   FOR  JUDGMENT

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Hon Le Pichon JA:

1.  This was an appeal from a costs order made by Deputy District Judge Jenkins on 24 July 2007 varying the costs order nisi of the ancillary relief proceedings that there be no order as to costs to one in favour of the respondent (“the wife”).  At the conclusion of the appeal hearing, the appeal was dismissed with costs, with reasons to be given which we now do.

Background

2.  The parties were married in 1989 and divorced in April 2005.  The wife commenced ancillary relief proceedings which were heard in December 2005 and February 2006 over a period of five days.  On 3 March 2006, the judge awarded the wife $22 million and made an order nisi that there be no order as to costs.

3.  As appears from the judgment of 3 March 2006, the aggregate net value of the parties’ assets was $42.7 million.  The largest single asset was the husband’s shareholding in a publicly listed company: he owned just over 28% of its issued capital and was its executive director, president and chief executive officer.  Other significant assets were two properties having an aggregate agreed value of $10.5 million, then subject to outstanding mortgages of approximately $2.75 million.

4.  A major issue at trial concerned the valuation of the husband’s shareholding.  Its importance is evident from the fact that an “upward movement of 10 cents affects the amount by $5 million”.  At the end of the fourth day of the trial, when the parties’ evidence had concluded and closing submissions would in the ordinary course have taken place the following day, Mr Egerton who appeared for the wife raised with the judge how the difficult question of share value was to be determined given that there was no agreement between the parties on the matter.  The ensuing discussion between bar and bench culminated in the parties’ proposal that there be a joint valuation of the shares by an independent firm of accountants.  The hearing was therefore adjourned to enable the joint valuation to be obtained and for the parties to submit written submissions prior to the adjourned hearing for closing submissions.  Ms Remedios who appeared for the husband then asked the judge to dispense with further oral submissions in order to “save costs” but the judge refused the request, commenting that “the extra costs, when compared with the overall costs, are not going to be that different”.  (Transcript 199P-Q).

5.  The judge recorded that Ernst & Young who had prepared the joint valuation had suggested a number of different methodologies that might be applied.  It would appear from the copy of the report in the appeal bundles (which regrettably is only partly legible) that at least four different methods were reviewed.  The judge noted that the parties had adopted different approaches and that Ernst & Young had recommended that of the husband which, in the event, also found favour with the judge.  It is to be noted that there is no evidence that the wife’s approach was irrational, unfair or otherwise a nonstarter.

6.  The valuation issue which obviously would directly affect the value of the parties’ total assets was plainly important.  Further, given the makeup and nature of those assets, apart from quantum (i.e. the amount to which the wife should be entitled), equally important if not more so was how that was to be funded because of the lack of assets readily convertible into cash since the realisation of any significant portion of the shares at any one time was not a viable option.

7.  The judge awarded the wife approximately 51.5% of the parties’ joint assets.  The order made entailed, inter alia, the transfer of the two properties to her free from any outstanding mortgage and the payment of a lump sum of $9.32 million in staged payments over a period of five years.

8.  On appeal by the husband, on 1 December 2006, this court (differently constituted) reduced the awarded to $21,350,000, varied the method of payment and ordered nisi that there be no order as to costs for the appeal.  The application by the husband in March 2007 to vary that order (relating to the costs of the appeal) was unsuccessful.  It should be noted that prior to the hearing of that appeal, the judge had directed that any application to vary the costs order nisi made by him on 3 March 2006 be deferred until after the hearing of the substantive appeal.  For that reason, the costs below could not have been dealt with at the appeal heard in 2006.

9.  On 21 June 2007 the wife successfully applied to the judge to vary his order nisi for the costs of the ancillary relief in her favour and the present appeal is from that order.

The judge’s ruling on costs

10.  The judge considered that the issue that occupied much of the hearing was “how payment to the wife was to be achieved”.  After referring to the principles in re Elgindata Ltd (No. 2) [1991] 1 WLR 1207 and accepting its application, he came to the following conclusion:

“8.    In my judgment I broadly accepted the wife’s argument as to the method of payment of the award to her.  In addition I awarded her substantially more than the husband was suggesting at the hearing.  In short, the wife has largely succeeded on the major issues in this case.”

11.  The judge noted that this had not been taken into account when making the costs order nisi.  He went on to mention one further matter which was whether the wife should be penalised in costs because of her failure over the valuation issue and said this:

“9.    …But noting principle (iii) of the Elgindata principles referred to earlier I do not propose to deprive her of any part of her costs.”

This appeal

12.  Ms Remedios sought to challenge the judge’s exercise of his discretion regarding costs.  The limitations on the part of this court to interfere with the exercise of discretion which it was within the discretion of the judge to make are well-settled.  Ms Remedios acknowledged the difficult task she faced.  It is not enough to show that a different judge might have made a different order.  What has to be shown is that the judge was ‘plainly wrong’ because, for example, he exercised his discretion in disregard of principle or that he took into account irrelevant matters or the conclusion which the judge reached was “outside the generous ambit within which a reasonable disagreement is possible”.

13.  Although no less than five grounds were set out in her skeleton submissions, they were all directed at the weight to be attached to various matters which, generally speaking, are matters for the judge and not for this court.  The first and principal ground was that the judge failed to give sufficient consideration to open proposals made by the parties.  It was said that on the second day of the trial, the husband made an open offer in the amount of over $24 million which exceeded what the wife was awarded at the end of the trial.  The first matter to note that by then, the bulk of the costs would have been incurred.  As the judge remarked, the husband’s offer at the commencement of the hearing was a mere $14.9 million and his award was of $22 million.  The judge was well aware of the open proposals since he had summarised those in § 4 of his ruling.  Moreover, as already indicated, the issue of “how payment to the wife was to be achieved” was a crucial one and it cannot possibly be suggested that what was on offer on the second day was one that the wife ought to have accepted given the terms of the judge’s order.

14.  As to the other grounds, they are equally devoid of merit.  For example, it was suggested that the fifth day of the hearing (i.e. the adjourned hearing which took place in February) was totally unnecessary and the judge had failed to take that into account.  The submission is disingenuous since it is apparent from the transcript of the hearing at the end of the fourth day that closing submissions were due to be made by the parties the following day which would have been the fifth day of the trial.  Indeed Ms Remedios initially requested that the hearing be scheduled to take place later than 10 a.m. in order to give her sufficient time to complete her written submissions.  The question of share valuation then arose as described in § 4 above.  In any event, Ms Remedios did make a specific request to the judge to dispense with the adjourned hearing at the end of the fourth day.  That was considered and refused.  It was plainly within the judge’s discretion to do so and I am unable to see how any criticism can be levied at the judge in respect of that exercise of his discretion.

15.  Another complaint was that the judge failed to or did not give sufficient consideration to the question as to which party should bear the cost of the valuation.  But that was a matter the judge did specifically addressed in § 9 of his ruling.  See § 11 above.

16.  It is unnecessary to refer to the other points outlined in the husband’s submissions.  In my view, none has any merit.

Hon Hartmann J:

17.  I agree.