VE (nee KE) v. VRJ

FCMC 7676 / 2011

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES

NUMBER 7676 OF 2011

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RULING
(Variation of Costs Order Nisi)

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1. By a judgment of 4 June 2015 (“the Relocation Judgment”) I granted leave for the respondent father to relocate the 2 children of the family to his hometown in Colorado of the United States.  The corollary of this decision is that I rejected the petitioner mother’s application for joint custody, with care and control to her and access to the father.  At the same time, I gave an order nisi there be no order as to costs.  The respondent now seeks to vary the costs order nisi so that he has the costs of the two applications, to be taxed if not agreed.

2. For convenience, I shall continue to refer the petitioner mother as “P” and the respondent father “R”.  I shall also adopt the same nomenclature and abbreviations used in the Relocation Judgment.  As I have already set out the factual background to the applications, the evidence and my reasoning in the Relocation Judgment, I am not going to repeat the same here.  This Ruling has to be read together with the Relocation Judgment.

The Children Applications

3. The applications were heard together in several tranches over the period from 23 September 2014 to 19 March 2015, with closing submissions completed in May 2015.  As I commented in the Relocation Judgment, this is a high conflict case.  The trial was originally set down for 6 days; eventually it took 17 days to complete the evidence.  Apart from the parties, the social welfare officer, the government clinical psychologist, R’s fiancée and a private clinical psychologist were arranged to give evidence in court.  The paternal grandfather, who was in the United States, gave evidence by electronic means in the Technology Court.  In addition to these testimonies, the court was also assisted by 4 social investigation reports, an international social investigation report and 4 clinical psychologists’ reports, the most significant one was a report dated 30 September 2014 by Dr Levy (“Dr Levy’s report”).

4. The parties’ ancillary relief dispute was disposed of by a Judgment dated 5 October 2015 (“the AR Judgment”).  This was the outcome of a 5-day trial.  Essentially, what the court had to deal with was how the net sale proceeds of the matrimonial home, stood at about $3.8 million and retained in court, were to be distributed.  After having $1 million set aside for the benefit of the 2 children of the family, I allowed P to have the balance of the net proceeds; it was, of course, subject to the Director of Legal Aid’s first charge.  In addition, I ordered that R has to pay P a monthly maintenance of $7,000.  As I observed in paragraph 180 of the Relocation Judgment the parties have no intention and no ability to communicate and work anything out sensibly for the benefit of the children.  I believe as of now the parties are still at loggerheads in respect of almost all issues.  

5. I understand from Ms Tsui for P that the net proceeds which P was awarded would in all likelihood be used entirely for reimbursing the costs of the Director of Legal Aid.  I believe, if costs are awarded, in all probability they would have to be paid out from public purse.

Legal Principles

6. It is common ground that while costs are in the discretion of the court the general principles as regards costs in children cases are that there should be no order as to costs save when one party has been unreasonable or reprehensible in the conduct of the litigation, as parents should not be deterred from putting cases concerning children before the courts: R v R (Costs and Child Case) [1997] 2 FLR 95, and Re G (Costs:  Child Case) [1999] 2 FLR 250, H v H, CACV 42/2002 (date of judgment: 6 September 2002).

7. Behaviour beyond the band of what is reasonable may result in an order for costs against that party.  In Keller v Keller and Legal Aid Board [1995] 1 FLR 259 Wilson J (as he then was) said at 265:

No one suggests that the court's discretion in respect of costs under s 51(1) of the Supreme Court Act 1981 has become emasculated in children cases. The position is only that in most such cases, indeed in ordinary cases, the proper weighing of the factors in the exercise of the discretion is likely to lead to the choice of no order inter partes. Where, for example, the conduct of a party has been reprehensible or his stance in the litigation has been beyond the band of what is reasonable, an order for costs might well be made against him. Equally a marked disparity in wealth, such that, for example, the wife's costs would bear harshly upon her economy but could be discharged by the husband without significant impact upon his economy, might give rise to an order against him.

8. When assessing whether a party’s conduct has been unreasonable, what should be considered is unreasonableness in the attitude to the litigation.  Hale J (as she then was) made the celebrated remark in R v R (Costs: Child Case) [1997] 2 FLR 95 at 98B that parents are expected to be unreasonable:

It is urged on his behalf that he was not totally unreasonable. The judge does indeed point to the good features about him and his relationship with R. He made some complaints about the mother's care of R to which the judge gave some credence, although it is right to say that in comparison with his criticisms of the father these are very limited indeed. It is further argued that it is not right to penalise the father for defects in his character which cause the apparent unreasonableness of his attitude. The fair point is made that in children cases one must not confuse unreasonableness in relation to the child – because one might say that we are all expected to be unreasonable in our attitudes to our children – and unreasonableness in the attitude to the litigation. However, it is quite clear that the judge took the view that the father had indeed been unreasonable in relation to the litigation. Of course, the parties should not be deterred, by the prospect of having to pay costs, from putting before the court that which they genuinely think to be in the best interests of the child, but there have to be limits. Children should not be put through the strain of being subject to claims that have very little real prospect of success, still less should they be put through a quite unreasonable involvement in their parents' disputes, to the extent that R was in this case. He was taken to see a psychologist, whom the judge described as totally unqualified to give an opinion on the case. We learn that this was done without the leave of the court. The judge made various criticisms of the psychologist's methods and described him as a 'paid hack'. He was also taken to see a solicitor between the end of the evidence and the judge's giving judgment. In other words, there was conduct in relation to the litigation which goes way beyond the usual sort of attitude which a concerned parent shows in relation to the future of his child.     (emphasis added)

9. Subsequent to the hearing and entirely unrelated to the present application, my attention was drawn to two recent judgments by the UK Supreme Court giving authoritative guidance on the issue of costs in children cases.

10. In Re T (Care Proceedings: Costs) [2012] UKSC 36, [2012] 1 WLR 2281, Lord Phillips PSC restated that “the general practice of not awarding costs against a party, including a local authority, in the absence of reprehensible behaviour or an unreasonable stance, is one that accords with the ends of justice”: §44.

11. In Re S (A Child) [2015] UKSC 20, [2015] 1 WLR 1631, Lady Hale DPSC explained the rationale for the general practice:

“18 As long ago as Gojkovic v Gojkovic [1992] Fam 40, 57, the Court of Appeal observed that it was unusual to make an order for costs in children's cases. In Keller v Keller and Legal Aid Board [1995] 1 FLR 259, 267–268, Neill LJ went further: “In the last decade, however, it has become the general practice in proceedings relating to the custody and care and control of children to make no order as to the costs of the proceedings except in exceptional circumstances.” He did, however, go on to say that it was “unnecessary and undesirable to try to limit or place into rigid categories the cases which a court might regard as suitable for such an award”.

19 Nevertheless, the cases which might be regarded as suitable may be deduced from the reasons why the courts have adopted the “no costs” approach. The classic explanation is that given by Wilson J in Sutton London Borough Council v Davis (No 2) [1994] 1 WLR 1317, 1319:

“Where the debate surrounds the future of a child, the proceedings are partly inquisitorial and the aspiration is that in their outcome the child is the winner and indeed the only winner. The court does not wish the spectre of an order for costs to discourage those with a proper interest in [the welfare of] the child from participating in the debate. Nor does it wish to reduce the chance of their co-operation around the future life of the child by casting one as the successful party entitled to his costs and another as the unsuccessful party obliged to pay them. The proposition applies in its fullest form to proceedings between parents and other relations; but it also applies to proceedings to which a local authority are a party. Thus, even when a local authority's application for a care order is dismissed, it is unusual to order them to pay the costs of the other parties.”

20 Whenever a court has to determine a question relating to the upbringing of a child, the welfare of the child is the court's paramount consideration: section 1(1) of the Children Act 1989. This applies just as much to care proceedings brought to protect a child from harm as it does to disputes between parents or other family members about the child's future. Although the proceedings are adversarial in form, they have many inquisitorial features. An application cannot be withdrawn without the court's consent: FPR r 29.4. The court is not bound by the cases put forward by the parties, but may adopt an alternative solution of its own. The court is not bound by the choice of evidence put forward by the parties, but can decide for itself what evidence it wishes to hear. The court is very often assisted by the independent investigations and reports of the family court reporter (in private law cases) or the children's guardian (in care and adoption proceedings) and other experts. Even in care proceedings, there are many possible outcomes available to the court. Thus, for example, in a case such as this, the available outcomes ranged from a closed adoption with no contact (other than letterbox contact) with the birth family to the child going to live with her father with no further intervention by the local authority. In between could be, for example, an open adoption, a special guardianship order, long term fostering under a care order with only limited contact with the birth family, medium term fostering with increasing contact with a view to restoring the child to her birth family in due course, placement with the birth family under a care order, placement with the birth family under a supervision order together with a child arrangements order, a child arrangements order or even no order at all. It can readily be seen, therefore, why in such proceedings there are no adult winners and losers—the only winner should be the child.

21   Furthermore, it can generally be taken for granted that each of the persons appearing before the court has a role to play in helping the court to achieve the best outcome for the child. It would be difficult indeed for a court to decide how to secure that the child has a meaningful relationship with each parent without hearing from them both. It would be difficult indeed for a court to decide the best way of protecting a child from the risk of harm without hearing from her parents and those whose task it is to protect her. That is why parents are compellable witnesses in care proceedings, even when it is alleged that they have committed criminal offences. No one should be deterred by the risk of having to pay the other side's costs from playing their part in helping the court achieve the right solution.”

12. There are other considerations justifying the “no costs” approach.  Lady Hale pointed out that generally parents are assumed to have been motivated by concern for their child’s welfare and want the best for their child as they see it: § 22.  Parents need to be able to co-operate with one another after the case is over.  Stigmatising one party as the loser and adding to that the burden of having to pay the other party’s costs is likely to jeopardise the chances of their co-operating in the future: § 23.  There is also the consideration that having to pay the other side’s costs, or even having to bear one’s own costs, will reduce the resources available to look after the children: § 24.

13. That said, Her Ladyship remarked that one consideration that the court could not legitimately take into account was whether a party was, or was not, legally aided: § 25.

14. Her Ladyship concluded in § 26 that costs order should only be made in unusual circumstances,

26   … They lead to the conclusion that costs orders should only be made in unusual circumstances. Two of them were identified by Wilson J in Sutton London Borough Council v Davis (No 2) [1994]1 WLR1317, 1319: “where, for example, the conduct of a party has been reprehensible or the party's stance has been beyond the band of what is reasonable: Havering London Borough Council v S [1986] 1 FLR 489 and Gojkovic v Gojkovic [1992] Fam 40, 60C–D”. Those were also the two circumstances identified in In re T, at para 44.

15. Significantly, Lady Hale further said that the exceptional categories recognised in Re T are not closed.  The possible exceptions are not confined to reprehensible behaviour or unreasonable stance.  There may be other reasons why an award of costs might be justified; financial hardship might be one of the other reasons.  Her Ladyship said the following in § 33,

“…The object of the exercise is to achieve the best outcome for the child. If the best outcome for the child is to be brought up by her own family, there may be cases where real hardship would be caused if the family had to bear their own costs of achieving that outcome. In other words, the welfare of the child would be put at risk if the family had to bear its own costs. In those circumstances, just as it may be appropriate to order a richer parent who has behaved reasonably in the litigation to pay the costs of the poorer parent with whom the child is to live, … if otherwise the child's welfare would be put at risk…”

16. Guided by these authorities, I now deal with R’s application.

The Respondent’s Grounds

17. While acknowledging the usual practice is no order as to costs, Ms Irving for R submitted that the present case is one that is appropriate for a costs order to be made against P. Ms Irving agreed that P did not want the children to leave and that she spent significant time with them but R had put forward a clear and workable proposal while P simply did not have any reasonable plan or proposal which could have been implemented for court’s assessment.   There was never an arguable case from P; her case was a hopeless case.

18. Ms Irving also made the point that due to P’s unreasonable opposition, apart from the legal costs allowance of $1 million that was paid out from court for the relocation application, R incurred huge debts to his former solicitors, who took out a statutory demand against him for $3.5 million.

The Petitioner’s Response

19. Ms Tsui emphasized that R would have to demonstrate that P was so unreasonable that warrants a costs order against her.  As the mother of her children, P was only acting in a responsible manner to oppose R’s application for relocation.  At the time when R took out the application in December 2013, the daughter was only around 11 while the son was only 9.  They had just started to live together with R’s new partner IY and it was not surprising for the children to feel insecure and wanted to stay with P in Hong Kong.  The children might not be telling the truth when they told P that they did not want to go to Colorado; yet this was not unreasonable conduct on the part of P.  

Discussion

20. To begin with, I remind myself that it is unusual to give a costs order in children proceedings.  What I should consider is: are there any exceptional circumstances justifying a deviation from the usual no order as to costs? 

21. R has two grounds.  The first is that, adopting an unreasonable stance, P’s case was a hopeless case. The second is her reprehensible behaviour in the conduct of the proceedings.

P’s Hopeless Case

22. Speaking of hopeless application, Butler-Sloss LJ in Re G (Costs: Child Case) [1999] 2 FLR 250 said at 252G:

If this judge in this case had found that this father had behaved unreasonably in the litigation and had gone beyond what many fathers do, seeking orders which are hopeless, the point will come at which pursuing a hopeless application becomes unreasonable. But hopelessness and unreasonableness are not necessarily the same thing. Indeed, particularly where there is a litigant in person, a degree of generosity towards a litigant may be more appropriate than to a litigant who is on legal aid generally advised by counsel and solicitors as to the extent to which they should continue to litigate.

23. Her Ladyship then added at 253D:

It seems to me that the case of R v R does not change the normal situation that it is unusual to order costs, although it will be appropriate to order costs when a parent, even a litigant in person, goes beyond the limit of what is reasonable to pursue the application before the court. I would not like this judgment to be seen in any way as suggesting that judges do not have the jurisdiction and ought not in the appropriate case to make an order that one parent should pay the costs of the other parent in children cases. But because it is an unusual order, it ought to be clear on the face of the transcript, either in the judgment or preferably in the order for costs, as to why it is that the normal situation is not being followed in this case. It is obvious that the judge did not put his mind to this point as to whether or not this was an unusual case.

24. Ms Irving stressed that while R had a workable and reasonable plan, it was clear that P’s plan was entirely ill thought out, and in fact it was not a “plan” as such but a demonstration of how far she had gone in entirely ignoring the realities of the parties’ circumstances in Hong Kong.  P advanced a case that R was using finances as an excuse in order to remove the children from her.  She simply disagreed with anything she did not like, with no real consideration given to the issue.  She disagreed that the Colorado home was suitable, disagreed that the children’s school in Colorado would be free (on the ground that some schools are not free), did not agree that R could not find a job in Hong Kong and was hampered by age and lack of Chinese language ability, did not agree that having lost a highly paying job, R could not afford to maintain 3 households.  The fact that P was oblivious to reality, or in complete denial, cannot be regarded as reasonable. 

25. Ms Tsui did not seek to argue that P had ever put forward any workable proposal for court’s consideration. It is plain that she had none.  In response, Ms Tsui stressed that even a hopeless case should not be considered as unreasonable and also made the point that P was not being deliberately unreasonable. Nonetheless, she conceded that P did not take the family’s economic reality into consideration.  That said, Ms Tsui argued that P could not have a concrete plan because she was at all times financially dependent upon R.

26. With respect, the economic reality was not something so abstract that it was impossible to fathom out. It was merely a matter of simple arithmetic, as can be seen from my simple calculation in §§ 79-80 of the Relocation Judgment.  Even on her own case, R and the children would not be able to survive in Hong Kong.

27. It is noteworthy that as a matter of fact, P raised the same issue of economic reality back in October 2013 (some two months before R’s Relocation Application) when the court was dealing with P’s application for an injunction against R’s retirement funds, resulting in another judgment handed down on 22 November 2013.  At that time R had already lost his job.  Mr Cough, the counsel on behalf of P on that occasion, validly made the observation that maintaining “two households in (their neighbourhood) is bound to be expensive.  It is difficult to contemplate managing on less than HK$1.5 million per annum”[1].  Mr Clough also accepted that P did not have the earning capacity to maintain herself and the two children in Hong Kong and R was unemployed.[2]  As regards the children, on behalf of P, Mr Clough made the following submissions in paragraph 31 of his skeleton:

31.   The Children

i.  The present arrangements cannot be maintained.  Hong Kong international education is expensive.  The children have moved from the less expensive Japanese International School to (delete) International School.  (P) earns HK$5,000 per month.  Current expenses for the children are about HK$50,000 per month.

ii.    The parties are already running out of funds.

iii.    Before there is any final resolution of this case, the parties have to deal with the future of the children. It is unsatisfactory to spend more and more money on interlocutory applications concerning the ancillary relief claim when the future of the children remains in doubt.

28. Plainly, P was fully aware of the family’s dire financial situation well before R’s relocation application.  It should have been clear in her mind long before the trial that the family’s liquid asset retained in court was being drained every month in maintaining 3 households.  Yet, she was in denial of the economic reality in the subsequent relocation trial.  It is indubitably an unreasonable stance in litigation.

29. It is true that P apparently had the support of Ms Cheng, the social welfare officer.  It can be argued that her case was therefore not hopeless.  As I said in §106 of the Relocation Judgment, Ms Cheng’s conclusion was arrived on the basis of a false premises that R could stay.  She did not support relocation because it was to the best interest of the children that the then existing arrangement was to be kept intact but clearly that could never be the case.  When Ms Lim, the government clinical psychologist, was giving evidence she already had Dr Levy’s report available to her.  She also repeatedly raised her concerns over P’s emotional and anger management problem; especially when P had to take care of the children single-handedly in Hong Kong. 

30. Ms Cheng finished her evidence on 26 September 2014 and Ms Lim finished hers on 9 December 2014.  In my view, bearing in mind that by then Dr Levy’s report was already available whatever support P might have had from these professionals had apparently gone.

31. It must have been obvious to anyone involved in the trial that Dr Levy’s report of 30 September 2014 would be catastrophic to P.  It could not have been anything else.  Dr Levy’s report was essentially Dr Pon, the children’s play therapist’s report.  The report raised serious concerns over P’s emotional stability and anger management problem.  P was bad tempered and might have outburst to the children under stress.  It was reported that there was open hostility from P to R and concern was raised regarding the effect of this on the children.  There was an opinion that the children could be somewhat fearful of disappointing their mother due to her reactions and history of unpredictability when upset with them. The children would often censor their true feelings and thoughts when interacting with their mother.  The children were afraid of telling the mother their true feelings.  There were also reports of the son being slapped by the mother and that P lost her temper easily: §§ 120-126.  What is more, Dr Pon indicated that the children had demonstrated a great deal of improvement and growth and were likely to be adaptable and resilient, and would be able to cope with a new environment such as relocation would entail: § 164.  Yet faced with this report P simply made an unsupported claim that Dr Pon had apologized to her for some of the remarks made in the report.  In short, P was, throughout, in complete denial, but this caused significant costs to be incurred.

32. In contrast to the father in Re G (Costs: Child Case), supra, who was a litigant in person and so might be afforded a degree of generosity, P was legally represented by a specialist matrimonial firm and specialist counsel throughout. I agree with Ms Irving that P had the ability to be realistic on the overall situation.  Her opposition to R’s application was not fuelled by reason.  She must have been fully aware of her emotional and anger management problems.  She was not able to consider children’s interest rationally.  It is plain that she stood to oppose whatever R proposed.  As a result a great deal of costs was spent.

P’s Unreasonable Conduct in the Litigation

33. P always maintained R’s relocation plan was aimed at hurting and punishing her. The financial reason was just an excuse.  This was, and probably still is, the subjective but unsubstantiated belief that she firmly held.  While it is understandable for the parties to have adopted this kind of attitude in matrimonial proceedings, especially in a high conflict case, in my view, it is quite beyond the band of reasonableness for P to have listed out the education choices in Japan as an option in her affirmation when she maintained that she was not considering moving to Japan with the children.  I also made the comment that I was not sure whether P’s opposition was motivated by her genuine concern for the future of the children’s welfare.  This comment was made against the background that she did not agree – without any reasons - that the Colorado home was a safe home or proper accommodation, that schooling in primary and secondary school is free of charge and that the children would be on “through-train” as local students to university.  She failed to agree to what, in the eyes of anyone, were glaringly and plainly true.  If she had given thought to these matters objectively, with a genuine concern for the future of the children, I am sure she would have given different answers. 

34. It should not be forgotten that I also considered P needed to be censured for having orchestrated the writing up of the daughter’s diaries for the purpose of exhibiting the same to court.  It was a breach of trust that the daughter had in her when the daughter would never have imagined that what she wrote would have formed part of the evidence adduced in court.

35. How the original equal split of time under the consent order was changed to 9-night / 5-night arrangement with R having the greater share was subject to considerable debate in trial.  I found it was illogical and did not make any sense for P to say that the change was due to R’s insistence and threat.  It was simply unreasonable for her to say she had no choice but to accede to R’s request: § 99.

36. P did not make a frank and full disclosure about the intended relocation to New York back in October 2010 when she made her ex parte application for a non-molestation order against R; and she was not telling the truth when she insisted that R did not consult her.  She also denied having sent the emails to R’s father informing him that she was not going to stay with R anymore and would not go to New York: § 168-172.  I accept that these matters related to what happened before the applications; as such they were of marginal relevance.  Yet time was wasted in trial in dealing with these matters.

Disparity in Wealth

37. The disparity of wealth between the parties is a matter to which the court may give regard in appropriate circumstances. Ms Tsui reminded me that there is no information as to R’s employment or his current income in US and that there may well be a wealth disparity issue which would disallow the court to order costs against P.  As I found in the AR Judgment, there is a huge disparity in the parties’ earning capacity: § 65 of AR Judgment. However, the unchallenged evidence in the ancillary relief trial was that R was merely expected to earn $76,650 (or USD9,890) after tax per month upon return to the United States.  Apart from being heavily indebted to his former solicitors, R continues to fully maintain the children and pay maintenance to P.  Despite the criticism from P over the lack of particulars of the legal costs owed by R, the statutory demand issued against him has not been challenged. As I observed in the AR Judgment, the family was effectively bankrupt.  I think it is fair to say that both are insolvent. Thus analyzed, I do not think the disparity in wealth carries weight. 

Other Considerations

38. Ms Tsui relied upon my observation in paragraph 151 of the Relocation Judgment that both parents were capable parent in giving adequate care and control to the children but this was made in the context where both continued to live in Hong Kong.

39. Ms Tsui also drew my attention to how co-operative P was in agreeing to a consent order on 24 October 2012 granting sole custody to R and joint care and control with equal split of time between the parties over a 14-day cycle.  She also stressed that P was amenable to resolve the dispute by mediation in order to save costs.  I accept these happened but they were either pre-applications or shortly after the applications were taken out. 

Should the Costs Order Nisi be Varied?

40. The ultimate question is whether the costs order nisi ought to be varied.  I remind myself that I should not fall into the error of awarding costs on the basis of “costs to follow the event”.  The benchmarks are whether there are unreasonable stance and reprehensible conduct on the part of P.

41. As far as the economic side is concerned, P never had a sensible proposal for the court’s consideration.  On that view, her case was hopeless from its inception.  I have not lost sight of the fact that she had some support from the social welfare officer.  Seen in this light, her stance should not be considered as so unreasonable that placed itself at the end of the scale.  Yet, with the advent of the oral testimonies of the professionals and Dr Levy’s report, her case had become entirely hopeless.  Dr Levy’s report was released on 30 September 2014 and as said above, Ms Cheng and Ms Lim finished their evidence on 26 September 2014 and 9 December 2014 respectively.  It was not until 10 March 2015, thus a lapse of 3 months, when P started to give her evidence.  With the assistance of her legal advisers, she should have had sufficient time to review her stance and the ability to be reasonable.  Added to this are my findings above that P was unreasonable in the conduct of the litigation.  Considering all these factors in a round, in the event I am satisfied that there are unusual circumstances that warrant a costs order.  Doing the best I can I consider it is fair that she has to bear half of the costs of the two children applications.

Conclusion and Order

42. For the above reasons, I am prepared to vary the costs order nisi.  I give an order that the order nisi dated 4 June 2015 be varied such that the petitioner is to pay half of the respondent’s costs of and incidental to the summonses dated 3 December 2013 and 28 February 2014, including costs reserved, with counsel certificate and to be taxed if not agreed.  The petitioner is also to pay half of the respondent’s costs of variation, again, including all costs reserved, with counsel certificate and to be taxed if not agreed.  As for the remaining half, it should be no order as to costs.  The petitioner’s own costs to be taxed in accordance to the Legal Aid Regulations.