WMJ v. CPS

FCMP 55 / 2015

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MISCELLANEOUS PROCEEDINGS

NUMBER 55 OF 2015

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RULING ON COSTS

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A. Background

1.  The parties were involved in a relationship which began in 2004.  Their child (hereinafter called the “Child”) a boy was born on 21 May 2007.  The parties in their joint names purchased a flat in Tseung Kwan O (hereinafter called the “Property”) in 2009.  The parties’ relationship was broken down in 2013.  They were the legal co-owners of the Property until a Notice of Severance of the joint tenancy was served by the Respondent father (hereinafter called “F”) on the Applicant mother (hereinafter called “M”) in April 2014.  On 11 February 2015, F as the plaintiff in that action filed a Statement of Claim (hereinafter called the “SOC”) under DCMP No. 2236 of 2014 in which he claims against M as the defendant in that action for an order that the Property to be sold and the sale proceeds be distributed to him.   

2.  On 11 March 2015 M as the defendant in the DCMP action filed her Defence and Counterclaim in which she counterclaimed for: - (1) A declaration that the parties the Property was held on constructive trust for her by F; (2) A declaration that she was a joint tenant in equity of the Property; (3) A declaration that she is entitled to half of the interest in the Property; and (4) Further or in the alternative an order to grant to her an irrevocable license to reside and exclusively live at and occupy the Property. On the same day M issued these proceedings under s. 10 of the Guardianship of Minors Ordinance, Cap 13 (hereinafter called “GMO”) on 11 March 2015.  By the Originating Summons herein (hereinafter called the “OS”) filed on 11 March 2015, under the paragraph 1 of the prayers M claims against F for the payment of the lump sum of HK$10 million for the benefit of the Child, and under the paragraph 2 for the court to order the transfer from F to M for the benefit of the Child of all his shares in the Property.

3.  F took out the summons dated 27 May 2015 for an order that the paragraphs 1 and 2 of the OS be struck on the grounds that they disclose no reasonable cause of action or are scandalous, frivolous, vexatious or abuse of the proceeds of the court.  He relies upon Order 18 rule 19 of the Rules of District Court and the inherent jurisdiction of the court.   H filed his Affirmation dated 29 May 2015 in support of his striking out application, M filed her 2^nd Affirmation dated 27 July 2015 in opposition and he filed his 2^nd Affirmation dated 4 November 2015 in reply.

4.  M took out the summons dated 13 November 2015 to amend her OS.  Leave was granted to her to amend on 16 November 2015.  According to the Amended Originating Summons (hereinafter called “AOS”) dated 27 November 2015, the paragraph 1 prays for the payment of the lump sum of HK$10 million or any reasonable sum to be held on trust for the purchase of the property with reversion to F, and the paragraph 2 prays for the court to order the transfer from F to M for the benefit of the Child of all his shares in the Property to be held on trust with reversion to F.

5.  The SOC was amended by F on 4 December 2015 to add his claim for : - (1) A declaration that M holds her interest in the Property on trust for him; and (2) A declaration that he is the sole beneficial owner of the Property.

6.  On 11 February 2016 M’s Defence and Counterclaim filed in the DCMP action was amended.  By the Amended Defence and Counterclaim she counterclaimed for: - (1) A declaration that the parties each hold an equal beneficial interest or share in the Property; (2) Half of the sale proceeds of the Property in the event that an order for sale is granted; and (3) Further or in the alternative an order to grant to her an irrevocable license to reside and exclusively live at and occupy the Property. 

7.  F took out the summons dated 17 February 2016 to amend his summons dated 27 May 2015 to: - Firstly update his original application from asking an order for the striking of the paragraphs 1 and 2 of the OS to that of the AOS; and secondly add a further or alternative application that these proceedings be stayed pending the resolution of DCMP No.2236 of 2014.  On the return day on 22 February 2016, M opposed his application for the proposed amendment.  Upon F’s application, leave was given to him to withdrawal that application.

8.  At the substantive hearing of F’s application for the striking out, by consent there is no order as to his application with costs reserved for argument, and upon the exercise of the court’s case management power, on the court’s own motion and by consent it is ordered that these proceedings be stayed pending the resolution of DCMP No.2236 of 2014.  The court then proceeded to hear the parties’ argument on costs.  This is my ruling on costs of the summons dated 27 May 2015.

B. Legal principles

9.  The court has a wide discretion as to costs.  For the present application, the relevant provisions in the Rules of the District Court governing the exercise of discretion as to costs are Order 62 rules 3(2A) and 5, which contain amendments introduced as a result of the Civil Justice Reform (hereinafter called “CJR”).                                    

10.  The effect of Order 62 rule 3(2A), was as explained in Melvin Waxman & Another v Li Fei Yu & Another [2013] 6 HKC 424 that the “rule” that costs normally follow the event is no longer the usual order in an interlocutory application, but remains an option. 

11.  In considering the appropriate order the court must have regard to the underlying objectives of CJR: Order 62 r.5 (1)(aa).  One of these objectives is the discouragement of unnecessary or unmeritorious applications: see White Book at 62/3/3B (pp1162-1163 2016 HK Civil Procedure Vol 1). 

12.  Under Order 62 rule 5(1)(d), the court may take into account a “without prejudice save as to costs” offer. 

13.  When dealing with costs orders, under Order 62 rule 5(1)(e) the court may take into account the conduct of the parties.  Rule 5(2) provides that conduct for this purpose includes (a) whether it is reasonable for a party to raise, pursue or contest a particular allegation or issue; (b) the manner in which a party has pursued or defended his case or a particular allegation or issue; (c) whether a claimant who has succeeded in his claim, in whole or in part, exaggerates his claim; and (d) conduct before, as well as during, the proceedings.

14.  Under Order 62 rule 5(1)(f), the court may take into account whether a party has succeeded on part of his case, even if he has not been wholly successful.

C  Discussion

15.  In the present case, the parties’ main contentions centred on :-

(i) Whether any party can be regarded as the successful party;

(ii) F’s “without prejudice save as to costs” offer dated 27 November 2015;

(iii) Conduct of the parties

C.1  Whether any party can be regarded as the successful party

16.  There was no order as to F’s application for the striking out of the paragraphs 1 and 2 of the AOS, and his application therefore cannot be regarded as successful.  The summons dated 27 May 2015 was however issued for striking out of the paragraphs 1 and 2 of the OS.  It is plain that M’s claims against F under the paragraph 1 of the OS are doomed to fail, inasmuch as the Family Court simply does not have the jurisdiction to order for the payment of the lump sum of HK$10 million for the benefit of the Child except for the immediate and non-recurring needs of the Child or for the purpose of enabling any liabilities or expenses reasonably incurred in maintaining the Child before the making of the order to be met, or for both, as the court thinks reasonable having regard to the means of F (see: s.10 (2)(a)), but there is not a scintilla of evidence in M’s 1^st and 2^nd Affirmations respectively filed on 27 April 2015 and 27 July 2015 showing that the said lump sum is required for the Child has any immediate and non-recurring needs or for the purpose of enabling any liabilities or expenses reasonably incurred in maintaining the Child before the making of the order to be met.  F accordingly did have a meritorious application, at least in so far as to the application for striking out the paragraph 1 of the OS. 

17.  Regarding H’s application for the striking out of the paragraph 2 of the OS that is materially different from the paragraph 2 of the AOS and therefore any assessment on the probably outcome of his application for striking of the paragraph 2 of the AOS (see paragraph 18 below) does not necessary applicable, I have to say the court does not have a crystal ball and cannot accurately predict whether, after a substantive hearing, his application will be successful or unsuccessful.

18.  Despite F’s argument that the parties’ respective claims and counterclaims in these proceedings and in the DCMP action are apparently duplicitous and overlapping and therefore are scandalous, frivolous, vexatious or abuse of the proceeds of the court, I nevertheless take the view that it is unlikely that the court would order the striking out of paragraphs 1 and 2 of the AOS for M’s claims under these proceedings and her counterclaims under the DCMP action are different in the form and substance that the former’s claims are for the exercise of the Family Court’s discretion under s.10 of the GMO but the latter’s claims are for reliefs under the equitable principle of proprietary estoppels.  Suffice to say, even if she loses the counterclaims under the DCMP action, still she may or may not succeed in these proceedings.  In addition, it is well established that a striking out application should only be embarked upon in plain and obvious, disputed facts are to be taken in favour of the party sought to be struck out, and the claim must be obviously unsustainable, the pleadings unarguably bad and it must be impossible, not just improbable, for the claim to succeed before the court will strike it out : see White Book at 18/19/4 (p448 2016 HK Civil Procedure Vol 1)  Neither do I take the view that it is appropriate to strike out the paragraphs 1 and 2 of the AOS on the ground of disclosing no reasonable cause of action.  I therefore take the view that F should have withdrawn his striking out application after leave was granted to M to amend the OS on 16 November 2015.  But then, that was exactly what he intended to do. 

C.2  F’s “without prejudice save as to costs” offer dated 27 November 2015

19.  By a letter dated 27 November 2015 from his solicitors F made the “without prejudice and save as to costs” offer that he was prepared to withdraw his application to strike out on the conditions that: - (1) His costs in the striking out application be borne by M in the sum of HK$100,000 and payable forthwith; and (2) M agrees to a stay of these proceedings until the conclusion of the DCMP action.  Even after the F’s solicitors made several follow-up calls to M’s solicitors, regrettably she did not respond to that offer whatsoever.

20.  In one of the leading authorities on costs in family cases Gojkovic v Gojkovic [1992] 1 All ER 267 Butler-Sloss concluded :-

“It is therefore clear that Calderbank offers require to have teeth in order for them to be effective. This is recognised by the requirement in Ord 62, r 9 (and the equivalent CCR Order 11, r 10) for the court to take account of Calderbank offers, and by analogy open offers, in exercising its discretion as to costs. There are certain preconditions. Both parties must make full and frank disclosure of all relevant assets, and put their cards on the table. Thereafter the respondent to an application must make a serious offer worthy of consideration. If he does so then it is incumbent on the applicant to accept or reject the offer and, if the latter, to make her/his position clear and indicate in figures what she/he is asking for (a counter-offer). It is incumbent on both parties to negotiate if possible and at least to make an attempt to settle the case…”

21.  Despite that I have taken the view that these proceedings and the DCMP action are in form and substance different from each other, in view of the duplicity and overlapping of the parties’ respective claims and counterclaims in the DCMP action and those in these proceedings, it needs little more than a modicum of common sense for M to see that it is immensely sensible to have these proceedings stayed pending the resolution of the DCMP proceedings.  I therefore take the view that the Calderbank offer dated 27 November 2015 is a serious offer worthy of consideration.  M raised two reasons for her failure to respond to F’s Calderbank offer dated 27 November 2015 viz: - (1) M did not agree to F’s request for costs in the sum of HK$100,000; (2) M was concerned about that the interim maintenance that has been paying by F to her for the Child is insufficient.  My observations to M’s alleged reasons for her failure to respond are as follows.  As stated by Butler-Sloss in Gojkovic, when F made a serious offer worthy of consideration, it was incumbent on her to accept or reject the offer and, if the latter, to make her counter-offer.  It is incumbent on her to negotiate if possible and at least to make an attempt to settle the case.  It is inexcusable that she has made no response to his Calderbank offer dated 27 November 2015.  About her alleged concern on the alleged insufficiency in the interim maintenance of the Child, F has been paying the sum of HK$20,000 per month for the interim maintenance of the Child.  If she considered that the said sum of HK$20,000 per month was inadequate to cover the Child’s needs, again she could negotiate the issue with F.  If the parties are unable to reach an agreement on the reasonable quantum of interim maintenance, notwithstanding that the parties might agree to have these proceedings stayed pending the resolution of the DCMP action, such stay would not hinder her to apply to the Family Court for interim maintenance for the Child.  As to costs, it is always open to M to accept F’s offer to settle the substantive application by agreeing to have these proceedings stayed pending the resolution of the DCMP action, but at the same time to have the question of costs reserved for argument.  I take the view that not only her alleged reasons for her lack of response to F’s Calderbank offer dated 27 November 2015 are unacceptable, but also she has unreasonably opposed F’s application dated17 February 2016 to add the further or alternative application that these proceedings be stayed pending the resolution of the DCMP action.

C.3  Conduct of the parties

22.  Under Order 62 rules 5(1)(e) and 5(2)(d), the court may take into account parties’ conduct before, as well as during, the proceedings.  F blamed M for her reluctance in making any offer for a settlement of the substantive application, and he contended that the court should discourage litigants from refusing to negotiate by considering costs sanctions.  I agree.

D. Conclusion

23.  All in all, I remind myself of the provisions of Order 62 rules 3(2A) and 5 of the Rules of the High Court, which set out the factors which the court shall have regard in exercising its discretion as to costs.  I caution myself of the need to consider the overall justice of the situation and examine all the factors and circumstance, taking into account whether a party has succeeded on part of his case, even if he has not been wholly successful, and the underlying objectives in Order 1A.  I have taken the view that F’s application for the striking out of the paragraph 1 of the OS is meritorious and probably he would have been successful if the matter had gone to trial, and I therefore regard that he should have the costs of that part of the application, but regarding his application for the striking out of the paragraph 2 of the OS, I have taken the view that I cannot accurately predict whether, after a substantive hearing, his application will be successful or unsuccessful, and given that that was dealt with without a substantive hearing, to do my best in the circumstance I regard that there should be no order as to costs of that part of his application.  Taking an overview on costs up to M’s amendment of the OS, I regard that it is just and reasonable to make an order that M is to pay 50% of F’s costs of the summons dated 27 May 2015 up to but excluding 16 November 2015 when leave was granted to M to amend the OS, including all reserved costs and with certificate for counsel’s attendance.  About costs after M’s amendment to the OS, despite that I have taken the view that F cannot be regarded as the successful party in his application for the striking out of the paragraphs 1 and 2 of the AOS, had M accepted his Calderbank offer dated 27 November 2015 that these proceedings be stayed pending the resolution of the DCMP action, it would not have been necessary for the parties to continue these proceedings thereafter.  I therefore regard M should pay F his costs of the summons dated 27 May 2015 from 27 November 2015, including all reserved costs and with certificate for counsel’s attendance.

24.  IT IS therefore ORDERED that:

(1) M shall pay F 50% of his costs of the summons dated 27 May 2015 up to but excluding 16 November 2015, including all reserved costs and with certificate for counsel’s attendance, to be taxed if not agreed;

(2) M shall pay F his costs of the summons dated 27 May 2015 from 27 November 2016, including all reserved costs and with certificate for counsel’s attendance, to be taxed if not agreed; and

(3) M’s own costs be taxed in accordance with Legal Aid Regulations.