KWAN PO YEE v. WONG HO MING KENNETH

1996, No.MP 1518

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS

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Dates of hearing : 16th - 17th January, 12th, 13th June and 18th November 1997

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R U L I N G

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1. I have before me three matters for resolution.  Each is consequent upon a judgment handed down by me on 27^th June of this year.  Before considering each matter that has arisen out of my judgment, some brief background is required.

A history

2. In or about 1989 the Applicant and Respondent came to know each other and became lovers.  They never married.  However, the Respondent, a businessman of uncontested affluence, arranged the purchase of an apartment in Taikoo Shing using a limited liability company called Hundred Health Limited as the vehicle of that purchase.  The Applicant set up home there.  She gave up work and a little later fell pregnant.  A daughter, Wong Ka Yan (bearing the English first name of Kelsey) was born in July 1992.  There has never been any dispute that the Respondent is Kelsey’s natural father.

3. Unhappy differences arose between the couple and in or about September 1994 their relationship came to an end.  Circumstances of considerable friction then arose.  The Applicant refused to leave the Taikoo Shing apartment where she and the child lived even after she learnt that Hundred Health Limited had defaulted in payment of instalments due to the Hong Kong Chinese Bank under a mortgage loan and was being sued in the jurisdiction of this Court for the full balance outstanding.  Initially, Respondent paid relatively generous sums to the Applicant but, according to the Applicant, these fell away and were replaced by amounts of a minimal nature, insufficient for the needs of herself and the child.

4. In January 1996, the Applicant issued proceedings in the Family Division of the District Court in terms of the Guardianship of Minors Ordinance, Cap 13.  In this action she claimed custody of the daughter with reasonable rights of access to be granted to Respondent.  She also sought certain financial orders for the benefit of the child; namely, periodical maintenance, payment of a lump sum and an order that the Taikoo Shing apartment be transferred free of encumbrance to the Applicant for the benefit of the child.

5. In February 1996 the action was transferred to the Court of First Instance and came before me for hearing in mid January of this year.  On the second day of that hearing, believing that they were close to settling their differences, the parties asked that the matter be adjourned sine die.  The relevant order was made.  It was anticipated by the parties that, having reduced their agreement to writing, they would be able to present it to this Court for consideration and endorsement by way of a consent summons.

6. Regrettably, no such summons was forthcoming and on 12^th June the parties came back before the court.  It was the Applicant’s contention that she and Respondent had been unable to reach agreement and that accordingly the hearing should continue.  The Respondent, however, contended that an agreement had been reached and sought leave to present details of that agreement as well as the Applicant’s alleged conduct in regard to it in order to illustrate the unreasonableness of her claims generally.  This application was opposed.  It was my oral ruling that such evidence was not admissable.  I gave a number of reasons.  Inter alia, they were –

a. That where there was a dispute as to whether an agreement had been reached or not, I could only resolve the issue by hearing evidence of “without prejudice” negotiations which would take up an inordinate amount of time at considerable cost to both parties.

b. Even if I found that there had been an agreement, it was still for me to decide what was in the best interests of the child, the existence of an agreement being only one factor and not inevitably the most compelling.

c. It was common cause that negotiations had been aimed at settling matters not only in respect of the child’s welfare but also between the parties themselves on a broader basis.  For this Court, if it found an agreement, to then attempt to sort the ‘wheat from the chaff’ would be an exercise in futility.

d. In family law matters it would be wrong in principle, except in the most compelling of cases, to allow evidence of disputed out of court settlements as it would act as a deterrent to fair and robust negotiations between the parties.

7. At the conclusion of the adjourned hearing, in my written judgment, my orders were as follows –

“1. That in terms of s.3(1)(c)(I) of the Guardianship of Minors Ordinance, Cap 13, the Applicant be and is hereby declared to be vested with the custody of the minor child, Wong Ka-yan, Kelsey (born 23^rd July 1992).

2. That, having been granted all necessary rights and authority in terms of s.3(1)(d) of the aforesaid Ordinance, the Respondent be granted defined rights of access to the said child in terms of s.3(1)(c)(ii) thereof, such rights to be exercised on every alternate Saturday from 2 in the afternoon until 7 in the evening in the presence of the Applicant.

3. That with effect from the 1^st July 1997 the Respondent shall pay to the Applicant the sum of $21,000 per month as and for maintenance for the said child until the said child attains the age of eighteen (18) years or becomes self-supporting whichever is the sooner.

4. That, in addition to the maintenance stated in paragraph 3 above, for such period of time that the Applicant rents accommodation for the benefit of the said child, the Respondent shall pay to the Applicant as and for maintenance for the said child a further sum of $17,000 per month.  This sum shall be paid on the first day of the month in which the Applicant rents such accommodation and shall continue to be paid until the Applicant ceases to rent accommodation or remarries.

5. That within thirty (30) days of the date of this judgment the Respondent shall pay a lump sum payment to the Applicant for the benefit of the said child in the amount of $108,000.

6. That there be liberty to apply.

7. That, in the absence of agreement, the matter of costs shall be argued on a date to be fixed.”

8. There has been no agreement as to costs and the Applicant has restored the hearing for argument.  That is one of the three matters now before me.  The other two arise out of a summons issued by Respondent seeking an order for reasonable access to the child and a further order that entitled him to certain rights of set-off.

Rights of access to the child

9. It is Respondent’s case that he has been frustrated in his wish to see his daughter.  He, therefore, seeks an order of defined access.  In paragraph 2 of my judgment, however, I made just such an order and see no need at this time to change the details of that order.

10. The Applicant says that the Respondent has not seen the daughter since much earlier this year and that, in fact, she has never knowingly frustrated the Respondent’s attempts to gain access.  She does admit, however, that, because of nuisance calls, it has been difficult to contact her over the telephone but has argued that there have been obvious ways around this minor problem.

11. I have made it clear to both parties that the daughter has a right to know both her parents.  If the parties find it emotionally too difficult to allow access to be exercised when both are together, then separate arrangements will have to be made, perhaps initially with the mother [the Applicant] absent and her place taken by a Social Welfare Officer.  If necessary, Social Welfare will have to take over general supervision of access arrangements.  I trust, however, that this will not be required.  The terms of defined access are clear enough.  The Respondent has to do nothing more than present himself at the Applicant’s residence at the specified time; the Applicant has to do no more than ensure that she and the child are ready and waiting.

The claim for set-off

12. I have already referred to Respondent’s contention that, after the adjourned hearing in January, he and the Applicant reached a binding agreement as to the broad matters in dispute between them.  It is Respondent’s case that this agreement encompassed the sale of the Taikoo Shing apartment owned by Hundred Health Limited and the use of a substantial amount of the free residue to purchase another property which would be owned by the Applicant in an undivided half share for herself and in an undivided half share in trust for the daughter, Kelsey.

13. Pursuant to this settlement, argued Respondent’s counsel, a provisional agreement was entered into for the sale of the Taikoo Shing apartment to a third party for $7,100,000 and at about the same time a further provisional agreement was entered into for the purchase of an apartment for Applicant and the child for the sum of $4,380,000.  According to Respondent, by reason of the Applicant reneging on the settlement, he has been unable to honour these agreements.  This has resulted in a loss to him of several hundred thousand dollars.  It is a loss which he believes he is entitled to recover from the Applicant and he seeks to do so (in part) by deducting by way of set-off a sum of $8,000 per month from the total of $21,000 ordered to be paid to the Applicant each month in terms of paragraph 2 (supra) of my judgment.

14. Respondent argues that he should be given leave to exercise this set-off because the sum of $8,000, in terms of my judgment, is payable effectively to maintain the Applicant and is not maintenance for the child.  This, with respect, I consider to be a misreading of my judgment.

15. In assessing maintenance for the child, I considered her needs under three headings; first, financial provision for her direct maintenance; second, the provision of accommodation and, third, the provision of care and supervision either by a maid or the mother herself.  It was my finding that, prior to the breakdown of the relationship between the parties, the Applicant had given up work so that she could be a full-time mother.  This was done with the concurrence of Respondent.  After the parties had separated, the Applicant chose to remain caring for the child on a full-time basis rather than going back to work and hiring a maid.  As I said in my judgment –

“ Just as, in my judgment, it would be perfectly proper for the mother to claim the expense of a maid to look after the child while she was working so I consider it proper for the mother - at this time at least when the child is of such a young age and so very dependent - to claim a remuneration for herself for taking on that duty herself.  The great difficulty that I face, however, is in assessing a proper quantum.”

I went on to say –

“ In deciding on an appropriate figure I can again do no more than exercise my discretion in light of the relevant circumstances, remembering always that, there being no marriage, the mother has no entitlement to claim for maintenance as if she was a wife making a claim for ancillary relief under the Matrimonial Proceedings and Property Ordinance, Cap 192.  In doing so, remembering that she now has, through the child, the benefit of reasonable accommodation, I consider that a sum of $8,000 is equitable for the mother.”

16. Leaving aside provision for accommodation, I found that the child was entitled to $13,000 as and for maintenance and $8,000 for care and supervision which at this time is provided by the mother rather than a hired domestic helper.  The purpose of the total of $21,000 was clearly stated in paragraph 2 of my final orders which I repeat –

“ That with effect from the 1^st July 1997 the Respondent shall pay to the Applicant the sum of $21,000 per month as and for maintenance for the said child until the said child attains the age of eighteen (18) years or becomes self-supporting whichever is the sooner.” [my italics]

17. That being the case, in my opinion, there can be no validity in the argument that a debt allegedly due by the mother may be set-off against moneys owing to the child.

18. If there remains any doubt in the matter, I have been referred by counsel for the Applicant to Parry v. Meugens (FD) [1986] 1 FLR in which a husband, required to make periodical payments to the wife for the maintenance of the children of the family, paid a debt due by the wife and then attempted to recover what he had paid by way of monthly deductions from those periodical payments.  The magistrates upheld this set-off.  On appeal it was held that, while the magistrates had a wide discretion to remit, that discretion had to be exercised judicially.  The judgment of Reeve J. reads –

“ There is nothing in the case stated to indicate what relevant considerations, if any, they took into account.  In particular, there is absolutely nothing to suggest - I think I must infer from that that it was not the fact - that they applied their minds to the question that the payments of £105 per month were not payments which belonged to the wife, the appellant, at all; it was the children’s money.  That is quite clear from the order which directed that the payments should be made to the children, and it seems to me that their failure to take any account of that vital consideration wholly vitiates the way in which they have exercised their discretion.  As Mr Cryan has put it quite clearly, the justices cannot deprive the children of their money to satisfy some other person’s debt, albeit it is their mother.”

Costs

19. At no time during the course of argument on costs was I advised of any without prejudice offers of settlement by Respondent that focused solely on what should properly be paid for the financial support of the child as opposed to a settlement which also encompassed the broader financial issues between the parties.

20. It was argued on behalf of the Applicant that the Respondent had made unacceptable provisions for the financial support of the child, initially just $5,000 per month, increasing to $6,000, and that she was therefore forced to institute action to obtain both an interim and thereafter an equitable final sum of maintenance.  Accordingly, even though she was not awarded all she sought, without litigation she would not now be receiving an equitable payment.  Litigation was, therefore essential to ensure a just result and it follows that she should be entitled to her costs.

21. It was further argued on behalf of the Applicant that she has virtually no assets, a fact well known to Respondent, while he is a man of very considerable affluence.  For her to be deprived of her costs would, therefore, undermine the order of maintenance made.

22. On behalf of Respondent, it has been argued that I should consider costs under three separate headings; first those costs incurred up to the adjournment in January of this year; second, those costs incurred in the June hearing after the Applicant had reneged on a settlement reached and, third, the costs of this last hearing.

23. As concerns the costs incurred up to the adjournment in January, it has been argued on behalf of the Respondent that he had no option but to oppose the Applicant’s claims as they were greatly exaggerated.  This was, of course, a stated basis of his opposition at the hearing itself, a fact acknowledged in my judgment –

“ What then is the father’s position?  The father does not plead inability to pay.  He has not, for example, disputed the allegation that he has an interest in race horses which must cost him (before any question of winnings is taken into account) a sum in excess of $60,000 per month.  The father accepts that, while there is no suggestion that he falls into the rarefied category of the ultra rich, he nevertheless possesses through property holdings and the like a very high degree of affluence; sufficient to pay for the benefit of the child whatever this Court considers reasonable.  It is his argument, however, that the mother’s demands are manifestly unreasonable, that she is attempting, by seeking grossly inflated maintenance for the child, to thereby secure financial support for herself too; support to which, in law, she has no entitlement.  To employ the robust language used by the father’s counsel, it is the father’s belief that the mother has proceeded with this litigation on the premise that if she cannot get the man then she will at least get his money, using the child to do so.”

24. Of course, even if Respondent was of the view that he was facing greatly exaggerated claims, it was always open to him to propose by way of a Calderbank letter what he considered to be a reasonable amount of maintenance.  If he had done so, the Applicant would then have proceeded at her risk.  But, as I have said, I have had no evidence placed before me of any such correspondence.

25. As concerns the Applicant’s claim, I did find it to be incorrectly framed.  In may judgment the following was said –

“ Having digested the mother’s affirmations and heard her give oral testimony during the course of the hearing, I am satisfied that her expenses have been tailored to a material degree to provide indirectly for herself as well as the child; in short to ensure that she too can maintain the life style that the father gave to her during the time when they were still romantically involved and he was providing for her.”

26. Nevertheless, I am faced with the position that, while I found the Applicant’s claim to be excessive, the amount I awarded was very considerably in excess of that which had been paid by the Respondent prior to litigation.

27. Gojkovic v. Gojkovic [1992] 1 All ER 267 is authority for the principle that, while costs prima facie follow the event, the court is vested with a far greater discretion in family matters than applies in other civil jurisdictions.  Butler-Sloss LJ in considering that discretion is cited (at page 271) as saying –

“ There are many reasons which may affect the court in considering costs, such as culpability in the conduct of the litigation, for instance (as I have already indicated earlier) material non-disclosure of documents.  Delay or excessive zeal in seeking disclosure are other examples.  The absence of an offer or of a counter-offer may well be reflected in costs, or an offer made too late to be effective.  The need to use all the available money to house the spouse and children of the family may also affect the exercise of the court’s discretion.  It would, however, be inappropriate, and indeed unhelpful, to seek to enumerate and possibly be thought to constrain in any way that wide exercise of discretion.”

28. Applying those broad principles and in the general exercise of my discretion, I am of the opinion that the Applicant is entitled to her costs calculated up to the January adjournment.

29. What then of subsequent proceedings?  It has been argued on behalf of Respondent that these were only necessary because the Applicant reneged on a settlement reached and accordingly she should bear the costs.

30. The Applicant, however, does not accept that any settlement was reached.  Seemingly, she blames the failure upon Respondent’s lack of good faith.  The out of court negotiations conducted on a without prejudice basis are, in Applicant’s submission, irrelevant to the question of costs now before me.

31. In the circumstances of this particular case, I agree.  I say so for the following reasons.  The alleged out of court settlement concerned the broader issues between the parties; for example, giving to the Applicant part ownership of a home.  The ‘wheat and chaff’ problem that I have referred to earlier therefore still applies.  No agreement duly signed by the parties has been exhibited to me nor has one at any stage been submitted to court for endorsement.  Even if there was such an agreement, it would still be for the court to decide whether it was in the best interests of the child and reject it if it was not.  It was still open to Respondent, even if he believed that there had been an agreement reached and then breached by Applicant, to submit a Calderbank offer before the resumption of the hearing.  For this court now to attempt to decide whether an out of court settlement was reached would be an immense task, effectively involving another trial.

32. In all the circumstances, in my judgment, I should view the re-hearing on one that took place because the parties failed to reach an agreement on relevant matters and thereafter have that agreement sanctioned by the court.  In the absence of any intervening Calderbank offer, the same discretionary principles apply to the adjourned hearing as they have to the original and Applicant is entitled to her costs.

33. As concerns costs of the hearing in respect of which this ruling is made, taking all circumstances into account, I am of the view that costs too must go to Applicant, she being substantially the successful party.

Orders

34. My orders therefore are as follows –

1. That the order of defined access stated in paragraph 2 of the orders made in the judgment dated 27^th June 1997 shall remain unvaried and of full force and effect.

2. That Respondent’s claim to exercise the right of set-off in respect of periodical payments due to the Applicant in terms of paragraph 3 of the orders made in the aforesaid judgment be dismissed.

3. That the costs of the action referred to in paragraph 7 of the orders made in the aforesaid judgment together with costs appertaining to the hearing of 18^th November 1997 be awarded to the Applicant.