ALDL v. FTFC AND ANOTHER

FCMC 13698/2013

[2023] HKFC 6

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES

NO. 13698 OF 2013

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J U D G M E N T
( Renewed Legal Costs Provision )

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Introduction

1.  This is the application of the petitioner (“Wife”) by her Summons dated 8 September 2022 for renewed legal costs provision (“Renewed LCP Summons”) payable by the 1^st respondent (“Husband”) in the revised sum of HK$3,488,930, over 9 months from September 2022 to the end of the ancillary relief trial in May 2023 (ie HK$387,659 per month).

2.  The Husband voluntarily paid $900,000 to the Wife via her solicitors as additional legal costs provisions earlier and now asked for dismissal of this application.

3.  As to the background of the case, I do not think that it is necessary to repeat here as it has been succinctly stated in the following judgments respectively:

(1)  Judgment for MPS[1] handed down by Judge A Tse on 22 November 2019 (“MPS Judgment”);

(2)  Judgment for leave to appeal[2] by Judge A Tse on 25 September 2020 (“Leave to Appeal Judgment”);

(3)  Judgment for specific discovery[3] by Judge A Tse on 27 October 2020 (“Specific Discovery Judgment”);

(4)  My Judgment for variation of MPS[4] handed down on 17 February 2022 (“Variation Judgment”).

4.  Regarding the brief procedural history, the parties filed a consent summons for maintenance pending suit at HK$125,000 per month on 11 February 2015, which was ordered in term on 26 February 2015.

5.  By a summons dated 20 December 2017 (“Original LCP Application”), the Wife sought:

(1)  An upward adjustment of maintenance pending suit to HK$230,000 per month;

(2)  Legal costs contribution in the sum of HK$3,600,000 or alternatively a monthly sum of HK$300,000 paid over 12 months.

6.  The Original LCP Application culminated in the MPS Judgment handed down on 22 November 2019, which ordered the Husband to pay HK$220,000 per month as maintenance pending suit, and HK$300,000 per month as legal costs provision for a period of 12 months (totalling HK$3,600,000).

7.  The Husband applied for leave to appeal against the MPS Judgment, which was dismissed pursuant to the Leave to Appeal Judgment.

8.  The Husband applied for a downward variation of maintenance pending suit and legal costs provision, which was dismissed by the Variation Judgment.

9.  On 5 July 2022, the Husband applied to adduce expert evidence in respect of his psychological and mental condition (“PTSD Summons”), followed by a further application on 15 August 2022 to appoint a replacement ME/CFS expert (“ME/CFS Expert Summons”).

10.  On 9 September 2022, I ordered that:

(a)  The Husband do pay 70% of the costs of the PTSD Summons, while reserving costs for the ME/CFS Expert Summons;

(b)  The Husband pay reasonable costs to cover the Wife’s experts at the first instance.

11.  FDR has been dispensed with pursuant to my Order dated 1 December 2021.

12.  The trial on preliminary issues together with the Wife’s section 17 summonses before me began on 24 October 2022 and was adjourned after 5 days on 28 October 2022 for further hearings (tentatively fixed on 17 January 2023 with 1 day more to be confirmed).

13.  The ancillary relief trial before me began on 19 December 2022 for 4 days, followed by up to 3 additional hearing dates from 22 May 2023 onwards.

The Renewed LCP Summons

14.  The Renewed LCP Summons originally seeks:

“… a monthly sum of HK$800,000 for 6 months commencing from September 2022 or such other reasonable sum and period as the Court deems fit … to cover the Petitioner’s legal costs up to the conclusion of the Trial of Ancillary Relief with 6 days reserved, which has been fixed on 19^th December 2022 to 22 December 2022, and 17^th January 2023 to 18 January 2023; … ” [Emphasis supplied]

15.  As explained in the Wife’s 22^nd Affidavit at §14, the total funds sought in this application have been reduced from HK$4,800,000 to HK$3,488,930 to reflect various developments since the Renewed LCP Summons. Pertinently:

(1)  On 1 November 2022, the Wife’s solicitors received HK$900,000 from the Husband through his solicitors to fund her legal expenses, without prejudice to his position to oppose the present application.

(2)  The Court has also ordered the Husband to cover the reasonable fees of the Wife’s experts at first instance.

General Legal Principles

16.  The power of the Court to order any form of maintenance pending suit (which includes legal costs provision) is derived from section 3 of the Matrimonial Proceedings and Property Ordinance (Cap. 192). The principles guiding the Court’s exercise of discretion pursuant to this section are well-established, namely the sole criterion provided by the legislature is one of ‘reasonableness’, which is said to be synonymous with ‘fairness’ (See: LCYP v JEK [2018] HKCFI 1907 at §26; HJFG v KCY [2012] 1 HKLRD 95 at §37).

17.  The pre-requisites for legal costs provision are set out in the decision of Currey v Currey (No. 2) [2007] 1 FLR 946 which are endorsed by the Hong Kong Court of Appeal in LCYP v JEK at §§27-29.

Previous Determinations

18.  In both the MPS Judgment and the Leave to Appeal Judgment, Judge A Tse unequivocally held that the Wife satisfied the threshold in Currey. In the former decision, it was held at §§115-116:

(1)  The Currey test did not require an applicant to have no assets. Rather, it was sufficient for the Wife to demonstrate that she had no assets that could be reasonably deployed.

(2)  Here, the Parc Royale Property was not only her sole asset but also her home. There was (and remains) no dispute that the Wife had not been in gainful employment since 2009 and was wholly dependent on the Husband for financial provision.

(3)  Even if the Wife’s ability to resume employment was a matter to be decided at trial, there could be “no dispute that the [Husband]’s earning capacity [was] far higher than hers.” In all the circumstances, it was “wholly unfair and unreasonable to expect the [Wife] to raise litigation funding by mortgaging her only home.”

19.  In the latter, the Husband sought leave to challenge the MPS Judgment on the following grounds of appeal:

(1)  The Wife failed to satisfy the test in Currey, in that she failed to show she could provide no security for borrowing, or that none could be reasonably offered. In particular, the Husband drew the Court’s attention specifically to the Wife’s ownership of the flat and two car parking spaces in the Parc Royale Property, and suggested that she could reasonably use them as security to provide herself with sufficient credit.

(2)  The Wife’s solicitors had continued to represent her despite the accrual of outstanding legal fees, indicating that she could continue to expect legal representation.

(3)  The quantum of the legal costs provision sought was unreasonable.

20.  I agree with the Wife’s submission that these arguments, which closely resemble the Husband’s present submissions, had been categorically rejected by Judge A Tse who aptly noted (at §19 of the Leave to Appeal Judgment) that in view of the Wife’s lack of income and employment, no bank would reasonably grant her with a mortgage:

“This is the Wife’s only home. She is and has for a long time been unemployed and has no income. No bank would ever grant her a mortgage … The Husband’s insistence on the Wife obtaining a mortgage on her only home can only have one purpose: that is to put a dagger over her head to hamper her efforts in pursuing her claim or to put pressure on her to materially induce her stance on settlement and lead her to accept a settlement that was less than fair because of concerns about her only home. This is wholly unreasonable.” [Emphasis supplied]

21.  As to the risk of the Wife being deprived of legal representation, the Husband had already relied heavily on Rubin v Rubin[5] in his leave to appeal application but unsuccessfully arguing that the order for legal costs provision should not include historical legal costs incurred (see §§21-24 of the 2020 Leave to Appeal Judgment).

22.  Judge A Tse further explained at §§23, 27 to 32 of the Leave to Appeal Judgment:

(1)  The present case involved complex legal and financial issues. Given that the Wife has been seriously ill, it was important for her to remain legally represented to avoid proceedings being held in limbo; this would allow the case to be expeditiously moved to trial.

(2)  It was wrong for the Husband to assume that the Wife would continue to be represented by her solicitors despite being in arrears: Wyatt v Vince (Nos. 1 & 2) [2015] 1 WLR 1228.

(3)  The Court does not always draw a distinction between prospective and outstanding legal costs. Indeed, so long as a client was indebted to her solicitor, there was a risk of impact to their professional relationship. The solicitor might, for instance, feel constrained in taking important steps in the proceedings. The debt may also materially induce the client’s stance on settlement and could lead her to accept a settlement on terms which were less than fair because of concerns about litigation debt: Re F (A Child) [2016] 1 WLR 4720.

(4)  It was wholly unreasonable to require the Wife to be at the Husband’s mercy, as she was pressured to either risk losing her only valuable asset or expect her solicitors to continue acting without payment.

23.  In my view, the Husband cannot have a second bit of the cherry and makes the almost same submissions before me again, which had been previously rejected by Judge A Tse. If I entertain this argument again, it will only encourage the legal practitioners to re-litigate all the issues before another judge in the Family Court. In effect, it is another kind of forum-shopping.

24.  As the court shall only approach this application on the board-brush basis, I consider that generally speaking, this court shall not re-try each and every argument raised by the Husband again. What he should do is to renew his application for leave to appeal in the Court of Appeal, but he fails to do so.

25.  If the Husband had been paying the Wife the legal costs provisions up to the FDR as ordered by the MPS Judgment, unless there is material change to her financial position, I think that he shall continue to provide legal costs with the Wife up to the trial.

26.  In short, although I am not bound by the reasoning in both of the MPS Judgment and Leave to Appeal Judgment, I see no good reason not to accept them. In other words, I reject the Husband’s submissions in this regard.

27.  Besides, I would say that Rubin’s case is not binding on this court and that the risk of losing representation is simply not a requirement mandated under the Currey test as endorsed by the Hong Kong Court of Appeal or Court of Final Appeal. The sole criterion remais ‘reasonableness’ or ‘fairness’.

No Material Change to Wife’s Financial Circumstances

28.  Apart from her ownership of the Parc Royale Property, the Wife claims to hold savings of HK$1,578,758.52 as of 8 September 2022, as well as liabilities totalling HK$657,877.87 (mainly comprising of credit card bills and cheque(s) pending clearance). Hence, her actual bank balances are said to add up to HK$920,880.82 only: see Wife’s 20^th Affidavit at §§12-14.

29.  As observed in the Variation Judgment at §36, I have already combed through the Wife’s medical conditions and required treatment, management, and therapeutic measures. In refusing any downward variation of maintenance pending suit, I had already determined that there was no material change to her reasonable needs. Indeed, it added, at §33:

“I accept Ms Cheng’s submission that the objective of MPS payment is to hold the ring for the parties pending trial of the ancillary relief, and if the Wife’s case is vindicated at trial, her need for treatments must be recognised as part of her immediate, ongoing and reasonable needs. Depriving her of such treatments or forcing her to cut down on these expenses in the interim period could cause her irreparable harm. On the other hand, the issue at stake for the Husband is only money, and he can be compensated for any overpayment of MPS should the trial judge finds in his favour.” [Emphasis supplied]

30.  The alleged unused car park space at Parc Royale Property came to be valued at “$1.27 million” in the Husband’s written submission, which I cannot agree, as there is no separate valuation report for it. I therefore reject the suggested sale of this car park space by the Husband which is unlikely to be a practical solution to fund the Wife’s legal costs.

31.  For the sole purpose of this application but without prejudice to my facts findings after the ancillary relief trial, I maintain that there was no material change to her financial circumstances since the Original LCP Application.

Reasonable Quantum of Wife’s Legal Costs

32.  This is the main issue in dispute as the Husband contended that the Wife’s estimates of costs are improper and inflated.

33.  In WW v LLN[6], the Court of Appeal called for “extra caution in the balancing exercise” and required “greater certainty” in respect of costs already incurred. It was said that:

“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……

…..

40. As regards figures of incurred costs, there should be greater certainty on the same. In the absence of material changes in circumstances, the ultimate costs claimed by a party should not be substantially at variance with the figures for incurred costs in the estimates. Whilst there could be greater room for adjustment in respect of the figures for future costs in a Form H, the court may demand the solicitor to give an account for the variation when the difference is so great that some explanation is called for.

…..

45. In our judgment, there should be some flexibility in the evidential requirement on the quantum of costs in a litigation funding application which should be processed summarily. In a case where the claim is for a modest amount and the case is at a relatively early stage, it would be counter-productive to require a detailed breakdown for future costs as this may generate lengthy and costly but fruitless debates on such details. This would go against the summary nature of the exercise and the broad brush approach that the court should adopt in processing the same. Provided that a judge can be satisfied on the strength of a Form H that the ongoing costs are reasonable and the sums asked for are commensurate with a proportionate scale of the litigation, an award could still be made.”

34.  I accept the Husband’s submission that this court should guard against injustice, unrecoverable fees and disproportionate legal expenditures by the Wife. On the other hand, I also consider that it is a complicated case. Mr Marwah and Mr Bake for the Husband had prepared a very helpful table summarising the Wife’s costs estimates and the Husband’s objections in their written submission.

35.  As the Husband has been ordered to pay costs of the Wife’s MPS application, his leave to appeal application, his MPS variation application and 70% of the costs of the PTSD Summons, I consider that all such costs should have been summarily assessed or subject to formal taxation and shall not be counted again.

36.  The Husband argued that costs for the trial of preliminary issues and s17 applications are within the scope of the MPS Judgment. I agree. I consider that Judge A Tse expected the said trial should have been fixed as early as possible after the MPS Judgment. Unfortunately, that is not the case.

37.  For the expert fees, I have ordered the Husband to bear them first and I fail to see how the Wife would include them in her estimates of costs.

38.  For the remaining items of costs, I do not think that it is necessary to assess and go through them item by item. In my view, I am entitled to use my judicial experience on family cases to arrive at a rough and ready figure in similar circumstances and would simply adopt a board-brush approach.

39.  To sum up, the Husband has paid HK3.6 million as legal costs provisions to the Wife earlier. Further having taken into account the cash held by the Wife and the additional sum of $900,000 paid by the Husband, I exercise my discretion to allow another $900,000 for the legal costs provisions which shall be paid by 9 monthly instalments from September 2022 up to May 2023.

Husband’s ability to pay

40.  Regarding to the topic of the Husband’s means and financial ability to pay, it has been analysed in the Variation Judgment at §§19-30. Indeed, the Husband admitted that he has transferred substantial assets to the 2^nd Respondent over the years. He also admitted having HK$1.59 million cash in bank and liquidated assets. For the sole purpose of this application but without prejudice to my findings after the preliminary issue and ancillary relief trials, I decide to make robust assumptions against the Husband and find that he has the ability to pay.

Conclusion

41.  Based on the reasons above and to achieve some means of equality of arms, I order that:

i.  the Husband do pay the Wife a monthly sum of HK$100,000 for 9 months commencing from September 2022 to cover her legal costs up to the conclusion of the trial of the ancillary relief in May 2023;

ii.  such payment shall be made to and kept by the Wife’s solicitors and shall be used solely for legal costs in these proceedings.

42.  For the question of costs of this application, I consider that there has been 9 months of serious and unexplained delay by the Wife from December 2021 when the ancillary relief trial was set down. Further, the quantum of the costs estimates is inflated. I therefore exercise my discretion to make an order nisi that there be no order as to costs including all costs reserved relating thereto, which shall become absolute unless any of the parties apply to vary by summons within 14 days.