FNN (AN INFANT) BY FDD HER MOTHER AND NEXT FRIEND v. GC

FCMP 27 / 2018

[2019] HKFC 268

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MISCELLANEOUS PROCEEDINGS NO 27 OF 2018

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RULING ON COSTS

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Background

1.  The Applicant Mother (‘the Mother’) issued the present Originating Summons on 1 February 2018 for the following reliefs:

(1)  The Respondent Father (‘the Father’) do pay the Mother $65,000 per month or such sum as deemed fit by the court for the maintenance of FNN (‘the Daughter’) starting from a date to be determined by the court;

(2)  The Father do pay the Mother the sum of $300,000 being reimbursement of the Daughter’s hospital fees incurred by the Mother upon the birth of the Daughter; 

(3)  Other orders/ directions as the court deems fit; and

(4)  Costs.

2.  The Mother filed her supporting Affirmation on 2 February 2018.  The Father filed his opposing Affirmation 0n 6 April 2018, and the Mother filed her replying Affirmation on 4 May 2018 and her Form E on 18 May 2018, and then the Father filed his Form E on 23 May 2018.  After that, the parties reached a settlement agreement and they procured a Consent Summons dated 16 July 2018 setting out the following terms of the settlement agreement to be lodged with the court for the court’s consideration and approval:

(1)  The Father do pay the following maintenance for the Daughter:

(a)  The sum of $160,000 being $10,000 per month for the period from 11 March 2016, the date of birth of the Daughter, to 10 July 2017;

(b)The sum of $240,000 being $20,000 per month for the period from 11 July 2017 to 10 July 2018;

(c)  $20,000 per month, 1^st payment to be made on 11 July 2018 and subsequent payments on the 11^th day of each succeeding month until the Daughter attains the age of 18 years or ceases full time education, whichever is the later.

(2)  The Father do pay the Mother the sum of $150,000 being reimbursement of half of the Daughter’s hospital fees; 

(3)  The question of costs of this action is to be determined by the Court.

3.  The Family Court granted an order in terms of the above consent application on 24 July 2018.  This is the hearing of the costs only proceedings pursuant to the Consent Order dated 24 July 2018.    

Legal principles

4.  The court has a wide discretion as to costs.  The relevant provisions in the Rules governing the exercise of discretion as to costs are Order 62 rr 3 and 5.  Order 62 rule 3(2) provides that if the court in the exercise of its discretion sees fit to make any order as to the costs of or incidental to any proceedings (other than interlocutory proceedings), the court shall, subject to that Order, order the costs to follow the event, except when it appears to the court that in the circumstances of the case some other order should be made as to the whole or any part of the costs.  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 HK Civil Procedure at 62/3/3B.  When dealing with costs orders, under Order 62 rule 5(1) the court may take into account, among other things, the conduct of the parties and any admissible offer to settle made by a party, which is drawn to the court’s attention.  Rule 5(2) provides that conduct for this purpose includes (a) whether it was 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, exaggerated his claim; and (d) conduct before, as well as during, the proceedings.

5.  I have particularly drawn the parties’ attention to YBL v LWS (No 2) [2017] 2 HKLRD 783, in which the Court of Appeal held that the relevant principles on the exercise of discretion as to costs were:

(a)  Whilst the courts often started with the proposition of costs following the event, it was no longer the general rule but a starting point (Hung Fung Enterprises v Agricultural Bank of China [2012] 3 HKLRD 679 applied);

(b)  There had to be some justification for depriving a successful party of his costs;

(c)  In measuring who was the successful party and the extent of his success, the court must examine the reality and justice of the case. Thus, in Hysan Development Co Ltd v Town Planning Board (No 2), no order as to costs was made notwithstanding the success of the appellant in reversing the Court of Appeal’s decision because they did not achieve the full objects of their appeals (Hysan Development Co Ltd v Town Planning Board (No 2) (2016) 19 HKCFAR 635 applied);

(d)  In addition, under O.62 r.5, the court in exercising its discretion should take into account the matters set out in r.5(1) as might be appropriate in the circumstances;

(e)  Order 62 r.5(2) highlighted conduct which the court could take into account including whether it was reasonable for a party to take an issue, the manner in which the matter was pursued or defended, the extent of success, and conduct before, as well as during the proceedings;

(f)  If a successful party had brought the litigation upon himself or had done some wrongful act in the course of the transaction, he could be deprived of his costs.

6.  Mr. Li counsel appearing for the Father contended that there should be no order as to costs inasmuch as: -

(1)  These proceedings were disposed of by way of a settlement agreement reached between the parties out of court;

(2)  This was a children matter;

(3)  The Mother’s conduct throughout had been reprehensible in that she had grossly exaggerated the claim, and as a result what the Mother actually was awarded was much closer to the Father’s proposal rather than the Mother’s previous much bloated claims. 

7.  On the other hand, Mr. Sham counsel appearing for the Mother contested that the court should make an order that the Father shall pay her costs of these proceedings, including reserved costs, on the following grounds: -

(1)  The Mother was the winning party;

(2)  The Father’s litigation conduct was unreasonable; and

(3)  Disparity between the means of the parties.

Difference consideration as to ‘settlement’?

8.  Mr Li particularly drew my attention to Glory Empire Global Ltd v Bateson Investment Ltd [2017] HKEC 1760, in which Anderson Chow J reviewed the authorities and then said:

44.  From the above authorities, I consider the following principles to be applicable where a judge is asked to determine the issue of costs in a situation where the issue of liability has become academic:-

(1)  The judge has a wide discretion not only as to the manner by which the issue of costs is to be determined, but also what evidence should be received and what findings to make.

(2)  In a simple case where the issue of liability is clear on the face of the pleadings or existing affidavit evidence already filed, it would be open to the judge to determine the issue of costs without receiving any further evidence.

(3)  Where the issue of liability is not so clear, the judge may direct evidence to be filed and the witnesses to be cross examined. The judge may also confine the evidence to be filed, and cross examination of the witnesses, to a particular issue or some particular issues.

(4)  In determining the issue of liability for the purpose of deciding costs, the court may adopt a broad brush approach and does not necessarily have to conduct a trial to determine the substantive issues.

(5)  Where it is impossible for the court, on the existing materials, to say what the likely outcome would be, the court may, in appropriate circumstances, decide to make no order as to costs.

(6)  Ultimately, the objective is to do justice between the parties without incurring unnecessary court time and consequently additional costs.

9.  Despite Mr. Li’s contention to the contrary, applying the above legal principles, and taking into consideration the indisputable fact that the Father has responsibility to the maintenance of the Daughter, I take the view that this is a simple case where the issue of liability is clear on the face of the existing affidavit evidence already filed and in consequence it is open to me to determine the issue of costs without receiving any further evidence.

Whether the Mother can be regarded as the successful party

10.  In YBL v LWS (No 2) supra, the Court of Appeal held that, in measuring who was the successful party and the extent of his success, the court must examine the reality and justice of the case.  In the present case, the Mother was obliged to come to court for the order of financial provision for the Daughter, and that although the final award is way short of her claims, it is nevertheless still more than what the Father has previously offered.  Taking an overview of the matter, I accept that the Mother is the successful party.  In the circumstance, there has to be some justification for depriving her costs.

Litigation Conduct of the parties

11.  The Mother accused the Father of dallying with her claim for the Daughter’s maintenance.  In contrast, the Father blamed the fact that it had taken such a long time for the parties to reach a settlement on the Mother.  He contested that the Mother had grossly exaggerated her claim and as a result what the Mother was awarded was much closer to the Father’s without prejudice save as to costs offer rather than the Mother’s previous much bloated claims.  My attention was directed to the following correspondence exchanged between the parties: -

(i)  As early as 9 August 2017, the Father wrote to the Mother accepting responsibility and agreeing to pay reasonable maintenance to the Daughter;

(ii)  On 24 October 2017, the Mother requested the Father to pay the colossal sum of $28,747,160 for maintenance of the Daughter up to her reaching 24 years old, and also the sum of $300,000 for reimbursement of hospital fees.  The Father suggested that it is unbelievable that, as stated by the Mother, the Daughter then aged 1 and half years old spent as much as $96,910 per month; 

(iii)  On 14 November 2017, the Father counteroffered $10,000 per month;

(iv)  On 17 November 2017, the Mother lowered her request to $60,000 per month, but insisted on full reimbursement of the hospital fees;

(v)  On 29 November 2017, the Father drew the Mother’s attention to that he earned only $50,000 per month;

(vi)  On 1 December 2017, the Mother further reduced her request to $45,000 per month and still insisted on the full reimbursement of the hospital fees;

(vii)  By the letter dated 7 December 2017 and also the letter dated 18 December 2017, the Father reminded the Mother of her responsibility to share the Daughter’s expenses;

(viii)  The Mother chose not to reply the above letters dated 7 December 2017 and 18 December 2017.  Instead, on 2 February 2018, the Mother commenced the present proceedings claiming $65,000 per month for the Daughter in the Originating Summons, and on 5 February 2018 served the court documents on the Father;

(ix)  On 29 June 2018, after the parties having exchanged affirmation evidence and Form E, the Father made the final offer in the terms as set out in the above consent application.

(x)  On 5 July 2018, the Mother accepted the offer dated 29 June 2018 save as to the question of costs.

12.  After having carefully considered the above, I do not accept that the Father is guilty of unreasonable litigation conduct as alleged by the Mother.  At the same time, I am prepared to accept that: -

(1)  The Mother has exaggerated her claim;

(2)  She has also unreasonably disregarded her share of the Daughter’s expenses throughout the parties’ negotiations;

(3)  The above unreasonable conduct on the part of the Mother is obstructive to an early settlement;

13.  By reason of matters aforesaid, taking a broad brush approach, I regard that it is just and reasonable to make 50% reduction of the costs payable by the Father to the Mother in these proceedings.

Children matter?

14.  Mr. Li contended that, this being a children matter, the usual order should be no order as to costs.  It is accepted that it is unusual to order costs in children matter: Hong Kong Family Court Practice (LexisNexis Butterworths, 2^nd edn) at §9.32, Sutton London Borough Council v Davis (No 2) [1995] 1 All ER 65 at 67f-h, R v R (Costs: Child’s case) [1997] 2 FLR 95.  Mr. Sham did not try to gainsay the above legal principles, but he stressed that the present case is distinguishable from cases about custody, care and control and access arrangements. 

15.  In IDC V SSA [2013] HKEC 1800, His Honour Judge Bruno Chan held that

18.   It is therefore clear from these principles that while it is in the unfettered discretion of the court, when it comes to costs over the custody care and/or access arrangements of a child, the appropriate order would normally be no order as to costs, but as for claims for financial provision for a child, the starting point is for costs prima facie to follow the event, which may however be displaced by an order against a party who had been guilty of unreasonable conduct or where there was such disparity between the means of the parties that a specific order would be fair or justified.

In CMMJ v SSM formerly known as SKL (Ruling on Costs: By Paper Disposal) (FCMC 67/2010, unreported, Deputy District Judge G. Own (as he then was), 27 July 2016), the above legal principle was adopted and applied.  After having carefully considered, I also agree with His Honour Judge Bruno Chan’s observation in the above and do not agree with Mr. Li’s contention that the so-called usual order of no order as to costs should be applied in the present case.

Disparity between the means of the parties?

16.  It was further suggested that, as the Mother’s income could barely support her living, if the Mother was required to bear her own costs, the Daughter would suffer.  In this regard, taking into account the undisputed fact that both parties earn similar monthly income, and that according to the parties’ Form E, the Mother and the Father’s net value of assets and liabilities are $614,708 and $1,262,564.32 respectively, I take the view that apparently the Mother has the ability to bear her own costs. As such, I do not accept the suggestion that, in light of the so-called disparity between the means of the parties, an order that the Father shall pay the Mother’s costs should be made.

Disposal

17.  In conclusion, I make the order that the Father shall pay 50% of the Mother’s costs of this action, including all reserved costs, to be taxed if not agreed, with certificate for counsel.  

18.  The Mother is partially successful in the costs argument.  In a broad-brush way, I make the order nisi that the Father shall pay 50% of the Mother’s costs of the costs only proceedings, including all reserved costs, to be taxed if not agreed, with certificate for counsel.  The order nisi becomes absolute 14 days after the order is made unless a party has applied to the court for varying the order.

19.  I am grateful to Mr. Sham and Mr. Li’s assistance to the court.