KKSR v. CLH

FCMC 13299/2019

[2020] HKFC 94

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES

NUMBER 13299 OF 2019

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RULING ON COSTS

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1.  This is the ruling of the parties’ respective applications for costs of (i) H’s ex parte without notice application dated 7 November 2019; (ii) H’s summons dated 8 November 2019 (“H’s summons’) for inter alia the continuation of the injunction order dated 7 November 2019; and (iii) the paragraph 1 of W’s summons dated 15 November 2019 (‘W’s summons’) for the discharge of the injunction order (collectively ‘the three applications’).

Background

2.  The parties were married in 1996.  This is a long marriage of 23 years.  In 2010, the parties adopted the daughter of the family, born in 2009, now 10 years old. The bulk of the matrimonial assets include 3 residential properties in Hong Kong, namely (1) the Seaview Crescent Property (‘Seaview Crescent Property’) and (2) Flat C and (3) Flat D ((2) & (3) collectively ‘the Matrimonial Home’) all of which said three residential properties are registered in the sole name of the respondent wife (‘W’).

3.  On 7 November 2019, upon the petitioner husband (‘H’)’s ex parte without notice application, Deputy District Judge M Lam granted an injunction order against W that restraining W from disposing or otherwise dealing with the proceeds obtain by her from a mortgage against Flat D, and disposing or otherwise dealing with the Matrimonial Home. On 18 November 2019 (‘the return date’), after an oral hearing, I made the order that the injunction order dated 7 November 2019 be discharged, save insofar as they relate to the restriction restraining W from delivering up possession of the Matrimonial Home, subject to H’s undertaking to damages. It was also ordered that costs of the three applications are to be disposed of on the papers.

W’s position

4.  W’s position was that she should have costs of the three applications allegedly for the following reasons:

(a)     There was no urgency or the need for secrecy justifying the ex parte without notice application;

(b)     It was obvious to H that W did not intend to defeat H’s claim for ancillary relief;

(c)     By the filing of the Form 8 against the Matrimonial Home, W was already prevented from further disposing or otherwise dealing with the same to H’s prejudice;

(d)     By reason of matters in the aforesaid paragraphs (a), (b) and (c), the injunction order should not be sought in the first place;

(e)     In any event, the injunction order dated 7 November 2019 was liable to be discharged because H had failed to serve the same on W within the time prescribed by the court order;

(f)     H’s application for a disclosure order was not granted;

(g)     W was the successful party as she succeeded in the application to discharge the injunction, except to the extent of prohibiting W from delivering up and parting possession with the Matrimonial Home.

(h)     W has achieved better than the ‘alternative case’ set out in W’s summons;

H’s position

5.  H’s position was that he should have costs of the three applications allegedly for the following reasons:

(a)     H disputed W’s contention that there was no urgency or the need for secrecy;

(b)     At the return date hearing, W insisted that she should be allowed to go ahead with the tenancy agreement. So, W did not actually offer any alternative case;

(c)     In view of W’s insistence on going ahead with the tenancy agreement, the injunction was the only way that H could continue living in the Matrimonial Home;

(d)     By the same token, the filing of Form 8 against the Matrimonial Home did not serve the same purpose of an injunction order;

(e)     H was the successful party as he succeeded in obtaining an order restraining W from delivering up or parting possession with the Matrimonial Home that was essential to the injunction order.

6.  Incidentally, H contended that it was of no consequence on costs that the disclosure order was not granted.

Legal principles

Costs

7.  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 Civil Justice Reform: Order 62 r.5 (1)(aa).  One of these objectives is the discouragement of unnecessary or unmeritorious applications. 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.

8.  In YBL v LWS (No 2) [2017] 2 HKLRD 783, 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.

Ex parte application

9.  The starting point is that applications for interlocutory injunctions should be made inter partes after the commencement of proceedings. It is contrary to the principles of natural justice that any judicial order adversely affecting a party’s interest should be made without the party being given a reasonable opportunity of being heard. Derogations are only permitted in certain limited and exceptional circumstances, the most obvious of which concerns matters of such extreme secrecy or urgency where there is no time to warn the defendant of what is proposed, or where the purpose of the injunction will or may well be frustrated is the defendant is informed of what is proposed, or where the defendant simply cannot be found: Hong Kong Civil Procedure 2020, Vol 1, 29/1/50.

My view

10.  I take the view that the main issues include: -

(i)      Merits of the ex parte without notice injunction application;

(ii)     Who can be regarded as the successful party;

(iii)     The parties’ conduct.

Merits of the ex parte without notice application

11.  It is not disputed, or indisputable, that: -

(i)     W has brought forth an early termination of the lease of the Seaview Crescent Property behind H’s back;

(ii)     In August 2019, W put the Matrimonial Home on sale unilaterally;

(iii)     On or about 9 August 2019, W took out a mortgage against Flat D without giving prior notice to H or his consent;

(iv)     In late October 2019, W signed a lease to let out the Matrimonial Home without giving prior notice to H or his consent;

(v)     When H discovered the said mortgage on 5 November 2019, he did not know how much W had received under the said mortgage.

12.  According to H, W has surreptitiously put in place a deliberate and well thought out scheme to defeat H’s claim for ancillary relief and to remove the daughter from the Matrimonial Home and H’s care. H contended that there was urgency in the matter due to the risk of H losing the roof above his head and due to the solid dissipation already made as evidence by W’s surreptitious actions laid out in the above, and a need for secrecy as H had a legitimate fear that once W found out H was initiating divorce proceedings and applying for an injunction, she would immediately dispose of the mortgage proceeds or even further dispose of the other matrimonial assets behind H’s back.

13.  I take notice that H knew as early as in August 2019 that W might have put the Matrimonial Home on the market and he was actually told in late October 2019 that W had let out the Matrimonial Home. The prospective tenant was due to move in on 1 December 2019. No doubt, he has had plenty of time to apply to the court for relief to prevent W from unilaterally removing him from the Matrimonial Home and there was no extreme urgency due to the alleged risk of H losing the roof above his head in the circumstance.

14.  I further take notice that: -

(a)     H knew that W would not be able to sell the Matrimonial Home as he was keeping the title deeds of the Matrimonial Home at the material time;

(b)     It appears from the facts set out in the above paragraph 13 that, in fact, W did not hide from H the listing or the subsequent leasing out of the Matrimonial Home, despite that those actions were taken by W without giving prior notice to H or his consent;

(c)     The mortgage having been taken out on 9 August 2019, had W intended to squander the monies obtained from the mortgage, she would have already done so long ago;

15.  Against the above, I regard that it is unlikely that, if W was informed of the injunction application, she would immediately dispose of the mortgage proceeds, or dispose of the other matrimonial assets, if she had not already done so. After having carefully considered the above, I do not accept that there was extreme urgency or the need for secrecy as alleged by H, or at all, justifying the decision of not informing W of the ex parte application.

16.  The parties were still on talking terms. It is also not disputed that H could reach W via WhatsApp. I take the view that H should have informed W of his ex parte application. If W were so informed, there and then, it would have been made clear to H that the mortgage loan was $2 million that was only about a quarter of the value of Flat D and a small fraction of the total value of the matrimonial assets, and that it would have been clarified that one of the reasons that W took out the mortgage was that she needed funds to meet the renovation costs of the Seaview Crescent Property that were about $700,000. Were such clarifications provided, H would have seen that his claim for ancillary relief was still well covered by the remaining matrimonial assets so much so that there was no risk of dissipation to H’s prejudice.

17.  I accept that the filing of the Form 8 against the landed properties would prevent W from further disposing or otherwise dealing with the same.

18.  I do not accept that H’s ex parte application was totally unnecessary, however. As H contended, an essential part of the injunction was to let H continue living in the Matrimonial Home.

Who can be regarded as the successful party

19.  The parties took issue on who can be regarded as the successful party. 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.

20.  After having carefully considered all circumstances, I accept that, in view of W’s insistence on going ahead with the tenancy agreement at the return date hearing, W did not actually offer an alternative case.

21.  I agree that the consequence on costs that the disclosure order was not granted is minimal.

22.  More substantively, both parties succeeded partially. H was successful in obtaining an order restraining W from delivering up and parting possession with the Matrimonial Home while W was successful in the application to discharge the injunction order, save to the extent of prohibiting W from delivering up and parting possession with the Matrimonial Home.

The parties’ conduct

23.  I take the view that the chain of events leading to H’s ex parte application must be considered when looking to his motives to pursue the application for an ex parte injunction and the relative merits of the application at the time when it was made. Apparently, there was deep distrust between the parties that was caused by W’s repeated unilateral actions. It is obvious that such unilateral actions exacerbated H’s distrust of W and prompted him to take out the ex parte application. I take the view that the court should make a costs order that reflects the fact that W has brought the litigation upon herself.

Conclusion

24.  I remind myself of the provisions of Order 52 rr. 3 and 5 that set out the factors that the court shall have regard in exercising its discretion as to costs. I take notice that I have not accepted that there was extreme urgency or the need for secrecy justifying H’s decision of not informing W of the ex parte application. I place particular significance on the fact that both parties were partially successful. H was successful in restraining W from delivering up or parting possession with the Matrimonial Home that was an essential part of the injunction while W was successful in the discharge of the injunction save to save to the extent of prohibiting W from delivering up and parting possession with the Matrimonial Home. I also place particular significance on the fact that W perpetrated repeated unilateral actions that exacerbated H’s distrust of W and prompted him to take out the ex parte application.   Looking at the matters in the round, I regard that it is just and reasonable to make no order as to costs of the three applications.

Disposal

25.  I make no order as to costs of the three applications, including all reserved costs. In a broad-brush way, I make the order nisi that there also be no order as to costs of the costs only proceedings, including all reserved costs. The order nisi becomes absolute 14 days after the order is made unless a party has applied to the court for varying the order.