AA v. BB

FCMC 41/2022

[2025] HKFC 126

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES

NO. 41 OF 2022

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D E C I S I O N

(Ancillary Relief Costs)

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Introduction

1.  The ancillary relief (“AR”) judgment is dated 12 March 2025 (“Judgment”). The Petitioner husband (“H”) had asked to be heard in respect of costs: Judgment: [397]. Trial counsel for each party have lodged submissions on costs. Mr Barnes and Ms Liu lodged the Petitioner’s Submissions on Costs dated 8 May 2025 (“H’s Subs”) and the Petitioner’s Reply Costs Submissions dated 29 May 2025 (“H’s Reply”). Mr Li for the Respondent wife (“W”) lodged Skeleton Argument of the Respondent – Wife dated 8 May 2025 (“W’s Subs”) and the Reply Submissions of the Respondent – Wife dated 29 May 2025 (“W’s Reply”).

2.  H and W each consider they have achieved a good measure of success and should be awarded costs. H applies for 50% of his costs to be paid by the W. H seeks an order in his favour to reflect two relevant features of the case: first, H’s success on a number of key issues and second, W’s litigation misconduct, which significantly increased the costs incurred. W applies for 100% of her costs to be paid by H. W considers that she is clearly the more successful party, on Open Proposals, she is the “victor”. Therefore she is entitled to costs of the AR suit on the basis that “costs follow the event” and there is reason to depart from this starting point.

“Without prejudice” offers

3.  W has referred to “without prejudice” offers. At the outset I must determine whether W is entitled to refer to and rely upon without prejudice communications.

4.  H’s position is that W’s Sub’s refer to material which the court cannot consider, namely communications between the parties marked “Without Prejudice” simpliciter. H wrote to the court at the earliest possible opportunity to alert it to the problem: letter Hugill & Ip dated 19 May 2025. W’s solicitors were critical of this communication. H’s legal team fully accepts that written communications to the court should be the exception rather than the rule, and must be fully justified. In the present situation, there were very good obvious reasons for the letter of 19 May 2025. The concern was that the court should not read those parts of the W’s Sub which H contends cannot be referred to.

5.  The principles confirming the distinction between “Without Prejudice” communications, and those made “Without Prejudice Save as to Costs” or Calderbank offers, are addressed below.

6.  Often, the court is able to have regard to Calderbank offers in considering the appropriate award of costs. Calderbank offers – marked “Without Prejudice Save as to Costs” – are a variant of without prejudice offers allowing what would otherwise be privileged to be considered by the court in the determination of who should pay the costs: Xydhias v Xydhias [1999] 2 All ER 386, at p397.

7.  H says that the email exchange W refers to between W and H occurred in January 2024 and, just prior to the trial, in April 2024. All emails were marked “Without Prejudice”. None of them were marked “Without Prejudice Save as to Costs”. None of them said that they reserved the right to show the email to the court, including if the offer set out in the email was “bettered” at trial.

8.  H submits that the court cannot have regard to them. H asks that the court disregard W’s Subs [1] – [4], [6], [14], [16], the entire Section D i.e. [60] – [93], and Annexures A and B.

9.  It appears to H that now W has assumed that this “Without Prejudice” correspondence in Annexures A and B are no different from Calderbank offers or is treating it as such. Obviously, communications marked “Without Prejudice” are not Calderbank offers, unless there is a clear statement in the document reserving the ability to refer to the document on the matter of costs in the event that the offer is refused.

10.  W’s Subs rely on DGB v SDGK [2014] HKFLR 535, DD Judge I. Wong (as HH Judge I. Wong then was), including paragraphs 6 and 7 of that judgment which are set out below. On this issue H emphasises that the references are to without prejudice “save as to costs” offers and admissible offers. The principle stated is that in the exercise of its discretion in civil cases including matrimonial and family cases, the court will have to take into account, where appropriate in the circumstances, any written “without prejudice save as to costs” offer (Calderbank offer) and any admissible offer to settle made by a party, which is drawn to the Court’s attention: see Order 62, rule 5(1)(aa) to (g), RHC. Of particular relevance to ancillary relief proceedings and in that case was the Calderbank offer, namely a written “without prejudice save as to costs” offer made by a party to the other. H submits that the same does not apply to “without prejudice” offers.

11.  Mr Barns maintains that the Family Court is in no different position to other courts: there is no special rule allowing it to consider “without prejudice” communications in determining costs of ancillary relief proceedings. The court may not look at or take into account such offers, including on the matter of costs, unless both parties consent: Sternberg Reed Solicitors v Harrison [2020] Ch 223 at [28], [30]. H does not consent.

12.  There is a strong public policy underpinning this prohibition, enabling and encouraging under the “without prejudice” cloak freedom of settlement discussions to take place. The courts have consistently stated that "without prejudice” correspondence is not admissible when considering costs because to do so would subvert the implicit agreement under which such correspondence takes place: Vestergaard Frandsen A/S v Bestnet Europe Ltd [2015] 1 Costs LR 85 at [26] – [28].

13.  Mr Barns submits that none of this is controversial, in law. This is not a “grey area”. Indeed, W’s insistence on referring to what are clearly inadmissible communications is yet another example of litigation misconduct and further underlines H’s assertion that the court should reflect its disapproval by an appropriate adverse costs order.

14.  Mr Li replies that the court should at least consider the without prejudice offers de bene esse. This is because it is important the court see the position taken by the parties respectively. Further, that H should not be able to hide behind the cloak of the Calderbank formula when the correspondence was private between the lay clients themselves without their lawyers. W should not be expected to know the legalese. W is not a lawyer. In my view where parties use the “without prejudice” protection that choice should be accepted. If a party is in doubt as to the meaning either, ascertain the meaning, or do not use the term.

Determination on “WP” offers

15.  I accept H’s submissions. The law is clear. The “without prejudice” offers are inadmissible. I am not persuaded that there is any reason to disregard the “without prejudice” designation in this case. I am not prepared to rely on “without prejudice” offers in determining the appropriate costs order in these AR proceedings. I shall now consider the applications for costs, excluding the without prejudice communications.

The Law

16.  The court’s discretionary power to make appropriate costs orders stems from Order 62 rule 3(2) of the Rules of the District Court (Cap. 336H) (“DCR”), which states:

“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 this 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.”

17.  In family matters, because of the particular dynamics involved, the exercise of the discretion is wider than in other civil proceedings. The starting-point is that costs follow the event: HK v BD [2011] HKFLR 66 at [78], as per Hartmann JA, citing Gojkovic v Gojkovic (No 2) [1992] 1 All ER 267, 271. A more recent UK decision affirming this principle is RA v KS [2023] EWFC 102 at [45].

18.  In exercising the court’s discretion as to costs, the court should take into account the factors set out in Order 62, rule 5(1), RDC including the underlying objectives of the Rules of Court set out in Order 1A, rule 1 (r. 5(1)(aa)) RDC, the conduct of the parties (r. 5(1)(e)), and whether a party has succeeded on part of his/her case, even if s/he has not been wholly successful (r. 5(1)(f)). Order 62, rule 5(2) RDC conduct the court may take into account includes whether it was reasonable for a party to take an issue, the manner in which the matter was prosecuted or defended, the extent of success and the conduct before and during the proceedings.

19.  In YBL v LWS (No. 2) [2017] 2 HKLRD 783, Hon Lam VP (as he then was) confirmed (at [9], citing Chief Justice Ma in Mimi Kar Kee Hung v Raymond Kin Sang Hung (unrep., FACV 10&11/2014, 7 July 2015) at [7]) that the discretion as to costs is to be exercised in a principled way with a view to reality and justice. The principles relevant to the appeal in YBL v LWS were:

“10. For present purposes, the relevant principles on the exercise of discretion as to costs can be summarised as follows:

(a) whilst the courts often start with the proposition of costs following event, it is no longer a general rule but a starting point, see Hung Fung Enterprises v Agricultural Bank of China [2012] 3 HKLRD 683;

(b) there have to be some justifications for depriving a successful party of his costs;

(c) in measuring who is 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) (2016) 19 HKCFAR 635, the Court of Final Appeal made no order as to costs notwithstanding the success of the appellants in reversing the Court of Appeal’s decision because they did not achieve the full objects of their appeals;

(d) in addition, under Order 62 Rule 5, the court in exercising its discretion shall take into account the matters set out in Rule 5(1) as may be appropriate in the circumstances;

(e) Rule 5(2) highlights some conduct which the court may take into account including whether it is reasonableness 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; …”.

20.  W relies on DGB v SDGK for the following statement on costs principles:

“5. In general terms, apart from children’s cases, the starting point on costs in matrimonial and family proceedings, as they are in civil litigations, remains to be "costs follow the event": Order 62, rule 3(2) RHC.

6. Broadly speaking, in the exercise of its discretion in civil cases including matrimonial and family cases, the court will have to take into account, where appropriate in the circumstances, the special matters set out in Order 62, rule 5 of RHC, namely, the underlying objectives set out in Order 1A, rule 1, any offer of contribution, any payment of money into court and the amount of such payment, any written offer made under Order 33, rule 4A(2), any written "without prejudice save as to costs" offer (Calderbank offer), the conduct of the parties, whether a party has succeeded on part of his case, even if he has not been wholly successful; and any admissible offer to settle made by a party, which is drawn to the Court’s attention: see Order 62, rule 5(1)(aa) to (g), RHC.

7. Of particular relevance to ancillary relief proceedings and in the present case is the Calderbank offer, ie a written "without prejudice save as to costs" offer made by a party to the other. It has been commented that a Calderbank offer may be an important and material consideration in the exercise of court’s discretion as regards to costs but the existence of a Calderbank offer should influence but not govern the exercise of court’s discretion. The proper question to be asked is whether the party to whom offer was made ought reasonably to have accepted the proposal made. Paragraph 22/2/A, Hong Kong Civil Procedure (2015); also W v K and Anor (Costs) [2008] HKFLR 378 at para 13.

8. In the leading case of Gojkovic v Gojkovic [1992] Fam 40 Butler-Sloss LJ stated as follows:

‘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. ... But the starting point in a case where there has been an offer is that, prima facie, if the application receives no more or less than the offer made, she/he is at risk not only of not being awarded costs, but also of paying the costs of the other party after communication of the offer and a reasonable time to consider it. …’.

9. Locally, as regards the costs in ancillary relief cases, Hon Yuen JA sets out the principles in L v C [2007] HKFLR 334, CACV No 169/2006 (date of judgment: 19 March 2008),

23. As a matter of law, it is clear that costs are in the court’s discretion. Pointers as to how that discretion should be exercised include the following:

(1) in family cases, as in others, costs should normally follow the event;

(2) however because of the special dynamics of family litigation (eg where the case involved children, or where financial resources were inadequate to meet the needs of both parties, etc.), the discretion may be broader than in civil matters generally (Gojkovic v Gojkovic [1991] 2 FLR 233, F v F (No. 2) [2003] 3 HKLRD 977); …;

(3) the court also retains a discretion to deprive successful litigants of costs under the Elgindata principles (In re Elgindata Ltd (No. 2) [1992] 1 WLR 1207); …

10. Notwithstanding the starting point remains to be "costs follow the event", it is important not to forget that the basic principle is that costs are in the court’s discretion. The court has full power to determine by whom and to what extent the costs are to be paid. Accordingly, the discretion of the court is much wider in family cases and the starting point is more easily displaced than in any other civil proceedings. In TL v SN [2010] HKFLR 506, (CACV 196/2009) (19 October 2010), Hon Kwan JA, in her unanimous judgment for the Court of Appeal, reaffirmed that in matrimonial cases, as in other cases, costs should normally follow the event. More recently in Z v X & C [2013] HKCU 542, CACV 166/2011 (8 March 2013), Hon Cheung JA, in para 10 of the judgment, reaffirmed the court’s approach on costs in ancillary relief application is that costs should follow the event although because of the special dynamics of family litigation, the discretion may be broader than in civil matters generally: para 10 of the Judgment.”

21.  H notes that authorities cited in W’s Subs [11 & 12] support his case. In DGB v SDGK, the court held there are many reasons affecting the court in considering costs, such as culpability in the conduct of the litigation: for instance material non-disclosure of documents or information and excessive zeal in seeking disclosure.

22.  Mr Li refers to KJ v KMLM (unrep., HCMC 4/2010, 21 May 2014), where To J set out further nuances on costs relative to the arguments:

“13. The broad guidelines on costs have been set out by Nourse LJ in Re Elgindata (No 2). These guidelines were modified following the implementation of the Civil Justice Reform ("CJR")…. The modified guidelines are as follows.

14. First, costs are in the discretion of the court: Order 62, rule 2(4).

15. Second, the principle that costs follow the event is no longer regarded as a general rule but a convenient starting point from which a court can readily depart. It only operates to shift to the unsuccessful party the burden of showing why some different approach should be adopted on the facts of that particular case: Order 62, rule 3(2);

16. In the United Kingdom, the starting point of costs in family cases is no order as to costs… Despite that the English Family Procedure Rules 2010 are not applicable to Hong Kong, in the light of the nature of ancillary relief proceedings, the starting point of costs following event can be easily displaced where the parties genuinely seek the court’s adjudication on their appropriate share from the family pool. It would be within the court’s discretion to make a no costs order in an appropriate case.

17. Third, the starting point does not cease to apply simply because the successful party raises issues or makes allegations on which he fails, but where that has caused a significant increase in the length or costs of the proceedings he may be deprived of the whole or part of his costs. Since CJR, the court is more ready to take an issue-based approach. It is no longer necessary for a party to have acted unreasonably or improperly to be deprived of his costs of a particular issue on which he has failed…. Nor is it necessary to show that the successful party has deliberately wasted time and costs: see Re Ricacorp Properties Limited. For the purpose of this guideline, a significant increase in the length or costs of the proceedings means one that can be estimated as a more than trifling proportion of the total costs. The costs need not be assessed with precision. It suffices if the court can give an estimate of the proportion of these costs: see Chan Lan v Shing Kei. A party may be deprived of part of his costs on the failed issues even if such costs overlap with those of the succeeded issues: see Zhuhai International.

18. Fourth, where the successful party raises issues or makes allegations improperly or unnecessarily (or unreasonably, in the United Kingdom), the court may not only deprive him of his costs but may order him to pay the whole or part of the unsuccessful party’s costs: Order 62, rule 7(1). By implication, a successful party who neither improperly nor unreasonably raises issues or makes allegations on which he fails ought not to be ordered to pay any part of the unsuccessful party’s costs.

19. Fifth, as a result of the CJR, amendments were introduced to Order 62, rule 5 which requires the court in exercising its discretion to take into account certain special matters in appropriate circumstances. In the circumstances of the present case, three special matters are pertinent: (1) the underlying objectives set out in Order 1A, rule 1, in particular, to increase the cost-effectiveness of any practice and procedure and to promote a sense of reasonable proportion and procedural economy in the conduct of proceedings (rule 5(1)(aa)); (2) the conduct of all the parties, including whether it was reasonable for a party to raise, pursue or contest a particular allegation or issue; the manner in which it was pursued, whether the claimant who has succeeded in his claim, in whole or in part exaggerated his claim, and his conduct before as well as during the proceedings (rule 5(1)(e)); and (3) whether a party has succeeded on part of his case, even if he has not been wholly successful (rule 5(1)(f)).”

23.  Mr Barns relies on KJ v KMLM for the holdings that:

(1)  Where a successful party raises issues or makes allegations on which he fails and where that has caused a significant increase in the length or costs of the proceedings, he may be deprived of the whole or part of his costs. A significant increase in the length or costs of the proceedings means one that can be estimated as a more than trifling proportion of the total costs. The costs need not be assessed with precision. It suffices if the court can give an estimate of the proportion of these costs. A party may be deprived of part of his costs on the failed issues even if such costs overlap with those of the succeeded issues (at [17]).

(2)  Where the successful party raises issues or makes allegations improperly or unnecessarily, the court may not only deprive him of his costs but may order him to pay the whole or part of the unsuccessful party’s costs (at [18]).

(3)  The court in exercising its discretion should take into account certain special matters in appropriate circumstances, including the conduct of all the parties, whether it was reasonable for a party to raise, pursue or contest a particular allegation or issue; the manner in which it was pursued, whether the claimant who has succeeded in his claim, in whole or in part exaggerated his claim, and his conduct before as well as during the proceedings (at [19]).

W’s position: W is the more successful party on WOP

24.  Mr Li submits, whilst the court’s jurisdiction on costs is broader in the family division, the core principles on costs in civil proceedings continue to apply. The starting point remains “costs follow the event”. Even on the parties’ respective Open Proposals (absent any “WP” material), W says that she is still, clearly, the more successful party, on Open Proposals she is the victor. Therefore, she is entitled to costs of the AR suit and there is no reason to depart from this starting point.

25.  The facts are detailed in the Judgment however, W refers to the following as salient background. At date of Judgment, H and W were aged 51 and 43. There are 2 Children aged 13 and 9 attending Hong Kong schools. Joint custody and shared care and control of the Children was agreed: Consent Order dated 15 February 2023. Parties were in accord that the Children enjoyed and still enjoy a high standard of living [367].

26.  The court determined, inter alia, that:

(1)  W was to receive HK$27,535,408.19 of the HK$64,035,833.50 pot, that is 43%;

(2)  H was to transfer all of his interest in the AB properties to W, accounting for HK$12,560,000;

(3)  H was to transfer all of his interest in CD property to W, accounting for HK$1,094,436.50;

(4)  H was to pay a lump sum of HK$6,740,000 to W within ~9 months, as follows:

(a)  HK$740,000 within 21 days of Decree Absolute (“DA”);

(b)  HK$2 million within 3 months of DA;

(c)  HK$2 million within 6 months of DA;

(d)  HK$2 million within 9 months of DA;

(5)  In addition to Undertakings, H was to pay to W periodic payments for their 2 Children at the monthly rate of HK$89,000 until 18 or their respective cessation of full-time education: Judgment [399].

27.  Mr Li submits that Open Proposals in AR proceedings, bear equal importance to Calderbank Offers, where the seminal question is whether it is one which the recipient party ought reasonably to have accepted. This requires a comparison between the parties’ respective offers and the court’s determination. W’s position is that she is entitled to costs of the AR suit on her WOP, and in particular for the following nine reasons.

28.  First, a comparison of parties’ respective Open positions and the ultimate determination of the court is dispositive. As to capital division:

(1)  Court’s determination 43% of the pot, or ~HK$27.54 million be to W. With assets held in W’s own name being HK$7.14 million, the balancing sum is HK$20.4 million.

(2)  HOP position 26% of the pot or HK$16.76 million be to W. This is made up of (1) assets in W’s own name, being HK$7.14 million, (2) net lump sum of HK$101,600, (3) H’s interest in the AB properties (with outstanding mortgage of ~HK$1.95 million to be paid by W), and (4) W to transfer to H her ½ share interest in the CD property (with outstanding mortgage of ~HK$1.51 million to be paid by H). The calculations are as follows:

-  Assets in W’s own name: HK$7.14 million

-  Combined net value of A properties: HK$10.61 million

-  HK$3.72 million “lump sum” offered under HOP

Less (―):

―  H’s claim for repayment of HK$2,948,400 of FMH rent

―  H’s claim for repayment of HK$140,000 in property taxes on the AB properties

―  HK$530,000 for purported loss in value of the CD property

―  W’s ½ share of the CD property (net of mortgage): HK$1.094 million

=  Equals: HK$16.76 million.

(3)  WOP position 50% of the pot, being HK$34.44 million, with balancing sum of HK$26.52 million per WOP.

29.  W’s Subs demonstrates this by a sliding scale to show the determination is closer to W’s end of the range. W bettered HOP by HK$11 million. WOP was short by HK$6.9 million. On capital division, W is clearly the successful party.

30.  On Children periodical payments (“PP”) the Court’s determination is HK$89,000 as Children PP. HOP position was HK$0 as Children PP. WOP position was HK$115,000 as Children PP. W’s claim is much closer to the determination on the sliding scale. W bettered HOP by HK$89,000. She achieved just HK$26,000 less than WOP.

31.  W says that the above ought to be dispositive of the costs issue on Open Proposals. On the ultimate determination, it is clear that she was the successful party, or at least the more successful party.

32.  Second, on Children PP, H’s stance was HK$0, whereas the court directed HK$89,000 per month, at HK$44,500 per child per month. The payments commence from the date of Judgment [399]. There is a real financial impact:

(1)  Calculating up to 18 years old, the Children PP is as follows:

(a)  Elder Child (aged 13): $44,500 x 12 months x 5 years = HK$2,670,000.

(b)  Younger Child (aged 9): $44,500 x 12 months x 9 years = HK$4,806,000.

TOTAL (up to 18 years old): HK$7,476,000.

(2)  If both Children pursue an undergraduate 4-year degree:

(a)  Elder Child: $44,500 x 12 months x 9 years = HK$4,806,000.

(b)  Younger Child: $44,500 x 12 months x 13 years = HK$6,942,000.

TOTAL (up to completion of undergraduate degree): HK$11,748,000.

33.  W says that the unreasonableness of H’s stance of HK$0 is apparent. Plus, H’s stance of HK$0 is doubly unreasonable given in cross-examination, he frankly admitted that the bulk of W’s declared Children expenses were reasonable and that the Children should enjoy a similar standard of living whether with H or W [356]. W asks, if H actually accepts W’s declared figures, why is he offering HK$0? There is no evidence that W can single-handedly support monthly expenses of HK$183,927.

34.  H replies that this is not the question. H is adamant that at no time during the trial did he suggest that W bear 100% of the Children’s expenses. The court found that W had deliberately not disclosed the extent of her earnings/earning capacity. She did so in order to depict herself as a person without any real capacity to meet some of the Children’s expenses. The court did not accept this self-portrait.

35.  Further, W’s claim that H offered “HK$0” as Children PP, repeated through the submissions, is simply and plainly incorrect. It ignores H’s undertakings at [12] of HOP to pay the Children's school fees, any and all education-related costs including school bus, books, camps, uniform, provide financial support to the Children respectively during any 'gap year' the Children may take, pay 50% of the costs of one domestic helper who will be working for W and the Children’s medical expenses. It is unattractive for W to have advanced such an obviously incorrect submission. And, I would add, unhelpful.

36.  H asks that his position on their expenses be seen in the context of W’s deliberate concealment of her earning capacity. The Judgment [379], found that “W is able to make some contribution. She proposes $115,000 Children's maintenance on the basis her income is $30,000 per month. I have found it to be considerably greater. Once a share of the most substantial expenses, are provided by H she can use her own funds for other general and daily expenses.” H argued at trial that W was in a position to contribute to the Children’s expenses, and the court agreed.

37.  At first blush W would appear to have succeeded on the issue. Looking at the issue, not only the monetary sum, the finding that W should and could make some contribution is material. The difficulty in determining what that should be was caused by W’s refusal to be forthcoming about her earnings. H’s acceptance of W’s declared figures for Children expenses is only part of the equation. He did not know W’s earnings. Whether he should pay any sum above the HOP contributions turned on what W was able to contribute to Children’s expenses, which she made difficult to assess. H’s stance was not unreasonable in that he was offering to pay Children expenses in terms of the FMA, which was presumptively dipositive. The unfairness in holding W to the FMA in terms had regard to all the evidence at time of trial. That said, W may be regarded as the successful party on the issue of Children PP.

38.  Third, the court’s determination on the size of the pot bore primary importance to the resultant capital division. H’s stance was that the pot was ~HK$25 million. W’s stance was ~HK$65 million. The court’s determination was ~HK$64 million, which closely replicates W’s stance. The difference is to the value of W’s own assets [393].

39.  W says that had H been agreeable that this was a HK$64 (or HK$65) million pot, the trial may not have been necessitated. Of prime relevance is H’s stance, which is miles off the true pot size as determined by the court. H sought to exclude from the pot ~HK$39 million, i.e. 61%. Thus, the court added back despite H’s arguments ~HK$41.2m to the pot.

40.  H replies to W’s submission that had he agreed the size of the matrimonial pot as HK$64 million or HK$65 million the trial may not have been necessitated by asking “Why”? There is simply no basis to suggest that the trial would not still have been necessary – including because W was convinced, up to the delivery of the Judgment and, even now, that H has failed to disclose the true extent of his holdings. That would appear to remain her view. H’s position is that the X Group value was a contested issue on which his case was accepted, as set out below.

41.  Fourth, H sought to exclude from the pot the major item H’s interest in X Trust/Group. This alone accounts for HK$40.85 million.

42.  W describes H’s case as having 2 limbs: (1) challenge to the SJE’s valuation of ~HK$40.85 million: Joint Asset Schedule, H’s proposed value was ~HK$9.7 million; and (2) H’s share thereof, H says he only has 1/5 interest, being HK$1.94 million. The position is extreme: HK$1.94 million vs HK$40.85 million.

43.  W denounces H’s challenge on the SJE’s valuation claiming:

(1)  H mounted his extreme challenge in the absence of contrary expert evidence. The alternative figures produced were home-made by Counsel for H, without the SJE’s expertise. Thus, H’s challenge was entirely without merit.

(2)  The time spent on H’s sudden accost of the SJE valuation with H’s alternative calculations was pointless, as H in fact failed to put his case of the alternative value to the SJE.

(3)  The SJE was unshaken in cross-examination, and the court fully adopted his evidence.

44.  I cannot accept the above submission. The challenge was not “entirely without merit”. The time spent questioning the SJE was not pointless. H put his case to the SJE. He was not arguing NAV but addressing the income method assumptions and approach adopted by the SJE. I found that H’s questioning of the SJE was entirely proper and, ultimately, worthwhile for H’s case: Judgment [186, 188]. Findings were made in light of the answers given by the SJE, including that X is illiquid: Judgment [194], [195], [198]. This also goes to W’s Fourth point above, on size of the pot, as well as the X Trust issues.

45.  W continues, on top of this H advocated for a further “court discount”. This was again not accepted by the court [200]. However, in the same paragraph I acceded to considering H’s alternative approach of adjusting the sharing principle to deal with the valuation.

46.  I do not accept that H wholly failed to challenge the SJE valuation. The SJE’s valuation evidence was elaborated upon at trial. The SJE figure HK$40.85 million was adopted subject to that trial evidence and H’s case, inter alia, that X is illiquid. In my view W’s position disregards the reality of H’s challenge and case on the X Group. W ignores the fact that the court adopted H’s alternative to the further court discount, of adjusting the sharing principle to cater for the same matter. I find that H’s position on the X Group was not simply as depicted by W. He advanced alternative cases. At trial he was not relying on the NAV approach, but was addressing the income approach of the SJE.

47.  W submits that on H’s purported 1/5 share, so an 80% discount overall, the court found that “the entire X Trust fund should be regarded as a financial resource available to H for the purposes of section 7(1)(a), MPPO in this case…” [271]. H’s case of only “1/5 interest” again failed, and the entirety was instead taken into account for AR purposes.

48.  H replies to W’s claim of success on the issue regarding the X Trust / Group, that her argument that H claimed H’s share was 1/5 of the X Trust is a complete misunderstanding of H’s consistent argument pre-trial and at trial. H’s Opening Submissions [53] and Closing Submissions [3] were perfectly clear: H accepts the court may regard the X Trust as a financial resource. This was noted by the court: “H admits that the X Trust is a financial resource”: Judgment [271]. H was not simply submitting that by reason of X Trust he only has 1/5 interest, being HK$1.94 million and that was all the court may take into account. H’s point was that the X Trust is a discretionary trust. He does not have a fixed beneficial interest. In so far as he was required to state his interest, on the basis he was one of 5 beneficiaries under a discretionary trust, his interest is 1/5.

49.  Mr Li concluded that whilst he would not attempt a precise calculation on the extent of time spent on the above issues, suffice it to say, it took up a major part of the trial / its preparation / and the Judgment itself. She says that the above failures of H are key considerations in costs and that these failures are significant in terms of the size of the pot. I shall address the time and costs incurred in respect of these issues below. In so far as they took up a major part of the trial, it is my view that part of that time and those costs should not have been necessary, but for W’s position on the X Trust.

50.  Fifth, W argues that throughout the entirety of the AR suit, H’s position has been “to adopt the FMA”. As rightly found by the court, “I do accept that if the FMA or HOP is to be adopted in full, it would leave W in a predicament of real need against fairness, necessitating a reduction in standard of living, which affects the Children” [375]. W accepts that enforceability and weight of the FMA would in any event be an issue to be resolved by the court in this AR suit. She now says that it is H’s insistence on full adoption / enforcement of the FMA which necessitated the trial. Had H borne in mind inter alia issues of fairness – as the court did – H ought not have maintained such a stance throughout. H’s insistence on the FMA was thus an unreasonable stance. This is to be reflected in costs.

51.  W’s position set out at Judgment [49] was that the FMA should bear “no weight”, as follows:

49.   W says that the FMA is unenforceable and in any event, ought to bear no weight in the section 7 exercise. Mr Li summarised W’s case on setting aside/ according no weight to the FMA thus:

(1)   First, the vitiating factors of (a) non-disclosure, (b) misrepresentation, and (c) undue pressure undermine the FMA under contract law and equity.

(2)   Second, the unfairness of the FMA in substance – manifested in the resultant financial imbalance and the context under which waivers were signed – will engage the “safety-net of unfairness” under family law principles and the court should utilise the “safety-net” to safeguard W’s and the Children’s financial interests.

(3)   Third, should the above not negate the validity/ effect of the FMA, H’s own non-performance constitutes a repudiation of the contract, which W accepts; the contract is terminated.

52.  In my view W’s Subs fail to acknowledge the reality of each parties’ respective position and the contested issues regarding the FMA. H said the FMA should be accorded decisive weight, alternatively “significant weight”: Judgment [48]. W said that the FMA is “unenforceable” and in any event ought to bear “no weight” in the section 7 exercise. W maintained that H’s case was untenable and that no weight should be accorded to the FMA: Judgment [136]. The issue was then whether the findings ought to vitiate the FMA such that the court should wholly disregard it or alternatively whether it should still be given weight. H’s alternative case was that “substantial weight” ought to be given to the FMA: Judgment [139]. The FMA was not adopted “in full” but was accorded “substantial” weight.

53.  Sixth, H backtracked from the FMA terms advocating:

(1)  For W to repay H rental for the FMH from date of the FMA to trial, totaling: HK$2,948,400. This was rejected by the court [325, 327].

(2)  For W to repay H property taxes for the AB properties from the date of the FMA to trial, totaling: HK$140,000. This was rejected by the court [326, 327].

(3)  For W to pay H a decrease in the valuation of the CD property from June 2022 to the date of the SJE, in the sum of: HK$530,000. This was rejected by the court [326, 327].

54.  Thus, H sought to deduct HK$3,618,400 from W’s share. The HOP net lump sum then becomes HK$101,600, i.e. HK$3.72 million (lump sum) less HK$3,618,400 (repayments sought) equals HK$101,600. The court found that “H’s position is clearly unreasonable” [324]. The finding was actually that H would have to show that it was an overpayment, W was in a position to pay it and that it was fair in the circumstances which it was not: Judgment [325]. In any event, this should be balanced against deductions or sums W claimed should be added back, that were refused. W required H repay sums H contributed to his partner and sister: Judgment [320] – [323]. Neither the claims of H or W were allowed. I shall treat these refused claims of each party as a zero sum item, with the time and costs incurred balancing each side out.

55.  W asserts that it is not just that H used up court time to deal with his proposed deductions, more so is H’s unhelpful / bullying stance and attitude in seeking settlement / bringing a close to proceedings that matters. H replies that W’s groundless accusation on his stance and attitude is contrary to the Judgment [386] holding, “I have not found that H was guilty of egregious or other unworthy conduct”. W’s Subs have also failed to substantiate this very serious accusation.

56.  Seventh, throughout the proceedings, in H’s 1^st and 2^nd Forms E, he has not disclosed an income. This created a cloud over H’s financial abilities. The court found according to W’s case, that H’s income is HK$585,000 per month [352]. However, H’s case was not rejected. The SJE had to assess a salary for H or a person in his position as part of his valuation because H did not receive a salary as such: Judgment [164]. W’s Subs continue that though Counsel for W is mindful of the court’s finding on “non-disclosure”, it is H’s litigation conduct in providing disclosure that is presently relevant. I address disclosure below, but findings were on the parties conduct regarding disclosure, not only the evidence that was or was not discovered. W appears to persist with her case that H has undisclosed beneficial interests in many companies. She refers to H’s conduct as set out in W’s Trial Opening / Closing Submissions maintaining that his financial disclosure has been more than difficult throughout. W relies on the following examples:

(1)  H’s 1^st Form E disclosed operating 5 companies in the X empire. In H’s 1^st and 2^nd Answers, the number of companies jumped to ~30 companies. At the 2^nd CMH, H revealed that the number of companies he has an interest in are ‘in the hundreds.’ Not interested in “going the full mile”, W agreed to value just 7 out of these companies.

(2)  Yet, H was still unreasonably economical in disclosure. This necessitated W’s Specific Discovery Summons, which ultimately H was ordered to answer: c.f. Order dated 23 May 2023 by HH Judge T. Kwan.

57.  Eighth, by HOP, even the HK$3.72 million (or HK$101,600 net) lump sum was to be paid over 29 monthly installments. WOP proposed a 6-month period. The court determined that 9-months, for a much larger lump sum, was appropriate. This, again, underlines H’s unreasonableness in the AR suit.

58.  Further, 29 months to pay HK$3.72 million in the context of H’s HK$585,000 monthly income shows H’s underlying intention to unduly prolong payment to W. H denies the allegation and any intention to unduly prolong payment to W. That criticism is groundless. The FMA at [24] proposed 30 monthly instalments. There was no finding in the Judgment that the timing of the payments was unreasonable or improper. Nor is there any evidence that the timing of the payments caused any financial difficulty to W. To the contrary, W’s trial submissions stated that she was open to a longer instalment plan than in WOP: Judgment [317]. The parties were granted leave to address the instalment timetable and the order provided that instalment timetable was “unless otherwise agreed or ordered”: Judgment [396, 399(3)(c)]. The mere fact that W wished to accelerate the timetable of payment does not mean that HOP was unreasonable. I do not count the HOP instalment proposal against H.

59.  Ninth, the court adopted the net value of the landed properties with the outstanding mortgages accounted for. W proceeded on a similar basis. However, HOP required W to absorb the cost of the outstanding mortgage in the transfer of H’s AB properties interest to her. According to W this is an unreasonable stance taken by H.

60.  H says that the proposal that W take H’s AB properties together with the existing mortgages is no basis to criticise him. Merely because the court held otherwise does not mean that H’s stance was unreasonable. This method of transfer was agreed as part of the FMA at [19b] and there was no finding that W was under any misapprehension as to what the transfer of properties entailed when she signed the FMA. I do not count any such mortgage issue against H as a separate matter on costs.

W - LKW v DD

61.  In summary, W’s case is that H was unsuccessful at every step of LKW v DD. I do not accept that submission. In any event W seeks to make it good as follows:

(1)  For Step 1: H falls far short in his version of the size of the pot from that of the court – HK$39 million short.

(2)  For Step 2 on the needs of the parties: H advocated abiding by the FMA. However, the court expressly found “that strict adherence to the FMA would leave W in a predicament of real need impacting the Children and the safety-net” [386]. This unequivocally rejects H’s position.

(3)  For Step 3 on departure from equality: the court’s award of ~HK$27.54 million to W is more than H’s calculation of the pot in its entirety. His premise of an ~HK$25m pot makes his success impossible.

Further, the court’s decision was more or less equal division – just as W proposed. The 57:43 ratio in H’s favour is only a slight adjustment to account for the risks / liquidity associated with the nature of assets apportioned to H whilst W received the relatively more secure marital assets of the landed properties [388].

(4)  For Steps 4 and 5 on a fair result: as mentioned above, the court’s decision to award Children’s maintenance when H offered none makes plain H falling flat in his stance. The court essentially awarded a further HK$11.75 million.

62.  I do not find the above assessment particularly enlightening when the parties have each gone into the detail of the actual issues and findings they rely upon. Point (2) above is inaccurate. Point (3) above is simply wrong. The sharing principle was departed from for three reasons, not just one, as set out in the Judgment [383] to [390], namely because of the FMA, the structure of the award due to the nature of the assets and the respective financial obligations towards the Children. There were 3 major issues addressed before turning to the LKW v DD steps. The issues in dispute at trial are set out at Judgment [20] and [22]. The parties’ stances are set out above. Issue 1 was “what weight is to be given to the FMA”: Judgment [49]. The legal issues were in relation to (1) financial agreements following separation, (b) how the court deals with valuation of private companies, (c) interests subject to trusts, and (d) non-disclosure. They were considered before the DD v LKW Steps: Judgment [22]. The allocation of time and resources for consideration and determination of those contested issues more accurately reflects the costs reality.

63.  Mr Li submits that with W having prevailed in this AR suit, the burden is thus on H to show why a different approach to ‘costs to follow event’ should be taken.

H’s position on costs

64.  H submits that W has materially exaggerated the extent of her success by comparison of the determination with Open Proposals. In any event, he seeks to justify a departure from costs following the event, not only that W should be deprived of part of her costs but also that she should contribute to his costs.

65.  To justify the costs order sought H addresses (1) key issues where the court accepted H’s position, and (2) W’s litigation conduct.

(1) Key Issues where the court accepted H’s position

The FMA and alleged “vitiating” factors

66.  H says that much of the evidence and a significant portion of the trial was taken up by W’s case that the court should attribute no weight to the FMA in deciding on matters of AR.

67.  Mr Barns reiterates that the courts have emphasised repeatedly the importance of mediated settlements being given due weight, for reasons including the saving of costs, the encouragement of settlement, and the best interests of children. Claims that such agreements are tainted by unfairness are not to be embarked on lightly, and where they are found to be without basis, there is good reason for the court to consider the costs of such unsuccessful challenges and fashion its costs order appropriately.

68.  W sought to challenge the FMA citing numerous “vitiating” factors: (a) non-disclosure (b) misrepresentation and (c) undue pressure: Judgment, [49]. H says that the bulk of the affirmations filed by the parties were devoted to dealing with these “vitiating” factors. W has essentially raised every possible “vitiating” factor, in a scattergun approach.

69.  The court considered the points relevant to non-disclosure, and found against W: Judgment, [55] – [75]. The court also rejected W’s claim there was undue pressure / unconscionable conduct in relation to their business dealings, the Children, the affair. H did not wrongfully take advantage of W’s trust: Judgment at [93]++. The court conclusion on this issue found that there was “no factor” in the parties’ relationship which would form a basis to conclude that it would be unconscionable to hold them to the agreement, and that there was a dearth of unconscionable conduct: Judgment [124]. H refers to the extent to which W stressed these points in her written and oral testimony (and Counsel’s submissions), and how H was forced to respond to them, in his evidence, and in his Counsel’s cross-examination and submissions. H’s conservative estimate is that at least 1.5 to 2 days of trial (out of 4.5 days), was taken up by this topic alone.

70.  Mr Barns notes that H’s claim for at least some of the costs devoted to the question of the importance of the FMA would be significantly weakened had it been W’s position that the FMA should carry weight, but that it would be unfair for her to be held strictly to its terms. This was, ultimately, the finding the court made. The fact is, W went “all in” and decided, with full awareness of the consequences, including taking court time and incurring very considerable costs, to argue points which were without merit. Had she not raised these points in a scattergun approach, H may well have decided not to proceed by way of a Crossley application, as the court would, as part of its duty, always consider the weight to be attached to a mediated agreement, as H submitted throughout.

71.  W’s fifth point above is that it is H’s insistence on full adoption / enforcement of the FMA which necessitated the trial. The fact that the FMA would produce an unfair result was repeatedly ventilated earlier on in the proceedings. H’s position has been “to adopt the FMA”. W’s actual position at trial set out at Judgment [49] on setting aside the FMA was that the FMA was unenforceable and in any event, ought to bear no weight in the section 7 exercise first, by reason of the vitiating factors and secondly on the basis of unfairness. Further, that did not negate the validity/ effect of the FMA, H’s own non-performance constitutes a repudiation of the contract accepted by W terminating the contract. W submits that, whilst appropriate weight was placed on the FMA, it was not enforced, as shown by comparison with its terms and the court’s determination. W’s Subs claim that H’s insistence on the FMA was thus an unreasonable stance to be reflected on costs.

72.  Whereas H’s position is that as a direct result of W raising these unmeritorious points, H has incurred substantial legal costs. This is precisely the kind of litigation conduct the courts have repeatedly admonished, and it alone calls for an adverse costs order.

73.  The court proceeded on the basis that the FMA is “presumptively dispositive”: Judgment [135]. Only one vitiating factor had been established, namely, W was under a misapprehension as to the value of the X Group: Judgment [138]. The court rejected any suggestion that H was guilty of egregious or other unworthy conduct, and accepted that “significant weight” should be given to the FMA, in line with H’s alternative case: Judgment at [386].

74.  In my view W’s present position appears to ignore the reality that it was W who was making allegations that H had to defend, and was required to answer on the facts and law and that were ultimately rejected.

75.  H asks that the court make two findings: first, that H’s position on two of the three “vitiating” factors, was completely vindicated and second, that his argument that real and substantial weight be given to the FMA, as opposed to W’s position that no or little weight be given, was accepted by the court and this was one of the significant findings contributing to the awards pronounced. Having considered the voluminous evidence on these issues, the manner that the case was presented and argued and the costs submissions of both parties, I am prepared to so find.

76.  W was held to have gone to great lengths to set aside the FMA, which in my view were excessive, unjustified and unnecessary. I am in no doubt but that W unreasonably caused a significant increase in the costs of the proceedings, that can be estimated as a more than trifling proportion of the total costs. The costs need not be assessed with precision, but I accept H estimate that at least 1.5 days of court time, a substantial part of the affirmation evidence and consequentially many of the factual and legal submissions, should not have been necessary. The law on mediated agreements in ancillary relief proceedings and the FMA terms would still have to be addressed. However, had W not persisted in her case that “no weight be attached” or confined her case to setting aside the FMA to one vitiating factor, or that she did not know the actual value of X or simply that she relied on the safety net and unfairness, knowing that the court will always consider fairness and the weight to be attached, those additional costs would not have had to be incurred. This is material litigation conduct of W that should be reflected in the costs order.

77.  Another issue related to the FMA, but which W took as an additional separate point, was Issue 1(3). W maintained that:

“Third, should the above not negate the validity/ effect of the FMA, H’s own non-performance constitutes a repudiation of the contract, which W accepts; the contract is terminated.”

78.  Determination of that issue required consideration of the evidence of events and conduct of each party in the months after the FMA was executed as well as the relevant law. W by conduct affirmed the FMA. When she did dispute the FMA she did not rely on any failure by H to perform terms or purport to accept his repudiation: Judgment [149]. W’s case on H’s repudiation which W accepted terminating the contract was rejected: Judgment [142] – [150]. The issue should not have been pursued on the facts and in the context of these matrimonial proceedings.

Disputed Assets

79.  H submits that he was also successful - the overall ‘winner’ – in relation to the determination of the value of disputed assets.

80.  The X Group:

(1)  The court accepted H’s position that valuation is not an exact science, that there is not a ready market for the X Group and that it is profoundly illiquid. There was no demonstrated prospect of the Group being sold even if it was to be contemplated and the Trustee was to approve the sale: Judgment [194], [197], [198].

(2)  The court accepted H’s alternative of adjusting the sharing principle to take the element of profound illiquidity into account: Judgment [200].

81.  I consider those matters material and take them into account.

82.  UBS Account, Referral fee owed to SL, Legal costs of other proceedings, Add-backs, CL: Consistent with H’s stance in the List of Issues, the court held the value of these items was nil: Judgment [329]. W had made the numerous duplicated and unnecessary requests in respect of the non-existent UBS Account and the financial information of CL. Cumulatively the work and costs involved would not be insignificant.

83.  Loans, Debenture: The court held that following the FMA and HOP, HK$370,000 shall be returned to W when the debenture is refunded upon the son leaving the school: Judgment [329]. This is consistent with H’s stance, but it was quickly determined.

84.  SPEL: H claims that the court accepted H’s valuation in the List of Issues: Judgment [329]. W replies that SPEL was included in the SJE valuation. The SJE valuation was adopted. So H’s submission is misleading. SPEL value was already accounted for in the X Group value.

W’s income and earning capacity

85.  The court accepted H’s submission that W's earning capacity is considerably greater than she portrays it to be and rejected W’s claim that she could only make $30,000 per month: Judgment [335] – [350]. This issue was determined against W in H’s favour. This was a material issues that incurred time and costs before and during the trial to determine. This is also material litigation conduct of W to be taken into account.

86.  H submits that the issues set out above were directly determinative of the ultimate division of assets. On these key issues, H’s case, for the most part, was accepted by the court. I accept H’s submissions above and find that more of the most time consuming contested issues were determined in H’s favour.

(2) W’s Litigation Conduct

87.  H’s submits that W’s conduct in the litigation was frequently unreasonable, disproportionate and failed to accord with the important principle that parties should at all times consider procedural economy in the conduct of proceedings. The predictable result was the incurring of substantially greater costs than should have been necessary for the disposal of this case. Litigants in all proceedings, including matrimonial cases, must be selective as to the points they take. The extent to which they may recover costs or be penalised by adverse costs orders is an incentive for responsible litigation behaviour: Hong Kong Civil Procedure 2025, Vol.1, §62/5/6.

Discovery - H

88.  H says, first, W’s relentless but ultimately futile insistence that H had failed in his duty to provide full and frank disclosure. W’s allegations comprised four main points: Judgment [272]-[278]. This was not merely a “throwaway” allegation made lightly, but one particularised and pursued in an extraordinary number of letters from W’s solicitors to those acting for H. H’s counsel elicited an acknowledgment from W during cross-examination on this topic, that the instructing of experienced matrimonial solicitors was not an inexpensive exercise.

89.  The court addressed H’s four examples of this litigation overreach: Judgment [281] to [284]. In respect of each example, H’s position was accepted.

90.  So too, the court found for H in relation to the allegation (made repeatedly pre- and mid- trial) that there was an indeterminate number of other companies in which H had a beneficial interest, and in respect of which he was deliberately not disclosing such interests. This was, among the many findings made dismissing as without merit not simply the allegation, but the manner in which it was alleged:

(1)  the relentless persistence, in the face of rational and reasonable responses, for financial statements which, as an experienced business-woman, W should have known did not exist, or the pursuit of information of de minimis importance financially speaking: Judgment [285].

(2)  the passivity of W raising the allegation but refusing to pursue proper procedural steps to substantiate (or eliminate) it, an unhelpful stance to a court clothed with a quasi-investigative function: Judgment [286(2)].

(3)  the stubborn maintenance by W of her position despite the involvement of a very experienced and frequently appointed SJE, and after a thorough investigation into all relevant elements of the X business including documentation: Judgment [289].

91.  Whereas W’s Seventh point above, is that throughout the proceedings and in H’s Forms E, he has not disclosed an income or financial ability and the court found according to W’s case that H’s income comes to HK$585,000 per month [352]. W’s Subs continue – though Counsel for W is mindful of the court’s finding on “non-disclosure”, it is H’s litigation conduct in providing disclosure that is presently relevant.

92.  As noted above, it does appear that W does not accept the findings. In any event, in respect of H’s discovery, W’s conduct, the manner in which she pursued matters and excessive zeal in seeking disclosure calls for an adverse costs order: DGB v SDGK .

Discovery – W

93.  Second, H says ironically, given W’s case that H was the guilty full and frank disclosure breacher, the court found that she had failed to give proper information to assist in assessing her earning capacity, a vital element in all AR determinations: Judgment [347]. I accept that W’s conduct obstructing efforts to ascertain the position was material.

94.  First, the court held at [307], [343] and [347] of the Judgment that W refused to provide meaning information on her earnings, earning capacity and likely financial resources in the foreseeable future leaving the court with no option but to draw inferences. H submits W’s refusal to provide information is precisely the kind of material non-disclosure noted in DGB v SDGK and Gojkovic v Gojkovic, and one which justifies an adverse costs order. That is so.

Inaccurate expenses list created by W

95.  Third, W produced a list of expenses which was not only materially inaccurate, but which she ultimately conceded the court could place no reliance upon. Again, court time was wasted, due to W’s failure to devote her own time, with the assistance of a very experienced firm of matrimonial specialists, to presenting her evidence with care and attention.

96.  I accept the above 3 points.

Illusory trust

97.  I am bound to add a fourth matter, W’s case that the X Trust was an “illusory trust”. Much time was spent, on both fact and law, to deal with the illusory trust allegation, notwithstanding that H had unreservedly accepted that the X Trust was a financial resource to be taken into account. The X Trust was held to be a real trust, it was not an “illusory trust” nor sham. W disavowed claiming sham but her case was in part to that effect so it had to be addressed: Judgment [214], [227]-[244], [262]-[264], [267].

98.  The real issue was the extent to which the X Trust assets should be included as an available resource. W could have gone directly to KLK and the Charman test. H sought unsuccessfully to distinguish KLK on the facts, but the time involved pales into insignificance against the W’s “illusory trust” case: Judgment [270]-[271].

99.  I have considered whether this may simply be regarded as a matter where W made arguments that failed, so should have no bearing on costs or that W should be deprived of some part of her costs or, alternatively, whether it crossed the line to being unnecessary or unreasonable conduct. In my view, given the facts in respect of the X Trust that were known to W and that H had accepted that the X Trust was a resource to be taken into account, it was unnecessary and unreasonable to have insisted on her case that X Trust was an “illusory trust”. It undoubtedly took time and incurred costs to deal with the factual and legal issues, that should not have been necessary. I find that this conduct justifies an adverse costs order against W.

100.  Having expanded upon the factors the court should consider in striving to achieve an appropriate costs order, H refers to the finding at Judgment [307] that, inter alia, W went to extreme lengths to discredit H to bolster her case and in the process undermined her own credibility and that the court cannot rely on her evidence. Mr Barns appreciates that this was not a finding lightly made. It amounts to a finding that W has acted unreasonably in her conduct of these proceedings. H submits that the court, in exercising its admittedly broad discretion, should bear in mind the underlying objectives of the Rules: Order 1A, rule 2, DCR. The costs order should properly reflect the court’s findings set out in the Judgment [307].

101.  To be specific: H says that a fair and reasonable award, reflecting the time caused by the litigation of unnecessary issues, coupled with W’s own conduct, would be to grant him 50% of his costs. This is a reasonable estimate of the work done by H’s legal advisors in responding to matters which should never have been raised by W. H refers to the sheer volume of materials, both in court documents – affidavits, exhibits, submissions – and correspondence concerning these issues. The reality and justice of the case requires the court to make an order that W pay a reasonable proportion of H’s costs in these proceedings. W submits the 50% estimate is arbitrary and should be rejected. Indeed, if H was as successful and blameless as he claims, why has he limited his claim to just 50%?

DISCUSSION

102.  The starting point is costs follow the event. There must be some justification for depriving a successful party of their costs. In measuring who is the successful party and the extent of their success, the court must examine the reality and the justice of the case. The court may take account the Order 65, rule 5(1) DCR factors, including the underlying objectives Order 1A ,rule 1, conduct of the parties: Order 65, rule (5)(2), DCR. The discretion must be exercised in a principled way with a view to the reality and justice.

103.  W considers that she is the successful party, the “victor”. There are no victors in contested AR proceedings. H says that the parties incurred a combined HK$5,019,168 in legal fees as at the date of the FDR hearing in January 2024. H’s average monthly legal expenses were HK$118,000 pm (from May 2022 onwards) as at 2 February 2024: H’s Form H dated 14 March 2024. H estimates that his total pre-trial costs on ancillary relief up to and including the trial are HK$4,954,990. And of course, W also incurred very substantial costs up to and including trial, and now, thereafter. Whoever bears the costs burden, this is a family resource.

104.  I shall proceed on the basis that the WOP is closer to the financial outcome than the HOP. That being the event costs are to follow, the starting point is that W is entitled to her costs. The discretion on costs allows, and in this case requires, that other matters also be considered.

105.  H replies that this is not an ordinary case where W’s Open Proposal was closer to the final allocation of the matrimonial pot, and therefore costs should simply follow the event. Contrary to W’s characterisation, this is a case where H has succeeded on a substantial number of issues. Even if, which is not accepted, W was the overall winner and the starting point is that costs should follow the event, given the factors set out above, H has amply discharged the burden of showing that costs should not follow the event. W has exhibited marked litigation conduct in the course of these proceedings, as found by the court, and an order that she be rewarded with her costs would be most unjust.

106.  Mr Barns submits that this is not a case where both parties have succeeded on some issues, and therefore there should be no order as to costs. The court has repeatedly rejected W’s claims and W’s evidence: for example Judgment [307]. The conduct of W went beyond a reasonable litigant rightfully pursuing a claim with some basis which was ultimately unsuccessful. Mr Barnes continues that W’s litigation conduct has left much to be desired and W has made groundless accusations about H’s litigation conduct. All of which acts fly in the face of the underlying objectives set out in Order 1A rule 2 DCR.

107.  H relies on authorities cited above to support H’s contention that an adverse costs order should be made against W. The principles in KJ v KMLM were echoed more recently in YSG (YX) v LYAG [2023] HKFLR 753 at [23], [50] – [53]. The Court of Appeal accepted the reasoning of the Judge below that where both parties have succeeded on some issues, the starting point should be no order as to costs. Since one party had unreasonably persisted in her pursuit of an unsuccessful argument, and had been unreasonable in the manner in which she presented it, this justified an order for her to pay part of the other side’s costs. I accept that those principles are very much at play, here.

108.  First, the court held at [307], [343] and [347] of the Judgment that W refused to provide information about her earning capacity. W has engaged in material non-disclosure in relation to her earning capacity. W’s refusal to provide information is precisely the kind of material non-disclosure noted in DGB v SDGK and Gojkovic v Gojkovic, and one which justifies an adverse costs order.

109.  Secondly, W’s excessive zeal in seeking disclosure, and unreasonable refusal to accept that H had complied with his duty to give full and frank disclosure. Mr Barns notes remarkably, and in defiance of the clear findings in the Judgment (in particular at [281] – [289]) W’s Subs [54] seek to portray H as a serial non-discloser: H’s Subs [28] – [30]. W’s assertions show a level of desperation, and non-acceptance of the court’s findings. The costs order should reflect this at least to some extent.

110.  Thirdly, W raised, unsuccessfully, allegations against H which significantly lengthened the proceedings and served only to increase costs. W’s unnecessary, exaggerated and ultimately unsuccessful claims caused a significant increase in the length and costs of the proceedings. A significant length of time was taken on the “vitiating” elements of the FMA and the allegation that H’s non-performance was a repudiation of the FMA accepted by W terminating the FMA. W also required H respond to the allegations concerning the UBS account, and CL, making unrelenting allegations of non-disclosure. Fourthly, the unnecessary illusory trust case.

111.  H submits that this is a case where the assets are substantial and an order for costs can be made: see Gojkovic v Gojkovic (No.2) [1991] 2 FLR 233, 237.

112.  W maintains she is the clear winner, so is entitled to her costs. There is no special factor justifying any departure from costs following the event. W says it was H’s unwarranted challenges contesting the SJE and FMA stance that caused a significant increase in the length of proceedings, adding to both the financial and emotional cost of these proceedings. H made no reasonable offer to W and lost the AR suit. W is clearly entitled to her costs of the AR suit. I cannot accept those submissions.

113.  I do take W as the successful party. I find that:

(1)  W, the successful party, raised issues and made allegations on which she failed and that caused a significant increase in the length and costs of the proceedings. Therefore she may be deprived of the whole or part of her costs. A significant increase in the length or costs of the proceedings is one that can be estimated as a more than trifling proportion of the total costs. I readily find that the increase in costs was a more than trifling proportion of the total costs. W may be deprived of part of her costs on the failed issues even if such costs overlap with those of the succeeded issues. That would include the FMA issues: KJ v KMLM [17].

(2)  W, the successful party, raised issues and made allegations unnecessarily, improperly and unreasonably. Therefore she shall be ordered to pay part of H’s (“the unsuccessful party’s”) costs: KJ v KMLM at [18]. They include the FMA, illusory trust and disclosure issues. I find that the increase in costs was a more than trifling proportion of the total costs. The costs cannot be assessed precisely. I would be prepared to give an estimate of the proportion of these costs as approximately half.

(3)  In exercising the discretion I have taken into account the above facts, matters and circumstances, including conduct of both parties, whether it was reasonable for either to raise, pursue or contest a particular allegation or issue, the manner in which they were pursued, whether W in whole or in part exaggerated her claim and the facts and conduct before as well as during the proceedings KJ v KMLM at [19].

DETERMINATION

114.  W is to be regarded as the successful party but I am persuaded to depart from the starting point that costs follow the event. H has discharged that burden. I have considered whether to order no order as to costs, as both parties have succeeded on some issues. H asks the court to make an order that W pay a reasonable proportion of H’s costs – 50% – in these proceedings. W considers the estimate arbitrary. I accept the estimate that the unnecessary costs that have been caused by W’s unreasonable conduct and unnecessarily pursuing issues would be in the region of 50%. However, taking all the circumstances into account, particularly that W is to be considered the successful party and bearing in mind that the discretion as to costs is to be exercised with a view to reality and justice, I order that W do pay 20% of H’s costs of the ancillary relief suit, including previously reserved costs (if any), with a certificate for counsel. In my view that is just and sufficient to reflect the reality as well as parties’ duty regarding responsible litigation behaviour and to assist the court in the performance of the underlying objectives.

The ancillary relief costs order

115.  I make the following order:

The Respondent shall pay 20% of the Petitioner’s costs of the ancillary relief suit, including previously reserved costs (if any) with certificate for counsel, to be taxed if not agreed.

COSTS

116.  The starting point for the costs of this application is of course that costs follow the event. On W’s Subs sliding scale H’s case comes closest to the final determination. H sought 50% of his costs and recovers 20%. W sought 100% of her costs but must pay 20% of H’s costs. Here I also take into account W’s attempt to adduce and rely on without prejudice communications, which are inadmissible. However, exercising the discretion in a principled way (and not merely mathematically) with a view to reality and justice, I make a costs order nisi that W shall pay 50% of the costs of the costs application to H with certificate for counsel. Either party may apply to vary the costs order nisi within 14 days hereof, failing which the nisi order shall become absolute. H may consider that inadequate but the parties are encouraged to finally stop and to resume their lives raising their children free of the burden of litigation.

117.  I take this opportunity to thank counsel for H and W for all their assistance in these proceedings.