CL v. ZRC

FCMC11118/2014

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES N0. 11118/2014

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Decision
(Variation of Costs Order nisi)

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Introduction

1.The Petitioner wife and the Respondent husband were Shanghainese. The wife presented her divorce petition relying on the husband’s substantial connection to Hong Kong. The husband issued a summons to challenge the Jurisdiction of this court and or to stay the Hong Kong divorce proceedings on ground of forum non conveniens (the September summons). Judgment was handed down on 4 February 2015. Jurisdiction is found as of right but the divorce proceedings were stayed on ground of forum non conveniens, with a costs order nisi to be made absolute at the expiration of 14 days that the wife is to pay half of the husband’s costs of the application, including all reserved costs, to be taxed if not agreed, with Counsel Certificate.

2.This is an application by the wife for variation of the order nisi as to costs. Upon the parties’ joint application, the wife’s application for variation is to be dealt with by way of written submission and directions were made accordingly.

Background

3.The wife relied solely on the husband’s substantial connection with Hong Kong in presenting her divorce petition to this court. Shortly after being served the petition the husband commenced his divorce proceedings in Changning District Court, Shanghai. Thereafter, the husband took out the September summons, the husband’s application was fixed for argument on 23 January 2015. In the meantime the wife had attempted to challenge the divorce proceedings in Shanghai but failed.

4.The parties’ respective cases were such that, in broad terms, there were four issues required determination, namely:

1. Did the husband have substantial connections with Hong Kong at the time the wife presented her petition?

2. Where jurisdiction is founded as of right, is this court a natural and appropriate forum to the parties’ divorce proceedings or is Shanghai Court more appropriate?

3. If so, will the wife be deprived of any legitimate personal or juridical advantage if the action is tried in Shanghai Court?

4. If so, how should I exercise my discretion?

5.Judgment was handed down on 4 February 2015. It was my judgment that the husband did have substantial connection with Hong Kong and there was therefore jurisdiction; but that Hong Kong was not the natural nor appropriate forum, the parties had the most real and substantial connection with Mainland PRC, which was clearly and distinctly more appropriate forum than Hong Kong. And the wife was not able to show that she would be deprived of any legitimate personal or juridical advantage or she would not obtain justice if the action was tried in Shanghai Court. Accordingly, I allowed the husband’s application for stay on grounds of forum non conveniens in favour of the People’s Court of Changning District, Shanghai Court with a costs order nisi that the wife was to pay half of the husband’s costs of the husband’s application.

6.The wife took out a summons dated 18 February 2015 for variation to have the costs order nisi be varied to no order as to costs, and there be no order as to costs for her application for variation. However, in her counsel written submission in reply, the wife agreed that the general principle that costs follow the event should apply, and sought to have costs of the present application should this court allowed her application.

7.The husband by a letter dated 26 February 2015 proposed and invited to have the costs order nisi be made absolute. The parties by a consent summons and a joint letter dated 6 March 2015 applied to have the wife’s application for variation be dealt with by way of written submission. A consent order was made accordingly.

The wife’s case

8.Mr Neal Clough for the wife submitted that in the September summons, the husband made two separate and distinct applications: (1) he challenged jurisdiction on the basis that he did not have substantial connection with Hong Kong and (2) he sought a discretionary remedy on ground of forum non conveniens. These two separate and distinct applications were heard together for convenience. Applying the general principle, the wife should be awarded costs incidental to the husband’s unsuccessful challenge to jurisdiction; while the husband be awarded costs incidental to his successful application for stay. Applying a broad brush approach and looking for a fair result having regard to such practical considerations as taxation the more pragmatic approach would be to make no order as to costs.

The husband’s case

9.Mr Jeremy Chan for the husband submitted that by the September summons, the husband sought to discharge the wife’s Hong Kong divorce proceedings on two grounds: (1) lack of jurisdiction (substantial connection) and (2) forum non conveniens. Ultimately the wife’s Hong Kong proceedings were stopped. Though there were different legal tests for substantial connection vs. forum non conveniens, there was only one set of facts and evidence. Substantial connection was merely an incidental argument and covers precisely the same facts and factors. Costs ought to follow the event, subject to the Elgindata principle. That the husband also taking the jurisdiction point did not materially and significantly increased costs and /or lengthen the proceedings. In the premises, the costs order nisi was very generous and ought to be made absolute.

The Law

10.It is common ground that the issue of costs is a matter of discretion for the court. By virtue of Rule 3 of the Matrimonial Causes Rules (MCR), where it is not provided for by the MCR, the Rules of the High Court shall apply with the necessary modification. Order 62 rules 2 of the Rules of the High Court provides that “The powers and discretion of the Court as to costs under sections 52A and 52B of the Ordinance … shall be exercised subject to and in accordance with this Order.” “Wide though the discretion is, it is a judicial discretion, and must be exercised on fixed principles, that is according to rules of reason and justice, not according to private opinion … ; or even benevolence … and the exercise of discretion even by a judge sitting alone must be justifiable… “(Hong Kong Civil Procedure 2015 Para.62/2/6).

11.Order 62 rules 3(2A) 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 interlocutory proceedings, it may, subject to this Order, order the costs to follow the event or make such other order as it sees fit. ” “Hence, the principle that costs normally follow the event is no longer the prescribed usual order but is instead just an option. In Melvin Waxman v Li Fei Yu (unreported HCA 1972/2012)… To J took a two-step approach to the matter before him. First, having regard to a claim that is bound or likely bound to fail, and thus the other side should not be burdened with unnecessary interlocutory proceedings, where “a party pursues interlocutory proceedings for the purpose of delaying the evitable or for the purpose of seeking an impossible claim, he should be deprived of his costs even if he succeeds in the interlocutory proceedings’. Secondly, as there was nothing to suggest lack of merit or a real risk of such, To J took an “issue-based approach” – whether it was reasonable for the applicant to pursue the interlocutory proceedings that he did (in (that) case challenging the jurisdiction of the court). Finding the answer to be in the negative, To J found that it was in the spirit of the Civil Justice Reform that such unreasonable interlocutory conduct should be deterred, and thus replaced the order nisi with an order that the 2^nd Defendant bear the costs of the interlocutory application..” (Hong Kong Civil Procedure 2015 Para.62/3/3B).

The Elgindataprinciples

12.Both parties in their written submissions referred to the principles stated in Re Elgindata Ltd (No.2)(CA):

“(i) Costs are in the discretion of the court.

(ii) They should follow the event, except when it appears to the court that in the circumstances of the case some other order should be made.

(iii) The general rule 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 cost of the proceedings he may be deprived of the whole or a part of his costs.

(iv) Where the successful party raises issues or makes allegations improperly or unreasonably, the court may not only deprive him of his costs but may order him to pay the whole or a part of the unsuccessful party’s costs.

Of these principles the first, second and fourth are expressly recognised or provided for by (the rules). The third depends on well established practice. Moreover, the fourth implies that 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.”

Discussion

13.As mentioned above, the cost order nisi is related to the husband’s September summons by which the husband sought to discharge the wife’s Hong Kong divorce proceedings on two grounds. I do not agree that there were two separate applications as submitted by Mr Clough. In the husband’s application, I was required to determine 4 issues namely:

1. Did the husband have substantial connections with Hong Kong at the time the wife presented her petition?

2. Where jurisdiction is founded as of right, is this court a natural and appropriate forum to the parties’ divorce proceedings or is Shanghai Court more appropriate?

3. If so, will the wife be deprived of any legitimate personal or juridical advantage if the action is tried in Shanghai Court?

4. If so, how should I exercise my discretion?

14.Issue (1) related to the jurisdiction of the court, where Issues (2 to 4) related to forum non conveniens. The husband succeeded in having the wife’s divorce petition be stayed. Both grounds required the consideration of the same set of evidence, yet significant times and costs could have been saved if the husband did not take the jurisdiction point. This is the reason for the costs order nisi and in my view this is consistent to the third principle set out in Re Elgindata.

15.Mr Clough referred to Melvin Waxman v Li Fei Yu and submitted that the wife should be awarded costs for the husband’s unsuccessful jurisdiction challenge. In that case the 2^nd Defendant’s application to stay the action on the ground of forum non convenience was dismissed with costs order nisi that the costs of the 2^nd Defendant’s application be to the Plaintiffs’ costs in the cause with certificate for two counsels. The Plaintiffs applied for variation and the trial judge reviewed his costs order nisi and replaced it with an order that the 2^nd Defendant shall pay the Plaintiffs’ costs of the application.

16.In the present case the wife knew the husband was running alternative arguments in his application to discharge her Hong Kong divorce proceedings. No litigant in like situation would have taken two separate applications as submitted by Mr Clough. The husband failed on the jurisdiction ground but succeeded on the ground of forum non conveniens, thus unlike the 2^nd Defendant in Melvin Waxman v Li Fei Yu, the husband succeeded in having the wife’s divorce proceedings stopped. The husband simply succeeded in his application.

17.Mr Chan submitted that it is well established that the facts and factors relevant/applicable to forum non conveniens are also relevant and applicable to ‘substantial connection’ as well. Although the finding of substantial connection with Hong Kong at time of the presentation of divorce petition was based on a number of connection factors which was also relevant to the consideration of forum non conveniens. Yet the legal tests for the jurisdiction point and forum non conveniens are different. As I stated in paragraph 29 of my judgment, “In a stay application, we are not only focusing on whether one party has substantial connection with Hong Kong, but to which jurisdiction the parties have the most real and substantial connection.”

18.Both parties referred to the principles set out in Re Elgindata. It is suffice to say that applying the relevant principles, the husband being the successful party is entitled to costs, however, as mentioned above, he challenged the court’s jurisdiction and failed, this has caused a significant increase in the length and costs of the proceedings, and I have exercised my discretion to deprive half of his costs.

Conclusion

19.Accordingly, I dismissed the wife’s application and the costs order nisi is to be made absolute. The wife is to pay the husband costs of this application, with certificate for counsel, to be taxed if not agreed.