Z v. X

CACV 166/2011
CACV 251/2011
CACV 252/2011

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NOS. 166, 251 & 252 OF 2011)

(On Appeal from HCMC No. 1 of 2007)

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BETWEEN

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JUDGMENT ON COSTS

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Hon Cheung JA (giving the judgment of the Court) :

1.  In our judgment of 13 November 2012, we allowed partially the Wife’s appeal on her ancillary relief application, we also allowed partially the Husband’s cross appeal but dismissed the Intervener’s cross appeal. We directed the parties to lodge written submissions on the costs of the appeal and below.

2.  In our judgment we referred to the Husband’s and the Intervener’s appeal in CACV 251/2011 and CACV 252/2011 respectively.  They are in respect of the costs order made by Saunders J dated 30 September 2011 when he discharged a mareva injunction that was issued on the application of the Wife.

3.  At the appeal we ordered that all costs issues be reserved for determination after our determination of the appeal on the ancillary relief.

4.  This Court will now address these issues.

1)  Costs of trial before Saunders J

(1)  Saunders J’s Order

5.  Saunders J ordered the Husband and Intervener to pay the whole of the Wife’s costs, including any costs in interlocutory matters which have been reserved and not otherwise dealt with, as to 50% on a party and party basis, and as to 50% on indemnity basis.  

6.  Saunders J’s reasonings are as follows :

‘ 21. I am accordingly of the view that I am bound, in the exercise of my discretion, that even in a big-money case, the usual rule will be that costs follow the event.

22. The starting point of therefore, notwithstanding the payments made by the husband to the wife over a seven-year period, is that the wife is entitled to her costs at least on a party and party basis.

23. A particular feature of the defence advanced by the husband and the intervener was summarised by Mr Clough in his skeleton in the following way:

“Had the husband disclosed his assets, as he is required by law to do, then:

(1) there would never have been a need for a trial of preliminary issue on the ownership of (X Ltd) at all. Likewise, there would never have been any appeal on this issue;

(2) the ancillary relief trial (if any were necessary) would have been speedy and focused on the remaining narrow issue;

(3) the presence of (the intervener) throughout the entire proceedings would have been dispensed with; and

(4)  the array of satellite litigation that has grown around the case would never have occurred, including the subpoenas against the banks.”

24. I agree.  The greater proportion of the 16 days of trial and the fact that the trial which began on 14 April 2010, did not conclude until 18 February 2011, is attributable to the examination of the assertion by the husband that the intervener owned 87.5% of X Ltd [i.e. NAIGL], and in pursuing matters of disclosure.  Mr Chan is right when he says that the wife succeeded in establishing only that the husband owned 83.1% of X Ltd [i.e. NAIGL] and the intervener was able to preserve 4.4%, which on the valuations can be said to be worth some $16 million.  But that can hardly be characterised as a success to be taken into account in the assessment of costs.

25. I accept Mr Coleman’s submission that some account must be taken of the fact that the payments made to the wife over a seven-year period would to some extent have gone on costs.  At the end of the day, and taking a broad view of the matter, in order to do it [sic] appropriate justice to the wife, there will be in the order of the husband and the intervener must pay the whole of the wife’s costs, including any costs in interlocutory matters which have been reserved and not otherwise dealt with, as to 50% on a party and party basis, and as to 50% on an indemnity basis.’

(2) The parties’ position

7.  The Husband submitted that there should be no order as to costs of the hearing before Saunders J since this is a ‘big money case’.  Further there should be no indemnity costs order.

8.  The Intervener also submitted that there should be no order as to costs below.

9.  The Wife maintained that Saunders J was correct.

(3) Our view

10.  Although Saunders J in W v K & Anor (Costs) [2008] HKFLR 378 stated that in ‘big money case’ each party should bear its own costs, this 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 (e.g. where the case involved children, or where financial resources were inadequate) the discretion may be broader than in civil matters generally : L v C (CACV 169/2006, Judgment 19 March 2008) applying Gojkovic v Gojkovic (No 2) [1991] 2 FLR 233; TL v SN (Ancillary Relief) [2010] HKFLR 506.

11.  In England the approach has now been changed where the general rule is that the Court will not make an order requiring one party to pay the costs of another. However, costs orders may be made because of the litigation conduct of another party.  The factors to be considered include, for example, whether an open offer to settle has been made, whether it was responsible to raise, pursue or contest a particular allegation or issue and the financial effects on the parties of any costs order.  (See Rayden and Jackson on Divorce and Family Matters, 18^th Ed, Noter up to Vol 1(2) [52.17] ‒ [52.20] and see further the Noter up on Family Procedure Rules 2010).

12.  The changes in England were carried out by prescribed rules.  The position in Hong Kong has remained unchanged since L v C and TL v SN.   

13.  In our view Saunders J who adjudicated the 16-day trial was the best person to decide on the appropriateness of the costs orders below.  We are not satisfied that any error has been committed which requires this Court’s intervention.

2) Costs of the appeal [CACV 166/2011]

(1) Wife and Husband

14.  The Wife asks for the costs of her appeal against the Husband on an indemnity basis.

15.  The Husband said that costs of the appeal should be based on the outcome of the individual issues as determined by this Court.  In summary they are as follows :

1) the duration of the marriage : no order as to costs;

2) the ownership of the 83.1% shares in NAIGL : no order as to costs as between the Wife and the Husband;

3) the valuation of the Husband’s interest, if any, in NAIGL : the Wife to pay the Husband’s costs;

4) the valuation of the Husband’s interest in NUIGL : no order as to costs;

5) what are the matrimonial assets that are available for distribution : the Husband to pay the Wife’s costs;

6) whether there should be departure from the principle of equality on the distribution of the assets : no order as to costs;

7) the various issues raised by the Husband : no order as to costs.

16.  In any event, the Husband submitted that on a broad brush basis, the Wife should only be entitled to 30% of her party and party costs of the appeal and cross appeal.

(2) Wife and Intervener

17.  The Wife asked for costs against the Intervener. 

18.  The Intervener submitted that the Wife failed in her appeal against the Intervener that 4.4% of NAIGL shares belong to her but recognized that the Intervener failed in her cross appeal that the whole of NAIGL shares belong to her.

19.  The Intervener submitted that the costs of these two issues should be set off against each other.

(3) Our view

20.  We are of the view that the issue of the NAIGL shares materially concerned both the Husband and the Intervener.  The Husband claimed in his Respondent’s Notice that Saunders J erred in holding 83.1% of NAIGL belongs to him.  The Intervener in her Respondent’s Notice argued that the 87.5% (including the 83.1%) of NAIGL belongs to her.  This issue constituted a substantial part of the appeal.

21.  Overall the Wife has succeeded in her appeal against the Husband and the Intervener. We are of the view that the Wife is entitled to 80% of her costs of the appeal and cross appeals of the Husband and the Intervener.  The Intervener was of course not concerned with other issues raised between the Wife and the Husband. Hence of this 80%, the Husband and the Intervener are jointly and severally responsible to the extent of 40% while the Husband is solely responsible for the remaining 40%.

(4) No indemnity costs

22.  The Wife asked for indemnity costs on the basis that she had made an open offer (which was renewed at the beginning of the appeal) to withdraw her appeal and accept the judgment of Saunders J.  That offer was rejected.  We do not regard this to be the proper basis for ordering indemnity costs.  We will order party to party taxation with certificate for two counsel.

3) Costs of the mareva injunction [CACV 251/2011 and CACV 252/2011]

(1) Saunders J’s Order

23.  After Saunders J gave judgment on the ancillary relief on 9 August 2011, the Wife on 21 September 2011 applied ex parte for a mareva injunction against the Husband and the Intervener.  The Wife had previously made a similar application before Line J on 16 September 2011 who refused the application.  On 26 September 2011 the Wife applied by summons for the continuation of the mareva injunction.  The Husband applied by summons dated 28 September 2011 to discharge the mareva injunction and dismiss the Wife’s summons of 26 September 2011.

24.  On 30 September 2011 Saunders J discharged the mareva injunction and also dismissed her summons after hearing counsel for the parties and upon the Intervener’s undertaking to :

‘ hold and continue to hold and not dispose of, up to the value of HK$147.9 million, 41,550 shares of New Asia International (Group) Limited [i.e. NAIGL] (representing 83.1% its issued shareholding) and of its subsidiaries and their properties and assets, until the determination of the appeal proceedings in CACV No. 166 of 2011.’

25.  Saunders J ordered each party to bear its own costs in the inter partes proceedings and he made no order as to costs of the Wife’s ex parte application.

26.  The Husband contended that there was no basis for the Wife to make the application on an urgent and ex parte basis and there was non-disclosure in terms of the registration of lis pendens against the Sun Ngai properties and the undertaking given by the Intervener in 2009 for not dissipating assets. The Wife had disclosed the lis pendens in her affirmation thrice but not in counsel’s submission.  Further the Husband submitted that there was no evidence of risk of dissipation of assets.

27.  The parties have not obtained from Saunders J the reasons for his decision on costs nor supplied the Court with a transcript of his oral decision although Saunders J expressly allowed the transcript to be given.  This is most unsatisfactory particularly on the part of the Husband and the Intervener who challenge the decision.

28.  As it turns out, a soft copy of the transcript of Saunders J’s reasoning is available.  The relevant part reads :

‘ I am satisfied that the wife was justified in considering that there was a risk of dissipation. She was justified for two reasons, firstly, because of the conduct of the husband and the intervener in the past and, secondly, because there had been no response at all from either sets of solicitors to the letters that had been written following the judgment.

However, I am not satisfied that the matter was one of urgency and it should have been brought on notice.  Notice now having been given, an undertaking has been given by the intervener which I am satisfied gives adequate protection.  The injunction will therefore be discharged.

I am satisfied that there has been no material [non] disclosure, however, this is a case which required a much more comprehensive skeleton from counsel presenting the application to the ex parte judge.  There is a fine line to be drawn between drawing the judge’s attention to relevant matters and material non-disclosure.  I am satisfied that there are matters to which the judge’s attention should specifically have been drawn to.  Those have been outlined by both Mr Coleman and Mr Chan, but the failure to do so does not constitute material non-disclosure.  The correspondence should have been replied to, it is as simple as that.  Mr Clough, in the statement he made at the end concerning correspondence between solicitors, is quite right.

Weighing the fact that there was no real need for urgency in this matter and, accordingly, the ex parte application and the consequent application to continue the injunction on notice were unnecessary on the one part, and the failure of the solicitors to reply to correspondence on the other part, I am satisfied that justice will be done in costs if each party simply bears their own costs on the application.  Thank you, gentlemen.’

(2) Our view

29.  The application was for a post judgment mareva injunction.  Saunders J was clearly appraised of the issues when he made the costs order.  We are not convinced that his decision was plainly wrong or had been in error on the well recognized basis.  Accordingly the Husband and the Intervener’s appeals in CACV 251/2011 and CACV 252/2011 (leave having been granted by Saunders J) are dismissed with costs to the Wife.

4)  Costs of the appeal on 7 January 2010

30.  This Court allowed the appeal by consent from Deputy High Court Judge Carlson with costs reserved.

31.  The Husband and the Intervener submitted that costs should follow the event and the Wife should pay the costs of that appeal.

32.  The re-trial conducted by Saunders J came to the same conclusion as Judge Carlson on the beneficial ownership of 87.5% of NAIGL.  This is affirmed by this Court.  In the circumstances, we order that there will be no order as to the costs of that appeal.

5) The aborted trial in October 2008

33.  The Husband did not attend the trial before Judge Carlson that was due to start in October 2008.  As a result the trial was adjourned. Judge Carlson reserved the costs of the adjournment.  Saunders J in his Decision of 25 November 2011 (on the costs of the aborted trial and the Wife’s application to vary the costs order nisi of the trial) further ordered each party to bear its own costs of the aborted trial, the reason being that the Husband was unable to attend the trial because he was prevented from coming to Hong Kong from the Mainland by reason of a prohibition order.

34.  The Wife said she was ready for the trial and asked for the costs of the adjournment. This is part of the Wife’s appeal in CACV 166/2011.

35.  In our view Saunders J had exercised the discretion on costs properly and we see no basis to interfere.