SANK v. PGN

FCMC 2699 / 2008

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES

NUMBER 2699 OF 2008

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BETWEEN

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J U D G M E N T
(Costs, Disclosure, Maintenance, Dismissal of claims)

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Introduction

1.  There are three issues before the court that require adjudication, namely who should bear the costs of the ancillary relief proceedings, secondly how much maintenance should the husband now pay to the wife for the support of the only child of the family, E and thirdly whether or not there should be a dismissal of claims or alternatively whether or not the wife’s claim for a lump sum payment should be adjourned sine die with liberty to restore.

2.  There are two fundamental issues that permeate this case. From the husband’s perspective the main issue is each party’s duty to negotiate. In essence his case is that he made a reasonable offer early on in the proceedings and that given the way that things have evolved he should now be entitled to his costs from the date of that offer, in accordance with normal Calderbank principles. He says that significant legal costs have been incurred because of the wife’s failure to negotiate in a sensible and pragmatic way. The central issue from the wife’s perspective relates to disclosure. On the wife’s case the husband’s failure to disclose, his litigation conduct and generally uncooperative attitude has led to a significant amount of money being wasted on legal fees. The husband for his part accuses the wife of being overzealous in her approach to discovery, especially given that she had worked in the family business and was therefore better placed than most to understand the financial realities of the situation. He says that it wouldn’t have mattered what he had disclosed the simple truth of the matter was that the wife did not believe him then and that she does not believe him now. He says that he had fully disclosed, but the wife chose not to believe the evidence produced. The wife’s costs stand at just under HK$900,000 and the husband’s at approximately HK$500,000.

Open offers

Wife’s offer

3.  On the 29 March 2011 the wife put forward the following proposal:

…

Our client’s proposals herein are made simply in an effort to bring the action to a close without more costs being incurred and are made without prejudice to her position to claim her costs against your client in the event that your client does not agree to settle the outstanding matters and our client is compelled to go to Court to argue the costs issue and/or E’s maintenance.

Given the recent information from the mortgagee bank that the sale price of the Farm is AUD620,000, and on the basis that there are no assets, our client puts forward the following terms in full and final settlement:-

1.   Your client pays maintenance for E at the rate HK$12,000 per month plus one half of E’s medical expenses.  The maintenance and medical expenses shall commence from June 2010 (when your client commenced work in Hong Kong) taking into account all interim payments that he has paid since October 2010.  For the avoidance of doubt “medical expenses” shall include travelling and accommodation expenses for E in the event of medical treatment being obtained overseas.

2.   Nominal maintenance for our client in the sum of HK$1 per annum;

3.   Each party pays their own costs;

4.   All other financial claims of both parties be dismissed.

Husband’s offer

4.  The husband countered as follows:

As to paragraph 1 of the proposed settlement, you are asking our client to contribute towards E’s maintenance in a sum that is disproportionate with our respective clients’ incomes and so it is unlikely that he will agree to that.  In any event, we are quite unable to advise our client properly because of your client’s refusal to provide up to date financial information as to her income, expenses and capital position

As to paragraph 2, if your client will agree to a nominal maintenance order in favour of our client, he may agree to this.

As to costs, we have unequivocal instructions to seek an order for costs in our client’s favour. The matters set out in your letter alleging litigation misconduct on our client’s behalf are wholly rejected and indeed are not supported by a proper study of the history and correspondence.  Rather they support our client’s argument that there should be a costs order in his favour.

            Paragraph 4 can be agreed.

Wife’s updated position

5.  As at the 21 April 2011 the wife sought HK$20,000 per month as maintenance for E, plus half of his medical expenses back dated to the date that the husband commenced working in Hong Kong. She did not ask for a dismissal of claims.

6.  In her counsel’s closing she put her position thus:

77.   The wife now asks for her costs of the ancillary relief, including costs of the hearing in April and May.

78.   She asks that her application for lump sum be adjourned sine die and that she be granted an order for nominal maintenance.

79.   She further asks for maintenance for E, in the sum of HK$20,000 a month or whatever sum the court finds reasonable, backdated to the date the husband started work in Hong Kong, in May 2010.  The wife’s open offer on 29^th March 2011 was for the sum of HK$12,000 which the husband did not accept.  She thereafter did detailed calculations and found the expense to be much higher than she had thought.  She also asks that the husband pay half of E’s medical expenses.

Husband’s updated position

7.  The husband for his part says

24.   R has agreed to pay P HK$8,000.00 per month plus half the cost of medical treatment evidenced by receipts or prior agreement.  This is based upon R’s ability to pay and can be judged by reference to each party’s income.  P earns double the monthly earnings of R.  Assuming a reasonable monthly sum of HK$24,000.00 for E’s maintenance (it was originally estimated by P at HK$20,000.00 per month (D1 pp7-8)) R’s current contribution is fair and reasonable.

……

27.   The indisputable fact is that the only asset that was ever available for distribution between the parties to this marriage was the YR Vineyard.  This fact was known to both parties.  The value of that asset was established within 6 months or so of the filing of the Petition and well before significant legal expenses had been incurred by either party.  It should have been the easiest of financial settlements to achieve but instead if has turned into a very costly piece of litigation caused entirely by P’s abject refusal to accept the true position. There was nothing R could do.  It was impossible for him to prove a negative until the Bank repossessed and the farm was sold.

Background

8.  There are many sad cases that come before the Family Court and to a certain extent those who work within the system become immune to them, but this case stands apart from the rest; the real tragedy being that the outcome could have been very different for both sides and their son had they taken a different approach to the litigation and perhaps more importantly a different approach to each other.

9.  In April 1999 the parties married in Western Australia, where the husband part owned and ran a vineyard with his parents. The wife is also Australian but she had been living and working in Hong Kong when they met. From about April 1996 the wife relocated to Western Australia and the parties cohabited from that time. During these early years the wife studied and worked on the farm. Sometimes she worked on the farm in a full time and sometimes in a part time capacity, depending on her other commitments. There is no dispute that both parties worked hard on making the farm a success, but that it was an uphill battle. Much of the business was financed through bank loans. This included a bank loan to fund an extension to the property and an overdraft to cover running costs. Although the business made money on occasions there was never really enough to reduce the bank borrowings. At some point during this early period the farm was valued at AUD2.1 million. This valuation did not include any of the buildings on the property. 

10.  When the parties married they also purchased the husband’s parents interest in the farm. Monies are still due and owing to them. The parties are therefore business partners as well as man and wife.

11.  In May 2001 the parties had their only child, a little boy called E, who is now 10 years of age. Tragically shortly after his first birthday E was diagnosed with a brain tumour. Although E is able to attend mainstream school he has periods of time when he is very severely ill and has to undergo debilitating and time consuming treatments, including chemotherapy. His attendance at school can at best be spasmodic. There have also been difficult attendant issues to deal with which also require specialist treatment.

12.  In February 2006, the wife received a job offer which meant relocating to Hong Kong. The parties jointly decided that this would be a good move. The husband’s perception was that this was essentially a move for financial reasons. The wine making industry in Western Australia was struggling at the time and in the words of the husband there had been massive over planting of vines. He said that the intention was that the wife would relocate with E and send money back in order to assist. The wife’s view was that this decision was made in order to benefit the family as a whole. In any event the wife moved first and E followed shortly thereafter. The husband initially commuted between both places. The wife did not send funds back.

13.  Unfortunately the parties’ marriage became untenable shortly thereafter and on the 11 March 2008 the wife issued a petition for divorce in Hong Kong, seemingly without giving the husband notice of the same. The decree nisi was pronounced on the 3 October 2008 and on the 5 February 2009 the parties agreed an order for joint custody of E, with care and control to the wife and reasonable access to the husband.              

Ancillary Relief

14.  On the 15 May 2008 the wife’s lawyers sent the husband a without prejudice save as to costs letter seeking inter alia AUD750, 000 on a clean break basis. Much has been made of this letter during the hearing, the husband’s point being that it was impossible for him to pay that sort of money to the wife or anything close to it. He believes that the wife must have known this, given that she had been responsible for much of the book keeping on the farm and was aware of the difficulties that the business was facing generally. The wife for her part seemed to believe that the farm was worth more than actually proved to be the case. In either event this letter makes no proposals in relation to the farm or the business itself.

15.  Both parties acknowledged that there were some private negotiations between them, which came to nothing.

16.  The husband says that he then proposed that the partnership be dissolved, that he takes on the partnership liabilities and continue the business as a sole trader. The wife was unwilling to agree to this presumably because it would have meant effectively agreeing to walk away with nothing. It seems that she believed, perhaps understandably, that there was a greater intrinsic value in both the land and the other partnership assets.

17.  On advice from lawyers in Perth, the wife then took steps to dissolve the partnership, without further notice to the husband. This of course made it very difficult for the husband to conduct any further business or to keep the farm afloat.      

18.  On the 16 September 2008 the husband obtained a valuation report valuing the farm at AUD1, 250,000 as at the 26 August 2008. There then followed a series of First Appointment hearings. It soon became clear during these hearings that the wife did not accept the valuation. This continued until the court intervened and the valuation was upheld. It was also suggested at this stage that the matter should proceed as quickly as possible because “at the end of the day there will be nothing there”.    

19.  The matter was set down for a FDR hearing on the 16 June 2009. Unfortunately the wife was not prepared to proceed on the 16 June and instead I heard an application on discovery. The wife had a number of concerns. In particular she wanted full details of the “wine making”. Mr Erving said on that occasion that

There is no wine making taking place and we do not have a bottling plant, so I don’t know where they got that from.

20.  I asked for that to be confirmed in writing. This was not done.

Further detailed orders were given and the case was transferred out of the FDR list. This was at the wife’s request. She preferred to go straight to trial. In retrospect I believe that this was a mistake.  

21.  When the matter came back before me again on the 11 September 2009 I made a precise order as follows:

The respondent do file and serve a comprehensive narrative affirmation in reply within 28 days thereof including a statement as to his involvement with any wine making business.

22.  In his affirmation the husband said as follows:

I am conducting a small amount of business, selling wine, in order to generate some income to assist in maintaining the vineyard.

23.  The wine making issue was not dealt with otherwise. On the 8 December 2009 the matter was set down for trial. It was clear to the outside observer at that stage that the vineyard was in serious trouble and I actively encouraged the parties to engage in mediation as quickly as possible and preferably the following week. In a letter from the husband’s solicitors on the 15 December the husband said as follows:

In so far as the first letter is concerned, our client notes your client’s refusal to allow funds already held by the bank to be utilized to service the loans.  In the circumstances, there is nothing more he can do so that it is likely that the bank will now foreclose on the loans as we explained in our letter of 10^th December.

In light of this, our client can see no point in wasting time and money on mediation, as there is nothing to mediate over.  Your client will have to live with the consequences of her actions.

24.  The wife responded as follows:

As you are aware the Judge is very keen for parties to mediate but the attitude taken by your firm and your client makes it impossible for mediation to proceed.

In any event we would remind you again of the Judge’s comments at the last hearing with regards to mediation and that she will take into account costs in the event that a party makes no effort to seek mediation.  As such our client again requests that your client agrees to mediation that Mr. David Pilbrow be the appointed mediator and that the costs be shared equally.  We understand that Mr. Pilbrow is available to see the parties at short notice.

25.  For the avoidance of doubt it seems to me that notwithstanding the fact that the wife had asked to go straight to trial the husband’s attitude at this juncture was far from helpful. The parties should have attempted to mediate the matter.    

26.  In any event it was further agreed that the husband would provide the wife with a soft copy or alternatively a hard copy of the Quickbooks, which was the book keeping programme originally established by the wife on the farm. The Quickbooks were to be provided from June 2008 to date.

27.  On the 18 December 2009 the husband offered to transfer to the wife all of his interests in the wine business, the land and the property on the basis that she indemnify him in relation to the partnership liabilities. The wife’s counsel said during the trial that this could not be considered a serious offer. How could she take on the farm and all that that entailed, whilst at the same time working full time and looking after E? Although that may have been the case it is clear that the wife was not making any serious proposals either with a view to resolving the issue in a sensible way.    

28.  At the first day of trial the wife still had concerns with respect to disclosure and the case was again adjourned until November. 

29.  On the 17 November 2010 the husband agreed to pay interim maintenance for E of HK$8,000 per month plus half of the ongoing medical expenses.

30.  On the 31 January 2011 the bank sold the farm for AUD620,000 leaving an outstanding debt to the bank of AUD170, 000. In addition monies are still due and owing to the husband’s parents. Consequently there are now no assets of any worth, just as the husband had foreshadowed.

31.  On the 15 February 2011 the wife made the following proposal:

We refer to this matter and wish to put in open correspondence proposals on behalf of our client in full and final settlement as follows:-

a)   Your client be responsible for all liabilities in relation to the mortgage on the farm (in your client’s sole name) loan from his parents (in your client’s sole name) and the partnership overdraft, as well as any and all other liabilities for the partnership/business.

b)   Nominal maintenance for our client at HK$1 per annum.

c)   Maintenance for E at HK$15,000 per month commencing from April 2008 as well as 50% of E’s medical from April 2008 and 50% of ongoing medical expenses.

d)   All other financial claims of both parties be dismissed

e)   Your client pays our client’s costs to be taxed if not agreed.

Our client proposes the above offer with a view to bringing this matter to an end so that she may concentrate on looking after E and on obtaining the best medical and appropriate treatment for him.  Our client believes this would be in E’s best interests and her proposals are made on this basis and not that she is not entitled to the claim or the applications.

If your client should insist on the matter going to a full trial however, then our client will have no option but to continue to claim her interest in the matrimonial assets and for maintenance for E retrospectively.  (the current payment is only interim maintenance and the matter remains outstanding).

In any event even if our client were unsuccessful at trial, we are of the view that our client has very strong arguments that costs should not be awarded to your client and your client would ultimately bear his own legal costs on the following basis-

a)   Your client’s failure to agree to mediation which Her Honour Judge Melloy was very keen for parties to attend.  Her Honour had indicated in Court that she would take this into account when dealing with costs should a party fail to agree to mediation;

b)   Your client up until October 2010 had not provided any maintenance for E’s expenses (including his substantial medical expenses) for the past few years.  Notwithstanding your client’s claim of not having any income, it is apparent that he has been carrying on business though K or otherwise and was able to finance himself on an MBA course and trip to Malaysia and the PRC.  In any event your client has been working since May 2010 but still failed/refused to contribute to E’s expenses until December 2010, and all he has paid in total is HK$24,000.  In the unlikely event costs were ordered, our client would seek to retain any costs ordered against her for E’s maintenance.

c)   Your client has used partnership funds to pay his legal fees throughout in which our client had an interest in such partnership assets.  Our client therefore has already indirectly contributed to your client’s legal fees.

d)   Your client’s conduct of this matter, his continued uncooperative attitude and inadequate disclosure has caused the bulk of the costs incurred in these proceedings.  Our client is entitled to full and frank disclosure in order to determine her position and her financial claims.  She cannot be expected to forego her claims simply because your client claims he has no funds, particularly as there is a sick child involved and our client may need to give up her job to take care of him. She has always made this clear.  Your client has not fully disclosed his financial position and it is noted that in his latest purported reply to our client’s request for further and better particulars, there was not one attachment of documentary evidence in support.

We shall bring this letter to the attention of the Court in the event that costs should be in issue.

32.  The husband responded by referencing previous offers as follows:

In his affidavit dated 12^th June 2009 at paragraph 13 (page 220 bundle A1) our client recorded the following:-

“I have, generously, in my view, offered to take on the partnership liabilities on the basis that they are currently financed by the farm property and to indemnify the Petitioner in respect of her liabilities on the basis that we both walk away without any financial orders in the divorce but she has refused this offer”

In paragraph 16 of his 2^nd Affidavit filed on 21^st December 2009 (page 342 bundle A2) our client said the following:-

“I have repeatedly offered to take on the partnership liabilities on the basis that they are currently financed by the farm property and to indemnify the Petitioner in respect of her liabilities on the basis that we both walk away without any financial orders in the divorce. This has been done purely in the future interest of E. The petitioner has refused to acknowledge this offer, she has no understanding whatsoever of the parlous state of the wine industry in Australia and has made no effort to understand. She could easily monitor the sale of other similar properties. I now withdraw this offer; the petitioner is now jointly and severally liable for the partnership debts and the consequences of her actions.”

Our client is making a reasonable contribution to E’s upkeep so, in the circumstances, the only proposal that he has to make is that your client should accept her joint and several liability in respect of the partnership debts, withdraw her financial claims and make a significant contribution to our client’s costs of these proceedings.

As to the matters set out on page 2 of your letter these are in general rejected and will be dealt with in detail at the end of the trial if necessary.

33.  Thus the stage was set. A compromise was not possible. The husband sought his costs and in addition the issue of E’s maintenance was still to be finally determined. In her final submission the wife sought her costs including the costs of the hearing in April and May. 

34.  In amongst all of this E continued to have unpleasant and at times intrusive treatment. Money was also understandably in short supply.

The law on discovery

35.  Both parties are under a duty to provide full and frank disclosure of their financial circumstances on an ongoing basis. For the avoidance of doubt reference should be made to the 18^th edition of Rayden at paragraph 17.28

Duty of disclosure: disclosure must be full, frank, clear and up to date

17.28   The importance of the duty of both husband and wife to make disclosure of their assets which is full, frank and clear cannot be overemphasised.  Unless a court is provided with correct, complete and up-to-date information on the matters to which, under s 25 of the MCA 1973, it is required to have regard, it cannot lawfully or properly exercise its discretion in the manner ordained by that section.  The duty on each party is absolute, and it must be discharged regardless of whether the application for ancillary relief is adjudicated upon by the court after full evidence has been heard, or settled after an exchange of financial information between the parties leading to a consent order.  The duty is also a continuing one; a party must not mislead the other party and the court into assuming that his financial situation is unchanged if it fact it has changed.  Any material changes in the financial situation of either party occurring between the filing of their Form Es and the final dispatch of the claims by the court must be brought to the notice of the other party and the court at the earliest opportunity.  A party who seeks to negotiate and secure a settlement without informing the other party about a material change in his or her financial circumstances runs the risk that, if a settlement is reached and a consent order is made, the consent order will be set aside by the failure to provide full, frank and timely disclosure. Shortcomings in disclosure will be visited by orders for costs against the offending party, often on the indemnity basis.  Furthermore, deviation from the standard of disclosure required may be visited by the court drawing adverse inferences against the party in default.

36.  At paragraph 17:30 Rayden continues as follows:

Discovery of documents: questionnaire

17.30 In ancillary relief proceedings discovery begins with service of the Form E and the documents which are required to be attached to the Form E, and any other documents necessary to explain or clarify any of the information contained in the Form E.  Thereafter discovery is by mutual request by means of a questionnaire served in advance of the first appointment, and by further questionnaire at a later stage of the proceedings with the court’s permission.  Questionnaires can, like interrogatories, request information as well as seeking production of documents.  As part of its case management role, the court should regulate the extent of the disclosure of documents so that the exercise is proportionate to the issues in question, and to ensure that the discovery process does not become a fishing expedition approved by the court.  An order for discovery can only be made against a party to the application.  Discovery encompasses all documents which are or have been in a party’s possession, custody or power relating to matters in question in the application for ancillary relief; it is a two-stage process: where objection is taken to production of a document in the possession or power of a party, the proper course is for the existence of the document to be disclosed and objection then taken to its production.  A party giving discovery is not obliged to disclose any part of a document which is irrelevant to the issues, and it is established practice to redact irrelevant parts of the document provided that the irrelevant part could be covered without destroying the sense of the rest of the document or make it misleading.

Discussion

37.  The wife’s case was that the husband did not make full and frank disclosure of his financial circumstances, that he was not open or frank and that he engaged in a litigious game of cat and mouse. This at a time when frankly speaking she did not trust him, was working fulltime and was also involved in the day to day care of their very sick child.

38.  The husband for his part says that he gave the wife everything that she asked for, including the Quick Books, that he responded appropriately and that in any event the wife knew or should have known how precarious their financial situation actually was. This, from his perspective, was at a time when he was actively engaged in trying to save the farm from foreclosure. He says that he saw his life’s work going up in smoke because of the wife’s actions and there was nothing that he could do about it.

39.  The wife suspected that the husband was still involved in wine making notwithstanding the fact that she had attempted to dissolve the partnership. She sought information about this. The difficulty was that only limited or unclear or sometimes even contradictory answers were provided. At what point then is enough enough? Was the wife entitled to know the answers to these questions as of right – or should she have taken a more pragmatic view given her intimate knowledge of the farm?

40.  It seems to me that this case would have been helped immeasurably had clear and unequivocal answers been given when they were sought, in a detailed but simple and straightforward way. The difficulty was that the husband seemed to be hiding something and indeed we now know that at times he was at best “economical with the truth”. I accept for example that the wife sought on a number of occasion information regarding “winemaking” on the farm. As set out above she asked in letters and in questionnaires for further information and clarification. She did not accept the answers given by the husband because from her intimate knowledge of the farm and its business dealings, it simply did not make sense. This was raised specifically in the hearing on the 16 June when Mr Erving categorically stated, presumably on instructions that no wine making business was going on. The husband was asked to put this in writing. He did not do so. Later I ordered that a comprehensive affidavit be filed to include information about any winemaking on the farm. The affidavit is far from comprehensive. During cross examination the husband accepted that wine making had been going on and then tried to extricate himself from this and said that there had been no wine making going on at the precise moment that the question was asked. With respect this is simply not acceptable. These sorts of games will not be entertained by the court. The wife was entitled to know the answer to this and other questions and the husband simply chose not to provide those answers in a simple and straightforward way.   

Partnership assets

41.  Likewise the wife sought a list of partnership assets and in particular a list of stock, including the wine. She wanted to know if partnership stock was being sold. At the end of the day the amounts involved are likely to have been rather small, but given that she was not receiving any maintenance at the time I accept that she was entitled to know what income, if any, the husband was making from the farm. She was also entitled to know if the husband was selling wine through his parents and if partnership assets were being used in an inappropriate way. The husband was evasive about this in his answers and during the cross examination. Eventually it was established that a trading company referred to in the Quickbooks as being a customer was infact owned by his parents. In other words the husband had been selling wine to his parents, who had presumably sold it on. It was unclear if they were simply a front or the alter ego of the husband, or alternatively if the transactions were completely above board. Similar difficulties arose with C’s Estate and M L. The wife believed that the husband was carrying on business with M L. He was subpoenaed to attend court and to give evidence. At the end of the day it was clear that the husband had not been involved in any business activities with M L. Unfortunately the wife simply did not believe the husband on this or any other point. She had some justification for this.

42.  But although I accept that some criticism must be made of the husband, by the same token I am also critical of the wife. She became almost obsessive in her approach to this litigation and in her desire to obtain answers. She said on more than one occasion that the husband would rather see the farm go under than give her anything. This belief seems to have coloured her whole approach to the litigation. She did not believe anything that the husband said and although that is understandable up to a point, a pragmatic approach by her would also have been welcome. The wife was aware that the farm relied heavily on loans and an overdraft, she knew of the precarious state of the wine making industry in Western Australia and she knew that the property valuation had fallen significantly. The fact that she did not, for example, believe the valuation when produced by the husband, did not assist matters. The wife’s case at the end of the day seems to have been that the wine making equipment, which was the source of some of the indebtedness could have been sold, the debts repaid and the land preserved. Having heard from both sides in the witness box I have to say that that seems a rather unlikely scenario. I accept the husband’s evidence that no one in Western Australia was purchasing second hand wine making equipment at that time.

43.  In his closing the husband put it thus:

Given that P knew from day one that the only matrimonial asset was the farm and given that she knew or ought to have known the extent of the joint indebtedness of the parties secured on the farm she must have or should have known that the only issue to be determined between the parties was the actual sale and/or disposal of the farm in order to limit the parties’ exposure to debt liabilities or to recover a small surplus which could have been shared.  Instead of accepting this she, through her legal advisers, embarked on an extremely expensive campaign which was nothing other than a fishing expedition to try to establish that R was diverting income from the farm and/or “feathering his own nest” to her prejudice.  She has manifestly failed to prove either.

44.  Although I accept that the wife’s approach bordered on a fishing expedition, the situation was not helped by the husband’s own approach to the litigation and to discovery in particular. The fact that

Even if, which is denied and never proven, R had been making secret “profits” from his conduct of the business, it would have made no difference to the eventual outcome because the bank debts far outweighed any income he could have made.

45.  Although that has proved to be the case it does not and should not have prevented the husband from making full and frank disclosure of his means i.e. clear, transparent and accurate disclosure. I also do not accept the suggestion that the husband’s failure to disclose the wine making activity was a “complete red herring”.                       

The law on costs

46.  The law in relation to costs is well settled.  In the leading case of Gojkovic v Gojkovic [1992] Fam 40 Butler-Sloss LJ put it thus:

“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. ... It would, however, be inappropriate, and indeed unhelpful, to seek to enumerate and possibly be thought to constrain in any way, that wide exercise of discretion. 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. That seems clear from the decided cases and is in accord with the Rules of the Supreme Court and the County Court Rules 1981 requiring the court to have regard to the offer. I cannot, for my part, see why there is any difference in principle between the position of a party who fails to obtain an order equal to the offer made and pays the costs, and a party who fails by the offer to meet the award made by the court. In the latter case prima facie costs should follow the event, as they would do in a payment into court, with the proviso that other factors in the Family Division may alter that prima facie position”.

47.  Clearly the issue of costs lies in the discretion of the court and costs are normally expected to follow the event.  This presumption is more easily displaced in family proceedings that in others.  Although I may be influenced by the existence of calderbank offers, they cannot be said to bind the exercise of my discretion.  (See In re Elgindata Ltd (No.2) [1992] 1 WLR).

48.  Butler Sloss added as follows:

“It is therefore clear that Calderbank offers require to have teeth in order for them to be effective. This is recognised by the requirement in Ord. 62, r. 9 (and the equivalent Ord. 11, r. 10 of the County Court Rules 1981 (S.I. 1981 No. 1687 (L.20)), as amended, for the court to take account of Calderbank offers, and by analogy open offers, in exercising its discretion as to costs. There are certain preconditions. Both parties must make full and frank disclosure of all relevant assets, and put their cards on the table. Thereafter the respondent to an application must make a serious offer worthy of consideration. If he does so, then it is incumbent on the applicant to accept or reject the offer and, if the latter, to make her / his position clear and indicate in figures what she / he is asking for (a counter-offer). It is incumbent on both parties to negotiate if possible and at least to make the attempt to settle the case. This can be done either by open offers or by Calderbank offers, both adopted by the husband in this case. It is a matter for the parties which procedure they prefer. There is a very wide discretion in the court in awarding costs, and as Ormrod L.J. said in McDonnell v McDonnell [1977] 1 W.L.R. 34, 38, the Calderbank offer should influence but not govern the exercise of discretion.

Conclusion

49.  Given all of the above and my criticism of both parties in the way in which they have chosen to conduct this litigation, I will make an order that there be no order of costs up until the date of the hearing on the 19 April. I make this order because it seems to me that both sides are partly to blame for the unfortunate way in which this litigation has been conducted. Criticism can be made of both sides. However given that this is the proposal that the wife initially put forward i.e. that each party walk away on the basis that there be no order as to costs and given that this offer was rejected by the husband, it seems to me that I have no alternative but to reflect this in some way in the order. Had this offer been accepted by the husband significant costs might have been saved. I will order that the husband pay a contribution towards the wife’s costs from April 2011 to date. I make this order also because although the wife has not been entirely successful in relation to E’s maintenance (see below), she has beaten the offer made by the husband and it seems to me that this should also be properly reflected in a costs order. Therefore the husband shall pay half of the wife’s costs on a party and party basis, to be taxed if not agreed from 19 April 2011 to date.    

Maintenance for E

Introduction

50.  The wife seeks maintenance for E pursuant to s.5 Matrimonial Proceedings and Property Ordinance Cap 192 (MPPO). 

51.  The only other substantive issue to be determined here is the appropriate level of maintenance to be paid for E going forward bearing in mind each party’s relative income. The wife originally sought HK$12,000 per month and then amended that figure to HK$20,000 per month at the hearing, plus half of E’s medical costs. The husband offered HK$8,000 per month plus half of E’s medical costs upon production of invoices. The wife asks that the maintenance be backdated.

52.  The wife is 40 years old and works in house for a well known bank. At trial the wife said that she hoped to change jobs in the near future and that she expected her remuneration package to be the same or similar to her present package. The trial proceeded on the basis that the wife’s income was expected to be in the region of HK$125,000 per month and that she would inform both the court and the other side if it increased to anything over HK$150,000 per month. She is presently earning in the region of HK$105,000 per month inclusive of bonus. She has resigned from this job, her last day being the 21 June 2011.  

53.  The husband is 53 years of age. He presently works for a wine distribution company in Hong Kong. He earns HK$60,000 per month. He was also said to be looking for new employment.

54.  The wife sought something close to a 50% contribution towards E’s expenses. The husband for his part said that he could not afford to pay anything more than he was paying at present i.e. HK$8,000 per month plus 50% of E’s medical costs.  

The law

55.  Applications of this nature are governed by s.5 MPPO Cap 192 which state that the court may make orders requiring one party in a marriage to pay maintenance to the other, for the benefit of a child of the marriage

“(a) before or on granting the decree of divorce …… or at any time thereafter”

What then is the appropriate level of maintenance to be paid by the husband for E going forward?

56.  The wife is seeking HK$20,000 per month for E. According to her latest form E she needs approximately HK$28,000 per month for E’s actual expenses, which included HK$12,000 per month for medical and dental expenses. If one puts the medical and dental expenses to one side her estimate stands at approximately HK$16,000 per month. In addition she seeks a contribution towards the general household expenses. These stand at c HK$52,000. I accept that a certain percentage of the general household expenses should be attributed to the wife directly. The remainder, being costs associated to E, should then be split between the husband and wife in an equitable manner. On occasion this may be 50:50 – or alternatively it can be a percentage based on the relative earnings of each party, or simply a reasonable amount in the circumstances. If one were to split the household expenses then HK$26,000 would be attributed to the wife and HK$26,000 to E. Of that, without taking into account the disparity in their current earnings, if each side were to pay 50% of E’s expenses, HK$13,000 should be paid by each party. If the husband’s contribution was reduced to 1/3 (in line with his current earnings) one would expect the husband to be contributing 1/3 x 26,000 = HK$8,668.40. In the circumstances it seems to me that the husband’s contribution should reflect the disparity in the parties earnings.   

57.  In this case the wife produced a bundle of receipts at the hearing, presumably in answer to the criticism that she had not substantiated her claim. She said that these supported her case that infact she spent more on E than she had originally thought. That be as it may, I intend to rely on the estimates provided in her Form E, as follows:

School fees	5,800
Transport to school	800
Extracurricular	500
Entertainment/presents	2,000
Holidays	2,500
Clothing/shoes	2,000
Lunch/pocket money	300
Uniform	2,000
Others
School building levy	2,083
Subtotal	16,183

58.  I accept these expenses, which generally speaking seem reasonable. I also accept that the husband should contribute towards 1/3 of those expenses as follows: 1/3 x HK$16,000 = HK$5,334.40. The parties have agreed that each should be contributing equally towards E’s medical costs/treatment, subject to agreement between the parties with respect to that treatment and the production of invoices. I do not intend to interfere with that agreement, which also seems fair and reasonable in all the circumstances of this case.

What can the husband reasonably afford to pay?

59.  I accept that the husband’s present income stands at approximately HK$60,000 per month, which is significantly less than the wife’s anticipated salary. In the circumstances I will order that the husband pay maintenance for E of HK$14,000 per month. This is approximately 1/3 of E’s actual expenses and 1/3 of E’s half share of the general expenses. I will hold him to his undertaking to contribute towards E’s medical expenses as set out above. Given the difficulties experienced by the husband in the run up to these proceedings I will not back date that order. I am confident that the husband should be able to pay this sum going forward and that it is a reasonable amount.   

Dismissal of claims

60.  The issue of whether or not it is possible to adjourn provision for capital claims was looked at in KEWS v NCHC, 19 October 2010, unreported. In that case HH Judge CK Chan looked at the authorities which supported the proposition that it is possible to adjourn an application for capital ancillary relief in exceptional circumstances. Reference was made in particular to MT v MT (Financial provision: Lump Sum) 1992 1 FLR and Hardy v Hardy [1981] 2 FLR 321. HH Judge CK Chan did not exercise his discretion in favour of the wife who was seeking such an order on that occasion.

61.  In this case the wife sought to adjourn her application because she is the mother of a very sick child and she still does not believe that the husband has made full and frank disclosure of his means. It was put to her that perhaps she believed that the farm might be resurrected one day – perhaps under a different guise. Although the wife denied this in the witness box I accept that that was certainly the tenure of some of her arguments. I initially had some sympathy with the wife on this, but as the trial developed it soon became clear that this was almost certainly not the case. Consequently it seems to me that this is not one of those exceptional cases were it might be appropriate to adjourn the wife’s claim for capital ancillary relief. I will therefore dismiss the wife’s capital claims for ancillary relief. Given the precarious state of E’s health it is only fair and reasonable that a nominal maintenance order should be made in her favour. I will therefore make an order as follows:         

Order

62.  Upon the husband undertaking to contribute towards 50% of E’s medical costs/ treatment subject to both an agreement between the parties and the production of appropriate invoices

IT IS ORDERED THAT

1)   The Respondent husband shall pay the Petitioner wife periodical payments for E in the sum of HK$14,000 per month the first payment to be made on the 1^st July 2011 and thereafter subsequent payments to be made on the first day of each succeeding month until E reaches the age of 18 years or ceases full time education, whichever is the later, or until further order.

2)   Nominal periodical payments to the Petitioner to be paid by the Respondent at the rate of $1.00 per annum for her maintenance during the joint lives of the parties or until the Petitioner’s remarriage, whichever is the shorter; first payment to be made upon decree absolute.

3)   The Petitioner’s claims for all forms of capital ancillary relief shall stand dismissed. The Respondent’s claims for all forms of ancillary relief shall stand dismissed.

4)   There shall be no order as to costs up to the 19 April 2011. Thereafter the Respondent shall contribute towards 50% of the wife’s party and party costs, such costs to be taxed if not agreed. There shall be certificate for counsel.

5)   Section 18 Declaration to issue.