WGL v. ASB

HCMP 489/2013

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 489 OF 2013

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D E C I S I O N
(Litigation Funding)

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Introduction

1.  This is an application by the Mother for a sum of HK$2,200,000 to be paid to her solicitors for litigation funding.

2.  In this decision, save where otherwise indicated, this Court will adopt the abbreviations in the judgment dated 28 June 2013 (“Judgment”), and also the decision handed down by this Court recently on 8 September 2017 (“08.09.17 Decision”).

3.  The background has been set out in the Judgment, and will not be repeated here.  ILB is now 10 years old.

4.  As seen in the 08.09.17 Decision, the forthcoming trial is in relation to 3 applications, one by the Mother for the Father to pay her the differences between the ordered amounts and the index-linked amounts, and two by the Father, one for downward variation of the ordered periodical payments of HKD290,000 per month to HKD80,000 per month, and another one for reimbursements of amounts said to be overpaid by the Father to the Mother.  These have been collectively referred to as Variation Summonses in the 08.09.17 Decision, and the trial is fixed for 3 days and will commence on 2 May 2018 (“Trial”).

Legal principles 

5.  When a spouse seeks litigation funding in an ancillary relief application in matrimonial proceedings, the guiding principles are those set out in Currey v Currey [2006] EWCA Civ 1338, and which have been adopted in Hong Kong in HJFG v KCY [2011] HKCA 402, as providing prudent guidelines[1].

6.  To summarise, those principles elicited from Currey,and set out by Hartmann JA, as he then was, in HJFG v KCY are:

(i)   A fundamental requirement is that the applicant has to supply a sufficiently detailed breakdown of anticipated costs[2];

(ii)   The overarching enquiry is into whether the applicant for a costs allowance can demonstrate that he/she cannot reasonably procure legal advice and representation by any other means, and the enquiry will include[3]:

•   To the extent that the applicant has assets, the applicant has to demonstrate that they cannot reasonably be deployed, whether directly or as the means of raising a loan, in funding legal services[4];

•   Whether the applicant cannot reasonably procure legal services by the offer of a charge upon ultimate capital recovery;

•   Whether there is public funding available to the applicant as would furnish the applicant with legal advice and representation at a level of expertise apt to the proceedings.

(iii)   In the broad exercise of discretion, satisfying the above condition alone may not be sufficient, and a judge may consider that other factors must come into play[5], including that :

•   The subject matter of the proceedings;

•   The reasonableness of the applicant’s stance in the proceedings, insofar as it can safely be assessed at so early a juncture;

•   The period over which an allowance for legal costs is to be paid, and that applicants should not therefore expect that an order that the allowance be paid until the final determination of all proceedings will be the inevitable order[6].

7.  As for non matrimonial cases, in England and Wales, an unmarried parent may make an application for financial provision for his/her child against the other parent under Schedule 1 of the Children Act 1989 (“Schedule 1”).  The relevant provisions in Schedule 1 in relation to periodical payments and lump sum, are paragraphs 1 (1) and (2)(a) and (c), which, as originally enacted, read as follows:

“(1) On an application made by a parent or guardian of a child, or by any person in whose favour a residence order is in force with respect to a child, the court may—

(a) in the case of an application to the High Court or a county court, make one or more of the orders mentioned in sub-paragraph (2);

(b) in the case of an application to a magistrates’ court, make one or both of the orders mentioned in paragraphs (a) and (c) of that sub-paragraph.

(2) The orders referred to in sub-paragraph (1) are—

(a) an order requiring either or both parents of a child—

(i) to make to the applicant for the benefit of the child; or

(ii) to make to the child himself,

such periodical payments, for such term, as may be specified in the order;

(b) …

(c) an order requiring either or both parents of a child—

(i) to pay to the applicant for the benefit of the child; or

(ii) to pay to the child himself,

such lump sum as may be so specified;

(d) …

(e) …”

8.  In Hong Kong, an unmarried parent may apply for financial provision for his/her child under section 10(2) of GMO which provides that:

“(1) The court may, on the application of either of the parents of a minor (who may apply without next friend) or the Director of Social Welfare, make such order regarding—

(a) the custody of the minor; and

(b) the right of access to the minor of either of his or her parents,

as the court thinks fit having regard to the best interests of the minor and to the conduct and wishes of the parents.

(2) The court may as regards a minor, on the application of a person with whom, whether by virtue of an order under subsection (1) or otherwise, custody of the minor lies at law, make in respect of the minor any one or more of the following orders—

(a) an order requiring payment to the applicant by the parent or either of the parents of the minor of such lump sum (whether in one amount or by instalments) for the immediate and non-recurring needs of the minor or for the purpose of enabling any liabilities or expenses reasonably incurred in maintaining the minor before the making of the order to be met, or for both, as the court thinks reasonable having regard to the means of that parent;

(b) an order requiring payment to the applicant by such parent or either of such parents of such periodical sum towards the maintenance of the minor as the court thinks reasonable having regard to the means of that parent;

…” (emphasis added)

9.  I set out the above provisions because as one can see, the Hong Kong provisions are quite different from the provisions of Schedule 1 of the Children Act 1989.  In particular, the words “for the benefit of the child” do not appear in sections 10(2)(a) or (b) of GMO, and words used are, as seen above, “maintaining the minor” or “towards maintenance of the minor”.  Notwithstanding these discrepancies, neither Counsel disputed that this Court has jurisdiction to make a costs allowance order under sections 10(2)(a) or (b) for the benefit of a child, or ILB in the present case.  Both Counsel have in fact relied on various English authorities in relation to Schedule 1 applications in putting forth their arguments.

The proper approach

10.  The main dispute on law between the parties is that when applying the Currey principles whether the Court should consider the means of the Mother, it being argued by Mr Todd on behalf of the Mother that the present case is really ILB’s case and not the Mother’s case, and that the Mother’s position is like a trustee, she will receive nothing as a consequence of it, and neither should she (like any other trustee) be put into debt because of it[7].

11.  Mr Todd submitted that the Mother’s position is qua trustee, and that it would be absurd to say that a trustee must dig deep into his or her own limited resources to fund the beneficiary’s resistance to litigation, and that no trustee would ever be expected personally to fund the interest of their cestui que trust (except where a trustee might have to reimburse where there has been serious misconduct).  Ordinarily a trustee would be entitled to look to their trust fund to be reimbursed, but here Mr Todd submitted that there was nothing left of the funds which the Father had paid for ILB’s benefit.

12.  Mr Todd relied on M-T v T [2006] EWHC 2494 A (FAM) where, in applying for a review of an order and implementation of financial provision for children under Schedule 1, the father challenged the order for payment of a sum towards the mother’s legal costs on the basis that the court did not have jurisdiction to make such an order.  This challenge was based on the case of W v J (Child: Variation of Financial Provision) [2003] EWHC 2457 (Fam) [2004] 2 FLR 300 in which Bennett J accepted the argument that a parent seeking the up-front payment of his or her legal fees against the other parent was seeking a benefit for himself/herself and not for the child. 

13.  In M-T v T, Charles J disagreed with the conclusion reached by Bennett J in W v J.  It was held by Charles J that the word ‘benefit’ within Schedule 1 [of the Children Act 1989] should be given a wide meaning and an overview of Schedule 1 showed that the applicant parent applied in a representative capacity, to obtain an order for the benefit of the child or children, and as a matter of construction of Schedule 1, legal costs were not excluded as a matter of jurisdiction; given that the applicant was in a representative or quasi-representative capacity, a payment in respect of the costs of bringing the case on behalf of the children was a payment for the benefit of the children, and it was for the benefit of the relevant children that the applicant should be enabled to litigate with an appropriate equality of arms[8].

14.  It was further held by Charles J that having that jurisdiction did not mean that it would always be exercised, and in exercising the discretion the point must be considered as to whether the proceedings or the level of costs were to satisfy the taste of the applicant for litigation.  He went on to say that it was clearly for the benefit of the children in those proceedings that their case should be put before the court fully and properly by counsel and that warranted the interim payment including a figure in respect of costs[9].

15.  In response to the submission that the Mother’s position is qua trustee, Mr Chan referred to In re Beddoe [1892]1 Ch 547 and pointed out that a trustee, who, without the sanction of the Court, commenced an action or defended an action unsuccessfully, could do so at his own risk as regards the costs, even if he had acted on counsel’s opinion[10].  A trustee would thus need to apply for leave from court to commence or to defend an action and to show reasonable cause for commencing/defending the action before the court would allow the trustee’s costs to be reimbursed or paid out of trust estate, and further an application by a trustee for reimbursement or payment out of trust estate has to be heard by a judge other than the trial judge of the action. 

16.  No Beddoe application had been made by the Mother in the present case.  Essentially, what was submitted by Mr Chan was that if the Mother were indeed a trustee, then she would need permission from the court before commencing/defending an action before her costs would be met from trust estate and there would be scrutiny from the court, whereas in the present case, there would not be scrutiny of whatever stance the Mother may take in relation to the Variations Summonses.  

17.  In M-T v T, when Charles J  said about the applicant in that case applying in a representative capacity, or that the applicant was in a representative or quasi-representative, he was merely adopting an analogy and had made it clear he did not use the expression in a technical sense, but only to mean that the applicant was applying to obtain an order for the benefit of the children and therefore somebody else[11].

18.  As further seen from the judgment of Charles J, in exercising the court’s discretion, there is a need to take real care to ensure that the payor is not being put in an unduly difficult or oppressed position, that where there is a prospect that the applicant will receive nothing there can be a greater risk of that happening, as the interim payment in respect of costs is one that is categorised as being for the benefit of the children, the payments can be taken into account in the substantive order made and this reduces the potential for unfairness to the respondent father.

19.  In the case before him, Charles J acknowledged that there were real differences between the applicant and the respondent on fundamental points of principle, and that it could be said that the applicant was advancing her position on those points for herself and on her case in the best interests of the children, but he was of the view then the fair way to bring that into account was that overpayments in respect of the children’s costs could be brought into account at the end of the day in deciding what sums should be applied for their benefit under Schedule 1 rather than by way of crimping the ability of the applicant before him, and thus the children, to be properly and fully represented before the court on all the many points in issue[12].

20.  Mr Chan referred the Court to the case of BC and DE [2016] EWHC 1806(Fam), a case where the mother was allowed an award for prospective Schedule 1 costs.  In that case, the mother had no financial resources or income of her own, and Cobb J had said he must exercise his discretionary power with a view to promoting fairness between the parties and that he must do so exercising a judicious mix of “caution and realism” citing Currey, and said that the applicant mother had a proper case to put before the court and that it was a case in which her legal costs were broadly on a par with the father; and that the father had the means to pay.  The mother in that case had no financial resources or income of her own,and Cobb J was satisfied that the mother could not reasonably obtain legal costs funding elsewhere, and held that it would not be fair or reasonable for the mother and her solicitors to be labouring (literally) under the disadvantage of financial pressure in the preparation of the case in the lead up to the final hearing[13].

21.  Thus, even if an applicant applying for costs allowance in a Schedule 1 application were applying in a representative capacity, the approach of Cobb J in BC and DE was to consider the mother’s own financial resources when considering the Currey principles, and not the child’s.

22.  As submitted by Mr Chan, if the applicant for costs allowance in Schedule 1 cases is the child who is a minor, the child would have to apply through a next friend/guardian ad litem, and in such a case, the available means of the child would be of relevant consideration under the Currey principles, and as the child normally does not of assets of his/her own, the court may also need to consider whether there is public funding available to the child.

23.  Mr Chan submitted that in the present case ILB is a beneficiary of two trusts and so is the Mother.  Mr Todd said that the Mother has no interest in the capital fund of the trusts, and ILB appears to have only a remainder interest, and that there have been no distributions.

24.  In any event, ILB has not been joined as a party in the present action.  In M-T v T, the possibility of the child being separately represented was raised by counsel representing the respondent father, where Charles J’s riposte was whether the father was asking him to join the children so that the father should make contributions towards their costs. The father said that was not his position, and did not continue to pursue the argument down that route.  This was not the position of the Father in the present case either.

25.  As there has been no application to join ILB as a party, the applicant of this application is in my view clearly the Mother.  Adopting the approach of Cobb J in BC and DE, I am of the view that in carrying out the overarching enquiry as set out in Currey, it is for the Mother to satisfy this court that she cannot reasonably procure legal advice and representation by any other means other than being granted the costs allowance, and that  in this respect, this Court should consider the Mother’s own means or financial resources.  In fact, as the Mother herself had said, she had tried to complete online a “means test” for Legal Aid but “her means” exceeded the limit.  

The Father’s position towards the present application 

26.  The Father’s position is that:

(i)   The Mother has not made full and frank financial disclosure of her means;

(ii)   This Court should make “robust assumptions” against the Mother;

(iii)   The Mother does not satisfy the Currey test;

(iv)   The Mother’s Costs Estimate is in any event too high.

The parties’ respective Form H (Estimate of Costs)

27.  I will first of all consider the Mother’s Costs Estimates for the Trial.  When the Mother first issued her summons for litigation funding on 3 August 2017, she sought a sum of HKD1.5m.  She was acting in person at the time and in her supporting affidavit, she had provided the estimate of HKD1.5m, based on HKD800,000 for two counsel’s fees and HKD700,000 for solicitors’ fees on the assumption that there will be a 5 day hearing for the Variation Summonses[14].  The Mother said this was her “guesstimate”.

28.  It was not clear how the Mother arrived at her guesstimate of 5 days.  Anyway, in this Court’s order of 3 August 2017, the estimated length of trial was stated to be 3 days, and the Trial has since been fixed for only 3 days.

29.  The Mother later said in her 5^th affidavit that she had instructed Withers to file a Notice to Act on 7 August 2017 and that after discussing legal funding with her solicitors and counsel, she had underestimated the costs, and that she would need HKD2,200,000.  She provided a breakdown as follows[15]:

(i)   A sum of HKD350,000 already paid on account to her solicitors, being HKD180,000 for Counsel’s brief fee for the hearing on 30 August 2017 and the remaining amount of HKD170,000 for her solicitors’ fees;

(ii)   A sum of HKD50,000 initially transferred to her solicitors for them to instruct her financial adviser/accountant to help in preparing and collating her Form E;

(iii)   She then estimated another HKD918,050 for fees to her solicitors between then, namely from about 24 August 2017, to the start of the Trial as follows:

Partner Ms Ser: 20 hours at HKD7,560 per hour = HKD151,200

Associate Mr Carpenter (about 4 years post qualified experience in England & Wales and 1-year qualification in Hong Kong): 120 hours at HKD3,600 = HKD432,000

Assistant Ms Forsyth (about 2 years post qualified experience in England & Wales): 100 hours at HKD3,200 = HKD320,000

Court Clerk = 5 hours at HKD2,970 = HKD14,850

(iv)   Leading and junior counsel’s fees of another HKD1m.

30.  The total of the above came to HKD2,318,050, of which HKD400,000 was already paid by the Mother as costs on account.  Her estimate for costs for the Trial under (iii) and (iv) would amount to about HKD1.92m.

31.  The Mother filed her Form H on 23 October 2017 which indicated unbilled costs and disbursements and counsel fees incurred from 7 August 2017 up to and including the hearing on 23 October 2017 (“23.10.17 Hearing”) to be HKD 919,195 of which, as mentioned above, HKD400,000 had been paid. 

32.  The Father also filed his Form H on 25 October 2017, indicating that his estimated costs and disbursements and counsel fees for one counsel incurred from 20 June 2017 up to and including the 23.10.17 Hearing to be about HKD1,043,000, which appeared to be higher than the Mother’s, but then the Father’s legal team came into the picture about 6 weeks earlier than the Mother’s.

33.  So far up until and including the 23.10.17 Hearing, costs on either side appeared to be more or less the same.  The Father had said in his 26^th affirmation that he reserved his right to challenge the quantum of the Mother’s costs estimate for the Trial[16].  In Mr Chan’s skeleton arguments, he had submitted that the Mother’s costs for the Trial should not exceed HKD1m.

34.  Mr Todd submitted that if the Mother’s costs were already over HK$900,000 including the costs of the 23.10.17 Hearing, then HK$2.2m sought for the Trial must be reasonable.  On the other hand, Mr Chan submitted that the sum of HK$2.2m sought was extravagant, excessive and disproportionate for preparing and conducting the Trial fixed only for 3 days.  

35.  Mr Todd sought to justify the requirement of a team of 3 solicitors in addition to junior and leading counsel for the Trial by submitting that there will be various legal arguments, namely on the trust arrangement or the Mother’s position qua trustee, res judicata and issue estoppel.  So far as the trust argument, that was already put forward in the present application by Mr Todd, and he was the only counsel who appeared for the Mother before this Court.  It is not quite clear as to why there needs to be arguments over res judicata or issue estoppel but even if these issues were to be raised, they would not be complicated issues.

36.  At the moment, the main ground for the downward variation by the Father is that the amounts paid by him for ILB had not been used towards the maintenance or for the benefit of ILB.

37.  Out of the Variation Summonses, the main disputed one would be the downward variation sought by the Father, from the ordered periodical payments of HKD290,000 to HKD80,000 per month.

38.  What the Father is seeking is a substantial reduction.  At the moment, the housing part of the ordered periodical payments has been suspended, and it is not clear whether the Father is now seeking to reduce only the “non-housing” part, but even so, this still means reducing HKD140,000 to HKD80,000 per month, almost a 43% reduction.

39.  However, whether the Mother has been applying the entirety of the ordered periodical payments towards the maintenance or for the benefit of ILB, or part thereof for the Mother’s personal benefit will be mainly a matter of evidence.  As seen later in this decision, there is a major dispute as to the whereabouts of a sum of about HKD13.7m paid by the Father for benefit of ILB but transferred out by the Mother from her bank account.

40.  So far as the Father’s interim application for immediate reduction of the monthly periodical payments as the Mother no longer needs to pay for housing/rent for ILB, this matter was argued on 30 August 2017 and led to the 08.09.17 Decision.  The Mother was in fact unsuccessful in resisting that application.  Costs of that application have been reserved. After the 23.10.17 Hearing, the Mother took out a further summons on 30 October 2017 for leave to file her 9^th affidavit in relation to the litigation funding application.  Although leave was granted on 17 November 2017 (“17.11.17 Hearing”), costs were ordered against the Mother.  Thus, so far, since her solicitors came on record on 7 August 2017, the Mother has not obtained any costs orders in her favour.

41.  There are currently no outstanding interlocutory applications.  On 3 August 2017, apart from directing the Mother to file an updated Form E with supporting documentation and evidence of actual payments of ILB’s expenses for past 2 years, this Court directed no other affidavit shall be filed in connection with the Variations Summonses, unless with leave of Court. 

42.  This Court made the above direction on the understanding that all supporting evidence supplied by the Mother in relation to ILB’s expenses will be provided to an independent accountant who will then be able to prepare an analysis of whether all or part of the Father’s payments had been applied for ILB’s maintenance/expenses.  No doubt, there may not be documentary evidence to support all of ILB’s expenses, but ultimately, this Court will need to decide what ILB’s reasonable expenses had been, and whether the Father had overpaid or underpaid.

43.  The present case is a high conflict one, and neither party trusts the other.  At this moment the Mother’s stance in opposing the Father’s downward variation of at least 43% cannot be said to be unreasonable, nor can it be said that it is not in the best interests of ILB. Having said this, it appeared that at the time of the 23.10.17 Hearing, the Mother still had not provided all the supporting documentary evidence as to ILB’s expenses and it is not clear whether the parties agreed to jointly instruct an accountant to prepare an analysis or not.

44.  So far, on the Father’s side, he had instructed only one counsel throughout. In any event, in my view, the Variation Summonses do not involve any complex arguments on law, and the Mother does not need a team of 3 solicitors and 2 counsel.  I do find her costs estimate on the high side.

45.  We are now 5 months away from the commencement of the Trial.  The Mother’s Form E was only filed a month before the 23.10.17 Hearing.  I understand the Father would be seeking further financial information from the Mother.  Hence, at this interim stage, discovery is not yet completed and also the accountant’s analysis is not available.  As said earlier, no leave has been granted to the parties to file any further affirmation.   

46.  Having considered all the circumstances of this case, I am of the view that going forward from now, the Mother’s estimated costs and disbursements (including counsel fees) up to the Trial should not exceed HKD1.2m, and this would include her costs and disbursements up to completion of discovery and the preparation of the accountant’s analysis.   

The Currey principles

47.  The burden is on the Mother to demonstrate that she cannot reasonably procure legal advice and representation by any other means, or she does not have assets which can reasonably be deployed whether directly or as the means of raising a loan, in funding legal services, or that she cannot reasonably procure legal services by the offer of a charge upon ultimate capital recovery.  The Mother had said she was not able to pass the “means test” for Legal Aid.  

Amounts paid by the Father

48.  According to a spreadsheet produced by the Father from 16 August 2006 until 27 September 2017 (“Spreadsheet”)[17], he had paid no less than HK$53.6m for the benefit of ILB, to the Mother or to third parties directly. This would be over a period of about 11 years.  He had asked where did all the money go and whether they had been truly spent for the benefit of ILB.

49.  The first item on the Spreadsheet was a loan to the Mother on 16 August 2006.  This was about a year before ILB was born and it is not quite clear why the Father had included this amount.  Further, for those amounts which were stated in the Spreadsheet to be directly paid to solicitors, ILB’s school, and the United Jewish Congregation of Hong Kong or Psychology Resources Limited etc, such amounts clearly went to those third parties as stated. 

50.  Out of the total amount of the remaining balance paid to the Mother for the benefit of ILB, as seen in the 08.09.17 Decision, a monthly sum of HKD150,000 of the ordered amount of HKD290,000 should have gone to ILB’s housing or rent under the 28.06.13 Order.  As for whether the rest has been spent towards the maintenance of ILB or for her benefit, this will be the main disputed issue for the Trial.

The whereabouts of a sum of about HKD 13.7m

51.  At this moment, the main query over the Mother’s financial resources is the whereabouts of a total sum of HKD13,739,168.26, or of about HKD13.7m, transferred by the Mother from her bank account on divers dates to a JP Morgan Chase Private Bank Account (“JP Morgan Account”) during a period of 22 months from October 2015 and February 2017.

52.  It was not disputed that this sum of about HK$13.7m came from the amounts paid by the Father for the benefit of ILB.

53.  The query on the whereabouts of this sum was first raised by the Father in his solicitors’ letter of 4 October 2017, but in response, in her solicitors’ reply of 11 October 2017 (“11.10.17 Letter”), the Mother’s attitude was to accuse the Father of raising those queries as an “aggressive fishing expedition” indicating that she did not want to be drawn into the expense and distraction of providing more information for him to use as a means of further questions thereby increasing her legal expenses for no good purpose[18].

54.  I have to say the Mother’s attitude and reaction was rather odd, in particular considering her present argument that she was/is a trustee for ILB of those sums paid by the Father.  If she considered herself a trustee, then she would have a duty to account for the trust estate.

55.  Anyway, the brief explanation the Mother gave in the 11.10.17 Letter was that the transfers were made by the Mother to her former boyfriend, Mr C, “by way of refund for the contributions [Mr C] made towards [ILB’s] accommodation during the two-year period in which [the Father] did not provide any maintenance for [ILB]”[19], and that when the Father eventually did pay her, she refunded each of the payments to Mr C.

56.  It was not quite clear which two-year period the Mother or her solicitors were referring to in the 11.10.17 Letter, but in her 4^th and 9^th affidavits, the Mother mentioned it was during the 28 month period during which the Father had failed to comply with the 28.06.13 Order and to pay the monthly sum of HK$290,000 and the CPI increases as ordered.  As the Father only started to pay the monthly sum of HK$290,000 from 26 October 2015 (which I understand was for November 2015), the “28 month period” referred to by the Mother would be from July 2013 to October 2015. 

57.  The Mother’s explanation in the 11.10.17 Letter of alleged repayments to Mr C was inconsistent with what she had said in her 4^th affidavit filed on 3 August 2017, that she still owed millions of dollars in debt to Mr C, and that she had not been able yet to pay any of that sum back to Mr C[20].

58.  In the 11.10.17 Letter, the Mother’s solicitors had attached an email from Mr C dated 9 March 2017 setting out the amounts allegedly owed to him by the Mother (“09.03.17 Email”)[21].  In this email, Mr C stated that as of 21 May 2013, the balance due from the Mother to him was USD4,122,394, and “since then”, he had made additional loans to the Mother.  He also set out the repayments “since then” from the Mother totalling USD1,608,418, and that as of the date of his email the total then outstanding was USD7,491,124.  According to what was stated by Mr C, the loans and repayments would be as follows:

Date	Loans to the Mother (USD)	Repayments (USD)	Outstanding Balance (USD)
21 May 2013			4,122,394
Since 21 May 2013	USD4,549,771: - (i) 2.274,328 for legal fees (ii) 1,060,395 for housing (iii) 1,215,048 for miscellaneous living expenses, including utilities, nannies etc	1,608,418
Total outstanding			7,491,124

59.  However, it was not clear how Mr C arrived at the total outstanding figure of USD7,491,124, since according to my calculations, and based on the above, the net amount outstanding should be USD7,063,747.

60.  In the Mother’s Form E, as at date of 21 September 2017, she also claimed she owed Mr C a total of USD7,491,124, being USD466,723.99 for US legal fees, and USD7,024,400 being for funds advanced by Mr C for other costs including housing and car costs[22].

61.  Mr C did not state when exactly the repayments were made by the Mother or received by him, only vaguely that it was “since then” meaning presumably since 21 May 2013.  It was also not clear whether all the additional loans from Mr C since 21 May 2013 of USD4,549,771 were made to the Mother by Mr C prior to 8 October 2015 (the date of the 1^st alleged repayment), or that she and Mr C had a running account, namely there were continuous loans and repayments throughout the period from 21 May 2013 until they allegedly broke up in May 2016 or January 2017, as the Mother had also said she had access of around USD10,000-USD20,000 per month from Mr C until January 2017[23]. It was actually not clear as to when the Mother and Mr C separated, whether it was in May 2016 or January 2017.

62.  In any event, the repayments which Mr C stated in the 09.03.17 Email that he had received from the Mother since 21 May 2013 totalled USD1,608,418, which, @7.8, would come to HKD12,545,660.40 or about HKD12.5m. As pointed out by Mr Chan at the 23.10.17 Hearing, this figure did not match the total amount of HKD13.7m transferred by the Mother to the JP Morgan Account, and there was a discrepancy of about HKD1.2m.  

63.  At the commencement of the 23.10.17 Hearing, Mr Todd had handed up a further email from Mr C sent on 20 October 2017 to the Mother’s solicitor (“20.10.17 Email”), confirming that “his” JP Morgan Private Bank account is and has always been in his name only, and not shared with the Mother, and that he has never had a joint account of any kind at any bank with the Mother. 

64.  What was stated by Mr C in his 20.10.17 Email was neither here nor there.  As pointed out by Mr Chan, Mr C did not actually make it clear that the JP Morgan Account into which the Mother had transferred the various amounts totalling HKD13.7m on divers dates was the account held in Mr C’s sole name nor was there any confirmation that the Mother had/has no beneficial interest in that account.  Mr C did not explain why there was a discrepancy of HKD1.2m in the alleged repayments stated by him and those stated by the Mother.

65.  The Mother had said in her 8^th affidavit that the JP Morgan Account belonged to Mr C and not to her.  The Father does not accept this, and I understand that he is seeking supporting documents from the Mother, such as the bank transfer instructions.  This is however a matter to be determined at the Trial.

66.  At the time of the 23.10.17 Hearing, even assuming Mr C was at all material times or is the sole beneficial owner of the JP Morgan Account, the figures in Mr C’s two emails were problematic, in that (i) there was no explanation from Mr C in his 20.10.17 Email as to the discrepancy of HK$1.2m in the alleged repayments, and (ii) the total net balance allegedly outstanding was almost USD500,000, or about HKD3.9m @7.8, more than the actual balance, although it was only at the 17.11.17 Hearing that the mistake in relation to the outstanding balance was pointed out to the parties by this Court.

67.  Notwithstanding the Father raising the issue of the discrepancy of HK$1.2m prior to the 23.10.17 Hearing, there was no explanation from Mr C nor the Mother.  In the midst of the hearing on 23 October 2017, in reply to Mr Chan’s submissions, Mr Todd suddenly said his instructions from the Mother were that there were 3 transfers for repayments omitted in Mr C’s 09.03.17 Email.  The 3 transfers were respectively HK$450,000 on 20 September 2016, HK$499,800 on 6 December 2016, and HK$299, 800 on 21 February 2017, totalling HKD1,199,600, or about HK$1.2m (“3 Transfers”).

68.  Then after the 23.10.17 Hearing, as mentioned earlier, the Mother issued her summons of 30 October 2017, seeking leave to file her 9^th affidavit.  In her 9^th affidavit, she exhibited a further email from Mr C dated 24 October 2017 (“24.10.17 Email”) stating that he had omitted the 3 Transfers from his 08.03.17 Email, and stating that the correct outstanding loan balance was USD7,336,524[24]. 

69.  The Father had opposed the Mother’s application to file her 9^th affidavit.  There was no explanation from the Mother as to why clarification could not have been sought from Mr C prior to the 23.10.17 Hearing.  However, I granted leave to the Mother because I could see no prejudice to the Father.  It would appear that Mr C did not discover the discrepancy himself.  The explanation for the discrepancy of HKD1.2m was proffered by the Mother during the 23.10.17 Hearing and it would appear that Mr C was then asked to confirm this after the hearing.  In any event, the outstanding balance stated in the 24.10.17 Email of USD7,336,5234 was still wrong. 

70.  What is clear is that neither Mr C nor the Mother knew exactly what the outstanding balance of the alleged loans should be.  

71.  During the 2013 trial, the Father had challenged that those payments from Mr C to the Mother were “loans”, and in the Judgment, I was of the view that those “loans” were “soft” in nature in that there was no sufficient evidence that the Mother would likely to be taken to court then or in the foreseeable future for non-repayment of those loans[25].  I further said that I would, on my part, regard those “loans” as resources available for the Mother in the foreseeable future. 

72.  As I have mentioned earlier, the Mother had said her relationship with Mr C broke up in May 2016, but she had also said that until January 2017 she had access to around USD10,000-20000 per month from Mr C.  According to the 11.10.17 Letter from her solicitors what the Mother meant by having “access” was that she held a supplementary credit card given to her by Mr C for her to pay for general living costs and personal expenses and that this had been disclosed by the Mother in 2013.  It would thus appear that she was using this credit card until January 2017.  Her alleged 8 repayments to Mr C were during a period of 14 months, from October 2015 to February 2017, and during most of that period the Mother had continued to have access to Mr C’s supplementary credit card.  It was not clear whether there was a credit limit to the card nor was it clear as to how much her expenses were.  In any event, it did not appear that the breakup of their relationship in May 2016 had affected the Mother’s “access” to funds or this credit card from Mr C until January 2017.

73.  There were two large lump sum payments to the JP Morgan Account, the first one of almost HKD8.2m and the other one of about HKD3m.  There were then 6 other payments including the 3 Transfers, 5 of which was about HKD450,000 each and one of HKD299,800.  Whether the alleged repayments totalled USD1,608,418 or USD1,763,018, these alleged repayments were at irregular intervals and of different amounts.  There was no explanation from the Mother as to why she needed to make those repayments, since there was no evidence that Mr C had threatened any legal action against her or made any demand for repayment.  There was no explanation on how the Mother and/or Mr C decided on when or how much to repay during those 14 months.  Whether the sum of HKD13.7m was indeed for repayments is clearly a matter to be determined by this Court at the Trial.

74.  More importantly, at this stage, the alleged repayments of   HKD13.7m to Mr C were said by the Mother to be repayments for the contributions Mr C made towards ILB’s accommodation during the 28 month period when the Father failed to comply with the 28.06.13 Order.  According to Mr C’s 08.03.17 Email, the housing part of the “additional loans” were USD1,060,295, or about HKD8.27m @7.8.  However, the housing costs ordered by this Court was a monthly sum of HKD150,000 only, and thus the total sum for ILB’s accommodation for the 28 months would only be HKD 4.2m.

75.  There was no explanation from the Mother why she had to borrow almost double the amount namely some HKD8.27m from Mr C for ILB’s housing during the 28 month period, and repaid even more, some HKD13.7m.

76.  Whichever way one looks at it, even on a broad brush approach, what the Mother alleged that she had paid or refunded Mr C for ILB’s housing costs seemed to exceed the amount of the Father’s contribution for the accommodation for ILB and/or any shortfall on the maintenance payments as ordered by this Court.  

77.  The Mother kept referring to the Father as a billionaire and that he is running a “Millionaire’s Defence”.  As I have said in the 08.09.17 Decision, this does not mean that the Mother is entitled to a blank cheque for ILB.  It further does not absolve the Mother’s obligation to make full disclosure and to account as to how the monies paid by the Father has been spent on ILB.  This does not mean she has to account to the last dollar or cent but it also does not mean that she does not have to provide any account or supporting documents at all, or to explain large transfers.  The Mother should in fact be fully aware of her obligations, since during the hearing in May 2013, she disclosed that she had instructed a financial consultant, or a qualified accountant, to help her professionally to keep records and to assist her finances.  The Father said he had been seeking from the Mother a detailed breakdown of ILB’s expenses since early 2015, and in the Mother’s 5^th affidavit, she had also said that she had a financial adviser/accountant to help her prepare and collate her Form E and the requested documentary evidence.  The Mother was in fact ordered on 3 August 2017 to provide all supporting documents and evidence of actual payments of the expenses of ILB for past 2 years, but as mentioned earlier, by the time of the 23.10.17 Hearing, it seems that she still had not done so.

78.  As said, the whereabouts of the total sum of about HKD13.7m or whether those were repayments to Mr C will be a matter for the Trial, and it is not for the Court at this interim stage to make any finding.  I accept however that the Mother’s disclosure in relation to the HKD13.7m has so far not been satisfactory.

The Mother’s disclosed assets and financial resources

79.  In the Mother’s Form E, she disclosed assets consisting of cash in bank accounts of just under HKD 900,000 plus jewellery, watches and artwork estimated to be worth about HK$1.27m.  She then disclosed liabilities of almost HKD 61.5m, the bulk of which was the amount allegedly owed to Mr C, and that there were also loans from another male friend Mr D of HKD 2.635m.  In her Form E, she disclosed that she had no income, and her personal expenses were of HKD96,000 per month, and that her present boyfriend (“Mr H”) pays for the accommodation and utilities for her and ILB.

80.  The Mother disclosed interest in two trusts settled by her father, but said these interests had played no significant part in the outcome in the financial proceedings which took place in England before Parker J in November 2010.  The Jersey trust is said to own a residential property in London worth about Sterling 2m and that the Mother’s parents pay a rent to the trust for the property, and that the Mother, her sister and their respective children are a life tenant as to income but the Mother says her right to capital is at the discretion of the trustees.  The BVI trust is said to own two small holiday homes, one in Florida and one in Provence and leased back to the Mother’s parents for their life time, and that the Mother and her siblings and their respective children and remoter issue are equal life tenants with respect to income, and the Mother says she has no immediate right to capital save with the trustees’ discretion. 

81.  It appears that the BVI trust in December 2014 sold a property in Aspen for USD6.2m, but the Mother said she did not receive distributions from the trust, and said that the sale proceeds were used to purchase the property in Provence and a small condominium in Aspen.  The Mother’s parents also own two houses in Hong Kong in a luxurious development on the Peak through a Bermudian company, and her parents reside in one and her sister resides in the other.  This is also the same development where the Mother and ILB lived with Mr C, and now with Mr H.

82.  There was no sufficient evidence at this interim stage that the Mother had been receiving any distributions or income from the trusts, or income from any work or employment.

83.  The Mother’s parents had confirmed in a letter to the Mother that they were not able to lend her any money for legal fees.  As mentioned earlier, the Mother said she had taken the “means test” on the Legal Aid website and it confirmed that she would not be entitled to any legal aid because of her savings of HK$1,329,546 as of 24 July 2017.  The Mother had also said she would not be able to obtain legal services by offering a charge on the outcome of the litigation by way of commercial litigation funding.

84.  As mentioned, the bulk of her liabilities consisted of amounts said to be owing to Mr C and also amounts owing to Mr D.  In particular, almost USD4.55m was said to have been advanced to her by Mr C since 21 May 2013, and further Mr D had advanced her HKD2.635m, HKD2m of which was said to be for legal fees, and HKD635,000 of which was said to be for living costs when the Father was in arrears of ILB’s maintenance.  These were not commercial loans.  The fact that Mr C could not even state accurately the balance of the loans allegedly due to him in all his 3 emails would seem to indicate that he was not seriously concerned over repayment and as I have said there was no evidence that Mr C had threatened any legal action against the Mother for repayment or that he had demanded any repayment from the Mother.  As for Mr D, there was little information about him other than he was said by the Mother to be a friend.  

85.  As earlier mentioned, the Mother had the use of a supplementary credit card from Mr C until January 2017.  No statements had been provided.

86.  Since March 2017 she has been residing with Mr H[26]. The Mother had said Mr H who was in the middle of his own divorce proceedings in the United States had told her that he would not be able to lend her funds for her legal fees, although there seems to be no problem for Mr H to provide the Mother a debit card, linked to his bank account.  This was disclosed by the Mother’s solicitors in the 11.10.17 Letter, namely that the Mother has been provided with a supplementary debit card linked to Mr H’s bank account, which was said to have “minor credit facilities” but said to be mostly used by the Mother for ATM withdrawals, and that the Mother only used this card to pay towards her personal expenses and towards the household expenses for Mr H’s home[27]. The Mother made no disclosure of this in her Form E or of the amounts of withdrawals, nor were there any details or statements produced.  She also did not disclose the limit, if any, of the “minor credit facilities”.  

87.  In my view, the Mother has not been lacking in financial resources since the 28.06.13 Order, and at this stage, she has provided very little supporting documentation in relation to her own financial resources. 

Exercise of discretion

88.  In the present application, as said by Cobbs J in BC and DE, the main concern is to ensure that the mother and father have equality of arms and equal access to justice[28] and Cobbs J had also agreed with counsel for the mother in that case, that there is an ordinary expectation that the provision of funding ought to be “reasonably” available – ie imposing no unreasonableness on the applicant nor on the provider of advice and/or representation and he quoted what was said by Wilson LJ said in Currey, namely Mrs Currey “did have assets and could give security for borrowings; the point was however that it was unreasonable to expect her to do so”[29].

89.  As said earlier, the Mother had disclosed assets of a total of about HKD2.16m as at the date of her Form E of 21 September 2017, of which some HKD 890,000 was in cash.  Mr Todd had submitted that even if the Mother has some assets, she is now 48 years of age, and she should not be expected to use her own assets in the present litigation, in particular when she is defending the Father’s substantial downward variation for the benefit of ILB, and not for her personal benefit.

90.  As mentioned in the 08.09.17 Decision, the Father was paying the Mother a sum of HKD290,000 per month since March 2017 although the Mother no longer needed to pay for the rent of ILB.  As the housing portion of HKD150,000 per month was only suspended by this Court from 1 August 2017, the amount paid by the Father from March 2017 to July 2017, namely HKD750,000 would be an extra buffer for the Mother[30].  The Mother had herself said in her 4^th affidavit that although in July 2017, she still had about HKD1.33m in her bank account which she accepted to be significant, she said HKD750,000 was in dispute[31].  This sum was a sum paid by the Father for the benefit of ILB and for ILB’s housing, during which period in fact, there were no housing costs.  The sum of HKD750,000 in Mother’s bank account cannot be said to be the Mother’s personal assets.

91.  I see no reason as to why the Mother could not utilise this amount, or at least a large part of it, towards her legal costs. There was no objection put forward by the Father in this respect.  This should be more than sufficient to cover her costs up to the stage of completion of all discovery and the preparation of the analysis by an accountant.  

92.  In any event, as seen above, the Mother’s financial disclosure so far has not been satisfactory, in particular in relation to the HKD13.7m and also the supporting documentation of ILB’s expenses and also her own financial resources.  As seen from Currey and Currey, and also HJFG and KCY, the burden is on the Mother to demonstrate that she cannot reasonably procure legal advice and representation by any other means, and in light of her unsatisfactory financial disclosure so far, I am of the view that she has not discharged the burden on her and she has not satisfied the Currey test.  As this stage, I am not prepared to exercise my discretion in favour of the Mother, or make any order for costs allowance or litigation funding as sought by her.  

93.  I therefore dismiss the Mother’s summonses issued on 3 August and on 11 October 2017.  Costs will be reserved.