YCKS v. MPKC

FCMC 5771/2018

[2021] HKFC 44

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES

NUMBER 5771 OF 2018

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Decision

(Variation on costs order)

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Introduction

1.  In my judgment on ancillary relief handed down on 10 November 2020, the petitioner (“the wife”) succeeded in her ancillary relief application. I ordered a transfer of matrimonial property (“the Lamma Property”) by the respondent (“the husband”) to the wife at nil consideration within 30 days from the decree absolute (“the Judgment”). In the Judgment, costs on ancillary relief matters was ordered on a nisi basis that the husband do pay costs of the ancillary relief including the wife’s summons for variation of maintenance pending suit filed on 23 April 2019 and all costs reserved to the wife, to be taxed if not agreed.

2.  The husband, the unsuccessful party, filed a summons on 24 November 2020 for variation on costs to one of no order as to costs. The wife opposed.

3.  I do not intend to repeat the facts and evidence of this case. I shall adopt the abbreviations contained in the Judgment.

Applicable legal principles on costs

4.  I cite the judgment of HHJ Grace Chan in LLC v. LMWA & anor [2018] HKFC 100 in respect of costs consideration in matrimonial proceedings, be it the facts of the judgment concerned a preliminary issue, the principles are applicable. In short, the burden rests with the unsuccessful party, the husband, to show a different approach on costs should be adopted on the facts of the case.

“13. There is no dispute that costs are within the discretion of the court which shall have full powers to determine by whom and to what extent the costs are to be paid (See: Order 62 rule 3 of the Rules of the High Court).

14. The starting point for discussion on legal principles on costs are set out in the often quoted English authority of Re Elgindata Ltd (No 2) [1993] 1 All ER 232 at 237f-g, which can be summarised in the following:

(1) Costs are in the discretion of the court;

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

(3) The general rule does not cease to apply simply because the successful party raises issues or makes allegations on which he fails, but where that has caused a significant increase in the length or costs of the proceedings he may be deprived of the whole or a part of his costs;

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

15. The Civil Justice Reform (“CJR”), however, has brought about new elements on costs in civil litigation. For example, Order 62 rule 3(2) of the Rules of the High Court (“RHC”) provides that the court shall order the costs to follow the event, except when it appears to the court that in the circumstances of the case some other order should be made as to the whole or any part of the costs.   For another example, in exercising its discretion, the court is required to take into account, where appropriate in the circumstances, the following special matters set out in Order 62 rule 5(1) of RHC,

“ (aa) the underlying objectives set out in Order 1A, rule 1;

(a) any such offer of contribution as is mentioned in Order 16, rule 10, which is brought to its attention in pursuance of a reserved right to do so;

(b) any payment of money into court and the amount of such payment;

(c) any written offer made under Order 33, rule 4A(2);

(d) any written offer which is expressed to be "without prejudice save as to costs" and which relates to any issue in the proceedings, but the Court may not take the offer into account if, at the time it is made, the party making it could have protected his position as to costs by means of a sanctioned payment or a sanctioned offer under Order 22;

(e) the conduct of all the parties;

(f) whether a party has succeeded on part of his case, even if he has not been wholly successful; and

(g) any admissible offer to settle made by a party, which is drawn to the Court's attention.”

16. On the “conduct of the parties”, Order 62 rule 5(2) explains that,

“(2) For the purpose of paragraph (1)(e), the conduct of the parties includes -

(a) whether it was reasonable for a party to raise, pursue or contest a particular allegation or issue;

(b) the manner in which a party has pursued or defended his case or a particular allegation or issue;

(c) whether a claimant who has succeeded in his claim, in whole or in part, exaggerated his claim; and

(d) conduct before, as well as during, the proceedings.”

17. In Hung Fung Enterprise Holdings Ltd v Agricultural Bank of China [2012] 3 HKLRD 679, Kwan JA commented that the broad guideline of “costs shall follow the event” should not be regarded as a general rule but only operates to shift to the unsuccessful party the burden of showing why some different approach should be adopted on the facts of that particular case:

“100. Although the principles in Re Elgindata Ltd (No 2) [1992] 1 WLR 1207 at 1214A to C continue to apply after the Civil Justice Reform, the approach these days is to regard the proposition that costs should follow the event not as a general rule but only operates to shift to the unsuccessful party the burden of showing why some different approach should be adopted on the facts of a particular case (Chan Mei Yiu Paddy & Anr v Secretary for Justice & Ors, HCAL 16/2007, 9 December 2010, Saunders J, para 5), the rationale being that a mechanistic adoption of follow the event principle may result in parties incurring unnecessary costs in civil litigation (Wong Kam Tong v The Incorporated Owners of Yuen Long Tin Shing Court, HCMP 1454/2011, 6 December 2011, Court of Appeal, paras 10 to 13).” (emphasis added)

18. Her Ladyship went on to explain the relevant considerations in deciding whether to deprive a successful defendant of his costs in the following way:

“101. To deprive a wholly successful defendant of costs, the relevant considerations are as stated by Atkin LJ in Ritter v Godfrey [1920] 2 KB 47 at 60:

‘In the case of a wholly successful defendant, in my opinion, the judge must give the defendant his costs unless there is evidence that the defendant (1) brought about the litigation, or (2) has done something connected with the institution or the conduct of the suit calculated to occasion unnecessary litigation and expense, or (3) has done some wrongful act in the course of the transaction of which the plaintiff complains.’

102. Atkin LJ further explained at 60 to 61 that by (1) is meant that the defendant “has so conducted himself as to lead the plaintiff reasonably to believe that he had a good cause of action against the defendant, and so induce him to bring the action”. Such conduct may be unreasonable or improper, or conduct other than that which constitutes the alleged cause of action. (2) and (3) may possibly overlap and would include improper conduct in or connected with the litigation calculated to defeat or delay justice.

103. It is not necessary to prove all three matters to deprive a wholly successful defendant of costs, one or more of those matters would do. The principles in Ritter v Godfrey have been applied in Hong Kong, see for example the decision of the Court of Appeal in Ho Shu Kwong v Chiang Chun Yuan [2002] 3 HKLRD 419 at para 18.” (emphasis added)

19. Put simply, the starting point is that the unsuccessful party will have to bear the costs of the successful party/parties, unless the former can show that a different approach on costs should be adopted on the facts of the case.”

5.  For contested applications in Family Court, the leading case of Gojkovic v. Gojkovic[1991] 2 FLR 233 at 236, Butler –Sloss LJ (as she then was) enunciated in her judgment:

“However, in the Family Division, there still remains the necessity for some starting-point. That starting point, in my judgment is that costs prima facie follow the event (see per Cumming-Bruce LJ in Singer v. Sharegin [1984] FLR 114 at p.119), but may be displaced much more easily than, and in circumstances which would not apply, in other Divisions of the High Court. One important example is, as the judge pointed out, that it is unusual to order costs in children cases. In applications for financial relief, the applicant (usually the wife) has to make the application in order to obtain an order. If the financial dispute can be resolved, it is usual, and normally in the interests of both parties, that the applicant should obtain an order by consent; and if money is available, and in the absence of special circumstances, such an agreement would usually include the applicant’s costs of the application. If the application is contested and the applicant succeeds, in practice in the divorce registries around the country where most ancillary relief applications are tried, if there is money available and no special factors, the applicant spouse is prima facie entitle to, and likely to obtain, an order for costs against the respondent. The behaviour of one party, such as in material non-disclosure of documents, will be a material factor in the exercise of the court’s discretion in making a decision as to who pays the costs.” [emphasis added]

Discussion

6.  In this case, the wife succeeded in her ancillary relief application with an order of transfer the Lamma Property in satisfaction of the needs of herself and the children. The husband was found to have failed to disclose his true financial status with funds available. The wife then obtained an order for costs against the husband. The husband is now seeking an order to vary the said costs order to one of “no order as to costs” on grounds that (i) the wife did not genuinely participate in mediation and (ii) her litigation conduct was “over excessive and aggressive”.

(i) Failure to mediate genuinely

7.  The husband submitted on grounds that the wife has unreasonably refused to engage mediation. The parties had only attended a mediation session in 2016, the husband complained the wife’s attempt was not genuine. Thereafter, the wife rejected invitations by the husband to participate in further mediation until trial.

8.  The wife deposed in her 36^th affirmation filed on 8 February 2021 that she has participated in 3 sessions of mediation with the husband on 12 January 2016, 19January 2016 and 17 February 2016. The wife explained she did not further engage in any mediation after 3 sessions because their relationship was turbulent and traumatic. The wife complained the husband has repeatedly in breach of Court orders throughout the proceedings where she was of the view that mediation would not be fruitful.

9.  Practice Directions 15.10 - Family Mediation expressly states:

“1.4 In exercising its discretion on costs, the Court takes into account all relevant circumstances. These would include any unreasonable failure of a party to engage in mediation where this can be established by admissible materials. Legal representatives should advise their clients of the possibility of the Court making an adverse costs order, where a party unreasonably fails to engage in mediation.

1.5 The Court will not make any adverse costs order against a party on the ground of unreasonable failure to engage in mediation where:

(i) The party has engaged in mediation to the minimum level of participation agreed to by the parties or as directed by the Court.

(ii)  A party has a reasonable explanation for not engaging in mediation." [emphasis added]

10.  Both the wife and husband did not state they have agreed on minimum level of participation on mediation and neither party had relied on Court directions to do so. Yet, the wife has pointed out they have participated in 3 sessions of mediation on 3 separate days as opposed to the husband allegation of 1 session of mediation.  I see from the dates of the 3 sessions were 12 January 2016, 19 January 2016 and 17 February 2016. Mediation was carried out over one month. I have no basis to find either party have failed to participate in mediation or it was not a genuine attempt.

11.  Secondly, I accept the wife has duly explained the reason in refusing to participate in further mediation after the 3 sessions because the husband has continuously in breach of Court directions.

12.  As a result, no adverse costs order shall be made against either party.

(ii) The wife’s litigation conduct

13.  The husband complained the wife was “over excessive and aggressive” in litigation and had resulted in family assets and resources squandered since petition.

14.  The wife replied in her affirmation filed on her 35^th affirmation filed on 11 December 2020 that the husband has consistently and fully obfuscated his obligation to pay maintenance pending suit to both herself and the children of the family. The husband was also accused of failing to disclose his financial position truthfully.

15.  Throughout the proceedings, the husband was found to have failed to disclose his true financial position with evidence to evade paying maintenance pending suit for the wife and the children. I am satisfied the wife has a valid case on ancillary relief against the husband. The wife’s litigation conduct was far from “over excessive and aggressive”.

Conclusion

16.  When order on costs remains a discretion with the Court, in applying the principles above and in light of all circumstances, I fail to see the husband can establish a different approach shall be adopted to order costs otherwise. 

17.  I make the following orders:

(i)  The husband’s (the respondent’s) summons filed on 24 November 2020 be dismissed.

(ii)  The husband (the respondent) do pay costs of the said summons to the wife (the petitioner), to be taxed if not agreed.

(iii)  The wife’s (the petitioner’s) own costs be taxed in accordance with the Legal Aid Regulations.