LHC v. KHS

FCMC 3343 / 2015

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES

NUMBER 3343 OF 2015

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RULING
(On Costs)

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The Application

1.  This Ruling is a sequel of my earlier Ruling handed down on 4 May 2016 (“the Judgment”) by which I dismissed the petitioner wife’s application for maintenance pending suit for the benefit of the parties’ daughter and gave an order nisi that the petitioner is to bear the respondent’s costs of her application.  The petitioner now applies, by way of summons dated 2 June 2016, to vary the costs order nisi.  Her primary position, as appeared on the summons, is that it should be no order as to costs.  

2.  For convenience I shall continue to refer the petitioner as “P”, the respondent “R” and the child “YY”. I shall also adopt the same nomenclature and abbreviations used in the Judgment.  As I have already set out the background to P’s original application, the parties’ arguments and my reasoning in the Judgment, I am not going to repeat the same here.  This Ruling has to be read together with the Judgment.

The Legal Principles

3.  Initially, Ms Kwong, counsel for P, developed her arguments upon the principle that although costs is generally a matter of court’s discretion, where cases involving children, the starting point would be no order to be made as to costs unless there are exceptional circumstances to justify a departure.

4.  I agree this is the general position: for children’s cases normally there should be no order as to costs save when one party has been unreasonable or reprehensible in the conduct of the litigation, as parents should not be deterred from putting cases concerning children before the courts: see R v R (Costs and Child Case) [1997] 2 FLR 95, Re G (Costs:  Child Case) [1999] 2 FLR 250, H v H, (unreported, CACV 42/2002, 6 September, 2002).  Yet, the crucial question is whether the present application is one that the above general position should apply.  During the hearing I indicated that I take a different view.  My view is that the present application does not fall within the “children’s cases” category, if I may conveniently call it.  

5.  It is important to note that all the authorities referred by counsel are dealing with the future arrangement of children.  R v R (Costs and Child Case), supra and Re G (Costs:  Child Case), supra are both on the costs of residence order and locally, S v S (unreported, HCMP 5547/1999, 22 June 2000) and H v H, supra are on custody, care and control.  As I see it, in so far as the discussions relate to costs in these authorities, they should be understood against the subject matter before the court.  In the present case, the underlying application is one for maintenance under section 5 of the Matrimonial Proceedings and Property Ordinance (“MPPO”) (Cap 192) for the benefit of the parties’ child.  This is an application for ancillary relief, the subject matter of which is starkly different from those in the authorities. 

6.  It appears that the general position as contended by Ms Kwong is also not the English position.  Jackson’s Matrimonial Finance (9^th Ed) said the following as regards the costs of proceedings under Schedule 1 to the Children Act 1989:

“Costs

10.54   Costs are governed by FPR 2010, Pt 28 and PD 28A.  Although FPR 2010, 28.3 embodies the ‘no as to costs’ (sic) principle that applies to many financial applications in family proceedings, this rule does not apply to proceedings under Schedule 1 to the Children Act 1989.  Paragraph 4.2(b)(i) of PD 28A expressly confirms this.  Consequently, the court may at any time make such order as to costs as it thinks just and Pts 43 and 44 (except rules 44.3(2) and (3)) of the CPR apply.  It is suggested that the guidance in Judge v Judge and Baker v Rowe is likely to be of relevance, notwithstanding the fact that neither of these cases involved an application under Schedule 1 to the Children Act 1989 and both were decided at a time when the Family Proceedings Rules 1991 applied.  In effect, the Court of Appeal in both of these cases stated that the judge starts with a clean sheet and that there is no general rule as to how the discretion to award costs should be exercised.  However, the fact that one party has been unsuccessful and must therefore usually be regarded as responsible for the generation of the successful party’s costs is likely to be the decisive factor, subject to any countervailing considerations.”

7.  The present application is an interlocutory application.  The relevant rules can be found in Order 62, rule 3, Rules of the High Court (“RHC”), specifically Order 62, rule 3(2A) which deals with interlocutory proceedings.  As I have already discussed the relevant legal principles in another judgment (dated 5 February 2016) when I dealt with the specific discovery sought by R, for the sake of completeness, I only need to set out the discussions in §§ 23 to 27 of that Judgment,

“23. I now come to the issue of costs.

24. It is trite that the issue of costs is a matter of discretion for the court. The discretion is a wide one and of course must be exercised judicially. In ancillary relief cases, it has been said by the Court of Appeal that because of the special dynamics of family litigation, the discretion may be broader than in civil matters generally: Z v X & C, (unrep., CACV 166/2011, 8 March, 2013) at § 10.

25. As far as the general principles are concerned, the relevant rules can be found in Order 62, rule 3, RHC. Sub-paragraphs (1) to (2A) of the rule state as follows:

(1) Subject to the provisions of this Order, no party shall be entitled to recover any costs of or incidental to any proceedings from any other party to the proceedings except under an order of the Court.

(2) If the Court in the exercise of its discretion sees fit to make any order as to the costs of or incidental to any proceedings (other than interlocutory proceedings), the Court shall, subject to this Order, 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.

(2A) If the Court in the exercise of its discretion sees fit to make any order as to the costs of or incidental to any interlocutory proceedings, it may, subject to this Order, order the costs to follow the event or make such other order as it sees fit.

26. Sub-paragraph (2A) was introduced in the Civil Justice Reform in 2009. Thus, under the post CJR regime, the principle that “costs to follow the event” is no longer the prescribed usual order but is instead just an option as regards costs in interlocutory proceedings: Hong Kong Civil Procedure 2016 Vol 1, § 62/3/3B. The present position in this regard has been succinctly summarised by Hon To J in his judgment in Melvin Waxman v Li Fei Yu (unreported, HCA 1972/2012, 11 September 2013), which I gratefully adopt.

19. Summing up on the post-CJR position, I think the court has much wider discretion as to costs in interlocutory proceedings. Unlike other proceedings, the general rule of costs following the events do not apply. The court is entitled to take into account all the circumstances of the case, including those set out in rule 5, to make such order as it thinks fit. In the exercise of its discretion, the court may take the issue-based approach or may take into account merit of the parties’ case or the possible outcome of the action. The circumstances of interlocutory proceedings are so numerous that it is impossible to make any general rule. Costs to follow the event and costs be to the successful party’s costs in the cause are obvious options.

27. Further, in the exercise of its discretion, the court will have to take into account, where appropriate in the circumstances, the special matters set out in Order 62, rule 5, RHC,

(1) The Court in exercising its discretion as to costs shall, to such extent, if any, as may be appropriate in the circumstances, take into account-

(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.

(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.” (emphasis added)

8.  In addition to the above, I would respectfully refer to what Mr Justice To said in § 20 of Melvin Waxman v Li Fei Yu, supra, regarding the burden of proof:

“20. As for the onus of proof, I think it is the same post-CJR as it was pre-CJR. It must be the successful party’s burden to satisfy the court as to the type of costs order it is entitled. To begin with, the successful party is assisted by the general rule of costs to follow the event. By the mere fact of being successful, the successful party has discharged the evidential burden of showing it is entitled to costs. Thus, effectively, the evidential burden is on the unsuccessful party to adduce sufficient evidence or argument that some other or lesser order is appropriate, such as no order as to costs, costs be to the successful party’s costs in the cause or costs to the unsuccessful party. In the absence of evidence or convincing argument to the contrary, the successful party would also have discharged the legal burden. Costs to follow the event would be the appropriate order to make. If the unsuccessful party is able to discharge that evidential burden, it will be the legal burden of the successful party to show that he is entitled to the costs order which he seeks. In reality, having heard the interlocutory application, it would be quite obvious to the court what costs order would best serve the justice between the parties without relying on the burden of proof.” (emphasis added)

9.  When I made the order nisi, I was adopting an issue-based approach and I was conscious of the options available to me under Order 62, rule 3(2A), RHC.  The evidential burden is on P, the unsuccessful party, to adduce sufficient evidence or argument that some other or lesser order is appropriate.

Discussion

10.  P’s initial position that the proper costs order should be no order as to costs upon the basis that her application is one of “children’s cases” must fail in light of the applicable legal principles that I have discussed above.  By the time when it came to the hearing, Ms Kwong conceded that P should only bear 1/3 of R’s costs, the remaining 2/3 should be no order as to costs.

11.  I have not been updated on YY’s present situation, specifically on her education in the UK.  In the absence of any up-date, it is safe to assume that she has not resumed her studies.  The implication is that YY, now 23 years old, does not fall within the ambit which allows the court to grant maintenance in her favour: section 10(3), the MPPO; and § 22 of the Judgment.

12.  Ms Kwong put forward the following arguments.

(1) P has a Reasonable Case

13.  Ms Kwong submits that P has a reasonable case which goes to the best interest and welfare of YY. Every step was taken to ensure it was YY who received any benefit.  However, R was not cooperative when he was first asked to contribute YY’s living expenses in Hong Kong, resulting in P having to take out the present application.

14.  It has been submitted on P’s behalf that she had a genuine and legitimate expectation that R would continue to support their daughter because YY relied entirely upon her father before she returned to Hong Kong.  Had P not persisted with the application, R would in all likelihood not have made any financial contribution or undertaking for YY.  Ms Kwong refers me to the fact that R did not give any constructive reply despite upon repeated written requests from P’s solicitors.  This was the very reason for P to have taken out her application in mid February 2016.  That said, Ms Kwong concedes that upon her return to Hong Kong YY would still have some of the monies that were remitted to her.  She also reminds me that R also resisted at first to pay any amount in the call-over hearing of 1 March 2016 and it was only by the court’s order that R paid $5,000 per month as YY’s interim interim maintenance.  R’s subsequent proposal on 21 March 2016 to give YY a monthly subsidy of $3,000 for 3 months only was also entirely insufficient.  It was only until one week before the substantive hearing that R counter-proposed to give a monthly subsidy of $4,000 for another 6 months. Hence, it was P’s persistence that forced R to give the undertaking, thus her application might not be that wholly unsuccessful.  She got something anyway.

15.  Ms Kwong therefore contends that the application is not one that should never have been made or it was hopeless from the outset.  P did not go beyond the ambit of what was reasonable to pursue the application. 

16.  I agree P managed to convince the court that YY fell within the ambit of section 10(3), the MPPO and did succeed in getting something – though something that fell far short of what she had asked for.  It follows that her application was not one unreasonably taken out.  This is one of the factors that I need to take into consideration in the exercise of the discretion: Order 62, rule 5(1)(f), RHC.

(2) R was not Cooperative

17.  Ms Kwong complains that R was not cooperative throughout and that his counter-proposals came too late; otherwise the parties would have the chance to settle the matter earlier. 

18.  With respect, I disagree.  It has to be borne in mind that P’s final open offer before the hearing was $15,000 and that R’s last proposal was flatly rejected by her. Given the huge disparity between the parties’ respective positions, I doubt very much whether they would have any chance of settling the matter earlier.  I agree with Ms Chong that there was no way that P’s case, namely, asking for an interim maintenance initially at $22,050, subsequently reduced to $18,000 and further down to $15,000, had any reasonable prospect of success.  

19.  I said in the Judgment that I erred in favour of YY that it was her intention to resume her studies in London and it was open to her to do so.  I also accepted that if YY had continued her studies in London, R would still have continued to support her.  I therefore found that the requirement under section 10(3)(a) of the MPPO that she would be receiving instruction at an educational establishment had been satisfied: § 27 of the Judgment. At the same time, I took the view that it was perfectly realistic for her to seek employment: § 39 of the Judgment.  In the call-over hearing on 21 March 2016, R, through his counsel, informed the court that he would be willing to give YY a financial subsidy of $3,000 per month until she found a job and be financially independent.  In his 6^th Affirmation dated 21 March 2016, he reiterated his offer; and depending on the progress of her job hunting, he was willing to review and renew the financial subsidy.  In my view, these proposals, with a view to assist YY to achieve financial independence, cannot be said to be unreasonable.  It was also with this in mind that I agreed with R’s proposal that $4,000 per month for another 6 months should be sufficient in the interim before she returned to the UK:  § 40 of the Judgment.  It is clear to me that P should at least have accepted the open offer that was conveyed to her on 8 April 2016.  This is a relevant factor under sub-paragraph (g) of Order 62, rule 5(1), RHC.  I am also entitled to take P’s failure to response and to engage in serious negotiations into consideration: sub-paragraph (e) of Order 62, rule 5(1), RHC.

(3) P has no improper conduct

20.  Ms Kwong also submits that there was not any improper conduct on P’s part.   It may well be the case but equally there was not any improper conduct on the part of R either.

(4) Other factors

21.  Ms Kwong urges me to consider P’s financial situation.  She is entirely dependent on the interim maintenance of $18,500 per month to meet her daily needs.  However, as I said in the Judgment I have reasons to believe that P did not give a full and frank disclosure of her finance.  I also found she grossly inflated the figures: §§ 32 & 33 of the Judgment. 

22.  Finally, I need to mention that Ms Chong argues that P was not acting out of her genuine concern for the welfare of YY but out of her selfish desire to drag the daughter into this litigation so as to penalize R.  I must say with the evidence before me and without hearing the oral evidence of the parties, at the present moment I am not able to come to this conclusion.

The Appropriate Costs Order

23.  The ultimate question is what the proper costs order should be.  I agree with Ms Kwong that it was not unreasonable for P to have taken out the application but unfortunately, she exaggerated YY’s expenditure and seemingly failed to give a full and frank disclosure of her finance.  Most importantly, she failed to take a realistic view of the matter and failed to engage in any serious negotiations with R. She also failed to accept R’s offer of 8 April 2016.  The offer was not a complicated one entailing a review of the minutiae of evidence.  By the time of the hearing on 12 April 2016, P should have had sufficient time to consider the same.  In failing to accept the offer, P would have to face the adverse consequences in costs.  As said above, I consider the two offers that R previously made were also worthy of consideration.  The combination of all these factors leads to me to the conclusion that a fair and proper costs order would be for P to pay R’s costs as from 12 April 2016.  As for the costs prior to 12 April, 2016, the proper costs order should be no order as to costs.

Orders

24.  For the reasons aforesaid, I am prepared to vary the costs order nisi as follows:

1.   The petitioner do pay the respondent’s costs of this application as from 12 April 2016, with counsel certificate; and

2.   There be no order as to costs, including costs reserved, of this application prior to 12 April 2016.

25.  As for the costs on the variation of the order nisi, for the reason that P is successful in her application, though not to the extent that she asked for, I consider it is fair that P is to have the costs, with counsel certificate.  All the costs are to be taxed on party and party basis, if not agreed.