CCYL v. CCSR

FCMC 15718/2018

[2020] HKFC 154

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES

NUMBER 15718 OF 2018

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R U L I N G

( Variation of Costs Order Nisi )

( By Paper Disposal )

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Introduction

1.  This Ruling is a sequel of my earlier Judgment handed down on 10 October 2019 (“the Judgment”) by which I dismissed the petitioner wife’s application for maintenance pending suit (“MPS”) for a monthly sum of $315,000 (inclusive of legal costs provision) and I accepted the husband’s offer of $35,000 according to which I made an interim maintenance order for the benefit of the parties’ daughter. 

2.  When it came to costs, I took the view that since the petitioner had failed in her application, she should bear the costs of it.  Accordingly, I made an order nisi that the petitioner is to bear the respondent’s costs of her application. 

3.  The petitioner was not happy with the costs order nisi.  She applied, by way of a summons on 24 October 2019, for its variation.  Both parties have since agreed to have the variation matter to be dealt with by way of paper disposal.

4.  For convenience I shall continue to refer to the petitioner as “the wife” and the respondent as “the husband”.  As I have already set out the background to the wife’s original application, the parties’ arguments and my reasoning in the Judgment, I am not going to repeat the same here. 

5.  At this early juncture, it should be pointed out that in her summons for variation, the wife sought to have the costs order nisi to be varied to one of “no order as to costs”.  However, for reasons only known to her and her legal team, her submissions lodged in support was one for “the husband to pay her costs”. There was no explanation for the discrepancy nor was there any application for the amendment of the summons.  It was upon the enquiry by the court that the discrepancy was noticed as a result of which, with the consent of the husband (who was then legally represented), the wife was granted leave on 27 March 2020 to amend her summons in the way that the costs order is to be varied to either “no order as to costs” or “the husband is to pay the costs”. 

The Legal Principles

6.  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. 

7.  As far as the general principles are concerned, the relevant rules can be found in Order 62, rule 3 of the Rules of the High Court.  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.             (emphasis added)

8.  The application for MPS is an interlocutory application so sub-paragraph (2A) is applicable. 

9.  Sub-paragraph (2A) was introduced in the Civil Justice Reform of 2009: Hong Kong Civil Procedure (2020) Vol 1, §62/3/3B.  The present position in this regard has been succinctly summarised by Hon To J 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.

The Wife’s Grounds for Her Application for Maintenance Pending Suit

10.  The wife’s grounds in support of her application are briefly recapped below.

11.  First, the wife submitted that the husband’s self-petition for bankruptcy was a cynical move designed to attempt to defeat her financial claims: see [13].  This ground was rejected based mainly on her own evidence that the husband was in deep financial trouble at the relevant time and accordingly, I was not satisfied that the husband’s self-petition for bankruptcy was an attempt to defeat the wife’s claim: see [31] to [40].

12.  Secondly, the wife submitted that the husband failed to give a full and frank disclosure of his financial situation. On that basis, she invited the court to make ‘robust assumptions’ against the husband about his ability to pay. 

13.  On this ground, whilst I accepted that the husband had failed in his duty, I declined to make the ‘robust assumptions” as urged upon by the wife.  I considered that even with all the non-disclosure in mind, the wife’s own evidence that lent support to the husband’s assertion regarding the crumpling of his business must carry weight in the balancing exercise: see [55] to [62].

14.  Thirdly, I found there was not a shred of evidence that the husband’s family is willing to support the wife and the daughter at whatever level demanded by her: see [64].

15.  Finally, in addition to the above, insofar as the quantum was concerned, I disbelieved the figure proposed by the wife; I found it both extravagant and unnecessary.  I remarked that “The wife should understand that this litigation tactic of inflating items would meet with the disapproval of the court”: see [67].

The Wife’s Grounds for Variation

16.  It is Mr Chan’s submissions that although the wife’s application was dismissed, the fact of the matter is that without taking out the application the husband would not have offered to pay any MPS at all.  He emphasizes that it was only on the date of the substantive hearing of 12 August 2019 that the husband offered to pay $35,000 per month which the court eventually accepted.  It is common ground that during the course of the marriage the family enjoyed a relatively high standard of living and the husband was the main and predominant breadwinner.  The wife had no choice and was compelled to apply for MPS.

Discussion

17.  I am the docket judge in this case and have been overseeing the proceeding ever since its inception.

18.  The husband’s liability was not at issue but quantum was.

19.  The 1^st First Appointment hearing was fixed to be heard on Monday, 25 February 2019, at 9:30 am.  On 21 February 2019 (Thursday) (ie 4 days (or 2 working days) before the hearing) the wife’s solicitors wrote to the court seeking leave for her intended application for MPS to be heard in the same hearing.  In the letter the court was informed that the supporting affidavit “is being finalized and will be sworn tomorrow”. In other words, the supporting affidavit was not in sight.  The application was refused by the court with the following reason given:

“This is an 11^th hour application. The petitioner has also failed to lodge the 1^st Appointment Bundle”.

20.  The wife’s solicitors renewed the request the next day, ie on 22 February 2019 (Friday), but was refused by the court on the same date.

21.  I gather it was only on Monday, 25 February 2019 (ie the same date as the 1st First Appointment Hearing), that the summons for MPS was taken out with a return date of 12 April 2019.  Therefore, the hearing of 25 February 2019 was not meant to deal with the MPS issue and in all likelihood at the time of the hearing the summons had not been taken out yet and almost certainly the husband had not been served with the same.  Notwithstanding all these, since the daughter’s welfare was involved, I allowed the issue of interim maintenance to be raised.  The husband’s immediate response was, with the support of his mother, he was willing to pay a monthly sum of $20,000. The court accordingly made an interim order in terms of the husband’s offer. 

22.  It transpires from the husband’s submissions for the purpose of the present application for variation that before the hearing of 25 February 2019 and the wife’s taking out of her summons for MPS, the father had already agreed to pay maintenance for the benefit of his daughter.  The “Without Prejudice Save as to Costs” letters issued by the husband’s solicitors and annexed to Mr Cheung’s submissions showed that in fact similar offers had been made by the husband on 11 February 2019 and 20 February 2019.  In the letter dated 11 February 2019, he said his family was able to pay a monthly maintenance of $20,000 for the daughter plus all the expenses of education.  And in the letter dated 20 February 2019, the offer of $20,000 was repeated and it was said that the husband’s mother was agreeable to provide the wife with some financial subsidy in a discretionary amount for her accommodation. 

23.  I have not been referred to the response, if any, given by the wife in respect of the offers prior to the taking out of the application for MPS.  It is also not entirely clear as to how close, in real terms, the husband’s offers were to the $35,000 awarded by the court.  All that can be seen from the wife’s supporting affidavit is that the daughter’s school fees and the costs of extra-curricular courses were said to be $6,015 and $5,410 respectively, or a total of $11,425.  Be that as it may, on the basis of the above account of facts, I cannot agree with the wife’s submission that without taking out the application for MPS, the husband would not have offered to pay any MPS at all.

24.  It is also argued that it was only at the substantive hearing of 12 August 2019 that the husband offered to increase the interim maintenance to $35,000.  I accept that was the case but at no point the wife ever indicated that she would have accepted it if it had been made known to her before the hearing.  In fact, the offer was rejected outright. 

25.  It has also to be mentioned that during the hearing of 25 February 2019, when being enquired by the court as to what was the figure the wife had in mind, the answer from her legal representative was merely a sum of $50,000 per month. This was staggeringly much lower than the figure she sought in her application.  As I remarked in [67] of the Judgment, the litigation tactic of inflating items would meet with the disapproval of the court.

26.  The “event” of the application for MPS was clear: it was whether or not the husband should pay MPS in favour of the wife at the rate of $200,000 and legal costs provision of $115,000. The wife fell flat in her application.  The reason I gave in the Judgment for the wife to bear the cost was the wife had failed in her application: see [70].  It is clear that “the costs to follow the event” was adopted.  This is an option that the court is entitled to and did adopt.

27.  As I have demonstrated above, the wife failed virtually on all counts with the exception of the non-disclosure on the part of the husband.  I believe the result should have been the same even if an issue based approach is adopted.  When I made the order nisi, I was fully aware of the comments that I had made regarding the husband’s disclosure.  In this regard, it is apt to be reminded of what Hartmann J (as he then was) said in F v F (No 2) [2003] 3 HKLRD 976 at [22] that “the long-established principle that costs are determined not by dividing litigation into quantifiable subjects and figures, like a profit and loss account, but rather by way of overall impression”. 

28.  I am conscious that the wife, as a teacher, earns a modest income.  Yet, at the same time, it should not be forgotten that the parties have a joint interest in the Robinson Road Property (as referred to in [5] of the Judgment) with a net equity of around $15 million.  In light of the disapproval of the court on the wife’s litigation tactic of inflating items, in my view, the fact that the wife is earning a modest income should carry little weight in the exercise of the discretion.

Orders

29.  For the above reasons, the wife’s application for variation of the costs order nisi ought to be dismissed and I so order.

30.  The wife should also bear the costs of this application for variation, including the costs in respect of the amendment of the summons.  I make an order that the costs of the application for variation and the costs of and occasioned by the amendment shall be borne by the wife with counsel certificate.