LPYY v. FWHF

FCMP 89/2016

[2021] HKFC 227

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MISCELLANEOUS PROCEEDINGS NO 89 OF 2016

________________________

________________________

________________________

________________________

J U D G M E N T
(Varying costs order)

________________________

1.  This is the applicant mother (“Mother”)’s application for varying the costs order nisi, following the judgment of the court dated 8 May 2020 (“Judgment”), from the respondent father (“Father”)’s application for variation of maintenance (“Application”) payable for the child of the parties (“Child”).

2.  After a three-day trial, I handed down the Judgment in relation to the Father’s Application. I ordered that the periodical payment for the Child be varied downward from HK$32,500 to HK$29,500 per month, commencing on 1 December 2017, the date the Father took out the Application. I also ordered that there be no order as to costs for the Application, including all costs reserved, on a nisi basis (“Costs Order Nisi”).

3.  The Mother applied by way of Summons varying the costs order nisi on 21 May 2020 and provided written submissions dated 18 Mary 2020. She asked for variation of the Costs Order Nisi to the extent that the Father should pay her all the costs for the application. The Father opposed to her application.

4.  At the call over hearing on 2 June 2020, the Father requested time to file written submissions. Directions were given for the parties to file written submissions and the matter would be dealt with by way of paper disposal. The time the Father requested to file written submissions was quite substantial, and therefore the Court gave directions that unless the Father lodges with the Court submissions in opposition to the Mother’s application to vary the Costs Order Nisi by 4pm on 1 September 2020, the Father be deemed as not opposing to the Mother’s application.

5.  The Father lodged with the Court the written submissions on time. By the letter from Mr. Tam, Counsel acting for the Mother, dated 10 September 2020, he informed the Court that the Father only served to the solicitors for the Mother on 3 September 2020 by e mail, and therefore, he has failed to comply with the unless order and is deemed as not opposing to the Mother’s application to vary the Costs Order Nisi. Mr. Tam also informed the Court that the Applicant has no submissions in reply.

6.  I am of the view that as the Father lodged with the court his written submissions on time, relief from sanction of the unless order should be given in the circumstances. At the end of the day, the issue of costs is in the discretion of the Court and I have to consider all the relevant circumstances before deciding whether or not to allow the Mother’s application to vary the Costs Order Nisi. Having informed the Mother that the Court will take into account the Father’s submissions, by the letter from the Mother’s solicitors dated 4 November 2020, they confirmed that they have no reply submissions.

The legal principles

7.  The issue of costs is in the court’s discretion. Pursuant to Order 62, rule 5 of the Rules of the High Court (“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;

(e)  the conduct of all the parties;

(f)  whether a party has succeeded on party 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.”

8.  Mr. Tam has drawn my attention to the case KJ v KMLM and KCK (Variation; Costs) [2014] HKFLR 227, and had summarized the legal principles as follows :-

(a)  Costs are a matter of discretion, in the exercise of which the Court is required to take into account special matters under O.62, r. 5 of the RHC.

(b)  The principle that costs follow the event is a convenient starting point from which a court can readily depart. It 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.

(c)  Where the successful party raises issues or make allegations, on which he fails, has caused a significant increase in the length or costs of the proceedings, he may be deprived of the whole or party of his costs. Since CJR, the court is more ready to take an issue-based approach.

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

9.  I agree with the legal principles as submitted.

Discussion

10.  In paragraph 159 of the Judgment, I stated that :-

“Generally, costs should follow the event. In this case, the Father is successful in varying downwards the maintenance. However, the Father is getting far from what he asked for. As the award of cost is in the discretion of the Court and in view of the result of the judgment, and the conduct and background of the parties, I am of the view that it is fair to order no order as to costs, including all costs reserved. This is a costs order nisi, which shall be made absolute within 14 days.”

11.  Counsel for the Mother explained in the written submissions why the Costs Order Nisi should be varied, which are summarised into 6 grounds :-

(a)  The Mother is substantially the winner, not the Father

(b)  Adverse findings made in rejecting the Father’s principal basis

(c)  Father’s allegations against the Mother is untenable

(d)  Lack of genuine attempt from the Father to settle

(e)  Father’s rejection of the Open Proposal of the Mother was unreasonable

(f)  Serious unfairness to the Mother and the Child under the Costs Order Nisi

12.  The Father opposed to the Application and explained the reasons in his written submissions, with the following main reasons :-

(a)  There was no clear winner in the original application.

(b)  The Mother failed on a number of issues

(c)  There was zero attempt by the Mother to resolve the matter without trial

(d)  Varying the Costs Order Nisi and award any costs to the Mother is unjust to the Father.

13.  I have carefully considered all the submissions by the parties. I have also considered the background of this case, which I refer to paragraphs 3 to 41 of the Judgment.

14.  It is trite to stress that the issue of costs is in the Court’s discretion, with the consideration of relevant circumstances of the case. Generally, costs should follow the event, but there is no hard and fast rule.

15.  As stated in paragraph 159 of the Judgement, I am of the view that the Father is successful in varying downwards the maintenance, but he is getting far from what he asked for. Mr. Tam submitted that the Mother is substantially the winner, not the Father, as she was able to resist the Father’s Application to a substantial extent, whether on an outcome- or issue-based perspective.

16.  I have reservation to Mr. Tam’s submissions. While it is true to say that the amount ruled in the Judgment is far from what the Father asked for (which I had acknowledged in paragraph 159 of the Judgment), I have also considered the issues of the case and the allegations raised by the parties, as well as the manner the application is pursued or defended.

17.  I have identified the issues in dispute in paragraph 47 of the Judgment, which include the following :-

(a)  Whether the termination of employment of the Father is a material change of circumstances

(b)  The financial resources and earning capacity of the Father

(c)  The financial resources and earning capacity of the Mother

(d)  Reasonable expenses of the Child

18.  In relation to the financial resources and earning capacity of the Father, I have further identified sub-issues to be considered in paragraph 62 of the Judgment, as follows :-

(i)  Whether the Property should be considered as the Father’s financial resources.

(ii)  The liability of the Father

(iii)  Whether the financial difficulties alleged by the Father is self-induced

(iv)  The earning capacity of the Father

19.  Regarding whether the financial difficulties alleged by the Father is self-induced, I have summarised the Mother’s stance and allegation in paragraph 80 of the Judgment, which include mainly :-

(1)  The Father had dissipated assets by (a) spending money in purchasing and renovating the Property; (b) transferring his vehicle to his younger brother; and (c) unjustifiably reducing balance or withdrawing money from his account as early as in 2016, and the total amount inexplicable amounts to $3,491,152, which Mr. Tam had provided a detailed breakdown table (“Table B”), which was produced at the trial and marked as exhibit “A2”) (refer to paragraphs 81 to 91 of the Judgment).

(2)  The Father had lavish spending.

(3)  The inability of the Father to secure another job or get any income at all since September 2017 is unreasonable.

20.  I have to emphasise that the Court has to look at all the evidence as a whole and it is not practicable to simply compare the number of issues accepted by the Court, as some of the issues are intertwined. I have to emphasise that this is not a simple calculation exercise counting the number of points accepted. The points accepted by the Court may be one of the considerations, but at the end of the day, the evidence has to be looked at as a whole to see who is substantially the winner.

21.  An important event in this case, which triggered the application and which is not disputed, is that the Father’s employment at a bank, with a monthly salary of HK$177,219, was terminated by his employer in 2017. It is the Mother’s stance that the termination of employment is not a material change of circumstances. Examination had been conducted in this respect in relation to, for example, whether the Father accepted that there is a “high risk of redundancy” and it is not unexpected to have lost his job.

22.  It was upon the Court’s request for clarification that Mr. Tam clarified during trial that even if the Court is to rule that it is a material change of circumstances, it is the Mother’s case that the Father still has sufficient financial resources and high earning capacity, and the maintenance for the Child should not be varied downwards (paragraphs 48 to 50 of the Judgment).

23.  For this issue, I am of the view that the termination of employment of the Father by his employer is a material change of circumstances, but the more important question is, whether the Father still has the ability to pay for the same amount of maintenance for the Child, or whether there should be a reduction in amount, as I explained in paragraphs 51 and 52 of the Judgment.

24.  In my analysis in the Judgment, I have considered the evidence as a whole, especially the financial resources and earning capacity of the Husband. To summarise, I accepted that the Property should be considered as the Father’s financial resources, I ruled that the Father’s liability could be regarded as soft loans or financial assistance from his parents, I ruled that the Father’s earning capacity is much higher than that of the Mother (which is not disputed) and he still has high earning capacity, it is hard to believe that the Father had used his best effort to look for a job or to get some income for the long period of time he had been out of work and I have expressed my concern about the spending style of the Father and where exactly had some money been spent on, especially in view of the period of time after his employment had been terminated.

25.  However, at the same time, I am not convinced that there is dissipation of assets of the Father, as submitted by Mr. Tam, by (a) spending money in purchasing and renovating the Property; (b) transferring a car (with the purchase price of only $50,000 and estimated current value of about $2,000) to the Father’s younger brother; and (c) the large sums of money as shown in Table B of exhibit “A2”, in the total sum of over $3 million.

26.  I had ruled that the Father had not fully and frankly disclosed the full picture of his financial situation and I have drawn adverse inference in this regard, which resulted in the ruling that the Father is able to pay for the reasonable expenses of the Child as I had ruled (paragraphs 94 to 107 and 156 of the Judgment).

27.  In relation to the financial circumstances of the Mother, it is true to say that the Father’s allegations against the Mother’s finance is untenable and therefore there was no adverse inference to be drawn against the Mother. However, at the same time, I did notice that when the Mother is in financial needs, she could get financial assistance from her family and friends. I also observed that when the Child grows older, the Mother could re-enter the labour force and resume working either full time or part time (paragraphs 121 to 125 of the Judgment).

28.  In relation to the reasonable expenses of the Child, I did not accept the submissions of the Mother in taking a broad brush approach to accept that $32,500 is a reasonable sum. I explained that as this is not a big money case, looking at the individual items of the Child is more appropriate and necessary (paragraphs 127 to 130 of the Judgment).

29.  After consideration of the evidence as a whole, I have analysed and ruled the various aspects of expenses for the Child, and I have ruled that the total reasonable expenses are $29,500 per month.

30.  Having explained in paragraphs 15 to 29 above, I have reservation that the Mother is substantially the winner as alleged, whether on an outcome- or issue-based perspective.

31.  In any event, I will further consider other submissions of the parties, including the conduct of the parties, and also how the parties raise, pursue or contest the allegations and issues of the case.

32.  Both parties had alleged in their submissions that the other side had wasted the court time in making allegations and points not accepted by the Court. The issues accepted and rejected by the Court are summarised and analysed (see paragraph 15 to 29 above).

33.  For the reasons aforesaid, I am not convinced that at least two-third of the trial costs could be save, as suggested by the Wife’s Counsel. I am not of the view that the Father had acted unreasonably in pursuing his application and in contesting the allegations against him.

34.  In relation to whether there were genuine attempts of the parties to settle and whether it was unreasonable for the Father to have rejected the Open Offer of the Mother, I have considered all the evidence as a whole. The Open Offers by the Father and the Mother are stated in paragraphs 33 and 41 of the Judgment. While it is correct to say that the Open Offer of the Mother is nearer to the ruling by the Court after trial, I have also considered the parties’ conduct throughout.

35.  While the Father’s proposal had been unacceptable by the Mother, it cannot be denied that the Mother had not made counter-offer prior to the Open Offer. The Father had offered HK$18,000 as early as in 2017 and invited the Mother to consider and counter-offer, which the Mother objected as it was far from what she requested. The Mother had all along insisted in asking for the full amount outstanding. It was about 7 days before trial, in the Opening Submissions and Open Offer of the Mother’s Counsel, that the Open Offer, as stated in para 41 of the Judgment, had been proposed.

36.  It is noted in the Mother’s Open Offer that she suggested some allowance in the reduction of the amount of maintenance for 1 year, and after 1 year, she insisted resuming to the same amount as previously ordered.

37.  Further, I have not lost sight of the fact that money had been spent by the Mother in engaging solicitors to defend the application. With the payment of legal fees, the Mother will have less money to spend for herself or on the Child. The financial resources and earning capacity of the Mother was considered in paragraphs 113 to 126 of the Judgment. I notice that when the Mother is in financial needs, she could get financial assistance from her family and friends. Without providing further details or supporting documents for the loans of the Mother, I accept that they could be soft loans from her family and friends when she asks for help.

38.  Finally, I have considered the background and circumstances of the parties, and I have also considered the underlying principles as stated in O.1A, r. 1 of the RHC. I am of the view that it is fair to order no order as to costs between the parties. With the reasons aforesaid, I dismiss the Mother’s Summons for variation of the Costs Order Nisi.

Costs

39.  Generally, costs should follow the event. In view of the background of this case, I am of the view that it is fair to order no order as to costs, including all costs reserved, for this application. This is a costs order nisi, which shall be made absolute within 14 days.