MCYP v. CWYW

FCMC 11432/2018

[2022] HKFC 225

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES NO. 11432 OF 2018

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DECISION

( Leave to Appeal )

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Introduction

1.  This is an application by the Petitioner Husband (“H”) to apply for leave to appeal against my decision (“the Decision”) made on 12 August 2022 on the application by the Respondent Wife (“W”) for litigation funding.

2.  H and W are both in their fifties and were married in 1995. H filed a petition for divorce on 5 September 2018, a Decree Nisi was granted on 23 April 2019. The marriage lasted 23 years. H and W have three children during marriage (“the Children”).

3.  H was born into a wealthy family, his father passed away in 1980s and substantial wealth passed on to him and his siblings. H admittedly had asset worth over HK$370 million according to his Form E filed on 14 May 2019.

4.  From H’s Form E, he holds shareholdings in 18 private companies including [KC] & Co Ltd (“KCC”) and 1 publicly listed company.

5.  W filed on 20 August 2021 a summons for litigation funding for H to pay her a monthly sum of HK$420,000 as litigation costs allowance to cover her legal costs until the end of the FDR or further order.

3.  In my Decision, I ordered the Husband to pay HK$350,000 per month to the Wife from 20 August 2021 until the end of the FDR hearing or further order.

4.  By summons filed on 25 August 2022, the Husband applies for leave to appeal against the Decision.

Grounds of Appeal

5.  There are 6 grounds of appeal in H’s draft Notice of Appeal.

6.  Ground 1 is that the Decision wrongly found that H had financial resources to such extent that he could afford and should be ordered to pay HK$350,000 per month for legal costs provision.

7.  Ground 2 is that the evidence did not suggest that H had income and financial resources of substantially more than HK$890,000 per month.

8.  Ground 3 is that the Decision treated the Husband’s financial resources from KCC as being limitless or in effect infinite.

9.  Ground 4 is that the Decision should have estimated the amount required to take the case to FDR.

10.  Ground 5 is the Decision should not have linked monthly legal costs provision to the unknown date of FDR even if the amount of HK$5.89 million is a correct estimate.

11.  Ground 6 is the quantum of HK$5.89 million as the additional costs to costs already incurred is too high.

12.  In essence, Grounds 1, 2 and 3 are challenges to my findings of H’s financial resources. Grounds 4, 5 and 6 are challenges to my findings on the quantum and period of legal costs provision.

The Husband’s Financial Resources

13.  In the Decision, I found that H had financial assistance from KCC.

14.  Mr. Chan for H submitted that H had no sufficient resources after the divorce proceedings to sustain the family’s standard of living. H previously had only limited and manageable debts, there had been a drastic increase in his indebtedness leading to liquidity crisis. The Decision should not have treated H’s financial resources from KCC as limitless.

15.  Mr. Chan relied on HSYC v CLTK (FCMC 11141/2013) in which District Judge Melloy stated in paragraph 17 that “Although I would accept that in the final analysis KEWS v NCHC may be of some relevance on final ancillary relief, it is hard to apply these same principles to a maintenance pending suit/interim maintenance application, given that there can be no findings of fact made in relation to the financial resources of the husband and the financial relationship between him, his parents and the family business”.

16.  Mr. Chan argued that the findings in the Decision were not supported that all the express concerns from KCC about H’s ongoing financial liabilities was just a gesture, KCC being a family company of H, was closely connected to the extent that it would keep financing H despite all the express concerns about H’s inability to pay and even assuming KCC gave H were loans, KCC would still keep providing such loans.

17.  Mr. Chan argued that was no evidential basis to find that the Husband had total monthly amounts available to him of substantially more than HK$890,000 so that he could afford to pay for the family expenses and W’s legal costs.

18.  According to Rule 2(2)(c) of the Matrimonial Causes Rules (Cap. 179A), an order for maintenance pending suit is an ancillary relief. The decision of the Court of Final Appeal in KEWS v NCHC (2013) 16 HKCCFA 1 should apply to applications for maintenance pending suit and legal costs provision.

19.  There have been cases where third party assistance in dispute have been considered in applications for maintenance pending suit or legal costs provision like FCMC 747/2018, FCMC 7870A/2014, FCMC 7875/2020, FCMC 13891/2017 and HCMC 3/2018.

20.  I do not think what District Judge Melloy stated in HSYC v CLTK should be interpreted as a rule that third party assistance in dispute could never be taken into account of in applications for maintenance pending suit or legal costs provision. In my view, District Judge Melloy merely highlighted the difficulties in interlocutory applications to make a ruling on third party assistance in cases where no finding of facts could be properly made. In that case, there was no need for District Judge Melloy to make a ruling on the question of third party assistance, she was able to find that the husband had financial resources beyond his disclosure by adverse inference.

21.  In the present case, there can be no dispute that KCC is a family company closely connected to H. H holds 25% of shares in KCC and any transfer of KCC’s shares is subject to restrictions and non-transferable to non-family members and has to be approved by the board of directors.

22.  There is no dispute that KCC’s monthly expenses have been exceeding his monthly income. It was admitted by H that KCC had been giving financial assistance to him.

23.  According to H’s Answer to the 1^st Questionnaire, the financial assistance from KCC was said to be fringe benefits but not as loan. It was only afterwards that H changed the label to refer to the financial assistance from KCC as loans.

24.  As discussed in the Decision, despite all the alleged express concerns from KCC of H’s financial status, KCC nevertheless kept giving H financing assistance whether in the form of loans or otherwise. I was satisfied that KCC would keep providing financial assistance even assuming that what KCC gave H were loans.

25.  This is a case where there was enough evidence for me to make a finding on third party assistance even at the interlocutory stage.

26.  Apart from financial assistance from KCC, H admitted to have HK$15 million of securities subject to a pledge for an overdraft facility with the bank, even considering H owed the bank HK$5.65 million in the overdraft facility, H would still be accessible to over HK$9.35 million worth of liquid asset from overdraft facility.

27.  Adding the above HK$9.35 million worth of overdraft facility to H’s HK$5 million worth of securities, H had HK$14.35 million liquid assets at his disposal, that alone should be enough to cover W’s claim for litigation funding without the need to resort to KCC’s financial assistance.

28.  It is trite that financial assistance and ability to borrow could be considered as financial resources for maintenance pending suit and legal costs provision. (Jackson’s Matrimonial Finance (9^th edn.) at paragraph 3.92 and DX v LN (FCMC 7870/2014) at paras. 73-75).

29.  It is quite unrealistic for H who admittedly has assets worth of over HK$370 million to say that he does not have the ability to borrow whether from KCC or other sources.

30.  I find H’s challenges of my findings on his financial resources in Grounds 1, 2 and 3 to be unmeritorious.

Quantum and Period of Legal Costs Provision

31.  Mr. Chan submitted that legal costs should be based upon one properly estimated lump sum catered for up to FDR, the order should be payment of the lump sum in one go or by instalments and once the estimated amount is reached, the monthly payments would cease and would not continue.

32.  Mr. Chan argued that H’s estimates to be more reasonable when the parties had already spent HK$3.89 million by W and HK$3.6 million by H and it should take each party about HK$800,000 only to take the case to the FDR hearing.

33.  This is a claim of ancillary relief involving H’s assets worth at least HK$307 million. Considering the costs already incurred and costs expected to be incurred in future applications, Mr. Chan’s estimate of further costs to be incurred is over optimistic or simply unrealistic.

34.  I have already considered and accepted the estimated budget and breakdown on costs put forward by W in the Decision, what H now submitted on the question of quantum is just an attempt to re-argue the submissions made in W’s application.

35.  Mr. Chan submitted that it turned out that W was ordered to pay indemnity costs to the Third Party and there was no order as to costs between W and H in W’s specific discovery application referred to in W’s estimated budget on costs.

36.  This point could not assist H because W had applied and been granted leave to appeal against my decision in her said specific discovery application. Naturally, more costs could be expected to be incurred by W.

37.  Mr. Chan submitted that there would be little incentive for W now to have the FDR hearing promptly as the farther the FDR hearing is reached the more she would be paid.

38.  Mr. Chan was unable to refer to any evidence that W had caused delay. The little incentive allegation is no more than pure speculation.

39.  W had made it clear that she considered the assets of H to be worth over 3 times of his admitted assets of HK$370 million. It would be hard to imagine that W would want to delay the conclusion of the ancillary relief that could entitle her to a very substantial amount worth of award in return for a few more months of litigation funding.

40.  On the other hand, Ms. Yip, SC and Ms. Yu for W made a good point which I accept that every dollar paid by H for W’s litigation funding is going to W’s solicitors directly. Every dollar would be accounted for at the end of the ancillary relief. Even if there is overpayment, W’s solicitors would have to book that in the schedule of assets and liabilities as W’s costs on account.

41.  I adopted a broad brush approach in the Decision in making the order for litigation funding, adjustments for overpayment would be made at the end of the ancillary relief.

42.  I fail to see what merits H has in his challenges to the Decision on quantum and period of the order in Grounds 4, 5 and 6.

Legal Principles on Leave to Appeal

43.  According to section 63A(2) of the District Court Ordinance (Cap. 336), leave should not be given unless the court is satisfied that the appeal has a reasonable prospect of success or there is some other reason in the interests of justice why the appeal should be heard.

44.  A reasonable prospect of success means an appeal with prospects that are more than “fanciful” but which do not need to be shown to be “probable”. (KNM v HTF, HCMP 288/2011)

45.  Hon G Lam JA said in the Court of Appeal case in S v C [2021] HKCCA 1372, CAMP 243/2021 in paragraphs 6 and 7:

“6. ….The proper approach of the appellate court in an appeal from an order for MPS is well established by the authorities, as summarised by Judge A Tse in ALDL v FTFC [2020] HKFC 180 as follows:

“5. The granting of maintenance pending suit is a discretionary remedy. On appeal, the Court of Appeal will not exercise the discretion afresh. Instead, it will only interfere with the decision when the discretion was wrongly exercised, such as being contrary to the principle or the primary judge had wrongly taken into account irrelevant matters or ignored relevant matters [see MWY v HWM HCMP 120/2017, 16 May 2017; WW v LLN [2019] HKCCA 1278 at §§ 15-17.]

6. In CHWA v LNLAI [2019] HKCCA 1017 at § 3.1, the Court of Appeal, in refusing leave to appeal, stressed ‘the interim nature of [maintenance pending suit] which generally requires the Court to adopt a broad brush approach in deciding the amount to be awarded. It is also for a limited duration until the final resolution of the issue of financial relief of the parties. Inevitably there will be adjustment to the final order to be made in the event of overpayment or underpayment of [maintenance pending suit].’

7. The threshold for appealing against an order for maintenance pending suit is a high one. The court is inclined to leave factual questions of expenses and income for determination at the ancillary relief hearing. The Court of Appeal also stated that appeals against maintenance pending suit orders are ‘rare’ and the ‘powers of interference [of an appeal court] are strictly limited’: K v K [2011] 1 HKCC 66 at §§ 1, 3; Hewitt, Family Law and Practice in Hong Kong (3^rd ed. 2018), § 6.076.”

7. It is important to note that MPS is an interim measure, intended to be temporary, and subject to adjustments in the final orders to be made in the determination of ancillary relief. Overall fairness can be achieved at that point by giving credit and set-off if there is found to have been any overpayment or underpayment in the interim. In other words, an order for MPS does not finally determine the rights and obligations of the parties, and since it involves simply the payment of money, its effects may in general be redressed by monetary relief at the end. This explains why in relation to MPS the courts “take a broad view” of the parties’ finances rather than engage in any detailed investigation, adopt a “broad brush” approach, and seek to arrive at “rough and ready” conclusions (see Rayden and Jackson on Relationship Breakdown, Finances and Children at §11.78; HJFG v KCCY [2012] 1 HKLRD 95, §§32-38). Appeals should be rare and the parties should be encouraged instead to focus on, and bring about as early as practicable, the final resolution of their dispute. As has been said in Wong Kar Gee Mimi v Severn Villa Ltd [2012] 1 HKLRD 887 at §30 (albeit not specifically with regard to MPS), even if the threshold of reasonable prospects is met, the court may nonetheless in its discretion refuse leave to appeal in the interests of procedural economy and proportionality. For my part, I consider that leave to appeal from MPS orders should generally not be granted unless there is some special reason why the matter cannot or should not be left to the ancillary relief stage such as serious hardship caused by the order to a party. I can see none here based on the admissible materials, and on this ground alone I would dismiss the application.”

Conclusion

46.  As discussed, I find that H’s 6 Grounds of Appeal to be unmeritorious. In my decision, H has no prospect of success in appeal.

47.  Even if the threshold of reasonable prospects is met, leave to appeal should still be refused in the interests of procedural economy and proportionality.

48.  I do not find that there is any special reason why the matter cannot or should not be left to the ancillary stage.

49.  In light of the foregoing, I dismiss H’s application for leave to appeal against the Decision.

50.  I hereby make the order that H’s summons filed on 25 August 2022 be dismissed.

51.  Costs should follow the event. I further make an order nisi that H do pay W costs of H’s Summons filed on 25 August 2022, with Certificate for 2 Counsel, to be taxed if not agreed.