CCY v. TJ

FCMC 12551/2017

[2022] HKFC 102

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES NO. 12551 OF 2017

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DECISION

( Legal Costs Provision )

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BACKGROUND

1.  There are 2 summonses before me. The first summons is by the Respondent Husband (“H”) to apply for legal costs provision. The second summons is by the Petitioner Wife (“W”) to dismiss H’s said application for legal costs provision or alternatively stay his application until determination of H’s Crossley application.

2.  H and W were married in Australia in 2008, they have 2 daughters born in 2008 and 2011.

3.  W filed a petition for divorce on 26 September 2017 based on 2-year separation, decree nisi was granted on 26 February 2018 and was made absolute on 23 September 2018.

4.  A consent summons (“the Consent Summons”) signed by H and W was filed on 28 September 2017. According to the Consents Summons, H and W shall have joint custody of the daughters, and W shall have care and control of the daughters and H shall have reasonable access to the daughters.

5.  Under the Consent Summons, H was to pay W monthly maintenance of HK$30,000 for the daughters. The Consent Summons also provided that all the parties’ respective applications and claims maintenance pending suit, periodical payments, secured periodical payments, lump sum or sums, settlement, adjustment or transfer of property and/or variation of settlement order be dismissed.

6.  Despite the Consent Summons, in the CDR hearing on 20 August 2020, a consent order was made for W to have sole custody, care and control of the daughters.

7.  On 22 October 2020, H filed a summons for a Crossley application that he should not be bound by the Consent Summons together with his present application.

8.  H does not regularly pay HK$30,000 to W as the daughter’s maintenance and but pays HK$3,000 monthly for therapy costs for the daughters.

9.  Parties have not filed and exchanged their Form Es.

H’S CASE

10.  H acted in person since 13 March 2020 and no longer had the financial capacity to retain legal representation, most of his funds were depleted in legal costs and expenses on children matter.

11.  The estimated legal costs amounted to HK$940,150 in the Form H dated August 2020 but H’s solicitors gave him substantial discount due to his financial difficulties. The actual fees charged for previous hearings and work were HK$713,412.

12.  H now claims HK$35,000 per month as the estimated legal costs by reference to legal costs previously incurred. The legal costs were estimated to be no less than HK$35,000 per month by averaging HK$940,000 without discount over about 26 months. W incurred about HK$1,280,000 plus expenses with reference to her Form H for 36 months amounting to about HK$36,000 per month.

13.  H is employed as a teaching assistant at a university earning HK$33,995 per month. His monthly income barely covers his rental in the sum of HK$17,400 and general expenses of HK10,500 and therapy costs of the daughters in the sum of HK$3,000.

14.  H claims the only asset he has is HK$26,462 in his bank account and HK$30,800 worth of shares.

15.  W is the company director and CEO of a company owned by W and her father. From W’s Form J, she earned about HK$150,000 per month for the past 3 years.

16.  W currently resides in a 3,000 square feet property and has 2 domestic helpers and a driver.

17.  W has at least HK$33 million worth of landed properties. W transferred her half share in the property in Hung Hom to her father shortly before she took out the Petition for the consideration of HK$10,000,000.

LAW

18.  The principles for litigation funding are trite, Currey v Currey [2006] EWCA Civ 1338 sets out the following conditions:

(1)  That the applicant has no assets, or none that can reasonably be deployed;

(2)  That he/she can provide no security for borrowing, or none which can reasonably be offered;

(3)  That he/she cannot reasonably obtain legal services by offering a charge on the outcome of the litigation; and

(4)  That he/she cannot secure publicly funded legal help at a level of expertise apt to the proceedings.

19.  The Court of Appeal recently in the case of WW v LLN (No 2) [2020] 2 HKLRD 487 stated in paragraph 20 the following:

“(1) In order to obtain litigation funding, the burden is on an applicant to demonstrate that she cannot reasonably procure legal representation by any other means. This includes showing that she cannot secure publicly funded legal help at a level of expertise apt to the proceedings. To the extent that she has assets, the applicant has to demonstrate that they cannot reasonably be deployed, either directly or as the means of raising a loan to fund legal services;

(2) The subject matter of the proceedings and the reasonableness of the applicant’s stance in the proceedings will always be relevant.

(3) The period over which costs allowance is to be paid is also relevant. If the application was made before the FDR hearing, it may well be wise to order that the costs allowance should fund the applicant only up to that hearing. If the FDR fails, it would be for the new judge, on the basis of the materials properly before him, to determine whether a new allowance for legal costs should be granted and if so, in what amount.”

20.  The Court of Appeal also gave the warning in paragraph 21 that:

21. “The court should be alert to the risk of injustice arising from irrecoverable and/or unmerited sums paid for litigation funding, which would call for extra caution in the balancing exercise. As stated by Thorpe LJ in Moses-Taiga v Taiga [2005] EWCA Civ 1013, at §20:

‘… the whole purpose of alimony pending suit is to sustain the petitioner pending the court’s determination. There is manifestly a risk of unjustified and irrecoverable payments, but that has to be balanced against the risk of a denial of access to justice for the petitioner, if she has not the means to sustain herself and the litigation pending its determination.’ ”

ISSUES

22.  W’s objections to H’s application and in support of her summons are summarised as follows:

(a)  H should not be permitted to make his application under the Consent Summons.

(b)  H cannot apply for litigation funding after grant of decree absolute.

(c)  H has financial resources to fund his legal representation.

(d)  W does not have the ability to pay for H’s litigation funding.

23.  W referred to new evidence or evidence not included in the hearing bundle in her submissions. I make it clear that only materials included in the hearing bundle would be considered for sake of fairness.

CONSENT SUMMONS

24.  W argued that the Consent Summons has already dealt with any claim for maintenance pending suit, H should not be allowed to make application for legal costs provision. To allow H to pursue this application is tantamount to pre-determining the Crossley Summons so as to provide H with something that is contrary to what had otherwise been agreed by him.

25.  I do not accept W’s argument.

26.  The Consent Summons is the subject matter of the Crossley Summons pending arguments and determination, if H is not permitted to apply for legal costs provision due to the Consent Summons, it would be effectively recognising validity of and enforcing the Consent Summons before the disposal of the Crossley Summons.

27.  I am of the view that it is not the time to go into merits of each party’s case in respect of the Crossley Summons.

DECREE ABSOLUTE

28.  W argued that by the following wording of section 3 of Matrimonial Proceedings and Property Ordinance, H can no longer apply for legal costs provision after issue of decree absolute:

“the court may order either party to the marriage to make to the other such periodical payments for his or her maintenance and for such term, being a term beginning not earlier than the date of the presentation of the petition or making of the application and ending on the date of the determination of the suit, as the court thinks reasonable.”

29.  I do not agree with W’s interpretation. In my view, the suit mentioned in the provision refers to ancillary relief, maintenance pending suit clearly can be ordered until the determination of ancillary relief, not the decree absolute. It is uncommon in family court proceedings that the ancillary relief is determined long after decree nisi has been made absolute.

H’S FINANCIAL RESOURCES

30.  It is W’s case that H has failed to disclose all his assets.

31.  W contended that in H’s affidavit in support of the present application, H did not disclose that he was the sole shareholder of a company in Australia (“the Australian Company”) that owned 2 landed properties in Australia. It was W who made such revelation.

32.  H explained that the Australian Company did not own the properties and the company was just the trustee company for a trust owned by his widowed mother for her retirement. H helped his mother manage the Australian properties through the Australian Company as trustee.

33.  H produced a page from the land tax summary 2019-2020 issued by the Queensland Government, Australia. In this summary, the 2 properties were described as “LAND OWNED SOLELY THE T____ TRUST”, their taxable values were A$526,666 and A$366,666 respectively.

34.  H further stated that the Australian properties had always been negatively geared with total expenses and interest payments exceeding the rental income and both properties had mortgages exceeding the values of the properties secured by H’s mother’s home. The trust had made no profit since the setting up in 2006.

35.  W complained that H only purported that there was a family trust named T___ Trust, H still had not disclosed any detail of the trust such as the trust deed and the assets held by the trust.

36.  I agree. The only document that H has disclosed in relation to the Australian Company and the Australian properties is the page of tax summary which does not show how the trust was set up for his mother. There is no evidence about the creation and arrangement of the trust except the bare assertion of H.

37.  H transferred to his mother and sister each 50% of the shares of the Australian Company on 13 February 2018. Again, there was no explanation by H about the transfer.

38.  I am not satisfied H has made proper disclosure about the Australian Company.

39.  Even if H does not own assets, he should still have the ability to borrow. There is no evidence from H that he would not be able to raise fund through borrowing from financial institution or friends or family members.

40.  W alleged H of transferring without approval the total sum of HK$1,650,000 and unaccepted expenses of HK$917,850.06 when he was the CEO of the company held by W and her father amounting to HK$2,567,850.06 between 2014 and 2017.

41.  H does not deny transfers of the money from W’s Father’s company but denied they were without knowledge or approval. Whether the transfer was without knowledge or approval should be a matter for determination when the issue arises. However, H did not address on where the funds went.

42.  Despite H’s case that he had no money for legal representation, he still had sought legal services and he said he had incurred no more than HK$30,000 in legal expenses since 9 March 2020. Particulars of the same have not been given.

43.  H applied for legal aid twice on 21 June 2019 and 16 July 2020 respectively. Both applications fell through.

44.  H explained that he was asked in November 2015 by W to set up a company (“RGL”) for the purposes of securing shop leases. H was asked by W to pay cross-border and courier expenses between 17 October 2016 and 10 August 2017 by RGL. As RGL was not trading and had no assets, H was required to transfer money to RGL for the said payment and for RGL to reimburse him together with handling fee of HK$4,000 later. The transfer from H to RGL was recorded as “loan from director” amounting to HK$204,798 in total.

45.  After the divorce proceedings, it appeared H would not be repaid the HK$204,798 and the handling fee of HK$4,000, the debt was written off in the audited financials of RGL between 2017 and 2018.

46.  Nevertheless, Legal Aid Department still regarded that loan from director as H’s asset despite his explanation. H therefore failed the means test.

47.  According to H, the auditor of RGL already wrote off this debt as an impaired asset, it is hard to understand why Legal Aid Department would still refuse this explanation.

48.  H provided 2 letters from Legal Aid Department in refusing his application for legal aid. In the letter dated 21 June 2019, the reason for refusal was that H’s financial resources exceeded statutory limit of HK$307,130. In the letter dated 16 July 2020, the reason for refusal was that H’s financial resources exceeded statutory limit of HK$420,400 and his financial resources had been assessed at HK$527,246.74.

49.  H has not explained how his financial resources which normally include monthly disposable income and assets would be assessed at HK$527,246.74.

50.  By reason of the foregoing, I am not satisfied that H has discharged the burden that he cannot reasonably procure legal representation by any other means. In any event, H should have the ability to borrow from financial institution or friends or family members.

51.  H’s application for litigation funding shall not be allowed.

52.  Having reached the above conclusion, there is no need for me to consider and discuss W’s ability to pay.

53.  There is also no need to consider and discuss W’s alternative stance that H’s Summons be stayed pending determination of the Crossley Summons.

CONCLUSION

54.  I make the following order in respect of H’s and W’s Summonses:

(1)  H’s Summons for legal costs provision filed on 22 October 2020 be dismissed;

(2)  There shall be an order nisi to be made absolute in 14 days that H do pay costs of H’s Summons filed on 22 October 2020 and W’s Summons filed on 4 November 2020 to be taxed if not agreed.