WRJ also known as WR v. CWCP

FCMC 5599 / 2015

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES

NUMBER 5599 OF 2015

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RULING ON COSTS

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1.  This is the hearing of the parties’ arguments on costs of the respondent husband (hereinafter called “H”)’s summons dated 9 July 2015, made pursuant to section 17(1)(a) of the Matrimonial Proceedings and Properties Ordinance (hereinafter called “MPPO”), section 52B(3) of the District Court Ordinance (hereinafter called “DCO”) and inherent jurisdiction of the court, and the consent summons dated 6 January 2016.  H asks for costs of both applications, and the petitioner wife (hereinafter called “W”) takes the open position that there should be no order as to costs, save for the costs only proceedings.

2.  W, 33, is a housewife.  H, 56, was a merchant and is now allegedly unemployed.  The parties married in January 2008.  There is one child of the family, a boy, born in July 2008, now aged 7. 

3.  W filed petition for divorce under FCMC 1738/2014 in February 2014.  Next, H opened a DBS Joint Account (hereinafter called “the Joint Account”) with W and also made W an authorized signatory of H’s HSBC account (hereinafter called the HSBC Account”) on 6 March 2014.  The parties then reconciled and the divorce proceedings under FCMC 1738/2014 were discontinued in March 2014.  After that, W withdrew HK$476,543.82 and US$37,730 (hereinafter called the “Withdrawn Funds”) from the HSBC Account on 8 October 2014, unilaterally froze the Joint Account and left the matrimonial home in December 2014.  Finally, she filed petition for divorce on unreasonable behaviour ground under these proceedings on 8 May 2015. 

4.  On 29 May 2015, H filed and served the Answer and Cross Petition, by which he prays, inter alia, that he may be granted the custody of the child of the family and such ancillary relief as the court deems just.

5.  H filed a section 17 summons (hereinafter called the “First s.17 Summons”) for setting aside of W’s disposition of the Withdrawn Funds on 23 June 2015.  His 1^st Affirmation in support was filed on 24 June 2015.  The First s.17 Summons was somehow withdrawn by way of a consent summons dated 9 July 2015.  At the same time, he filed the summons dated 9 July 2015 for, inter alia, an order : - (1) that W be restrained from making any disposition, or transferring out of the jurisdiction or otherwise dealing with the Withdrawn Funds; and (2) that W do pay a sum representing the Withdrawn Funds into court.  His 2^nd Affirmation was filed on 22 July 2015.  W’s and H’s Form E was filed on 10 August 2015 and 12 August 2015 respectively.  W filed her Affidavit in opposition on 21 September 2015.  H filed his Notice of An Application for Ancillary Relief on 20 November 2015.

6.  Upon W’s undertakings that she shall not dissipate the matrimonial assets out of the jurisdiction (with the exception of maintenance and medical fees to her parents in Mainland China in the sum of not more that RMB50,000 per year), by consent on 7 January 2016 it is ordered that :- (1) H’s summons dated 9 July 2015 be withdrawn; (2) the Withdrawn Funds be added back to the matrimonial assets at the final conclusion of the ancillary relief proceedings; and (3) the costs of the summons dated 9 July 2015 and the consent summons dated 6 January 2016 be adjourned for argument.

7.  The court has a wide discretion as to costs.  For the present application, the relevant provisions in the Rules of the High Court governing the exercise of discretion as to costs are Order 62 rules 3(2A) and 5.                                                    

8.  Both parties accept that the effect of Order 62 r.3(2A), is as explained in Melvin Waxman & Another v Li Fei Yu & Another [2013] 6 HKC 424 that the “rule” that costs normally follow the event is no longer the usual order in an interlocutory application, but remains an option. 

9.  In applications for interim injunctive relief, it was formerly the practice of the court to grant the successful party his costs “in the cause”, on the basis that the interim relief is often linked with the final adjudication of the matter : see White Book at 29/1/55 (p690 2016 HK Civil Procedure Vol 1)  That is no longer the case.  The issue of costs on such applications can now be determined as a discrete question, on the basis that the court is entitled to and should consider the merits of the injunction application at the time the application is determined: see Mendlowitz & Associates Inc in its capacity as trustee in bankruptcy of Jay Tien Chiang v Winner International Group Ltd & Anor (unrep., HCA574/2009, 14 May 2010, Hon Au J, at para 28)

10.  In considering the appropriate order the court must have regard to the underlying objectives of Civil Justice Reform: See Order 62 r.5(1)(aa). One of these objectives is the discouragement of unnecessary or unmeritorious applications: see White Book at 62/3/3B (pp1162-1163 2016 HK Civil Procedure Vol 1). 

11.  Under Order 62 r.5(1)(d), the court may take into account written offer expressed to be “without prejudice save as to costs “.

12.  When dealing with costs orders, under Order 62 r.5(1)(e) the court may take into account the conduct of the parties.  Rule 5(2) provides that conduct for this purpose 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.

13.  Under Order 62 r.5(1)(f), the court may take into account whether a party has succeeded on part of his case, even if he has not been wholly successful.

14.  The parties’ arguments have been focused on :-

(i)    Merits of the summons dated 9 July 2015;

(ii)   Whether any party can be regarded as the successful party;

(iii)  Conduct of the parties; and

(iv)  Without prejudice save as to costs offers respectively made by the parties.

15.  Despite that the summons dated 9 July 2015 was allegedly made pursuant to section 17(1)(a) of the MPPO, section 52B(3) of the DCO as well as inherent jurisdiction of the court, both parties have not put forward any argument about the merits of the application under section 52B(3) of the DCO or inherent jurisdiction.  The parties’ arguments have been centred on section 17(1)(a) of the MPPO.  Section 17(1)(a) of the MPPO provides that where proceedings for relief under the MPPO are brought by a party, i.e. the applicant, against the other party, the court may, on an application by the applicant, if it is satisfied that the other party is, with the intention of defeating the claim for financial provision, about to make any disposition or to transfer out of the jurisdiction or other deal with any property, make such order as it thinks fit for restraining the other party from so doing or otherwise for protecting the claim. 

16.  W argued that by adding W as a signatory to the HSBC Account, she has been duly authorised to use the money in the HSBC Account and she is allowed to use the money in the HSBC Account at her own choosing, and it is, therefore, unreasonable for H to take out the summons dated 9 July 2015.  Notwithstanding W’s argument to the contrary, I agree with H that the money in the HSBC Account must be family asset.  Despite that W is authorized to withdraw money from the HSBC Account, if the court is satisfied that she is about to make a disposition or transfer out of the jurisdiction or otherwise deal with any property; and with the intention of defeating the claim for financial provision, H no doubt can obtain the protection under section 17(1)(a) MPPO. 

17.  H has demanded the repayment of the Withdrawn Funds since October 2014, by himself and through legal representatives.  The cold shoulder of W and her legal representative eventually drove H to take out the summons dated 9 July 2015. W’s financial disclosure in her Form E filed on 10 August 2015 was ambiguous about the whereabouts of the Withdrawn Funds.  W merely said they were moved from the HSBC Account to a DBS account that was later closed down.  She afterwards admitted to have used the Withdrawn Funds for living expenses and purchasing stocks.  It was only until 21 September 2015 when she filed her Affidavit in opposition that she provided a more detailed account for the whereabouts of the Withdrawn Funds.  It can be seen from the information provided that she has used the Withdrawn Funds for living expenses, to purchase stocks and expensive jewelries and to lend her friends money.  To date, H is still not satisfied that W has not dissipated the Withdrawn Funds.  After having carefully considered, I accept H’s argument that the account of the whereabouts of the Withdrawn Funds given by W is dubious and unconvincing.  In the circumstance, I also accept that H has reason to believe that W might be about to make further disposition or transfer out of the jurisdiction or otherwise deal with the Withdrawn Funds.

18.  I am, however, skeptical about whether H can show to the satisfaction of the court that W is about to make a disposition or transfer out of the jurisdiction or otherwise deal with any property with the intention of defeating the claim for financial provision.  Section 17(3) of the MPPO provides that where an application is made under section 17 with respect to a disposition which took place less than three years before the date of the application or to a disposition or other dealing with property which is about to take place and the court is satisfied that the disposition or other dealing would (apart from this section) have the consequence of defeating the applicant’s claim for financial provision, it shall be presumed, unless the contrary is shown, that the other party disposed of the property with the intention aforesaid or, as the case may be, is, with that intention, about to dispose of or deal with the property. Section 17(4) of the MPPO provides that any reference to defeating an applicant’s claim for financial provision is a reference to preventing financial provision from being granted to the applicant, or to the applicant for the benefit of a child of the family, or reducing the amount of any financial provision which might be so granted, or frustrating or impeding the enforcement of any order which might be or has been made at the instance of the applicant under the relevant provisions of the MPPO.  The parties have declared their income and assets in the Form E respectively.  According to the Form E, W had a net worth of HK$1,523,738.61 and no income, when H had a net worth of HK$3,541,268.19 and also no income.  W has been a fulltime housewife.  Her assets are all either directly or indirectly derived from advancements made by H.  As such, it is difficult to see how the disposition already made or about to be made by W in respect of the Withdrawn Funds can defeat H’s claim for financial relief.  I am, therefore, of the view that H’s application under s.17(1)(a) of the MPPO is weak.

19.  Section 52B of the DCO provides that the court may grant an interlocutory injunction restraining a party to any proceedings from removing from the jurisdiction of the court, or otherwise dealing with, assets located within the jurisdiction whether the party is or is not domiciled, resident or present within the jurisdiction.  The court may also make a freezing order restraining a party from disposing of or dealing with the assets pending the determination of the substantive issues.  The purpose of the relief is to prevent a party from dealing with his assets so as to make himself judgment proof, thus depriving the successful applicant from obtaining the fruits of her judgment.  Generally speaking, relief can be granted where the court is satisfied that (See Ninemia Maritime Corpn v Trave Schiffahrtsgesellschast and Co, The Niedersachsen [1984] 1 All ER 398) :

(i)    The applicant has a good arguable case against the respondent;

(ii)   There is a real risk that judgment will go unsatisfied by reason of the disposal by the respondent of his assets, unless he is restrained by court order from disposing of them; and

(iii)  It would be just and convenient in all the circumstances of the case to grant the relief sought.

20.  To invoke section 52B(3) of the DCO and the court’s inherent jurisdiction, H is required to show a real risk that his claim for ancillary relief will go unsatisfied by reason of the disposal by W of the Withdrawn Funds. Having taken the view that he has been unable to convince the court that the disposition already made or about to be made by W in respect of the Withdrawn Funds can defeat H’s claim for financial relief (see the paragraph 18 in the above), I am also of the view that his application under section 52B(3) of the DCO and the court’s inherent jurisdiction is weak.

21.  On 12 October 2015 H through legal representatives offered to W that upon W’s undertakings that the Withdrawn Funds be accounted for and reflected upon in the determination of the parties’ ancillary relief claims, the summons dated 9 July 2015 be withdrawn on the condition that the costs of and incidental to the application be paid by W.  The said letter started a spate of bitter exchange by way of long letters shuffled between the parties’ legal representatives.  At the end, the parties reached an agreement to settle the matter by consent in terms set out in the paragraph 6 in the above.  Suffice to say, the result is that H is undeniably in a better position (having W’s undertakings that she shall not dissipate the matrimonial assets out of the jurisdiction (with the exception of maintenance and medical fees to her parents in Mainland China in the sum of not more that RMB50,000 per year) and a consent order that the Withdrawn Funds be added back to the matrimonial assets) than he was (having nothing), had he not taken out the summons dated 9 July 2015.  Concurrently, W is successful in having H’s summons dated 9 July 2015 withdrawn.    

22.  I take notice that H has a weak case, at the same time bearing in mind that the court is no longer required to apply the rule of costs following the event in interlocutory applications, though the rule remains as one of the options.  I caution myself of the need to consider the overall justice of the situation and examine all the factors and circumstance.  I take into account that he has succeeded in part of the application, even if he has not been wholly successful.  I accept H’s contention that the chain of events leading to his application must be considered when looking to his motives to pursue the application for a restraining order.  There was deep distrust between the parties that apparently was caused by W’s repeated unilateral actions, e.g. her refusal to repay the Withdrawn Funds and failure to give a clear and convincing account of the whereabouts of the Withdrawn Funds.  It is obvious that such distrust prompted H to take out the summons dated 9 July 2015.  Looking at the matters in the round, I regard it is reasonable and just to make no order of costs of the summons dated 9 July 2015.

23.  I shall deal with the question of costs of the consent summons 6 January 2016 and the costs only proceedings in the following.

24.  After the without prejudice letter dated 12 October 2015 was sent on W’s behalf, the parties’ subsequent correspondence was primarily about the wordings of W’s undertaking and the issue of costs. 

25.  There were 4 draft consent summonses :

(a)  The first, drafted by H’s legal representatives and sent together with the letter dated 12 October 2015, consists of undertakings from W that the Withdrawn Funds be accounted for and reflected upon in the determination of the parties’ ancillary relief claims, and provisions that the summons dated 9 July 2015 be withdrawn and the costs thereof and the consent summons be paid by W to H;

(b)  The second, drafted by W’s legal representatives and sent together with the letter dated 30 December 2015, consists of undertakings from W that she shall not dissipate the matrimonial assets out of the jurisdiction (with the exception of maintenance and medical fees to her parents in Mainland China in the sum of not more that RMB50,000 per year), and provisions that :- (1) H’s summons dated 9 July 2015 be withdrawn; (2) the Withdrawn Funds be considered as part of the matrimonial assets and its disposal to be decided in the ancillary relief proceedings; and (3) the costs of the summons dated 9 July 2015 and the consent summons be adjourned for argument;

(c)  The third, drafted by W’s legal representatives and sent together with the letter dated 4 January 2016, consists of the same undertakings from W and similar provisions for the disposal of the summons dated 9 July 2015, save that regarding the paragraph (2) thereof, the words ‘be added back to the matrimonial assets at the conclusion of the ancillary relief proceedings’ were used instead of ‘be considered as part of the matrimonial assets and its disposal to be decided in the ancillary relief proceedings’;

(d)  The last, drafted by H’s legal representatives is quintessentially the same as the third.    

26.  H’s position on costs, as set out at the beginning letter dated 12 October 2015, is always that costs of the summons dated 9 July 2015 shall be paid by W to H.  By the letter dated 19 October 2015, W proposed that the summons dated 9 July 2015 be withdrawn on the condition that the costs be paid by H to W.  By the letter dated 9 November 2015, W proposed costs in the cause.  By the letter dated 24 November 2015, W proposed no order as to costs.  By the letter dated 25 November 2015, H refused to accept no order as to costs.  As seen from the paragraph 25 in the above, by 30 December 2015 the parties have reached agreement on the wordings of W’s undertakings, and by 4 January 2016 the parties have reached agreement on the wordings of the rest of the consent summons.  I have taken the view that the costs of the summons dated 9 July 2015 should be no order as to costs.  In the circumstance, I regard that H shall pay W costs after 6 January 2015, excluding the costs of the consent summons dated 6 January 2016 and including the costs of the hearing dated 16 May 2016.

27.  It is ordered that:

(1)  There be no order as to costs of the summons dated 9 July 2015 up to and including 6 January 2016 and the consent summons dated 6 January 2016;

(2)  H shall pay W the costs of the summons dated 9 July 2015 from 7 January 2016, including all reserved costs, with certificate for counsel’s attendance, to be taxed if not agreed.