WW v. LPQ formerly known as LLN and LSM AND OTHERS

FCMC 8485/2019

[2023] HKFC 9

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES

NO. 8485 OF 2019

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R U L I N G

(Variation of Interim Maintenance and Legal Costs Provision)

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1.  This is the 1^st respondent’s application dated 7 November 2022 for litigation funding in the sum of $1,100,000 (“Application for Litigation Funding”). This sum is to cover the costs as from the application up to the conclusion of the trial of the ancillary relief, including the wife’s section 17 application.

2.  Another application I have to deal with is the petitioner’s application for variation of the interim maintenance (“the Variation Application”) taken out on 27 October 2020.

3.  In this Ruling, I shall refer to the Petitioner as “the husband” and the 1^st respondent as “the wife”.

4.  It has been said by the Court of Appeal that reasons for decision on interlocutory application can be brief: Tsang Wing Kwai v Tsang Wing Fai [2018] 5 HKLRD 350, [2018] HKCA 759, at [31]. The following are the reasons for decision.

Legal Principles on Variation

5.  The husband’s application is made pursuant to section 11 of the Matrimonial Proceedings and Property Ordinance (Cap 192) (“MPPO”). The relevant legal principles can be summarized as follows,

1.  The court has a wide power to deal with the orders that fall within the scope of s 11 of MPPO.

2.  In an application under s 11, the court shall have regard to all the circumstances of the case and is entitled to look at the matter afresh. In doing so, the court is entitled to look at all the relevant matters set out in section 7 of the MPPO: see HCTT v. TYYC [2008] HKFLR 286, [2008] 5 HKC 86 at [15].

3.  Any change in any of the matters to which the court was required to consider when making the original order is one of circumstances to be considered: AEM v VFM [2008] 3 HKLRD 36, [2008] HKFLR 106, at [14.5].

4.  The original order is one of the matters that the court should consider. The court should pay due regard to the basis and intended effect of the original order and there should not be a radical departure from the approach taken by the parties. Ultimately, how much weight should be given to the original order must depend on the circumstances of the case. Lapse of time and whether there has been a material change in the circumstances are matters that the court need to consider: AEM v VFM, at [14.8].

5.  Although the jurisdiction to vary is untrammelled, normally the earlier order would not be varied unless there has been a material change in the circumstances: HCTT v. TYYC, at [16].

6.  Where a consent order is the subject of an application for variation, the application is not a venue for the parties to have second thoughts about their settlement. An application for variation should not be pursued when in substance the grounds advanced tantamount to re-argument of the issues: HCTT v TYYC, at [49].

6.  The order the husband now seeks to vary is a Maintenance Pending Suit (“MPS”) order. The Court of Appeal in S v C [2021] HKCA 1372, CAMP 243/2021 (date of Judgment: 21 September 2021) said the following,

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 KCY [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.

7.  I am aware that Hon G Lam JA said the above in the context of an appeal against a MPS Order, nevertheless, his observations are, in my view, pertinent to the present application, specifically when the trial of the ancillary relief has already been fixed to commence on 25 April 2023 (with 4 days reserved).

8.  Further, it is trite that, in application of this kind, a broad brush approach should be taken. It is unnecessary to conduct a minute examination of the evidence.

Background

9.  The following events are relevant.

10.  On 23 July 2019, HH Judge CK Chan made an order that the husband is to pay a MPS in the sum of $60,000 per month, plus a litigation funding of $50,000 per month, starting from 1 August 2019 until further order of the court. There was also an order backdating the MPS and litigation funding, resulting in a lump sum of $660,000 payable by the husband (“the Original MPS Judgment”). See: WW v LLN formerly known as LSM [2019] HKFC 188, FCMC 2996/2018.

11.  On 25 March 2020, the Court of Appeal allowed the husband’s appeal in part. The Court of Appeal reduced the backdated sum to $155,000. While the amount of litigation funding in the sum of $50,000 per month remained unchanged, the duration of the order was limited up to FDR only. It is significant to note that the MPS in the sum of $60,000 was undisturbed. See: WW v LLN (No 2) [2020] 2 HKLRD 487, [2020] HKCA 178.

12.  Shortly thereafter on 27 October 2020, the husband took out the Variation Application seeking to have the MPS varied down from $60,000 to $30,000 per month and the litigation funding be reduced to zero.

13.  The husband ceased paying MPS and litigation funding as from 1 November 2020.

14.  On 3 December 2020, the wife took out a judgment summons against the husband for the arrears of MPS and litigation funding.

15.  On 23 June 2021, HH Judge CK Chan fixed the FDR to be heard on 29 July 2021. At the same time, the learned judge ordered that all outstanding applications be adjourned sine die and to be restored after the FDR hearing.

16.  On 29 July 2021, the FDR failed to achieve any settlement. The litigation funding of $50,000 monthly ceased to be payable. On the same date, HH Judge CK Chan ordered that all outstanding applications, if any, are to be adjourned to 31 August 2021 at court no. 9.

17.  On 31 August 2021, the wife’s judgment summons was heard before Deputy Judge Doris To. The learned judge made the following orders:

(1)  The husband is to pay $100,000 before 31 October 2021 and thereafter $50,000 for the arrears;

(2)  The judgment summons be adjourned sine die; and

(3)  The Variation Application be adjourned to court no 9.

18.  It is significant to note that the husband took no further steps in respect of the Variation Application. As such, legally speaking, the original MPS order in the sum of $60,000 per month continues to be valid and subsisting up to this date. The husband has failed to honour his obligation under the order.

19.  At the mention hearing of the wife’s Application for Litigation Funding, Mr Hart drew the court’s attention to the Variation Application which remained stagnant. As the 2 summonses are effectively two faces of same coin, I allowed them to be dealt with together.

The Original MPS Judgment

20.  It is worthy to note what HH Judge CK Chan said at paras 25 and 26 of his Judgment,

25. I note from neither the husband’s affirmation in opposition (Bundle A1/19-25), nor his solicitor’s written submissions, there is any claim that he is not in a financial position to pay the MPS as claimed. In other words, the husband’s ability to pay is not a central issue in this application.

26. At the same time, I also note that there is no evidence, nor claim from the husband that the wife is having a good income source. Instead, the husband’s main objections are that the parties have already agreed on the separation of their finances long ago and there have never been any regular payments of $120,000 from him to the wife as maintenance…

21.  When considering the wife’s application for litigation funding, the only main issue in dispute was whether the wife could use the UK property for raising litigation funding. The learned judge considered that a broad brush approach should be taken such that whether or not the UK property is in fact belonged to the 2 sons should be left to be determined at trial. The Court of Appeal did not find the learned judge was erroneous in adopting this approach.

The Variation Application

22.  I shall deal with the Variation Application first.

23.  I have already referred to the legal principles and the Original MPS Judgment. I agree with Mr Wong that the important issue in the present application is whether there has been any material change of circumstances, and if so, what has changed, since the Original MPS Judgment.

The Husband’s Financial Situation

24.  The husband, in essence, said there was a change in his financial situation. In his supporting affirmation dated 27 October 2020, he said due to the failing business of his company, LS, his director’s fee has been reduced from monthly sum of $100,000 to $20,000 as from October 2020. On the top of this $20,000, he has been in receipt of housing allowance of $30,000 and rental from his property in Tung Chung Industrial Building, totalling $62,700 per month. He also said his bank balances were only about $106,000: see para 8(a) and (b). In his affirmation in reply dated 22 November 2022, he referred to the rapid depletion of his cash at the time: see para 6.

25.  In response, the wife said in her affirmation dated 24 February 2021 that before the husband’s petition for divorce, the liquid assets at his disposal exceeded $10,000,000. The husband’s deposit in his HSBC-513-888 account were $8,806,000 and $7,435,000 as at 30 January 2019 and 30 August 2019 respectively but the amount dropped to $2,008,000 on 29 April 2020 and further down to $170,000 on 30 September 2020.

26.  There was also another HSBC-045-888 account that had $4,948,000 and $3,090,000 on 15 January 2018 and 16 September 2018 respectively. The husband did not update the latest situation of this account in his supporting affirmation. The wife claimed the husband had transferred his monies away from his bank accounts to some undisclosed accounts: see paras 11 – 13.

27.  In reply, in respect of the HSBC-513-888 account, the husband said the following at para 17 of his affirmation dated 8 March 2021,

“I have already produced all relevant bank statements for scrutiny by (the wife) and her legal advisers. Although (the wife) makes a number of general complaints and criticisms based on the bank balances …, she has not raised any specific queries regarding any of the transfers. If I am given sufficient notice to do so by the Court, I am happy to offer my time to explain and crystalize the litigation.”

28.  In respect of the HSBC-045-888 account, the husband said it was a joint account between him and their younger son. He said “funds from different accounts were being moved around by (him) as (his) financial situation required”: para 18. The husband did not dispute that the account balance was reduced to zero. But he said it did not mean “all accounts were deposited with millions all the time”. He said, “I had in the year 1998 millions of dollars in my other bank accounts, but they are not relevant to this case.”: see para 20.

29.  I must confess I do not understand what the husband tried to say. The husband’s reply reminds me of what Hon Lam J (as he then was) said in L v L [2006] HKFLR 121,

197. I do not wish to rehash all the details set out in the chronology of non-disclosure prepared by the solicitor for the Husband. The manner in which the Wife chose to deal with request for information regarding KH in her answer of 11 May 2004 and then supplied bundles of documents in October 2004 for those advising the Husband to digest was singularly unhelpful. Given the level of professional advice the Wife could have obtained if she so wished, I find it hard to believe that she could not provide a more intelligible and meaningful answer in a timely and orderly manner. The party who gives disclosure also carries the obligation to present the information in a way that could be readily comprehensible to his opponent. Straightforward and direct answers could have been given by the Wife to questions like how much has been invested into a business and what were the sources of fund. A good litmus test for distinguishing a bona fide fulfillment of the duty to give disclosure from an attempt to obfuscate is to ask whether the answer or the material can on its own meaningfully assist in informing others as to the means of that party. I regret to say that having regard to the way in which the Wife had given disclosure of her means throughout the course of these proceedings, it is clear to me that she deliberately chosen not to give meaningful disclosure of her means.

198. It is high time that litigants in matrimonial proceedings and those advising them should appreciate that affirmation of means and answer to questionnaire are not a game of hide and seek. Too much legal costs and judicial time had been spent on such wasteful exercise. As stressed by Mr Mostyn, the onus falls squarely and fairly on a party to give full and frank disclosure of his or her own means. To adopt a wait and see approach with a hope that the opponent might fail to ask the right question is a tactic to be deplored. That by itself is a breach of the positive duty to give disclosure. As Coleridge J put it recently in J v V [2004] 1 FLR 1042, “all cards must be put on the table face up at the earliest stage if huge costs bills are to be avoided.” (emphasis added)

30.  The duty to give full and frank disclosure of one’s financial situation is onerous. It is an absolute and continuous duty: see Rayden and Jackson on Relationship Breakdown, Finances and Children, at [13.101]. He (or she) has to present his financial information in an intelligible and meaningful manner. In my view, it is wholly inadequate for the husband to say by just one stroke of sentence that it was “due to the failing business of his companies” and that he has already produced all relevant bank statements for scrutiny by the wife. In this connection, it has to be reminded that on the husband’s own admission, revenues from Watsons for the sale of LS’s products were diverted to the 3^rd respondent. Not only that the husband is the one in the best position to explain, he has a duty to do so. To provide the wife with all the bank statements and wait to see whether she was able to ask the right questions on particular transfers is a deplorable “catch me if you can” tactic. It is incumbent upon the husband to explain, with sufficient particularities, where the $5,100,000 in his bank account have gone.

31.  For these reasons, I agree with Mr Wong that the husband failed to explain the rapid deterioration in his bank balance. This point alone is sufficient for the disposal of the Variation Application.

32.  I take one step further by testing the veracity of the husband’s case against some basic figures provided from his side.

33.  The husband said in his affirmation dated 27 October 2020 that he still had about $106,000 in his banks.

34.  At para 21 of his affirmation dated 22 November 2022, the husband explained how he was able to survive under the stringent financial situation. He said he had sold a Mainland property (the Yorkshire Property), surrendered one of his insurance policies for $900,000 and borrowed $300,000 from his company LS.

35.  The Variation Application was taken out on 27 October 2020. Thus, from October 2020 up to the date of the substantive hearing, there was a lapse of about 24 months. At the hearing, Mr Hart conceded that:

(1)  the husband’s monthly receipt was about $62,700; this included director’s fee of $20,000, housing allowance of $30,000 and rental income. This gives a figure of $1,504,800 over 24 months; and

(2)  the husband’s monthly expenses were about $79,700 per month; hence, a total of $1,912,800.

36.  Although I have some reservations as to whether the husband’s monthly needs are under-estimated, for the present purpose I shall adopt this figure.

37.  It was further agreed by Mr Hart that during these 24 months, the husband paid $1,388,000 to his former solicitors and $800,000 to the wife pursuant to the order dated 31 August 2021 by Deputy Judge Doris To.

38.  I set out the above figures in the following table.

From November 2020 to the date of hearing (24 months)		HK$	HK$
Receipts
	Director’s fees, housing allowance and rental income	1,504,800
	Insurance policy	900,000
	Loan from LS	300,000	2,704,800
Expenses
	General and personal expenses	(1,912,800)
	Legal fees	(1,388,000)
	Arrears paid to the wife	(800,000)	(4,100,800)
Net			(1,396,000)

39.  I have not included the sale proceeds of the Yorkshire Property which, according to the husband, was sold in August 2020 for RMB798,000 for the reason that when the husband said by the end of October 2020 he had $106,000 only, the necessary implication must be that he had either included whatever balance it was in the said $106,000 or had already spent all.

40.  Therefore, allowing for one moment that the husband’s financial situation as claimed by him were true, even on his own version, there should be a shortfall of $1,396,000 or thereabouts. However, his evidence is that as at the date of the hearing he still had $446,266 in his bank accounts. These figure do not tally with his version; his version is not internally consistent.

41.  It should not be forgotten that the husband is a business man. He was and is a shareholder and director of LS. I agree with Mr Wong that the director’s fee, and indeed, other payments or dealings between him and LS, may be subject to manipulation. As a matter of fact, the husband’s credit card bill of about $40,000 to $50,000 per month were paid by LS.

42.  With the conclusion that I have come to, it is not necessary to come to any conclusion on whether the husband made some transfers to his mother and to two other ladies as alleged in para 14 of the wife’s affirmation dated 23 February 2021. It is also not necessary to come to any conclusion as to whether the husband should be able to make use of his insurance policies for some extra cash.

43.  On the above analysis, I regard the husband’s disclosure is obviously deficient. His assertion of financial difficulty is a mere say-so on his part. I shall make robust assumptions about his ability to pay and err in favour of the wife. The Variation Application should accordingly be dismissed.

Litigation Funding

44.  The English Court of Appeal in Currey v. Currey [2007] 1 FLR 946, set out certain guiding principles on how legal funding as interim maintenance may be granted. The principles set out there have been cited and relied upon in the courts of Hong Kong. Hon B Chu J has helpfully summarised these principles in WGL v ASB (Decision (Litigation Funding) [2013] HKFLR 391,

6. …

(i) A fundamental requirement is that the applicant has to supply a sufficiently detailed breakdown of anticipated costs;

(ii) The overarching enquiry is into whether the applicant for a costs allowance can demonstrate that he/she cannot reasonably procure legal advice and representation by any other means, and the enquiry will include:

• To the extent that the applicant has assets, the applicant has to demonstrate that they cannot reasonably be deployed, whether directly or as the means of raising a loan, in funding legal services;

• Whether the applicant cannot reasonably procure legal services by the offer of a charge upon ultimate capital recovery;

• Whether there is public funding available to the applicant as would furnish the applicant with legal advice and representation at a level of expertise apt to the proceedings.

(iii) In the broad exercise of discretion, satisfying the above condition alone may not be sufficient, and a judge may consider that other factors must come into play, including that :

• The subject matter of the proceedings;

• The reasonableness of the applicant’s stance in the proceedings, insofar as it can safely be assessed at so early a juncture;

• The period over which an allowance for legal costs is to be paid, and that applicants should not therefore expect that an order that the allowance be paid until the final determination of all proceedings will be the inevitable order.

45.  The burden is on the wife to demonstrate that she cannot reasonably procure legal representation by any other means.

46.  The husband put up all the grounds he could think of, leaving no stone unturned. He referred to the fact that the wife’s application for legal aid was unsuccessful, that she failed to give full disclosure of her bank accounts statements which are paying her credit card bills by auto-pay, that her spending pattern is extravagant and that she failed to produce her income from dealings with the China Resources Corporation, that she is a successful business woman and that she has the money. The husband also doubted how much the wife could actually obtain by surrounding her insurance policy with HSBC.

47.  On the evidence before me, I am not convinced that there has been any substantial change in the wife’s financial resources since the Original MPS Judgment. As referred to above, the only ground of objection advanced by the husband before HH Judge CK Chan was whether the wife could resort to the UK property for funding but this was rejected.

48.  I accept that the wife failed in her legal aid application because of the monthly sum of $50,000 received from the husband and the value of her insurance policy. I further accept that she cashed $390,000 by surrendering her insurance policy for fuelling this litigation. The money is on the verge of exhaustion and she has no other means of raising legal costs.

49.  The husband complained that the wife has been obfuscated and delayed the proceedings. The fact is at least since the case was docketed at my court, the wife was acting in person until recently in September 2022 when her solicitors entered into appearance. In any event, the wife is seeking legal costs that allow her to move on from here to trial.

50.  For the above reasons, I see no reason why the husband should not continue to pay interim maintenance by way of litigation funding.

51.  Mr Wong fairly accepted that the wife needed about $430,000 to fuel her 4-day trial (including Pre-trial Review). I consider this is a reasonable figure. Considering that the parties have agreed to engage in mediation, I round the figure up to $500,000 to include the extra costs arising from mediation.

52.  I would urge the parties to engage in mediation in a serious and candid manner. I am sure both would be greatly benefited in terms of time and the preservation of their family assets if an amicable settlement is achieved, not to mention the mental stress that they have to endure during the process. Lastly, the parties are reminded that litigation misconduct may result in costs being awarded against him/her on indemnity basis: see Town Planning Board v Society for Protection of the Harbour Ltd (No 2) (2004) 7 HKCFAR 114, L v C [2007] 3 HKLRD 819, and ML v YJ (No 2) (Stellar Contribution) [2009] HKFLR 122, Hashen v Ali Shayif [2009] 2 FLR 896 and 陳及胡 [2018] HKFC 144, FCMC 12002/2014.

Orders

53.  There are about 4 months to go before the trial. The husband should pay the litigation funding of $500,000 by 4 instalments of $125,000 each. The 1^st instalment is to be paid within 7 days of this Order and the subsequent instalments on the 1^st day of each and every succeeding month until full payment. In other words, the 4^th instalment is payable on 1^st April 2023.

Costs

54.  The husband failed in both applications. He should pay the wife the costs of the applications to be summarily assessed. The relevant directions will be given at the Pre-trial Review hearing of 13 March 2023.