RMH v. GY

FCMP No. 38/2020

[2021] HKFC 109

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MISCELLANEOUS PROCEEDINGS

NO. 38 OF 2020

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J U D G M E N T
(Legal Costs Funding)
(By Paper Disposal)

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The Application

1.  This is the mother applicant’s application of 15 April 2021 for legal costs funding payable by the respondent father.  She seeks a sum of $1,945,000 or such other reasonable sum as the court deems fit to cover her legal costs to be incurred.

The Previous Judgment

2.  This application is in fact the second attempt on the part of the applicant.  The first attempt was made on 28 April 2020 when she commenced the present proceedings by way of an Originating Summons.

3.  On 4 May 2020, I made an interim-interim maintenance order of $557,000 per month (including $157,000 for the rental of Hong Kong Home) for the benefit of the minor who has been referred to as “W”.  

4.  By a judgment dated 30 December 2020 (“the Judgment”), the interim maintenance for W has been assessed at $463,400 per month, inclusive of $157,000 being the rental for the Hong Kong Home.  The mother’s application for legal costs provision was rejected for the reasons set out in [99] to [125] of the Judgment.  There was no appeal from either side in respect of the Judgment.

5.  In this judgment, for the ease of reference, I shall continue to refer to the applicant as “the mother” and the respondent as “the father”.  I shall continue to use the same abbreviations and nomenclatures adopted in the Judgment.

6.  I have already set out the factual matrix relevant to the mother’s application at [7] to [22] of the Judgment.  I shall not repeat the same here.  Suffice to say is the Covid-19 pandemic has continued to cloud the situation; the mother and W are still being stranded in LA, the United States.  For this reason, the main trial, that was scheduled for February 2021, was forced to be aborted.

The Applicable Legal Principles on Variation

7.  Mr Chan, counsel for the mother, helpfully set out the applicable legal principles on this subject:

(1)   “once an application to vary is before it, the court is fully entitled to make an order considering all the circumstances afresh, paying such regard to the old order as may be thought appropriate” see e.g. HCTT v. TYYC [2008] HKFLR 286;

(2)   “The traditional approach to variation was not to re-fix afresh the amount of maintenance but to consider the amount of change in the actual means of the parties so that the new order should merely be increased or decreased roughly in proportion to the change in the means … …The modern approach, as required by section 11(7), is for the Court to consider all the circumstances of the cases. The Court is not required to proceed from the starting point of the original order but look at the matter afresh” see e.g. AEM v. VFM [2008] HKFLR 106;

(3)   “Almost invariably, an application to vary an earlier periodical payments order will be brought on the basis that there has been some change in the circumstances since the original order was made; otherwise, except in exceptional circumstances, the application will, in effect, be an appeal. If an order is not appealed against, or is made by consent, then the presumption must be that the order was correct when made. If it was correct when made, then there will usually be no justification for varying it unless there has been a material change in the circumstances” [HCTT v. TYYC [2008] HKFLR 286 at 290 citing Garner; see also AEM v. VFM [2008] HKFLR 106 at 111 §6].

8.  As regards the legal principles on legal costs provision, I have already set them out at [98] of the Judgment.  I repeat them below.

(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.

See also: WGL v ASB (Decision (Litigation Funding)) HCMP 489/2013 (date of Judgment: 30 November 2017).

The Mother’s Case

9.  The mother confirms that she is no longer in a relationship with GB.  GB returned to Hong Kong in about December 2020, and she has been in little / no contact with him since then.  There have not been any loans or other financial support from GB since August 2020. 

10.  Her liquidity position is dire.  She has $66,340 in the bank only, with outstanding credit card debts of over $280,000.  She is not only illiquid but also insolvent.  In the meantime, the mother has had to liquidate her modest investments in order to fund her medical treatments.  All “cash” in the safe of the Hong Kong Home have been used up.  She is living on borrowed credit which she is currently unable to pay.

11.  The mother’s R Company still has some money at HSBC but the company needs that money otherwise even worse financial consequences will follow including forfeiture of previously paid deposits.

12.  The mother’s financial situation became so desperate that she even had to borrow USD60,000 from her elderly grandmother’s pension, who is almost 80 years old.

13.  The mother said unless there are sufficient funds to cover the outstanding legal costs and costs on account by 15 June 2021, her solicitors would cease to act for her.

The Father’s Case

14.  Ms Irving’s main argument is that the mother has not behaved reasonably, and continues not to behave reasonably.  She continues to press on with her argument raised before that the mother has remained to be untruthful about her financial situation. Specifically, the mother “pocketed” 8 months’ rentals of the Hong Kong Home, totalling $1,348,000.  The mother’s credit card spending remained astronomical, being $283,330 for March 2021, a time when she claimed to be facing poverty.  

Discussion

15.  Ms Irving submits there is no evidence that the mother has applied for legal aid.  It is to be noted that the mother and W have been out of Hong Kong for more than a year.  It seems clear to me that there is no way the mother could have applied for legal aid remotely.

16.  This 2^nd attempt on the part of the mother for legal costs provision was made just about 4½ months after the dismissal of the previous one. The most important question is - has there been any material change in the circumstances since the Judgment that justifies variation? 

17.  It is to be recalled that as set out in the Judgment, the mother’s application for legal costs provision was rejected for 2 reasons.  The first was that the mother was not entirely truthful about her financial situation: see [110] to [114].  The second reason was that I was not satisfied with the mother’s assertion about her relationship with GB who was and could be a financial resource for the mother.

18.  I shall deal with the second reason first. It seems clear to me that the father is not challenging the mother’s assertion regarding the termination of her relationship with GB; as such, GB ceased to be a possible financial resource to fuel her litigation.

19.  I accept this is a material change in the circumstances.

20.  I now turn to the first reason, viz, the mother is not entirely truthful about her financial situation.

21.  Ms Irving highlights the fact that notwithstanding a sum of $157,000 has been ‘earmarked’ in the interim maintenance order for payment of rental for the Hong Kong Home, the mother has not paid the rentals since December 2020.  She has not spent the money on the purpose for which it was ordered and she intended to conceal it. This only came to light when the father identified this in his 4^th affirmation in reply.  By not having paid rent for 5 months, the mother has acquired additional sums of $785,000 that have not been used for her rent.  Further, GB paid rentals of the Hong Kong Home for at least 3 months, ie 14 May, 2 July and 26 August 2020, all of which were expenses already covered by the father’s maintenance payments.  As referred to above, these 8 months’ rentals amounted to $1,348,000. 

22.  It is therefore Ms Irving’s submission that the amount that the mother has misused is more than sufficient to pay the legal costs she says she cannot pay.  It cannot be said that the mother has acted reasonably.  She did not disclose, in an affidavit in which she was pleading poverty and asking for the court’s assistance, that she has not paid the rent and did not disclose this until it was actually brought up by the father. The fact that she has seen fit to entirely disregard the court order so that she might utilize funds expressly intended to pay to her landlord, which funds have been provided to her and used for other purposes, shows that the rest of her evidence on her financial position must be viewed with a considerable amount of scepticism. 

23.  There is some force in Ms Irving submissions.  I agree that the mother was not forthcoming as regards the non-payment of rentals.  That said, it seems Ms Irving somehow accepts the possibility that the mother does not have these monies anymore.  Ms Irving argues that if that is the position, it is the mother and no one else is to blame.  She has decided to spend money that was not intended for her to spend. In this regard, I note the mother mentioned in her supporting affirmation that she had incurred unexpected living costs and expenses in LA. 

24.  The father, in his affirmation in opposition, continued to criticise the mother for her “luxurious spending” in March 2021 on the basis of her credit card statement.  The mother denied any of these spending was luxurious and gave her explanations in her affirmation in reply.  I accept that the mother’s explanations are, on the face of the affirmation, believable. Ultimately, this has to be determined at trial. There is evidence from the mother that her R Company has not started generating any revenue yet.

25.  I am aware that 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: see WW v LLN (formerly known as LSM) [2020] 2 HKLRD 487 at [21], quoting Moses-Taiga v Taiga [2005] EWCA Civ 1013, as per Thorpe LJ at §20.

26.  The father has taken out a summons seeking a downward adjustment of the interim maintenance pending trial. This means more costs would be incurred. Whilst the additional legal costs for the father in terms of his immense wealth would just be “a drop in the bucket”, this cannot be so said for the mother.

27.  This brings me to the last and the most important point. I consider the subject matter of these proceedings is a factor that must be taken into account in the broad exercise of the discretion.  These proceedings are brought for and on behalf of W.  The mother is seeking reasonable maintenance payable by the father for the benefit W only. W himself is the sole beneficiary out of the present proceedings. It is trite that even a carer’s allowance is regarded as part of the maintenance for the benefit and welfare of the minor.  In the present case, the father has accepted full responsibility for the maintenance of W.  It has been emphasized by Mr Chan that any sums paid specifically for the Currey Legal Costs Provisions should be paid to the mother’s solicitors directly, to be used solely for legal fees.  The mother enjoys no benefit whatsoever other than being relieved (partially or wholly) of shouldering legal costs of these proceedings for the benefit of W.  I consider that this factor has to be weighed against other factors, notably the risk factor mentioned above, in the balancing exercise.

28.  I believe this is in the best interest of W that his reasonable maintenance could be fairly and justly determined.  All factors being considered in the round; I would allow the mother’s application.

Quantum

29.  The mother now accepts that it is not necessary to engage a senior counsel for hearings and trial.

30.  The outstanding legal costs owed to her solicitors up to and including the callover hearing of 29 April 2021 were $210,000.  The costs for the present application and for the father’s application for downward adjustment are estimated to be $119,000 and $460,000 respectively. Added to these are the costs up to the Pre-Trial Review (“PTR”) assessed at $170,000. These bring to a total of $959,000.  It should not be forgotten that these do not include the costs for trial which, according to the mother’s Form H for the hearing of 29 April 2021, are estimated at $1,430,000.  It means the mother is looking at a figure somewhere well beyond $2,300,000. 

31.  On the other hand, the father’s estimate dated 29 April 2021 of his own costs is $1,345,000 (ie $205,000 for PTR and $1,140,000 for trial) but it is not entirely clear whether or not the costs for his application for variation are included. 

32.  The father’s application for downward adjustment, which will be dealt with on 26 August 2021, is apparently premised on the imminent termination of the tenancy of the Hong Kong Home by the mother. When that happens he would be relieved of the burden of rental payments.  As I see it, given that the Judgment was given not so long ago and that the mother and W continue to be stranded in LA, the tenancy matter would be the only material change in the circumstances.  The forthcoming application for variation should not be a venue for the parties to re-litigate on issues that have been determined; otherwise the application would, in effect, be an appeal.  On that view, I have no doubt that the mother’s estimated costs of $460,000 for the father’s variation are on the high side.  I consider that $200,000 should be a reasonable sum.

33.  Taking a board brush approach, I assess that, inclusive of the outstanding legal fees, the mother would need a sum of about $1,799,000; the breakdown is as follows:

Outstanding legal fees	$210,000
Legal costs provision	$119,000
The father’s application for variation	$200,000
PTR	$170,000
Trial	$1,100,000
Total:	$1,799,000

34.  I round up the figure to $1,800,000.

35.  The mother’s position remains to be that she and W will return to Hong Kong for good as soon as the situation permits.  As of now, when this would happen remains an open question.  Assuming that the trial is to take place within 10 months, this would mean a monthly sum of $180,000.  I shall revisit the schedule when the situation becomes clearer.

Order

36.  For the reasons aforesaid, the mother’s application is allowed.  I make an order that the father pays a legal costs provision by way of interim maintenance in the sum of $180,000 per month; such sums to be paid directly to the mother’s solicitors and to be used as her legal costs only.  The first payment is to be made on or before 1 July 2021 and thereafter on the 1^st day of each and every month.

Costs

37.  The mother is successful in her application. I make an order nisi that the costs of this application be to the mother, with counsel certificate.