AB also known as ABW v. MAW

CACV 147/2016

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 147 OF 2016

(ON APPEAL FROM FCMC NO. 6310 OF 2015)

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REASONS FOR JUDGMENT
and
DECISION ON COSTS

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Hon Lam VP :

1.  I respectfully agree with the judgment of Cheung JA. As explained by my Lord, the difficulty with a FDR judge hearing or processing contested matters after the FDR without the consent of all the parties is the breach of the without prejudice privilege. With the engagement of the privilege, perception of the party or parties is important. Thus, in Shek Kam Tin v Chan Fuk Sang [1979] HKLR 532, notwithstanding the court did not feel embarrassed by the knowledge of a payment into court, the Chief Justice decided not to hear the case because “if we continued to hear the appeal and ultimately decided against the respondents, they might feel that in some way they have been prejudiced by the fact that we knew the amount of the payment into court.” For the same reason, Thorpe LJ said in Myerson v Myerson [2009] 1 FLR 826 at [30] that the exclusion of FDR judge from hearing other contested matters is not fact dependent. Hence, the husband did not carry any burden to demonstrate how a particular statement made by him in the FDR process would prejudice his arguments on the reserved costs. The FDR process being a confidential one, it should be subject to the same protection as a mediation process. Strict adherence to the rule that a FDR judge should not hear further applications is necessary to protect the integrity and confidence in the FDR process. I also agree for the reasons given by Cheung JA that there should be no order as to costs in the appeal.

Hon Cheung JA :

I.   The appeal

2.  The issue in this appeal is a narrow one : Is the Family Court Judge who had handled an unsuccessful family dispute resolution (‘FDR’) hearing, entitled to deal with the issue of costs that she had reserved in two interlocutory applications heard by her before the FDR hearing?  The answer that this Court gave is ‘no’.  I now give my reasons.

II.  Background

3.1  The parties are facing a contested ancillary relief application brought by the petitioner wife (‘wife’).  On 9 October 2015, H H Judge Melloy dealt with a discovery application brought by the wife against the respondent husband (‘husband’). After making orders concerning discovery, the Judge reserved the issue of costs.

3.2  On 8 December 2015 the Judge heard another interlocutory application brought by the wife for litigation funding from the husband.  Again, after making the decision on the application, the Judge reserved the issue of costs. 

3.3  On 22 and 23 February 2016, the Judge heard the FDR hearing which turned out to be unsuccessful.  On 7 March 2016, she set down the contested ancillary relief hearing for pre-trial review to be heard on 20 May 2016. 

3.4  By summons dated 22 March 2016, the wife asked the Judge to deal with the reserved costs of the two applications.  Despite objections by the husband who argued that the costs should not be dealt with by the Judge, the Judge on 5 May 2016 ruled that she was to deal with the question of the reserved costs herself and it would be dealt with on paper.

3.5  On 23 June 2015, the Judge granted leave to the husband to appeal against her decision.  The Judge’s order of 5 May 2016 was stayed pending the determination of the appeal. 

3.6  This Court heard the husband’s appeal and allowed the appeal. 

III.  Family Dispute Resolution

4.1  FDR was introduced into our family law proceedings on 3 October 2012 by way of Practice Direction 15.11 (‘PD 15.11’).  The title of PD 15.11 is ‘Financial Dispute Resolution Pilot Scheme’.

4.2  According to the explanatory note to PD 15.11, the procedure takes much from the English ‘Family Proceedings Rules 1999’, which came into force on 5June 2000, and is intended to reduce delay, facilitate and encourage settlements, limit costs incurred by parties to the proceedings and provide the court with much greater control over the conduct of proceedings than at present exists (para 1).

4.3  Paragraph 3 of the explanatory note further provides that the FDR hearing is to be conducted in circumstances of privileges :

‘ 3. ...Provision is made for there to be a Financial Dispute Resolution (‘FDR’) hearing where proposals for resolving the Application can be discussed in circumstances of privilege.’

4.4  The recognition that the FDR hearing is to be conducted in circumstances of privilege is implemented by paragraph 8 of the PD 15.11 itself :

‘ a. ...........;

b.     The judge conducting the FDR hearing shall have no further involvement with the Application, other than to conduct any further FDR hearing;

c.     Evidence of anything said or of any admission made in the course of the hearing shall not be admissible in evidence in a court, save upon the trial of a person for an offence committed at the hearing;

d.     No offer or proposal made by a party, whether orally or in writing, nor any response to any such offer or proposal, may be excluded from consideration at the FDR hearing by virtue of a claim of privilege;’

4.5  The rationale that the judge conducting the FDR hearing shall have no further involvement with the application (i.e. matters relating to the ancillary relief), other than to conduct any further FDR hearing, underlines the fact that information which otherwise is privileged and confidential, has been disclosed by the parties and heard by the FDR judge.  It is important for the proper operation of the FDR system that such information should be protected.  Hence, there should be no further involvement by the judge on matters concerning the ancillary relief application. 

4.6  In Myerson v Myerson [2009] 1 FLR 826 the English Court of Appeal was dealing with the FDR procedure under the English rule 2.61E(2) of the Family Proceedings Rules 1991 (‘FPR’) which provided that :

‘(2) The District Judge or Judge hearing the FDR appointment must have no further involvement with the application, other than to conduct any further FDR appointment or to make a consent order or a further directions order.’

4.7  Thorpe LJ observed :

‘ [26] .....Litigants distrustful of each other and made anxious by the complex tactics of contested litigation must be confident that conciliation within the court proceedings guarantees them the same confidentiality that they would enjoy had the dispute been referred by the judge to mediation by a mediation professional. So the intention and the meaning of the sub-rule are clear. The judge who has been armed to conciliate by the provision of all the privileged communications can only do one of three things that is to say set up a further FDR appointment, make a consent order or make an order for further directions, practically speaking directions for trial.’

4.8  The ‘without prejudice’ discussion in the FDR hearing is in fact an example of the ‘without prejudice’ rule.  In Rush & Tompkins Ltd v. Greater London Council and another [1989] 1 AC 1280, Lord Griffiths at 1299 stated that :

‘The “without prejudice” rule is a rule governing the admissibility of evidence and is founded upon the public policy of encouraging litigants to settle their differences rather than litigate them to a finish.’

4.9  Rush & Tompkins Ltd was applied by this Court in Tse Tsz Chong v. Law Sze Man [2015] 1 HKLRD 1120.

4.10  Although the FDR procedure in England is underpinned by statutory rules and ours is governed by way of a Practice Direction, the underlying philosophy is the same, namely, the recognition of privilege and confidentiality.  Although our PD 15.11 did not elaborate, as in the English rules, on the further role of the FDR judge, paragraph 8b thereof carries the same message, namely, the FDR judge shall have no further involvement with any contentious application after chairing a failed FDR hearing. 

IV.  The present case

5.1  In respect of the issue of costs in this case, on first blush, it seems to be eminently practical for the Judge herself to deal with the reserved costs issue, because, after all, she had heard arguments concerning the discovery and litigation funding applications.  However, there is a larger issue involved, namely, the Judge had heard of confidential and privileged information during the FDR hearings and the parties going into the FDR are expected that the FDR hearing would guarantee them with the same confidentiality that they would enjoy had the dispute been referred to private mediation.  This guarantee will become meaningless if the FDR Judge were to continue to deal with the contentious issues between the parties.  This principle applies equally in the present case, even if the Judge will only deal with the costs of the applications that she had already heard before the FDR, because the crucial point is that she had heard privileged and confidential information during the FDR hearing.  To upkeep the confidential requirement, it makes no difference if the Judge has said that she could not recall what had been said by the parties during the FDR hearing because the issues of substance and perception are equally important if the confidential nature of a FDR is to be upheld. 

5.2  Myerson itself is another example of how the confidentiality requirement is to be implemented.  In that case, although the parties reached an agreement during the FDR appointment, the consent order made by the FDR judge was not agreed by them and the FDR judge directed that she should determine this outstanding issue together with other contested issues that had occurred since the FDR.  She considered that after the FDR judge had made a final order, the FDR judge was no longer bound by the confines of rule 2.61E(2) of the FPR and became akin to the trial judge.  The English Court of Appeal disagreed.  Thorpe LJ stated that :

‘[30] With all due respect to Baron J, who has the greatest experience in this field, I cannot accept her fundamental premise that once agreement is reached the without prejudice material is no longer relevant and that the judge is therefore in a similar position to the trial judge who makes a final order. To me the dissimilarity is clear. The one has been exposed to confidential material and the other has not. Whether in the individual case the judge has or has not any recollection of the confidential material is not to the point. The rule provides a limitation on the function of the FDR judge that is not fact dependent.’ (emphasis added)

5.3  Further, Lawrence Collins LJ observed :

‘ [36] ... The policy behind the rule is to encourage settlement and in particular to protect without prejudice communications. That policy is not undermined by allowing the parties to waive the requirement.’

V.  Conclusion

6.  For these reasons the appeal was allowed and the order made that matters concerning the question of costs reserved by the Judge should be determined by the ancillary relief trial judge after delivery of the ancillary relief judgment.

VI.  Costs

7.  The husband asks for the costs of the appeal.  The wife asks for no order as to costs.  As apparent from the history of litigation, the wife was quite prepared to concede the appeal by way of a ‘Tomlin Order’ lodged by the parties on 27 October 2016. However, it was the direction of the Court that the appeal should be heard as scheduled, because this appeal deals with an important matter of principle and practice of the Family Court.  In the circumstances the appropriate order should be no order as to costs.