CKY v. FCY

FCMC 4604 / 2019

[2020] HKFC 216

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES

NUMBER 4604 OF 2019

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Judgment
(Maintenance Pending Suit – litigation funding)

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Introduction

1.  The petitioner (“the wife”) seeks maintenance pending suit for litigation funding in a sum of HK$75,000 per month from the respondent (“the husband”) by way of summons filed on 25 November 2019.

2.  As a starting point, the parties’ respective Form H stated the legal costs incurred by both parties up to financial dispute resolution (“FDR”) are as follows:

1^st Form Hs

	The wife	The husband
Estimated costs up to and including current hearing	HK$370,000 (in Form H dated 8 July 2019)	HK$374,000 (in Form H dated 5 July 2019)
Estimated costs after the current hearing up to and including FDR	Not applicable (in Form H dated 8 July 2019)	HK$507,000 (in Form H dated 5 July 2019)

2^nd Form Hs

	The wife	The husband
Estimated costs up to and including current hearing	HK$720,000 (in Form H dated 22 November 2019)	HK$608,000 (in Form H dated 25 November 2019)
Estimated costs after the current hearing up to and including FDR	Not applicable (in Form H dated 22 November 2019)	Not applicable (in Form H dated 25 November 2019)

Background

3.  The parties were married on 15 March 1965 according to the Chinese customary ceremonies, the marriage was later registered in accordance with section 9 of the Marriage Reform Ordnance, Cap 178 on 8 June 1978. The wife and husband have 2 daughters and 2 sons whom the daughters are 53, 51 years old and their third son is 49 years old (“Child C; Child L and Child J”).  Sadly, their youngest son has passed away in 1991. The wife petitioned on 18 April 2019 on ground of unreasonable behavior resulted in a defended suit because the husband said they have separated for decades. By an order dated 18 June 2020, the parties agreed to issue a fresh petition on ground of one-year consent.

4.  The family emigrated to the USA in 1978 and thereafter the husband travelled regularly between two places. The husband had an ex-marital relationship with a female (“Madam Ho”) from 1987 to 2010. In 2006, the wife returned to Hong Kong for good. From 2007 until present, the husband further developed a 2^nd ex-marital relationship with another female (“Madam Huang”). Madam Huang had given birth to 2 children with the husband and they have been living in Shenzhen until now. Notwithstanding the husband’s ex-marital relationships, at all times, the wife had presented herself as the wife of the husband.

5.  Contrarily, the husband said, which is denied by the wife, he had separated with the wife as early as 1987 and they have achieved a fair division of assets with which the arrangement was reduced into a signed written Chinese agreement on 20 January 1987. The wife was well aware of the husband’s ex-marital relationships and she was well acquainted with Madam Ho and Madam Huang. Madam Huang had joined family gatherings and the wife appeared to be delightful. In or about 2016, the wife accepted a HK$2,000 “cash gift” from Madam Huang when she visited the husband, Madam Huang and her 2 children during Chinese New Year. The wife, on the other hand, had a boyfriend since 1987.  The wife, her boyfriend and the husband had met for lunch.

6.  Most of the husband’s assets are in PRC, the only landed property the husband had in Hong Kong is a property in Yuen Long (“the Greenfield Property”) which the husband has purchased in 2011.  On 1 March 2019, the husband entered into a sale and purchase agreement to sell Greenfield Property with a consideration of HK$6,300,000.  On Child J’s information that the husband intended to transfer the proceeds of sale to Madam Huang in the PRC, the wife filed her petition on 18 April 2019 coupled with an application for an injunction to preserve the proceeds. Upon consent, pursuant to an order dated 30 April 2019, the husband paid into Court HK$3.15 million from the sales proceeds of Greenfield Property, being the wife’s potential share of matrimonial asset.

7.  The husband applied for an order of guardian ad litem when his health began to deteriorate since petition, and pursuant to an order dated 16 April 2020, Child C was appointed in such capacity.

Applicable legal principles

8.  It is trite law that the proper approach to maintenance pending suit is set out in by Hartmann JA in HJFG v KCY [2012] 1 HKLRD 95 at paragraphs 37 and 38:

“37. The principles that have emerged over time to guide judges in matters of interim maintenance have been fashioned in the main to ensure fairness. This is well illustrated in the judgment of Nicholas Mostyn QC, sitting then as a deputy High Court judge, in TL v ML and Others (Ancillary Relief: Claim against Assets of Extended Family) [2006] 1 FLR 1263, at 1289, in which, having looked at earlier authorities, he derived the following principles that speak specifically to fairness or are based on the need to ensure it.

For present purposes, it is sufficient to cite the relevant principles without citing the judge's reference to the source of those principles:

a. The sole criterion to be applied in determining the application is 'reasonableness', which is synonymous with 'fairness'.

b. A very important factor in determining fairness is the marital standard of living. This is not to say that the exercise is merely to replicate that standard.

c.     In every maintenance pending suit application there should be a specific maintenance budget which excludes capital or long-term expenditure, more aptly to be considered on a final hearing.  That budget should be examined critically in every case to exclude forensic exaggeration.

d.     Where the affidavit or form E disclosure by the payer is obviously deficient, the court should not hesitate to make robust assumptions about his ability to pay.  The court is not confined to the mere say-so of the payer as to the extent of his income or resources. In such a situation, the court should err in favour of the payee.

38.  Finally, it is to be noted that in applications for interim maintenance, when the amount to be paid is for a limited period only and not all of the evidence is necessarily before the court, it is not appropriate, nor indeed in most cases possible, for the court to conduct a detailed investigation into the finances of the parties.  While, in order to determine what is or is not reasonable, some analysis is always required, that analysis can be conducted on a 'broad brush' basis. ”

9.  The applicable principles on litigation funding is well stated in WW v. LLN formally known as LSM, CACV 524 of 2019, [2020] HKCA 178,

“The need for litigation funding

20. The principles for granting litigation funding are well-established:

(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[1];

(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.

HJFG v KCY [2012] 1 HKLRD 95, §§80-83; Currey v Currey [2006] EWCA Civ 1338.

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.”

10.  It is also decided in LCYP v JEK [2018] HKCFI 1907, B Chu J stated in the judgment at paragraphs 26 onwards,

“26. The Court’s power to order MPS (including element for legal costs provision) is stated in section 3 of the Matrimonial Proceedings and Property Ordinance, Cap 192. The sole criterion stipulated by that section is “reasonableness”, which has been said to be synonymous with “fairness”.

27. Wilson LJ had said in Currey v Currey (No 2) [2007] 1 FLR 946:-

“In my view the initial, overarching inquiry is into whether the applicant for a costs allowance can demonstrate that she cannot reasonably procure legal advice and representation by any other means.  Thus, to the extent that she 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.  Furthermore, not to forget the third of Thorpe LJ’s three features, she has also to demonstrate that she cannot reasonably procure legal services by the offer of a charge upon ultimate capital recovery.  I would add, fourthly, that the court needs also to be satisfied that there is no such public funding available to the applicant as would furnish her with legal advice and representation at a level of expertise apt to the proceedings, ie that the applicant does indeed in that regard fall within the unserved constituency…”

28. In short, the overarching inquiry is into whether the applicant for a costs allowance can demonstrate that she cannot reasonably procure legal advice and representation by any other means and that:

(i) To the extent that she 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.

(ii) She has also to demonstrate that she cannot reasonably procure legal services by the offer of a charge upon ultimate capital recovery;

(iii) The court needs also to be satisfied that there is no such public funding available to the applicant as would furnish him/her with legal advice and representation at a level of expertise apt to the proceedings.

29. What was said by Wilson LJ in Currey was endorsed by Cheung JA and Hartman JA in HJFG v KCY [2012] 1 HKLRD 95[2] who held that the Currey principles should in future be adopted as providing prudent guidance to both judges and practitioners in this jurisdiction.”

The wife’s case

11.     The wife is alleging the husband of failing to disclose matrimonial asset fully and frankly and she was legally advised to embark on the lengthy and costly exercise on discovery. The wife applied her resources in the defended suit since filing of the petition. The husband and the children only provided maintenance to her in a modest sum of slightly more than HK$20,000 per month, on her own resources, she has no means to procure legal representation. 

12.     From filing of the petition, the legal costs spent by each party was around HK$100,000. The wife said she is asking for HK$75,000 per month which is fair sum as the husband has planned to spend HK$507,000 on his own legal costs until FDR.

The husband’s opposition

13.     The husband opposed on 3 grounds: (i) the wife failed to bring herself within the Currey test; (ii) the husband has no financial ability to pay; and (iii) a sum of HK$75,000 per month is excessive.

My view

14.     The approach to decide maintenance pending suit should be one of a broad brush manner and most importantly, reasonableness in light of standard of living the parties have had during marriage. Litigation funding being a separate head and the applicant, the wife has the burden to prove to she has satisfied the landmark Currey test. As at the application, the wife has no difficulty to meet her daily expenses when she has an accommodation to stay and regular maintenance from the husband and her children. The issue here is whether she can satisfy the Currey test which justifies an order of litigation funding against the husband.

Does the wife have assets, or none that can reasonably be deployed?

15.     One of the difficulties in this case is the wife being a housewife for more than 50 years without income of her own, she has been financially dependent upon the husband and the children. The husband and her children have been paying her HK$15,000 and some HK$12,000 per month respectively. She has no landed properties; HK$91,335 cash in bank and HK$449,310 investment. The wife updated in her 2^nd affirmation, as at this application, she has spent HK$450,000 on legal costs upon realization of her investments and afterwards HK$184,700.25 cash with HK$30,000 investment remaining. The aggregate sum has further depleted, as she has stated in her 3^rd affirmation filed on 14 May 2020, that only HK$106,856.36 cash and HK$9,000 investment was left behind. The wife’s monthly expense was HK$25,900.

16.     On the wife’s evidence, notwithstanding the payment of living expenses by the husband, she is somehow supported by the younger daughter, Child C. The wife’s financial difficulty is driven by a loss in the investment by Child J and such sum was originated from the sale proceeds of this mother’s (the wife’s) property in the USA. The husband, in light of loss suffered by the wife, purchased a property in Tai Po for the wife’s use.  

17.     The husband is a well-funded businessman. He disclosed in his Form E he has 5 landed properties acquired long time ago and of which the purchase price of all of them was HK$6.5 million. Not to mention the properties have appreciated in value as at today, none of them was subjected to mortgage. The net income derived from those landed properties was HK$87,944 per month. Furthermore, the husband sold the Greenland Property in early 2019 which has resulted in an order dated 30 April 2019 to pay into Court HK$3.15 million. Besides, the husband has HK$490,980 cash in bank together with HK$2.96 million debt owed to him. The husband has a car to use and a chauffeur. The husband needs HK$158,890 for his monthly expenses because he is providing HK$15,000 to the wife and HK$50,000 to his mistress, Madam Huang.

18.     Solely looking at both parties’ financial means and assets, the husband is much well off than the wife, he has higher financial ability.  I accept the wife is unable to deploy her own assets to obtain legal representation.

Can the wife provide security for borrowing, or none which can reasonably be offered?

19.     The wife has been living in a flat purchased by the husband where their son, Child J, was the registered owner and this is why the wife was unable to obtain a charge against it. Be it the case, the husband argued the wife is well supported by Child J and she should turn to Child J for assistance of whom has previously provided his mother (the wife) with HK$300,000 as legal fees. Initially, Child J deposed in his affirmation he had sold a carpark for HK$1.5 million with an intention to support his mother (the wife) to procure legal representation. Nonetheless, the plan was stifled by 3 legal proceedings commenced by his father (the husband) and Madam Huang (his father’s mistress) in Hong Kong and the PRC. Child J himself has incurred HK$611,000 legal costs in the said 3 legal proceedings and therefore will be unlikely to be able to afford legal fees for the wife (his mother) in this suit.

20.     Ms Leung, counsel for the husband rebutted, the 3 PRC legal proceedings have been concluded. The legal fees spent have been crystallized and Child J shall have some HK$500,000 remaining to assist his mother (the wife).

21.     On this point, I am more in line with the wife and therefore find she has no assets under her name which could be charged for borrowing but Child J might be able to further support his mother (the wife) to obtain legal representation.

Can the wife reasonably obtain legal services by offering a charge on the outcome of the litigation?

22.     The wife did not address on this point.

Can the wife secure publicly funded legal help at a level of expertise apt to the proceedings?

23.     The wife did not address whether she can be publicly funded by legal aid. No evidence has been filed.

Quantum sought by the wife

24.     In WW v. LLN formally known as LSM, supra, the Court of Appeal stated litigation funding should be sought up to FDR stage, the new judge after the FDR stage should decide whether new allowance on legal allowance should be given upon material before him and in what amount.

25.     In this instance the wife seeks HK$75,000 per month for litigation funding until FDR. She justifies this by reference to the money spent on the legal proceedings to date and her breakdown of costs in both her Form Hs in which she estimates that she will need HK$720,000 up to the current hearing. In addition, she reiterates her need for her defended suit and discovery exercise against the husband. I am given to understand the parties have agreed by consent to file a fresh petition on ground of one-year consent,  the only dispute boils down to ancillary relief. It is expected the work involved should be greatly reduced.

26.     The husband opposed by saying the wife did not provide details of the breakdown of expected work from the main suit trial and ancillary relief. On this point, I accept the husband’s argument that the wife had failed to state in both her Form Hs adequately. The wife, as at taking out of this summons on 25 November 2019, has already incurred HK$720,000 which I find the sum is excessive when this petition was still at an initial stage with one questionnaire issued.

Conclusion

27.     I am given to understand the elder and younger daughters, Child C and Child L sided with their father (the husband) whereas their son, Child J sided with his mother (the wife). Whilst I accept there is some bearing here but the crux of this application should be done on a broad brush manner without tangentially diverted to decide on factual issues on family relationships.

28.     Neither should I decide at this stage on whether the separation agreement signed by the parties in 1987 should be enforceable; or whether the wife has failed to accumulate her assets through time; or whether Child J had caused his mother (the wife) to suffer loss in investment. The evidence of both parties has gone too far to point to family relationships vis-à-vis parents and children.

29.     On issue of granting an order of litigation funding, the factors that I shall take into account should be whether she can pass the Currey test.  

30.     Although I find the wife has difficulty to fund for legal representation, Child J was able to, at least, to provide her some financial support. Having such difficulty, I have no evidence whether the wife has attempted to seek legal aid and if not, the wife has also failed to explain why she did not do so.

31.     Having said that, the wife’s difficulty is now, on one hand, she  is unable to satisfy all limbs of the Currey test and on the other hand, she has limited means to procure legal representation. On the part of the husband, his health has been deteriorating and now Child C has been appointed as his guardian ad litem. There is a possibility the husband may be unable to testify at the ancillary trial. The parties shall avoid to be overly litigious and shall consider sensible negotiation on settlement premised on their respective situations.

32.     Mr Chan submitted, the wife agrees to make available a sum from HK$3.15 million in Court as her funds to procure legal representation. The proposal is attractive for it could solve the wife’s difficulty to raise funds. On a broad-brush approach, I see fit to release HK$150,000 to the wife from the HK$3.15 million in Court.  I consider the amount of HK$150,000 a fair sum when it only reflects less than 5% of the sum the husband has paid into Court. Nonetheless, such sum shall be set off from any ancillary relief order made in favour of the wife in final determination on issue of ancillary relief. 

33.     I reserve costs of the wife’s summons.   

Orders

34.     I make the following orders:

(i)     A lump sum of HK$150,000 be released to the wife (the petitioner) from the sum paid into Court by the husband (the respondent) pursuant to an order dated 30 April 2019 as maintenance pending suit for litigation funding.

(ii)     The said sum of HK$150,000 shall be set off from any ancillary relief order made in favour of the wife (the petitioner) in final determination on issue of ancillary relief. 

(iii)     Costs of the wife’s (the petitioner’s) summons filed on 25 November 2019 be reserved.