SKP v. SAFM

FCMC 5731 / 2010

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES

NUMBER 5731 OF 2010

----------------------------

-----------------------
R U L I N G
(Costs)
-----------------------

Introduction

1. This was an application on paper to determine costs following my judgment of the 2 September 2014 when I reserved costs for argument.  

The judgment

2. In the judgment I set out the background to the case and the resulting cost implications as follows:

  Background

  2.  This is a very emotive piece of litigation that appears to have been fuelled primarily by the parties’ unresolved conflict going back in particular to the basis of their agreement at the Financial Dispute Resolution hearing. The issues themselves are not difficult and should have been settled long ago. Unfortunately positions have hardened as the case has progressed and this has not been helped by mistakes that have been made along the way. In particular very significant errors were made by the mother in the presentation of her figures – errors which were not finally resolved until the first day of trial. 

3. In addition there has been an issue with respect to the division of the parties’ chattels – with the father complaining that certain items had not been returned to him – as agreed. Again although this issue was not terribly significant in itself, it is clear that this has served to heighten the tensions between the parties. The wife denies any wrong doing on her part.

4. In addition the father has taken great exception to the fact that the mother began the litigation by issuing a summons for committal – (although to be fair it is difficult to see how else the mother could have progressed her case save perhaps by issuing a judgment summons which is also a contempt of court process, given that the chief complaint relates to the father’s failure to comply with his financial undertakings). The mother withdrew the summons for committal on the 28 March 2013 with no order as to costs, following the Court of Appeal judgment in CYM and YML, but by then the damage was done. The father was clearly still very angry about this at the trial. 

5. The present dispute centres primarily on the mother’s complaint that the father has not complied with the court order dated the 9 March 2011 and the understanding that flowed from that – i.e. that they would split H’s expenses 50:50. The father in turn complains that the mother also failed to comply with the court order in that he alleges that she did not consult him ahead of time in relation to H’s extracurricular activities, that she enrolled him in activities that were not agreed and that she did not provide him with receipts for those activities. Thus he refused to pay – even for activities that the son had been enrolled in at the time of the original court order and which he knew that he was doing and of which he approved. He is also firmly of the view that H should only be engaged in three extracurricular activities at any one time and that he shouldn’t be enrolled in too many camps over the school holidays.

6. The situation was further complicated when the mother was offered a place for H at X International School. The father did not agree that he should attend. He repeated his opposition to this in the witness box notwithstanding the fact that H appears to be doing very well at X. The father’s chief complaint seems to be that the parties are not in the sort of social circle that would warrant H attending X. His argument appears to be to do with social class. The mother fundamentally disagrees with this and says that she simply wishes H to have every available educational opportunity that is open to him. 

7. Consequently H began attending X school as a day pupil in April 2014 but on the mother’s undertaking that she will be wholly responsible for the X school fees subject to a capped contribution from the father. The father will continue to pay 50% of the fees that he would have paid had H continued to attend an ESF school. Thus the mother presently contributes significantly more to the cost of H’s education than had been originally envisaged – although it would be fair to say that this is her choice.

8. The cost implications of this litigation have also been very significant. As I have said, mistakes were made during the course of the proceedings, which in turn has led to a significant increase in costs. This, extremely unfortunate aspect of the case, will need to be dealt with separately and as indicated to the parties during the hearing I will reserve the issue of costs generally so that this along with any other related issues may be properly looked into. I also accept that the history of offers made by each party, including any without prejudice offers will also need to be considered in that context. 

3. The parties filed their written submission on costs on the 24 October 2014 and the father filed a further reply on the 7 November 2014. I should say at the outset that matters have progressed since the judgment of the 2 September 2014, in that the court has been informed that the respondent mother will now relocate to Australia with H and although full agreement has not been reached, a consent summons to that effect has been filed. Reference is made to the potential move in the father’s submissions on costs where he makes certain allegations against the mother, including non disclosure of relevant facts at the trial. The chief complaint seems to be that the mother knew about the potential move but that she chose not bring this to the attention of the court at the relevant time. This does of course have implications with respect to H’s expenses. I should say at the outset that this is not something that formed part of the case that was argued before me and it is not something that I can usefully comment on. The allegation is also denied by the mother. In this regard the mother’s solicitors wrote to the court on the 6 November 2014 in the following terms:

We do not intend to file a Reply to your clients Costs Submissions other than to say that paragraphs 5-9, 51 and 52 of your clients Costs Submissions raised new matters, which are wholly incorrect and improper to raise now.  These paragraphs should be disregarded it in its entirety by the Court.

4. I agree with that observation. For the avoidance of doubt therefore it should be noted that I have not taken into account the content of those paragraphs when coming to my decision as set out below.   

The law 

5.   The law in relation to costs is well settled. In the leading case of Gojkovic v Gojkovic [1992] Fam 40 Butler-Sloss LJ stated as follows:

“There are many reasons which may affect the court in considering costs, such as culpability in the conduct of the litigation: for instance (as I have already indicated earlier) material non-disclosure of documents. Delay or excessive zeal in seeking disclosure are other examples. The absence of an offer or of a counter-offer may well be reflected in costs – or an offer made too late to be effective. ... It would, however, be inappropriate, and indeed unhelpful, to seek to enumerate and possibly be thought to constrain in any way, that wide exercise of discretion. But the starting point in a case where there has been an offer is that, prima facie, if the application receives no more or less than the offer made, she/he is at risk not only of not being awarded costs, but also of paying the costs of the other party after communication of the offer and a reasonable time to consider it. That seems clear from the decided cases and is in accord with the Rules of the Supreme Court and the County Court Rules 1981 requiring the court to have regard to the offer. I cannot, for my part, see why there is any difference in principle between the position of a party who fails to obtain an order equal to the offer made and pays the costs, and a party who fails by the offer to meet the award made by the court. In the latter case prima facie costs should follow the event, as they would do in a payment into court, with the proviso that other factors in the Family Division may alter that prima facie position”.

6.   This general approach has been routinely adopted in Hong Kong. It has been said that the issue of costs lies in the discretion of the court and costs are normally expected to follow the event. It is also accepted that this presumption is more easily displaced in family proceedings than in others.

7. Counsel for the father has also raised the possibility of an order being made in part on an indemnity costs basis and reference has been made to an assessment of this in the case of LYE v CWW and HWL, FCMC 14787/2002 when

Her Honour Judge Chu reviewed authorities on the matter of indemnity costs and quoting from Macmillan Inc v Bishopgate Investment Trust Ltd, said:

v)  “The power to order taxation on an indemnity basis is not confined to cases which have been brought with an ulterior motive or for an improper purpose.  Litigants who conduct their cases in bad faith, or as a personal vendetta, or in an improper or oppressive manner, or who cause costs to be incurred irrationally or out of all proportion as to what is at stake, may also expect to be ordered to pay costs on an indemnity basis if they lose, and have part of their costs disallowed if they win.  Nor are these necessarily the only situations where the jurisdiction may be exercised; the discretion is not to be fettered or circumscribed beyond the requirement that taxation on an indemnity basis must be ‘appropriate’”.

8. In addition Hong Kong Civil Procedure 2014 is also quoted as follows:  

“A taxation of the successful party’s costs on an indemnity basis could be properly ordered where the proceedings were scandalous or vexatious, or had been initiated or prosecuted maliciously, or for an ulterior motive, or in an oppressive manner. Any proceedings instituted of prosecuted in such circumstances as to constitute an affront to the court could properly be the subject of a direction for the taxation of the successful party’s costs on the indemnity basis. However, the circumstances in which an indemnity award might properly be made were not restricted to circumstances such as those described. The discretion was not to be fettered or circumscribed beyond the requirement that taxation on an indemnity basis must be ‘appropriate’”.

The issue

9. The main issue to be determined is what cost consequences should flow, if any, from a significant mistake made in the mother’s calculation of H’s expenses.

10. This is highlighted in paragraph 36 of the judgment when I said as follows:

  36.  The mother asks that the maintenance be back dated to the 1 May 2013 – which was shortly after her Form E was filed. The difficulty with that date is that the mother’s request for an upward increase in maintenance changed on the 25 June 2013 when she filed her 4^th affidavit in support of her Re Amended Summons dated the 20 June 2013 – as set out in full in paragraph 1 above. This is when the mistake occurred and when she said that H’s direct expenses were HK$49,314 per month as opposed to HK$19,337 per month. Although in retrospect the mistake is easy to see (the figure of HK$19,337 was taken from the line above), it was on that basis that the mother sought an increase of maintenance to HK$39,737 per month. It has been said that this made it very difficult for the father to enter into any meaningful negotiations with the mother until the situation had been properly clarified – which was not until the first day of trial. Although I accept that in part I am also mindful of the fact that the father also originally took quite an extreme position (see paragraph 14 above).

11. Paragraph 14 states

14.  Nevertheless it should be noted that the father did not pay for the outstanding extracurricular fees for 2011 and 2012 in the sum claimed at that stage of HK$28,198. Nor did he agree to pay for H’s share of the increased rental. As at the date of his 2^nd affidavit on the 26 July 2013 his position was as follows:

33.  Significant legal costs have been incurred because the Respondent feels she has the right to demand money whenever she likes and cites ‘H’s expenses’ as the reason.  She tried to have me committed to prison because I would not give in to her continued demands, even though she was, and remains, clearly in breach of the order.  I have tried to reason with her but she refuses to discuss on a sensible basis.  A full hearing unfortunately appears to be the only way this situation can be resolved once and for all.  I therefore ask that:-

(i) monthly maintenance remain at HKD18,500 per month;

(ii) that maintenance is not linked to any index;

(iii) that an annual sum equal to HKD10,000 be awarded for H’s ECAs;

(iv) that the respondent pays all X tuition fees and all fees related to X activities, ECAs and school trips over and above what would have been paid at ESF;

(v) that the Respondent’s claim for payment for apparent arrears be dismissed given her continued breach;

(vi) there is no order for a life or critical illness policy;

(vii) I do not see there is any need to mirror the Order in Singapore; and

(viii) that costs be awarded in my favour.

As will be seen the eventual award was in excess of this proposal.

Discussion

12. In the father’s counsel’s submission she helpfully sets out the history of offers made and places the “mistake” in its proper context as follows:

15.  The following table sets out the course of the litigation:

23/1/ 2013	Mother’s Summons for Order for Committal taken out shortly after  the Father had paid HK$15,000 for  2013 ECAs.
23/1/ 2013	Notice of Application seeking: (i)  increase in periodical payments to a sum the Court considers just to reflect the increase in rental; (ii)annual payment for ECAs of HK$20,000 with such amount to be increased by 15% each year; (iii)  CPI indexing on maintenance. CPI indexing had not previously been raised with the Father.
7/3/ 2013	Mother’s proposal to enrol H in  X International School and Father’s immediate disagreement.
25/3/ 2013	Agreement from Mother to  withdraw Summons for Committal.
27/3/ 2013	Confirmation that Mother  enrolled H in X.
20/5/2013	Third Affidavit of Mother: (i)  seeking general maintenance increase with amount not specified; (ii)life and critical illness policy; (iii)  increase of 15% pa on ECAs.
27/5/ 2013	Amended Notice of Application  for Ancillary Relief filed seeking: (i)  increase in periodical payment for unspecified amount to reflect increase in monthly rental; (ii)annual periodical payment for ECAs not specified; (iii)  arrears of ECAs; (iv)  both sums to be index linked to CPI.
20/6/ 2013	Re-amended Notice of  Application seeking: (i)  monthly periodical payment varied upwards in an amount deemed fit by the court; (ii)index linking for periodical payment; (iii)  annual periodical payment for ECAs, summer camps and all other activities; (iv)  index linking of the annual ECA payments; (v)arrears for ECAs; (vi)  costs.
20/6/ 2013	Fourth Affidavit of Mother confirming H’s expenses as HK$79,474. Affidavit had been filed following Court’s direction to Mother at 6 June hearing; “you will need to just clarify I think exactly what it is that your client is seeking so that everybody is on the same page and we have no surprises later on.” [Transcript Page 9A] Father to be ordered to pay half the cost of school trips, no sum specified
27/8/ 2013	Questionnaires exchanged.
2/10/ 2013	Answers exchanged.
	In response to the request to the Mother to provide a breakdown of H’s asserted expenses of HK$79,474 she said: “The Respondent has already provided details of H’s direct expenses and supporting documents in her latest Form E dated 26 April 2013 and disclosures to date.  As to the increase in expenses between December 2010 and April 2013, as explained above, this reflects inflation and the general increase of costs of items over the last 2 years.” [P3/746]
4/12/ 2013	HWB WP offer [Mother to Father]: (i)  monthly child maintenance of HK$35,000; (ii)ECAs HK$15,000 per annum; (iii)  CPI linking; (iv)  life and critical illness insurance; (v)mother seeks HK$320,000 to her costs.	1
5/12/ 2013	Father’s open offer of settlement: Based on Form E figures: (i)  monthly child maintenance of HK$23,000; (ii)ECAs HK$15,000 per annum; (iii)  1% increase pa on child maintenance sum; (iv)  no order as to costs; (v)parties be released from Recital R undertakings.
11/12/ 2013	Mother’s rejection of Father’s offer of settlement for reason that “it does not provide adequately for your client’s contribution towards the expenses of his son.”
14/1/ 2014	W-HWB WP offer [Father to Mother] : (i)  monthly child maintenance of HK$23,000; (ii)ECAs HK$20,000 per annum; (iii)  1% increase pa on child maintenance sum; (iv)  lump sum ECA “arrears” HK$28,198; (v)no order as to costs.
17/1// 2014	HWB-W [Mother to Father] without prejudice save as to costs letter confirming calculation error.
20/1/2014	W-HWB [Father to Mother] open letter asking if there are errors in Mother’s evidence. Open offer of 5 December 2013 suspended pending review of Mother’s evidence.
	WP offer of 14 January 2014 suspended for acceptance pending review of Mother’s evidence.
22/1/ 2014	HWB-W confirming “no errors in our client’s evidence”. Error in figures said to be “an error in a calculation in without prejudice correspondence which has been rectified within our subsequent without prejudice correspondence”
	HWB-W “There has been no error “in the preparation of our client’s case”, only an error in the calculation of H’s total costs in our without prejudice letter of 4th December 2013.”
27/1/ 2014	W-HWB requesting detailed review of Mother’s evidence. “We have undertaken a review of your client’s evidence and it appears to us that there is a significant error in what your client has asserted to be H’s maintenance throughout her evidence and ultimately being relied upon as the amount of maintenance she is seeking in this variation application”.
29/1/ 2014	HWB-WP offer [Mother to Father]: (i)  monthly child maintenance of HK$28,000; (ii)ECAs HK$20,000 per annum; (iii)  index linking; (iv)  lump sum ECA “arrears” of HK$28,363; (v)school trips and camps split 50-50. “parties to correspond with each other ahead of every school trip and that each party’s consent is not unreasonable withheld.” (vi)  mother seeks a contribution to her costs on the basis that hers had been “a simple and very modest proposal”.
4/2/ 2014	HWB-W [Mother to father] letter confirming errors in Schedule of Expenses at P2/320.
5/2/2014	W-HWB letter addressing evidentiary matters and confirming extension of counsel’s brief to 6 February 2014. Revised offer of: (i)  monthly child maintenance of HK$22,000; (ii)ECAs HK$15,000 per annum; (iii)  1% inflationary rise; (iv)  ECA “arrears” HK$28,363; (v)costs to be “discussed in detail once all other matters have been resolved”.
6/2/ 2014	HWB-W [Mother to Father] Open offer: (i)  monthly child maintenance of HK$28,560; (ii)ECAs HK$20,000 per annum; (iii)  index linking; (iv)  lump sum ECA “arrears” HK$28,363; (v)school trips and Camps split 50-50 “our client and your client will need to consult”; (vi)  mother seeks a contribution to her costs.
7/2/ 2014	Delivery of Father’s counsel’s brief of HK$160,000.
7/2/ 2014	W-HWB [Father to Mother] Noting formula errors in P2/320 of double counting of credit card expenses.
11/2/2014	W-HWB letter chasing reply re formula errors.
12/2/2014	HWB-W Confirmation of formula errors but reaching a wrong calculation as to the extent of the credit card error.
12/2/ 2014	W-HWB pointing out errors in calculation of double counting of credit cards.
13/2/2014	first day of trial; in the afternoon the Mother produced a “final” version of spreadsheet R.1 showing 50% of expenses for H at HK$23,766 pm inclusive of holidays.
13-14/2/2014	first half of hearing with Mother giving evidence she seeks $26,000 per month as maintenance. as said by the learned Judge “But why 26 and not 30? I mean, why?” [Transcript 64B]
20/2/ 2014	W-HWB [Father to Mother] WP offer: (i)  monthly child maintenance of HK$23,000; (ii)ECAs HK$20,000 per annum; (iii)  inflationary rise at 1% on maintenance; (iv)  lump sum ECA “arrears” HK$28,363; (v)Father will obtain life and critical illness insurance cover; (vi)  costs to be argued;
5/3/ 2014	HWB-W [Mother to Father] offer: (i)  monthly child maintenance of HK$23,000; (ii)backdating to 19 April 2013; (iii)  Rent to increase with actual rent and maintenance with HKCPI; (iv)  ECAs HK$20,000 per annum; (v)50% contribution to school camps and trips; (vi)  backdated “arrears” HK$28,363 and HK$1,900; (vii)  Mother seeks HK$500,000 towards her costs.
17/4/ 2014	W-HWB WP [Father to Mother] offer: (i)  monthly child maintenance of HK$23,000; (ii)ECAs HK$20,000 per annum; (iii)  backdated “arrears” HK$28,363 and HK$1,900; (iv)  Father will obtain life and critical illness insurance cover; (v)inflationary rise at 1% on maintenance; (vi)  costs to be argued.
13/5/2014	W-HWB [Father to Mother] chasing a response to offer of 17 April 2014.
21/5/ 2014	HWB-W [Mother to father] WP offer: (i)  monthly child maintenance of HK$23,000; (ii)backdating to 1 May 2013; (iii)  ECAs Hk$20,000 per annum; (iv)  backdated “arrears” HK$28,363 and HK$1,900; (v)school trips shared 50-50 by “discussion and agreement”; (vi)  index linking; (vii)  Father to take out Life policy with Mother named as one of the trustees.  Her father and brother will be trustees of her own policy, not the Father; (viii)  no order as to costs if everything is agreed.
22 /5/2014	W-HWB-[Husband to Wife]WP offer: (i)  monthly child maintenance of HK$23,000; (ii)backdating to 1 March 2014; (iii)  ECAs HK$20,000 per annum, but no agreement to “discuss and agree” extra school trips; (iv)  inflationary rise at 1% on maintenance; (v)backdated “arrears”; HK$28,363 and HK$1,900; (vi)  life insurance policies to be on a mutual basis as to naming of trustees/beneficiaries; (vii)  no order as to costs.
6/6/ 2014	W-HWB chasing a response to offer of 22 May 2014.
6/6/2014	HWB-W Mother been sick; will reply by 9th June.
9/6/2014	HWB-W [Wife to Husband] Open offer: (i)  monthly child maintenance of HK$25,000; (ii)backdating to 1 May 2013; (iii)  ECAs HK$20,000 per annum; (iv)  backdated “arrears” HK$28,363 and HK$1,900; (v)undertaking to pay half of trips and camps to be agreed in writing agreement not to be unreasonably withheld; (vi)  index linking on HK Composite CPI; (vii)  life insurance policy to cover maintenance and education, with Mother named as one trustee.  No mutuality offered.  Basis as to naming of trustees/beneficiaries; (viii)  no order as to costs.
16/6/2014	W-HWB [Husband to Wife] again chasing a response to WP letters of 22 May and 6 June 2014 and ultimately no response was ever given to these letters.
16/6/2014	W-HWB: reiterating that the Father will not accept or give an undertaking to pay half of “H’s school camps and trips with such trips to be agreed in writing and such agreement not to be unreasonably withheld” given the difficulty the Recital R undertaking had caused the parties.  Insistence on including this made it impossible for the Father to accept the Mother’s offer.   It was noted that the Mother was continuing to seek “a child maintenance amount which simply cannot be justified by the expenses she incurs for H”.
25/6/2014	W-HWB: re insurance, seeking mutual agreement to name the other party as trustee.
26/6/ 2014	HWB-W: no agreement as to trustees for the life insurance.
26/6/2014	W-HWB [Husband to Wife] Open offer: (i)  monthly child maintenance of HK$23,000 backdated to 1 March 2014; (ii)ECAs HK$30,000 per annum; (iii)  backdated “arrears” HK$28,363 and HK$1,900; (iv)  inflationary rise at 1% on maintenance; (v)Father will obtain life and critical illness insurance cover on mutual basis; (vi)  costs.
26-27/6/ 2014	Second part of hearing.

13. At the end of the day I made an order in the following terms:

  The order

47.  Taking into account all of the above I will therefore make an order as follows:-

  AND UPON both the Petitioner and the Respondent each undertaking to each other and the court to take out a life and critical illness insurance policy on themselves with H as the beneficiary.

IT IS ORDERED THAT

1) The parties shall be released from their undertakings given in paragraphs R of the court order dated the 9 March 2011. Further the undertaking in paragraph P shall be amended so that the father shall be responsible for 50% of the equivalent of the ESF’s school fees on an annual basis to be paid as a contribution towards H’s school fees either at X School or at any other school that H shall attend until he ceases his secondary school education.

2) Order 3 contained in the court order dated the 9 March 2011 shall be varied to the extent that the periodical payments order for H shall be varied up from HK$18,500 per month to HK$24,000 per month with effect from the 1 May 2013 such sum to be paid until H shall attain the age of 18 years or completes his first degree whichever is the later or until further order, such sum to be increased by 1% each annum on the 1 September each year commencing on the 1 September 2015.

3) Further the Petitioner shall pay to the Respondent the capitalized sum of HK$35,000 per annum as an additional periodical payment to cover all extracurricular activities, extra tuition fees, school camps and other trips, such sum to be paid on the 1 September of each year with effect from the 1 September 2014 and thereafter to be paid on the 1 September each year until H shall attain the age of 18 years or completes his first degree whichever is the later or until further order such sum to be increased by 1% each annum on the 1 September each year commencing on the 1 September 2015.

4) The Petitioner shall in addition pay to the Respondent the sum of HK$30,263 on the 1 September 2014 being the agreed sum for the arrears for previous extracurricular activities undertaken by H.

5) Costs shall be reserved for argument. In the first instance both parties shall file and mutually exchange a written submission on costs within the next 42 days. Leave be given for each party to file and serve a submission in reply if necessary within 14 days thereafter. Reference may be made to the closing submissions already filed.

14. Thus it seems to me that the litigation actually falls into three periods (and not five as suggested by the father’s counsel) namely 1) the period from the start of the proceedings on the 23 January 2013 to the 20 June 2013 – when the mother made her “mistake”, 2) the second period from the 21 June 2013 to 13 February 2014 – which was the first day of trial when the “mistake” was finally clarified and 3) the third period which covers both tranches of the trial and the adjournment period during which the parties attempted to negotiate a final settlement. As this is not a summary assessment of costs, and in the absence of any agreement as to quantum, it is anticipated that the parties’ costs will need to be taxed. Therefore I will not comment on the actual figures provided by husband’s counsel in her submission.   

1)  Period from the 23 January 2013 – 20 June 2013

15. I should say at the outset that I accept that the mother was perfectly entitled to issue proceedings given the rather uncompromising attitude of the husband and the inability of the parties to come to terms. I do not intend to go into the background in any great detail, other than as set out above, or to otherwise lay blame entirely at either party’s door. My analysis of the situation remains as set out in paragraphs 1- 8 of the judgment as replicated in paragraph 2 of this Ruling as set out above. It is suggested by the father that he should have 1/3 of his costs for this period of time because he was ultimately successful on the consumer price index point. With respect however I do not think it is useful to simply highlight one aspect of the case at this early stage. The mother’s request in this respect was part of a package. Infact there were no offers of settlement made by either side post the litigation being commenced until the mother’s without prejudice offer of the 4 December 2013. The mother for her part says quite generally that she should have her costs.

16. Consequently it seems to me that the most appropriate order for the first period is that costs shall be to the mother to be taxed on a party and party basis if not agreed.

2)  Period from the 21 June 2013 to 13 February 2014   

17. In the mother’s fourth affidavit of the 20 June 2013 she stated that H’s expenses were HK$79,474 per month. This was ultimately shown to be patently wrong. Although this was queried by the father in a questionnaire the “mistake” was not acknowledged and the situation was not finally clarified until the first day of trial. The mother attempted to gloss over this during her cross examination and pointed out that it was obvious that this had been a “mistake” and that all of the supporting documentation had been provided so that this should have been clear. With respect it was for the mother to make her case and not for the husband to second guess it.

18. The father argues that this “mistake” made it impossible to negotiate a settlement. I accept that up to a point. Other difficulties included the husband’s lack of flexibility with respect to Recital R and H’s ECA’s. It is also clear that by the time that the trial started there was no semblance of trust or goodwill left between the parties.

19. In such circumstances I will order that the mother shall pay the father’s costs for this period of time, on a party and party basis to be taxed if not agreed. The father has suggested that he should have his costs on an indemnity basis. I do not agree that the “mistake” falls into that category of case where indemnity costs are justified. It seems to me that the “mistake” although very unfortunate was a genuine one.  

3)  The third period from the 14 February 2014 to date  

20. At the end of the day neither party was entirely successful in their without prejudice or open offers. The father’s final offer was very close to the court’s judgment – albeit given that it only came to the mother’s attention on the first day of the second tranche of the trial – it came into that rather unfortunate category of offers, i.e. those which came too late to be truly effective. The father complains in his letter of the 26 June that the mother was refusing to negotiate. He said:

We have been instructed to withdraw our client’s offer of settlement contained in our WP letter dated 22 May 2014.

There was no clarity on whether or not that offer of settlement was accepted by your client until yesterday.  We chased a reply under our letter dated 6 June 2014 and you wrote back on the same day saying that you were continuing to take instructions.  However, some time then passed and we still did not have a reply to the without prejudice correspondence and we chased a reply again under our letter dated 16 June 2014.  You responded only as of yesterday on 25 June 2014 saying that your client will rely on her offer contained in your letter dated 21 May 2014.  We proceeded to write to you with our client’s open offer of settlement thereafter sent today 26 June 2014.  We proceeded to write to you with our client’s open offer of settlement thereafter sent today 26 June 2014.  To round matters off, we confirm that the without prejudice offer is now withdrawn.

21. Thus the offers on the table going into the second tranche of trial were as follows:

9 June 2014 – Wife’s open letter of offer:

We refer to the forthcoming resumed hearing in respect of our client’s application for payment of arrears and variation of maintenance for H.

We are instructed to put on an open basis our client’s offer having considered the transcript of the hearing held on 13^th and 14^th February 2014.

Our client’s open offer is as follows:

1. Monthly maintenance for H in the sum of HK$35,000 backdated to 1^st May 2013 (which is the first of the month after our client filed her Form E).

Our client gave evidence on the witness stand as to specific sums which were additional to the schedule of expenses attached to her Form E, which schedule was corrected during oral evidence to remove some duplicated credit card expenses.  Some of the additional expenses referred to in her oral evidence related to lunch payments for H at HK$2,500 per term (page 67J) as well as the “homework boy” at HK$1,400 per month during term time. (page 67T).

In her oral evidence our client pointed out that the expenses listed in the schedule to her Form E were substantially out of date, did not totally reflect the expenses of a growing 9 year old son and did not include multiple expenses simply met from cash with no receipts.

2. A sum of extra-curricular payments of HK$20,000 per annum commencing in January 2014.

3. Arrears of ECA expenses in the sum of HK$28,363 for the years 2011 and 2012 and HK$1,900 for the year 2013.

4. An undertaking to pay half of H’s school camps and trips, such trips to be agreed in writing and agreement not to be unreasonably withheld.

5. Index linking of the maintenance sum on the anniversary of the order made in these proceedings in line with the Hong Kong Composite CPI.

6. A life insurance policy for the benefit of H which covers all of your client’s maintenance and education obligations until H completes his full time education.  This sum can be a declining sum each year, but should cover critical illness and the trustee of such a policy for the benefit of H must include persons who are directly related to H together with our client who naturally shall be responsible for covering H’s expenses.

7. Our client continues to be disappointed by your client’s approach to his lack of contribution towards the costs of H’s current education, especially in light of the evident success of H’s move to X International School and the unquestionable benefits for his overall education and development.  This lack of willingness to pay just half of his son’s education costs is even more disappointing given your client’s ongoing refusal to visit his son regularly or make any holiday arrangements. She will therefore reluctantly accept the continued contribution of half of the equivalent ESF tuition fees towards the education costs of H.

Under this proposal the total monthly contribution by your client for H’s expenses, exclusive of education costs, but inclusive of life insurance and school trips is likely to amount to less than HK$30,000 per month.

This is a very small percentage of your client’s monthly income and is by no means a large sum for the 9 year old child of two high earning professional parents, paid to the parent who is sole carer and with whom the child lives.

If your client accepts this offer in its entirety, then our client is prepared to seek no order as to costs in order to finalise this matter without the large of expense of going back to court for two days.  The extent of costs incurred is wholly disproportionate to the claims she has made and would have been avoided entirely had your client met his obligations under the original order.

The offer shall remain open until close of business on 12^th June 2014.  For the avoidance of doubt she will be claiming her full costs if the above offer does not settle matters between them.

Your client has been in default in respect of his obligations dating back to 2011 and we repeat, none of the above terms of settlement are onerous for your client in light of his earnings and the limited amount of time he spends with his son (this we are instructed is just 3 visits thus far in 2014).

22. The last without prejudice offer written by the father prior to that of the 26 June was as set out in the open letter dated the 16 June 2014. This states as follows:

Thank you for your open letter dated 9 June 2014.

As is stated in your open letter, your client is making an offer having considered the transcript of her evidence given on 13 and 14 February 2014.  We fail to see any merit in your client making an offer of settlement based on the evidence she gave in the witness box as it is self serving.  Our client will reply upon the evidence which your client has filed in these proceedings supporting the expenses for H.  Nonetheless, we make specific comments to the matters raised in your correspondence set out below.

We consider it is critical to make the point that our client will in no way accept an undertaking, or give an undertaking, to pay half of ‘H’s school camps and trips with such trips to be agreed in writing and agreement not to be unreasonably withheld’.  We are surprised that your client is making such a proposal as it is that undertaking given by each party in Recital R of the Order dated 9 March 2011 which has caused the most difficulty between the parties and is the thrust of your client’s application (as amended) which is before the Court.  The fact that your client is continuing to include this as part of her proposal for settlement at this stage of the proceedings is one of the significant reasons for why your client’s proposal for settlement makes it absolutely impossible for our client to accept it.  The mere fact that she is making such a proposal as a condition of her offer of settlement, means our client has no option other than to continue with the proceedings including incurring the ongoing costs of litigation.

Given that your client seeks to proceed with seeking a child maintenance amount which simply cannot be justified by the expenses she incurs for H, we are concerned as to your client’s true motivation for continuing with these proceedings.  In this context paragraph 7 of your letter makes it abundantly clear that your client is seeking additional financing over and above the true expenses for H as a contribution to the school fees she incurs for H at X International School.  Your client has preferred an undertaking in these proceedings to meet 100% of the X International School fees less our client’s 50% share of the ESF school fees.  It is now wrong of your client to seek to claw back these higher school fees under the guise of child maintenance.  It is a matter for your client if she chooses to continue in the litigation in this manner as ultimately there may be cost sanctions made against your client and in favour of our client.  Such costs sanctions will be in addition to the costs relating to the two calculation errors that were detected in your client’s evidence.

To be abundantly clear, your client’s open offer of settlement is not accepted by our client.

23. Thus although the parties came very close neither could be said to have entirely won nor lost. I will therefore make an order that there be no order as to costs for this period of time. There shall be certificate for counsel.

Miscellaneous matters

24. Given this Ruling and for the avoidance of doubt, notwithstanding the fact that the issue of costs has been dealt with on paper without the necessity for a further court hearing, there shall be no order as to costs with respect to the costs argument.

25. In so far as the reserved costs are concerned, to the extent that they have not been included in the second period referred to above and for the avoidance of doubt, it is ordered that the costs be to the husband to be taxed on a party and party basis, if not agreed.