MCYP v. CWYW

CAMP 444/2022

[2022] HKCA 1891

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

MISCELLANEOUS PROCEEDINGS NO 444 OF 2022

(ON AN INTENDED APPEAL FROM FCMC NO 11432 OF 2018)

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JUDGMENT

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Hon Yuen JA (giving the Judgment of the Court):

1.  On 26 October 2022, the Petitioner (for convenience, hereinafter referred to as “the Husband”) filed a summons (“the Summons”) in this court making:

(1)  a renewed application for leave to appeal the decision of Deputy District Judge R. Chow (“the Judge”) given on 12 August 2022 (“the Decision”) ordering him to provide litigation funding to the Respondent (“the Wife”), and

(2)  an application for stay of execution pending the determination of the renewed application for leave and (if leave is granted) the determination of the appeal.

The Judge refused the Husband’s application for leave to appeal on 13 October 2022.  Having considered the documents filed by the parties[1], we are of the view that it is appropriate to deal with the application on paper.

Background

2.  The Husband and the Wife were married in 1995.  They are now in their late fifties.  They have 3 children aged between 19 and 25 (“Children”). The two younger children are receiving education overseas.  There is no information in the papers before us whether the eldest is still receiving education.  In the Husband’s Form E (filed on 14 May 2019), it was said that the eldest child would be graduating from university in June 2020 and would be likely to work upon graduation.

3.  The Husband was born into a very wealthy family.  His father died in the 1980s, having established successful businesses in land development and banking.  Apart from one listed company TS Land Development Ltd (“TS Land”) of which the Husband is a director, the family wealth is held in various private companies, including one called KC & Co Ltd (“KC”) of which he is also a director, in which the Husband and his siblings hold shares.  Although the memorandum and articles of KC have not been placed in the application bundle, there appears to be no dispute that the shares are not freely transferable.  In his Form E,[2] the Husband stated that the net value of his assets was HK$370 million, of which HK$304 million was attributable to his 25% shareholding in KC.  

4.  The Husband filed a petition for divorce on 5 September 2018.  A decree nisi was granted on 11 July 2019.

5.  A consent order was made on 30 November 2018 (“the Consent Order”).  Pursuant to this Order, the Husband shall pay the Wife maintenance pending suit (“MPS”) at HK$120,000 per month [§1]; and he also gave the following undertakings regarding payments (there are other undertakings providing for the Wife’s use of an overseas property [Recital F] and the matrimonial home in Hong Kong [Recital G], with domestic helpers and drivers [Recital H]):

-   to pay the education and living expenses of the Children [Recital C]; 

-   to directly settle credit card expenses for the Children up to a maximum of HK$60,000 per month [Recital D];

-   to directly pay expenses for 11 flights a year on first class and 5-star hotel accommodation for the Wife [Recital E];

-   to directly settle Chinese medicine and consultation fees for the Wife up to a maximum of HK$90,000 per month for 12 months [Recital I];

-   to directly settle credit card expenses for the Wife up to a maximum of HK$300,000 per month [Recital (J)]; and

-   to directly settle the Wife’s reasonable expenses at 5 clubs [Recital K].

In relation to the above, it would be noted that the Husband’s Answer (filed on 21 January 2020) to the Wife’s 1^st Questionnaire stated that TS Land and/or KC have provided to the Husband as director’s fringe benefits various benefits including:

-   accommodation (not including the overseas property),

-   domestic helpers and drivers,

-   education allowances for the Children,

-   overseas travelling expenses for the Husband and his family,

-   medical expenses and

-   club expenses.

In other words, the Husband would not have to pay these expenses out of his own pocket.           

6.  As mentioned earlier, the Husband filed his Form E on 14 May 2019. 

7.1.  On 20 August 2021, the Wife took out a summons to apply for an order that from that date until further order or the end of the Financial Dispute Resolution (“FDR”) hearing, the Husband do pay to the Wife a monthly sum of HK$420,000 as “litigation cost allowance to cover the [Wife’s] legal costs”. 

7.2.  The Wife’s case was that she was financially dependent on the Husband (which was not disputed), and that she had already incurred, and expected to continue to incur, substantial costs for leading and junior counsel and solicitors (collectively “the lawyers”) and a forensic accountant.  The outstanding costs due to the lawyers and the forensic accountant were approximately HK$600,000 and the following additional costs (totaling HK$5.29 million) were estimated:

-   General Handling (lawyers): HK$800,000;

-   Duxbury-calculation related costs (lawyers and accountant): HK$1 million;

-   Companies’ valuation, and discovery and third party discovery applications (lawyers and accountant): HK$1.65 million;

-   Litigation funding application (lawyers): HK$840,000;

-   FDR Hearing (lawyers): HK$1 million.

The Wife’s estimate therefore was that another HK$5.89 million would be incurred up to the end of the FDR hearing.  We would add as a matter of completeness that it appears from the Judge’s decision refusing leave [§35] that since the date of the Decision, the discovery applications have been heard, and appellate proceedings are under way.

8.  The Husband’s case was that the bulk of his assets consists of shareholdings in private family companies which restrict the transfer of shares to non-family members.  Pre-petition, he had limited and manageable debts, but post-petition the family has been living far beyond their means – “in part due to litigation costs but also in part due to the [Wife’s] extravagant overspending and litigation strategy” (Husband’s Skeleton for Leave to Appeal, §7).  He had been relying on loans from KC, but it has pressed him for repayment.  He also contended that the Wife’s estimate of costs is unreasonably high.

The Judge’s Decision

9.  The Judge noted that the litigation funding application was not opposed by the Husband on the ground that the Wife could afford her legal costs (§40).  He identified two issues for determination of the application: (1) the Husband’s ability to pay and (2) the reasonable amount to be ordered (§41).

10.  In relation to issue (1),

-   the Judge was of the view that the concern from KC about the Husband’s ongoing financial liabilities was just “a gesture” (§57), and that as KC was a family company closely connected to the Husband, it would keep on financing him (§§58-59);

-   the Judge also found that the Husband had liquid assets in the amount of HK$14.35 million at his disposal.  In his Form E, he said he had securities worth HK$20 million.  He had pledged HK$15 million worth for overdraft facilities with a bank, for which he owed the bank HK$5.65 million.  Accordingly, he had free use of securities worth HK$14.35 million, comprising of HK$5 million worth of unpledged securities, and HK$9.35 million worth for unused facilities.  That sum of HK$14.35 million would be sufficient to cover the Wife’s claim for litigation funding (§51). 

The Judge therefore concluded that the Husband had the ability to pay for the Wife’s litigation funding (§60).

11.  In relation to issue (2), the Judge was satisfied that this is a big-money case (§72).  The Judge was of the view that substantial costs would be inevitable before approaching the FDR hearing, as the parties apparently have very strong differences in their views over the value of the Husband’s assets (§78).  After considering the breakdown of the Wife’s estimate of costs (§§16 and 75), the Judge accepted the estimate as reasonable (§79).  The Wife had assumed that it would take 14 months to the FDR hearing (§10) but the Judge considered that it may take a longer time for the case to reach the FDR hearing (§84).  In the end, the Judge ordered the Husband to pay to the Wife a sum of HK$350,000 per month as litigation costs allowance from the date of the Wife’s summons to the FDR hearing (§86).  This works out at an additional period of (slightly less than) 3 months to get to the FDR hearing (HK$420,000 x 14 months = HK$350,000 x 16.8 months = HK$5,890,000 approximately).  

Intended grounds of appeal

12.  In this application, the Husband advanced the following 6 intended grounds of appeal:

(i)  In view of the Husband’s actual income, expenses and his undertakings under the Consent Order, the Judge wrongly found that the Husband had the financial resources to pay the Respondent HK$350,000 per month as legal costs provision. (“Ground 1”)

(ii)  The evidence did not suggest that the Husband has available to him more than HK$890,000 per month. (“Ground 2”)

(iii)  The Judge was wrong to treat the Husband’s financial resources from KC as being limitless or in effect infinite. (“Ground 3”)

(iv)  The Judge should have estimated the amount required to take the case to the FDR hearing in light of the substantive matters that would be happening before the FDR hearing and the costs of preparing for and attending the FDR hearing. (“Ground 4”)

(v)  The Judge should not have linked the monthly legal costs provision to the date of the FDR hearing when no date had been fixed for it.  If and insofar as the Judge found the Wife’s HK$5.89 million estimate to be the correct amount for legal costs provision up to the FDR hearing, the Order should end after at most 17 months (even if the FDR hearing should happen to take place later than 18 months after the Order). (“Ground 5”)

(vi)  The quantum of another HK$5.89 million (plus HK$4 million already spent) just to take the case to the FDR hearing was grossly too high.  There was no basis set out in the Decision as to what matters the legal costs were intended to cover which would lead to the incurring of such a substantial amount of costs.  The Judge had found no particularly expensive substantive matters that would (collectively or otherwise) cause the Wife to incur such substantial costs before the FDR hearing. (“Ground 6”)

Discussion

13.  The Court is empowered to include legal costs in an order for MPS (KGL v CKY [2003] 2 HKLRD 301, §12). 

14.  Accordingly, the following principles regarding an application for leave to appeal an MPS order, set out in S v C [2021] HKFLR 531 at §7, apply:

“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, at §§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”. (Emphasis added).

15.  Having considered all the documents before us, we are not persuaded that the Husband’s intended appeal meets the high threshold for granting leave to appeal.

16.1.  Under Grounds 1 and 2, the Husband argued that the Judge erred in finding that he had sufficient financial resources when he only had a monthly income of about HK$463,000.

16.2.  In our view, this argument has no merit.  First, it is obvious that the Husband’s reported income of about HK$463,000 per month was not his only resource.  This is clear from the terms of the Consent Order.  Quite apart from the expenses for which the Husband did not need to pay out of his own pocket, the amount the Husband voluntarily agreed to pay (HK$120,000 MPS + HK$300,000 maximum credit card settlement for the Wife’s expenses + HK$60,000 maximum credit card settlement for the Wife’s expenses for the Children) already exceeded the level of his reported income.

16.3.  Secondly, in §§49-51 and 60 of the Decision, the Judge found that the Husband had liquid assets of HK$14.35 million at his disposal (§10 above) which alone would be sufficient to meet the Wife’s claim for litigation funding. There is no appeal by the Husband against this finding by the Judge.

16.4.  In view of the above, we do not agree with the Husband’s submission[3] that there was “no evidential basis” for the Judge to find that the Husband had sufficient resources to pay for the Wife’s legal costs.  Grounds 1 and 2 have no reasonable prospect of success.

17.1.  Ground 3 concerns the Judge’s analysis of the Husband’s ability to borrow from KC.  The Husband complained that the Judge’s finding was not supported by evidence or the principles set out in KEWS v NCHC (2013) 16 HKCFAR 1 on financial assistance.[4] 

17.2.  We do not think it is necessary to delve into this ground, not least when the Husband had not included the evidence in the application bundle, as the finding that the Husband had HK$14.35 million at his personal disposal is sufficient to warrant the litigation funding order.

17.3.  The Husband also submitted that there are “dangers of relying upon ‘financial resources’ at the interlocutory stage”[5] and that the principles set out by the Court of Final Appeal in KEWS on financial assistance provided by third parties are concerned with final ancillary relief where findings on fact on a party’s financial relationship with third parties could be made.  Reliance was placed on the observations of HH Judge Melloy to that effect in HSYC v CLTK (FCMC 11141/2013, 2 April 2014). 

17.4.  In our view, this submission does not take the Husband’s opposition to the Wife’s application any further.  In §§57 and 59 of the Decision, the Judge did not make any finding on the disputed nature of the payments made by KC to the Husband, but was prepared to assume in the Husband’s favour that the payments were in the nature of loans.  In the 10^th edition of Jackson’s Matrimonial Finance at §3.103 (an earlier edition of which was cited by the Judge with approval in §55 of the Decision), it was stated that the ability to “touch resources from which payments could be made” is a relevant consideration in an application for MPS. 

17.5.  Accordingly, we are not satisfied that there is any reasonable prospect of success in Ground 3.  

18.  Grounds 4 to 6 concern the Judge’s findings on the quantum and period of legal costs provision.      

19.1.  In WW v LLN (No 2) [2020] 2 HKLRD 487 at §§45 and 46, this Court explained the evidential requirement regarding the quantum of costs in a litigation funding application as follows:

“45. In our judgment, there should be some flexibility in the evidential requirement on the quantum of costs in a litigation funding application which should be processed summarily. In a case where the claim is for a modest amount and the case is at a relatively early stage, it would be counter-productive to require a detailed breakdown for future costs as this may generate lengthy and costly but fruitless debates on such details. This would go against the summary nature of the exercise and the broad-brush approach that the court should adopt in processing the same. Provided that a judge can be satisfied on the strength of a Form H that the ongoing costs are reasonable and the sums asked for are commensurate with a proportionate scale of the litigation, an award could still be made.

46. On the other hand, a ‘big money case’ in which both sides are represented by counsel of senior standing with high level of fees would merit greater details being given. Even in those cases, breakdowns and details commonly found in a statement of costs for summary assessment should be sufficient. The court would only demand greater details in cases where the amount sought is exorbitant or there are other reasons for a closer examination of the figures put forward by an applicant. …” (Emphasis added).

19.2.  Contrary to the Husband’s contention under Ground 4, the Judge did consider the estimate of legal costs provided by the Wife, and accepted it (§§16 and 75).  There was a breakdown containing items of work (see §7.2 above) with which a family court judge would be familiar.

20.1  As to Ground 5, reading the Decision as a whole, we do not think that the Judge intended to order a monthly sum of HK$350,000 irrespective of however far in the future the actual date of the FDR hearing might turn out to be.  Having found the sum of HK$5.89 million to be reasonable, and having taken the view it could take a longer time for the case to reach the FDR hearing, he reduced the monthly sum sought by the Wife from HK$420,000 to HK$350,000.  There is no reason for reading the order as an open-ended order for the Husband to pay HK$350,000 per month to the Wife as litigation funding (until the end of the FDR hearing) in excess of HK$5.89 million. This is clear from the Judge’s rejection of the Wife’s request of an increase of the funding to HK$6.54 million (§82).  Of course, the inclusion of the words “or further order” in para. 1 of the Order also enables either party to go back to the court if there was a change in circumstances.

20.2.  Insofar as the following is a separate argument, we would reject the Husband’s submission that there is little incentive for the Wife to proceed to the FDR hearing with all due speed[6], as (a) it makes more commercial sense for the Wife to proceed to the final ancillary relief hearing as soon as possible, and (b) in any event, any over-payment of legal costs could be adjusted in the Wife’s award in the ancillary relief order.

21.  Under Ground 6, the Husband criticized the quantum of HK$5.89 million as being “grossly too high”.  This is not a matter for appellate interference in the absence of a palpable error on the part of the Judge.  As shown in the Decision, there was evidence before the Judge to warrant his acceptance of that estimate.  As the Judge observed in §78 of the Decision, there are likely to be substantial disputes between the parties over the valuation of the Husband’s assets, most of which are in the form of shareholding in private companies.  Thus, a sum of HK$1.2 million out of the HK$5.89 million estimate is budgeted for the forensic accountant’s fees.  Further, it is not disputed that both parties had already incurred over HK$3 million each in costs from the date of the Petition to the time of the Wife’s application for litigation funding. The Judge was entitled to take this into account as an indication of the likely level of costs to be maintained by the Wife (Decision §§76 and 77). 

22.  For the above reasons, we do not see a reasonable prospect of success in any of the intended grounds of appeal.  Nor has the Husband shown any serious hardship caused by the Decision.  The Husband’s renewed application for leave to appeal is accordingly dismissed. 

23.  As for the Husband’s application for stay of execution, it is well-established that the filing of an appeal (let alone an application for leave to appeal) is not in itself a ground for a stay of execution. Further there is no evidence in support of any other ground for a stay.  The application for a stay of execution should also be dismissed.

Order

24.  The Husband’s summons for leave to appeal and stay of execution filed on 26 October 2022 is dismissed with an order that he is to pay the Wife’s costs, summarily assessed in the sum of $60,000.  The reduction reflects the fact that this is a renewed application, and the same counsel had been instructed for the application (made on the same grounds) in the Family Court.  Finally, as the application is totally without merit, we make an order pursuant to Order 59 rule 2A(8) that no party may request our determination to be reconsidered at an oral hearing inter partes.