Lwl v. Lmf

FCMC 14442/2012

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES

NUMBER 14442 OF 2012

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__________________

RULING
(Costs of Ancillary Relief)

__________________

1.This is an application by the respondent husband to vary the costs order nisi given by this court on the trial of the ancillary relief.

2.In this Ruling, I continue to adopt the same abbreviations and nomenclatures used previously.  Thus, the petitioner wife will be referred to as “P” and the respondent husband “R”.

3.After a 5-day trial, by a Judgment handed down on 13 April 2015 (“the Judgment”), I gave the following orders in para 104 of the Judgment:

1. The matrimonial home be sold in open market within 6 months of the decree absolute;

2. The proceeds of sale, after deduction of the mortgage payments, all necessary incidental expenses, estate agent commission and legal costs and subject to the 1^st charge of the Director of Legal Aid, shall be divided equally between the petitioner and the respondent in equal shares on clean break basis;

3. The respondent do pay the petitioner periodical payment of $4,800 per month for the maintenance of the child, the first payment to be made on the 3^rd day of the month following the division of the proceeds of sale and thereafter on the 3^rd day of each and every month until the child reaches the age of 18 years or ceases full time education, whichever is the later;

4. There be liberty to apply on the implementation of the sale;

5. The interim maintenance order dated 10 October 2012 for the benefit of the petitioner is discharged forthwith; and

6. The interim maintenance order dated 10 October 2012 for the benefit of the child of the family shall continue until it is replaced by the periodical payment in Paragraph 3 above.

4.The interim maintenance order of 10 October 2012 referred to above was made by consent.  Under the order, R was to pay an interim maintenance to P and the child of the family in the respective sums of $3,500 and $1,800.

5.As for the costs, I gave an order nisi that there be no order as to costs. My reasons are set out in para 105 of the Judgment:

“105. Each party has mixed success in the present proceedings. P has been successful in getting half of the proceeds of sale but has failed in postponing the sale. As for R, in addition to the timing of the sale, he has been successful in resisting P’s claim for maintenance; and I have given a different sum for the child’s maintenance. Thus analyzed, each party has won on some of the issues; it would appear that the proper costs order should be no order as to costs and I so order by way of an order nisi.”

6.This is the order nisi that R, represented by his counsel Ms Yanky Lam, now seeks to vary.  He asks for payment by P of the costs of and incidental to the ancillary relief proceedings including costs previously reserved with certificate for counsel and also the costs of the present application with certificate for counsel.

The Applicable Legal Principles

7.In general terms, apart from children’s cases, the starting point on costs in matrimonial and family proceedings, as they are in civil litigations, remains to be “costs follow the event”:  Order 62, rule 3(2) RHC.

8.Broadly speaking, in the exercise of its discretion in civil cases including matrimonial and family cases, the court will have to take into account, where appropriate in the circumstances, the special matters set out in Order 62, rule 5 of RHC, namely, the underlying objectives set out in Order 1A, rule 1, any offer of contribution, any payment of money into court and the amount of such payment, any written offer made under Order 33, rule 4A(2), any written “without prejudice save as to costs” offer (Calderbank offer), the conduct of the parties, whether a party has succeeded on part of his case, even if he has not been wholly successful; and any admissible offer to settle made by a party, which is drawn to the Court’s attention: see Order 62, rule 5(1)(aa) to (g), RHC.

9.Of particular relevance to ancillary relief proceedings and in the present case is the Calderbank offer made by a party to the other.  It has been commented that a Calderbank offer may be an important and material consideration in the exercise of court’s discretion as regards to costs but the existence of a Calderbank offer should influence but not govern the exercise of court’s discretion.  The proper question to be asked is whether the party to whom offer was made ought reasonably to have accepted the proposal made: Para 22/2/A, Hong Kong Civil Procedure (2015); also W v K and Anor (Costs) [2008] HKFLR 379 at para 13.

10.In the leading case of Gojkovic v Gojkovic [1992] Fam 40 Butler-Sloss LJ stated as follows (at 59E/H):

“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. The need to use all the available money to house the spouse and children of the family may also affect the exercise of the court's discretion. 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 applicant 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.”

11.Locally, as regards the costs in ancillary relief cases, Yuen JA sets out the principles in  L v C, CACV No. 169/2006 (date of judgment:  19 March 2008):

[23] As a matter of law, it is clear that costs are in the court’s discretion. Pointers as to how that discretion should be exercised include the following:

(1) in family cases, as in others, costs should normally follow the event;

(2) however because of the special dynamics of family litigation (eg where the case involved children, or where financial resources were inadequate to meet the needs of both parties, etc.), the discretion may be broader than in civil matters generally (Gojkovic v Gojkovic [1991] 2 FLR 233, F v F (No. 2) [2003] 3 HKLRD 977); …;

(3) the court also retains a discretion to deprive successful litigants of costs under the Elgindata principles (In re Elgindata Ltd (No. 2) [1992] 1 WLR 1207);

(4) where a litigant succeeds on appeal but only on a new point, the court can deprive him of the costs below (Farquharson v Morgan [1894] 1 QB 552) or even order him to pay those costs (Yip Lai Fong v Sin Tung Hing [2004] 3 HKLRD 230), and the court can deprive him of the costs of appeal (Chard v Jervis (1882) 9 QBD 178).

12.Thus, the court has full power to determine by whom and to what extent the costs are to be paid.  The discretion of the court is much wider in family cases and the starting point is more easily displaced than in any other civil proceedings.  In TL v SN  (CACV 196/2009) (19 October 2010), Kwan JA, in her unanimous judgment for the Court of Appeal, reaffirmed that in matrimonial cases, as in other cases, costs should normally follow the event.  More recently in Z v X & C, CACV 166/2011 (8 March 2013), Cheung JA, in para 10 of the judgment, also reaffirmed the court’s approach on costs in ancillary relief application is that costs should follow the event although because of the special dynamics of family litigation, the discretion may be broader than in civil matters generally:  para 10 of the Judgment.

13.In the English case of C v C (Costs : Ancillary Relief) [2004] 1 FLR 291, Charles J having considered all the principles in details, arrived at a practical approach in many cases as follows : -

“[36] A practical approach in many cases is:

(1) To ask who would, or should, have paid the costs if agreement had been reached at an early stage and why this was so. Often this will be reflected in the common ground and the offers made. The answer to this question will often identify who should be regarded as the paying party or the person who should prima facie be liable for costs and thus, in terms of the starting point referred to in Gojkovic v Gojkovic and Another, the event. Also the answer to this may often support the view that up to a certain point prima facie one party should pay the costs of the other.

(2) To identify :

(a) the issues that are not in dispute at trial; and

(b) the issues that have prevented an agreement being reached and placed before the court for its approval and to consider their impact on the question of costs and thus, for example :

(i) their nature and whether the reality is that one party is going to be paying the other or whether there is a division of assets; (ii) the time taken in resolving the disputed issues; and (iii) who won on such issues.

This may strengthen or weaken the starting point referred to in Gojkovic v Gojkovic and Another [1992] Fam 40, sub nom Gojkovic v Gojkovic (No 2) [1991] 2 FLR 233 and will be relevant to the question whether issues and offers made on them should be treated separately when assessing the ability for costs.

(3) Consider the Calderbank offers and therefore apply FPR 1991 r 2.69 to the costs it covers.

(4) Consider the matters referred to in CPR r 44.3 (which include open offers).

(5) Consider how the costs of both parties have been affected by the disputed issues.

(6) Remember that the court has, and is exercising, a broad judicial discretion by applying the rules and earlier judicial guidance.

[37] The above list is not intended to be exhaustive or one that should be applied in all cases. Also there will be overlap between the points listed”.

14.Lastly, as to the approach to be taken, Hartmann J (as he then was) in F v F (No 2) [2003] 3 HKLRD 976 reiterated, in para 22, “the long-established principle that costs are determined not by dividing litigation into quantifiable subjects and figures, like a profit and loss account, but rather by way of overall impression”.

15.I am guided by the above principles.

The Issues at Trial

16.When it came to the trial, the parties’ respective positions were as follows.

17.P asked for the postponed sale of the matrimonial home until the child shall have attained the age of 18 or completed full time education or such other time as agreeable by the parties.  R should continue to be fully responsible to pay all payments of mortgage, charges (if any), management fees, government rent and rates while P would be responsible for utilities charges.  Upon sale, the net proceeds of sale shall be shared equally between them.  In the meantime, R should continue to pay monthly maintenance at the same rate as the interim maintenance, ie $3,500 for P and $1,800 for the child. 

18.On the other hand, R asked for the sale of the matrimonial home within 3 months of the decree absolute at a price of not less than $4,200,000.  The proceeds of sale are to be divided between P and R at the ratio of 30% : 70% on a clean break basis.  He also agreed to pay 50% of the amount of the maintenance as assessed by the court for the child or agreed between the parties. Alternatively, he agreed to pay a monthly maintenance of $2,500.

19.Thus, at trial, the court needed to determine

(1) when the former matrimonial home should be sold;

(2) how the proceeds of sale should be split;

(3) whether R needed to pay any maintenance to P and if yes, the level; and

(4) the amount of maintenance that R had to pay towards the child.

20.As an aid for a larger share of the proceeds, R relied on the loans that he got from his family members for the purchase of the matrimonial home and the recent loans that enabled him to continue to foot his mortgage payments and the interim maintenance.  Ms Lam contended that this was a factor that the court should take into account when considering whether to depart from equal division.  It was because of this contention that the court had to deal with the genuineness of these loans.

21.As regards the maintenance part, the court had to consider whether P has any interest in her parents’ coach renting business and if yes, how much she has been getting out of it.

22.In applying the principle that as a starting point, costs should prima facie follow the event.  The question is who was in reality the successful party?  Or put it in another way, what was the event that caused a 5-day trial?

23.Clearly, R was successful in having the matrimonial home sold now but he failed to obtain a lion’s share of the proceeds.  In the converse, P managed to obtain half of the proceeds.

24.R was also successful in contesting P’s claim for maintenance for herself.  That was because he was able to establish that P had been receiving monies from her parents’ business. 

25.As for the maintenance payable to the child, the court accepted one of his two proposals in this regard:  that he should be responsible for half of the amount of the maintenance as assessed by the court.  The other half obviously would have to be borne by P who, according to my finding, failed to give a full and frank disclosure of her financial resources.  In other words, I agreed that P should be placed on an equal footing with R.  I am aware that Mr Pickavant, for P, submits that the final figure of $4,800 maintenance is only $500 short of the $5,300 total maintenance that P sought; so R was very much on the losing side.  With respect, I do not see it this way.  What is important is the basis of the award and not just the figure in vacuum.  P gets not even a cent for her maintenance.

26.Thus analyzed, looking at the event, it would appear that R is more a winner.  It follows that if R had not gone back to his previous proposal that the proceeds of sale should be divided equally, there is indubitably a compelling case that he should have the costs.  This is a lesson for litigants to learn that they should not lightly go back on their words.

R’s Grounds for His Application

27.Prior to the 1^st Financial Dispute Resolution Hearing (“FDR hearing”) on 2^nd January 2014, R made 2 without prejudice proposals in order to settle the matter.  The first was made on 17 January 2013 (“R’s 1^st Proposal”) and the other was on 20 December 2013 (“R’s 2^nd Proposal”).  Ms Lam submits that P should have accepted either one of the proposals.  If P had she would have been put in the same, if not better, position as she is now under the Judgment.  Ms Lam also relies on P’s failure to give a full and frank disclosure of her financial situation.

28.I will deal with R’s grounds in turn.

R’s 1^st Proposal

29.Shortly after the commencement of the proceedings, the parties came to an agreement regarding the interim maintenance payable by R and that was the order of 10 October 2012 referred to above.

30.The without prejudice negotiations were kicked off by P in December 2012, some 3 months after the commencement of the petition for divorce.  By her solicitors’ letter dated 7 December 2012, P proposed, inter alia, that the entire interest of the matrimonial home be transferred to her absolutely with R to discharge the existing mortgage.  R is also to pay the child periodical maintenance of $10,000 per month and her in nominal sum of $1.00 per annum and that R is to bear all her legal costs.

31.R did not give a corresponding reply to the proposal.  Instead, by a letter dated 17 January 2013, R offered a set of comprehensive settlement terms by way of a draft Consent Summons (“R’s 1^st Proposal”).  The terms are as follows:   

(1) He offered to postpone the sale of the matrimonial home and to allow P and the child to continue to reside there until the child attains the age of 18 or such other time as agreeable between the parties.

(2) He undertook to continue to pay all the instalments of the mortgage, management fees, government rents and rates while P should be responsible for the utility charges. 

(3) Upon the sale in future, the net proceeds of sale of the matrimonial home having deducted the costs and expenses related to the sale and to the property should be shared and divided between the parties in equal shares.  However, before the proceeds of sale are divided, R requires the reimbursement of a sum equivalent to the management fees, government rent and rates and monthly instalments of the mortgage paid by him as from January 2013 up to the date of completion of sale of the matrimonial home.

(4) R would also pay the child’s periodical maintenance in the sum of $500 per month and nominal maintenance of $1 per annum to P.

(5) No order as to costs.

32.In the draft consent summons, R also sought an undertaking from P that unless with his written consent, P shall not allow or cause to allow any person, save and except herself and/or the child of the family, to occupy the matrimonial home.

33.I need to mention that on the same day, there was also another letter by R’s solicitors seeking P’s agreement for the downward adjustment of the interim maintenance from $1,800 to $500 and the cessation of the $3,800 maintenance in her favour, with a nominal maintenance in replacement upon the decree absolute.  In support of his stance, he referred to his worsening financial situation and most importantly, he asserted that P must have other sources of income, whether by employment or receiving financial support from her maiden family; otherwise she would not have been able to sustain her monthly expenses as well as that of the child. 

34.R set a time limit of 14 days for P to reply.  There was however no response. 

35.It has been contended by Ms Lam that R’s 1^st Proposal, which was made just about 3 months after the commencement of the proceedings, was the most generous offer he had made.  It was more generous than the award P has now obtained under the Judgment.  She emphasizes that under the offer, the sale of the matrimonial home is deferred, R agreed to provide a roof for P and the child with his continual discharge of the outstanding mortgage, management fees, government rent and rates which is about $5,000.  Together with the payment of a monthly sum of $500 for the child’s maintenance, it would mean a monthly sum of about $5,500 whereas under the Judgment, after the sale of the matrimonial home, R needs to pay $4,800 for the child’s maintenance only.

36.As said above, P was completely silent on R’s 1^st Proposal at that time.  It was not until 21 April 2015, after the Judgment was handed down and with the threat from R for payment of the costs that P, through her solicitors, set out the reasons why R’s 1^st Proposal and the subsequent 2^nd Proposal were rejected.

37.On R’s 1^st Proposal, P claims that at that time R delayed in his payment of the interim maintenance and was liable to committal proceedings.  Yet R failed to address this issue. 

38.P further complains that by imposing an undertaking that unless with his written consent, she shall not allow or cause to allow any person, save and except herself and/or the child of the family, to occupy the matrimonial home was an unreasonable restriction.  It was an intolerable interference after the divorce with her normal life.

39.Mr Pickavant also argues that the proposal did not provide for a 50/50 split because according to the proposal, R wished to be repaid all the mortgage instalments from January 2013 to mid 2018 upon full payment of the mortgage and additionally all future payments of government rent, rates and management fees.  All these sums are to be reimbursed to R prior to the division of the proceeds.  Mr Pickavant reckons that, assuming that the property is to be sold upon the child reaching the age of 18 in January 2026, a total of about $358,700 would have to be repaid to R upon division.  This is not a real 50/50 division; and in effect at the end of the day, R only needs to pay an extra sum of $500 per month for the child.  Mr Pickavant adds that R’s 1^st Proposal does not come near to providing enough maintenance for the child ($500 per month). 

Discussion

40.It is very easy to be wise after the event.  In my view, if what P says now were her real concerns and she was minded to talk with R, why she did not raise these at that time so that the parties might move forward with the negotiations?  As Ms Lam has rightly pointed out, prior to the present application, P has never ever stated her position or objection.  If P was really genuine about settlement, she should and could have articulated her “reasons” of non-acceptance or “objections” with the same particulars as now stated in the letter dated 21 April 2015.  For these reasons, I have great doubts over the truthfulness of the reasons now proffered by P. 

41.On P’s allegation that R delayed in his interim maintenance and hence was liable for committal, Mr Pickavant accepts that this issue was never raised before trial.  As such, I do not believe this was a reason.  Even if it were, it was merely a small point and should not have prevented P from giving a response.

42.As regards the undertaking, it should be noted that as early as on 10 October 2012 when the consent order regarding interim maintenance was made, P had already given her undertaking that save and except for herself and the child, no third party shall be allowed to stay overnight at the matrimonial home.  Subsequently, in order to allow her domestic helper to stay in the property, upon application she was granted a variation of the undertaking on 28 January 2014 to include the domestic helper as one of the persons being allowed to stay.  In her supporting affirmation, she acknowledged that according to her understanding the undertaking was given for the purpose of keeping other men/potential suitors out from the matrimonial home.  Clearly, P had no difficulty in obtaining a variation of the undertaking and what is most important is that if P had any real concern over the restriction she should have raised it at the time and engaged in constructive negotiation with R.

43.In response to Mr Pickavant’s challenge that it was not a true 50/50 split, Ms Lam seeks to argue that it is justifiable for R to seek a reimbursement of the mortgage payments and the property related expenses before the matrimonial home is eventually sold.  R would be totally deprived of not only the benefit of residing in the property but also the proceeds of the only family asset for a very long period of time.  She also argues that R’s offer of $500 together with payment of the mortgage and property related expenses until at least the mortgage is discharged in 2018 was in reality more or less the amount of $4,800 that the court eventually ordered in respect of the child’s maintenance.  Ms Lam also argues P can always apply for the variation of the maintenance for the child under section 11 of the Matrimonial Proceedings and Property Ordinance, Cap 192 upon the full payment of the mortgage in 2018.

44.Ms Lam’s submission is neatly made but I am not drawn to it.

45.First, R may well think that he has some very good reasons for asking for a deduction but the fact is the split is not a true 50/50 split.  Most importantly, this proposal was a retraction from his previous proposal given in Part 6 of his Form E dated 16 November 2012 in which he agreed to a postponed sale and upon sale, the net proceeds of sale to be shared between the parties equally without any deduction of mortgage payments and property related expenses.  There was no explanation in R’s 1^st Proposal as to why he retracted from his earlier stance. 

46.Secondly, the whole of $4,800 is non-refundable but under R’s 1^st Proposal, only $500 is non-refundable.  If Ms Lam agrees that the mortgage payments and the related property expenses are in essence maintenance then they should not be reimbursable.

47.Thirdly, the variation argument sounds attractive on its face but, as I see it, P will not be without difficulty in such an application in the future.  R never said that he is willing to increase the maintenance in favour of the child when he is free of mortgage.  There is also a likely argument on the part of R, in resisting P’s application that, at the time when she accepted the settlement, the change in circumstance occasioned by the full payment of the mortgage was well anticipated. 

48.For the above reasons, I am not convinced that P ought reasonably to have accepted R’s 1^st Proposal at that time.  That said, what I am convinced is that she should have responded and engaged in serious negotiation with R. 

R’s 2^nd Proposal

49.In the absence of a reply from P, R applied for the downward variation of the interim maintenance, from $5,300 to $800 in total, on 5 March 2013 but the application was quickly withdrawn.

50.It appears there was then a complete silence until 11 months later when P made another proposal on 18 December 2013.  She proposed that R should continue to pay the maintenance of $3,500 and $1,800 (ie according to the interim maintenance order of 10 October 2012), that the sale of the matrimonial home be postponed until the child completes full-time education, that the proceeds of sale be shared equally between the parties and that R should in the meantime continue to pay the mortgage, management fees, government rent and rates of the matrimonial home.

51.Two days later, on 20 December 2013, shortly before the 1^st FDR hearing, there came R’s final and last proposal on the line.  In the letter R explained his poor financial situation and claimed that P had not been frank about her income.  He then proposed the major terms as follows (“R’s 2^nd Proposal”),

(1) Within 28 days upon an order to be made by consent, R shall put up the matrimonial home for sale in consideration of not less than $4,200,000 or such price to be further agreed between the parties or order of the court;

(2) after deduction of the outstanding mortgage, estate agency fees and conveyance costs and expenses, the net proceeds of sale to be distributed between the parties in equal shares;

(3) within 14 days upon an order to be made, P shall at her own expenses vacate herself and the child from the matrimonial home and deliver up vacant possession of the matrimonial home for the purpose of sale; 

(4) after the granting of the decree absolute, R shall pay a monthly maintenance to the child, such amount shall be further agreed between the parties and/or determined by the court; and

(5) no order as to costs on the issue of ancillary relief.

52.Ms Lam draws my attention to R’s warning in his offer that he would invite the court to draw adverse inference against P on her income.  She argues that had P been frank about her financial status, had she given serious thoughts to the offer made by R, the ancillary proceedings could have been avoided at least in December 2013.  The offer was very close to what P gets under the Judgment now:  the sale is not to be postponed, upon the sale the net proceeds are to be distributed equally.  R also agreed to pay the child’s maintenance to be further agreed between the parties and/or determined by the court.  Even though there was no suggestion on the exact figure of the maintenance, R was willing to further negotiate with P and he was willing to be bound by the determination of the court, as what has happened now.  In fact, no time had been taken on the evidence of child’s maintenance during the trial.  However, P made no response at all. 

53.Contrary to his 1^st Proposal, this time R did not set a time limit within which P was to respond or accept.  However, there was never a reply.  As said, P only gave her “reply” after the Judgment.

54.She claims that R’s proposal of selling the matrimonial home within 28 days of the order was an immediate and premature attempt on the part of R to sell the property at an early stage.  R’s proposal would have left undecided the matter of the maintenance of the child to an undetermined future date after the immediate order for sale.  She would have been placed in a vulnerable position in the interim.

55.She elaborates that there were no restrictions to be placed on R as to what he would do with the proceeds of sale.  The permutations of methods that R could have used pending trial to dissipate the sale proceeds and increase expenditure/liabilities were at that stage infinite.  The unrestricted access to his share of the proceeds could have had a catastrophic future effect upon her case if R began to spend and borrow.  She worried that by the time when the court came to determine the quantum of the child’s maintenance, R would have spent most if not all the proceeds. 

56.On that basis, Mr Pickavant argues that the piecemeal proposal of a sale and the later conclusion as to the maintenance was not viable.  The matter of the sale proceeds, assets held, liabilities of parties at various dates were inextricably bound up with the ability to pay maintenance.  Accordingly, it was decided as vital that all financial matters should be dealt with at the same time in order to exclude the possibility of dissipation and financial manipulation. 

57.Also, R’s proposal that P and the child were to move out of the matrimonial home within 14 days of the order was a hostile one and R failed to make any financial provision to enable P to move.  P and the child would have no place to live, in particular, that was during the school term time.

Discussion

58.R set out in details the background and recent development of his financial situation and gave explanations for the immediate sale of the matrimonial home but P never responded.  In my view, if P had these genuine concerns, there is no reason why she did not raise them.

59.In response to P’s complaint about the immediate sale of the matrimonial home prior to the finalization of the maintenance in favour of the child, Ms Lam argues that even if agreement is reached between the parties on the sale of the matrimonial home and the share of the sale proceeds but leaving the child maintenance to be determined by the court in due course, the sale would not take effect until the child maintenance is finally heard and determined by the court and an order is made accordingly in which a section 18 declaration would be made.  P, as the petitioner, would then be in a position to apply for a decree absolute; and the sale could only take place after the issuance of the decree absolute.

60.Clearly, Ms Lam is referring to section 25(1) of the Matrimonial Proceedings and Property Ordinance, Cap 192.  Pursuant to section 25, the court is empowered to make an order for sale after the decree nisi has been issued but the sale shall not take effect before the decree absolute. 

61.Though I do not wish to disparage Ms Lam’s argument, it seems to me clear that the wording of R’s proposal has betrayed her.  The proposal simply does not sit well with the legislative provision.  In the present case, the decree nisi was only issued on 30 April 2014.  Thus, the court simply was not empowered to make a consent order that the matrimonial home was to be sold within 28 days back in December 2013.  There is clearly an ambiguity in respect of the wording here.  I think what caused this is simple. R’s legal representative was either simply ignorant of section 25 or forgot it entirely.  I have no doubt that what R had in mind was an immediate sale which could not be done unless by way of an agreement of the parties and that was what R sought at that time. 

62.That said, I do not consider that the ambiguity could have prevented the parties from engaging in sensible negotiation.  A relating point is the complaint that P has regarding the shortness of time within which P and the child would have to move out the matrimonial home. 

63.R’s proposal is clear:  there should not be a postponed sale until the child reaches 18 years old because of R’s deteriorating financial situation.  If this was agreed the number of days or months allowed for the sale or in packing up is merely a logistic matter and should not have deterred the parties to proceed further in order to reach a sensible settlement.  P could have easily written to R giving a reply.  On this point, it is pertinent for me to refer to what Butler-Sloss LJ said, again, in Gojokovic v Gojokovic, at 59B/D,

“It is therefore clear that Calderbank offers require to have teeth in order for them to be effective. This is recognised by the requirement in Ord. 62, r. 9 (and the equivalent Ord. 11, r. 10 of the County Court Rules 1981 (S.I. 1981 No. 1687 (L.20)), as amended, for the court to take account of Calderbank offers, and by analogy open offers, in exercising its discretion as to costs. There are certain preconditions. Both parties must make full and frank disclosure of all relevant assets, and put their cards on the table. Thereafter the respondent to an application must make a serious offer worthy of consideration. If he does so, then it is incumbent on the applicant to accept or reject the offer and, if the latter, to make her/his position clear and indicate in figures what she/he is asking for (a counter-offer). It is incumbent on both parties to negotiate if possible and at least to make the attempt to settle the case. This can be done either by open offers or by Calderbank offers, both adopted by the husband in this case. It is a matter for the parties which procedure they prefer. There is a very wide discretion in the court in awarding costs, and as Ormrod L.J. said in McDonnell v. McDonnell [1977] 1 W.L.R. 34, 38, the Calderbank offer should influence but not govern the exercise of discretion.”

64.Hartmann JA (as he then was) also had this to say in EJB v CJB [2011] 5 HKLRD 510, at para 130,

“130. As I understand it, the approach today is that, unless the parties are of the reasonable view that they do not have sufficient information available to them to enter into negotiations, they are under an obligation to explore settlement and to do so in a constructive manner. Unless attempts are made to settle, potentially avoidable litigation becomes inevitable. In family litigation there are two almost inevitable results. First, ill will between the parties is heightened. If there are children of the marriage this can have profoundly deleterious consequences. Second, except in big money cases – and this was not a big money case – there will be a significant drain on the joint matrimonial estate, both parties, directly or indirectly, being the losers.”

65.In my view, R put his cards on the table and made a serious offer worthy of consideration. It should be noted that apart from the explanations and reasons for his without prejudice offer set out in the letter, by then R had long disclosed his earnings in his Form E dated 16 November 2012.  It was never the suggestion of P that she had no idea whatsoever about R’s earnings and the amounts that he was paying in respect of the matrimonial home.  It appears to me that all along P took a somewhat unrealistic view on the parties’ financial situation.  With these authorities, I am sure that the court is entitled to take P’s failure to response and to engage in negotiation into consideration. 

66.Mr Pickavant also contends that there was a reasonable concern that R sought to have $500,000 repaid from the proceeds.  With respect, I do not find any substance in the argument.  That part of the proposal was simply that, “after deduction of the outstanding mortgage, estate agency fees and conveyance costs and expenses, the net proceeds of sale to be distributed between the parties in equal shares”.  I agree that reading the phrase in the context, there is nothing to suggest that R proposed to deduct $500,000 from the sale proceeds before division.  Ultimately, the question is why she did not raise it?  For this reason, I am against P on this point.

67.P’s alleged concern over dissipation of assets by R is difficult to understand.  P just repeatedly refers to R’s taking out a lease of $10,500 per month for his accommodation as an example.  Ms Lam is right to point out that there is no restriction on the use of the proceeds on the part of R or indeed on both parties in the Judgment.  If this really happens and if this is relevant at all when it comes to the determination of the maintenance, there is nothing to prevent P from raising the issue and seeking an adding-back to R’s assets.  In my view, it is perfectly viable for the parties to leave the quantum of the child’s maintenance to be determined by the court.  For this reason, I am also against P on this point.

68.Contrary to what P now asserts, I do not accept the complaints were her concerns at the time.  All along, she was minded either to have the whole of the matrimonial home or to have a postponed sale with no room for negotiation.  I am sure her complaints are all her recent fabrications.

69.Having found against P’s assertions and given what P obtains under the Judgment is very close to R’s 2^nd Proposal, there is a strong case on the part of R to seek costs against P.  I accept that R’s 2^nd Proposal does not exactly accord with the Judgment but after all, Calderbank offer only influence but not govern.

Other Grounds

Failure to Give Full and Frank Disclosure

70.As a final point, Ms Lam emphasizes on the fact that P was found to have failed to give a full and frank disclosure of her financial situation.  Due to her failure, R inevitably had to incur much costs to seek redress:  ML v JL (No 2) (Stellar Contribution) [2009] HKFLR 122.

71.As I have mentioned above, R alluded to this issue as early as on 17 January 2013.  In his affirmation dated 5 March 2013 in support of his application for a downward adjustment of the interim maintenance, R also deposed to the fact that since P’s monthly expenses of about $18,573 far exceeded her monthly income, he had reasonable ground to believe that P had failed to fully disclose her source of income and might have other means to support herself and the son.  Despite these warnings, P maintained a positive case that she had no income other than earnings from being a part-time waitress.  Substantial time and costs were incurred to deal with P’s ‘hidden’ incomes and her true financial resources. Questionnaires were served on 3 separate occasions essentially on the suspicious and unexplained bank entries of P which turned out to be her incomes from the coach renting business.  P had not been honest resulting in substantial time and costs being taken up in investigating her financial resources.

72.This is certainly a valid factor that the court may take into account and to which P has no defence.

Honours Even

73.Mr Pickavant argues that R’s proposals do not come close to the final court determination.  The final order for the sale of the former matrimonial home which provides her in the future with about $2,100,000 with which she may find rental accommodation and thereafter consider a purchase of property is an honours even point.  Whether to sell forthwith or to keep the property on trust to sell later when the child is grown up is often referred to as a balanced point. The real question to be determined was the share of the proceeds that each party would receive.  He refers me to HK v BD, CACV 252/2009 (date of judgment:  15 October 2010).

74.Mr Pickavant also relies on the fact that R lied about his absence of knowledge of P’s mainland property as a conduct that the court should take into consideration.  He refers to Order 62, rule 5(1)(e) and (2) of RHC.  He submits that it is a clear finding on a deliberate and calculated last minute lie that is proven to be untrue.

75.P also argues that the $4,800 maintenance that R is ordered to pay now is only $500 less than the total of $5,300 he agreed to pay for both of them in the interim.  R should, in practical term, have little complaint.  I do not agree. An interim maintenance is given on a broad-brush basis and is subject to adjustment.  Most importantly, according to my finding, R actually did not have the ability to pay $5,300 if he also had to bear the mortgage and the property related expenses.

76.As I have analysed in para 26 above, my conclusion is that R is more successful in the trial.  The mainland property issue was an 11^th hour application. It only took up a small portion of time during trial and in any event, it is not relevant to how the matrimonial home is to be shared.  I accept that R’s taking issue on this point should be condemned but it equally applies to P, on an even much stronger term, for failing to give a full and frank disclosure of her earnings.  I also agree with Ms Lam that P’s own proposals were tainted by the non-disclosure of her financial information.

Factual Issues in Trial

77.One of the fundamental barriers that stood in the way of a settlement was P’s insistence that the sale of the matrimonial home had to be postponed.  Of course, another barrier that led to the trial – but not before - was R’s assertion that this was a proper case to depart from equal division. 

78.P’s interest in the coach renting business dominated the scene when she was cross-examined by Ms Lam.  At the end, I found in favour of R.  I found that P has been receiving money from her parents by assisting them in their business (Para 39 of the Judgment).  I found that P should be able to stand on her own feet given that all along she has been receiving income or profit out of the coach renting business (Para 63 of the Judgment).  I found that P failed to give a full and frank disclosure of her hidden financial resources and that I drew an adverse inference against her that her total earnings are sufficient to cover her and the child’s expenses.  

79.The financial needs of P and the child were not subject to any challenge.  That was a sensible approach taken by R.  The bulk of the time was on P’s coach renting business when she was in the witness box for 2 days. 

80.R was also in the witness box for 2 days.  He met with half success in respect of his debts in that I found it was necessary for him to raise the recent loans of about $345,806 but I did not find in his favour the loans he obtained for the purpose of purchasing the matrimonial home.  I too did not accept P’s contention that she owed her parents $96,000.

Conclusion and Orders

81.Having dealt with all the points raised by the parties, what should be the proper costs order to be made?

82.I have reached the conclusion that R was more successful in the trial, that P’s failure to give a full and frank disclosure of her financial situation is a relevant factor, that P’s failure to response and to attempt to negotiate is also a relevant factor and that what P now obtains under the Judgment is very close to R’s 2^nd Proposal.  All these point to the direction that R should have the costs, at least in part.  There is however one factor that goes against him and this is the reversion of his position in seeking a lion’s share of the proceeds of sale. 

83.Having taken all the factors in a round, I have come to the conclusion that it is fair that R should have ½ of the costs of the ancillary relief proceedings as from 20 December 2013 (the date of R’s 2^nd Proposal) including costs reserved and also ½ of the costs of the present application with counsel certificate, to be taxed on party and party basis if not agreed.  There be no order as to costs, including costs reserved prior to 20 December 2013.  Since P was legally aided at some stage, I also give an order that the parties’ own costs to be taxed in accordance with the Legal Aid Regulations.  The costs order nisi is varied accordingly.

Representation

Mr Pickavant of John M Pickavant & Co, Solicitors, appeared for the Petitioner

Ms Yanky Lam, instructed by Annie Leung & Company (on the instructions of the Director of Legal Aid), appeared for the Respondent