Lcklm Nee Cklm v. Lwk
Read the full judgment text of FCMC 11425/2011 on BabelCite. This Family Court judgment was delivered on 18 March 2016 before Deputy District Judge I. Wong.
Matrimonial causes – Ancillary relief – Costs – Discretion – Quia timet injunction – Consent order compliance – Half costs awarded – In ancillary relief cases, costs discretion is broader. Post-CJR, costs to follow event is an option. Petitioner successful in application but failed some grounds. Respondent's conduct undermined confidence. Application not unreasonable. Costs order: Respondent pays half of Petitioner's costs with certificate for one counsel.
Legal issues: Costs discretion in interlocutory proceedings · Justification of application for costs · Assessment of quantum of costs
Outcome: Respondent to pay Petitioner half of her costs of the application, with certificate for one counsel, to be taxed if not agreed.
Cites 3 cases
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FCMC 11425/2011 IN THE DISTRICT COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION MATRIMONIAL CAUSES NUMBER 11425 OF 2011 ----------------------------
-------------------------- Ruling on Costs -------------------------- Introduction 1.This is a ruling on the costs of an application taken out by the petitioner wife on 6 February 2015. The subject matter was disposed of in the first call-over hearing on 11 March 2015, leaving the costs issue to be determined now. 2.For convenience, I shall continue to refer the petitioner wife as “P” and the respondent husband “R. I shall also adopt the same nomenclature and abbreviations used in the Judgment dated 26 February 2016 (“the Judgment”) by which R’s application for amendment of the consent order dated 18 February 2014 (“the consent order”) was dismissed. The amendment sought in that application was mainly in relation to the matrimonial home. The present application was, however, in relation to the Warehouse, another major item of the family’s assets. Since I have already set out the relevant factual background in the Judgment, it is not necessary for me to repeat them here. 3.As mentioned in the Judgment, the parties were able to settle the ancillary relief matters by way of the consent order but unfortunately they have since had immense difficulties in coordinating with each other in the carrying out of it. The application for amendment by R was one example and P’s present application was another. The Application 4.By her application, essentially for a quia timet injunction, P sought the following orders in relation to the proceeds of sale of the Warehouse pursuant to Order 29, rule 1, RHC and section 38A of the District Court Ordinance, Cap 336. She also relied on the inherent jurisdiction of the court:
The Warehouse 5.The Warehouse was held in the name of EIL (“the Company”) of which each of the parties owned 50% of the shareholdings. By a provisional agreement for sale and purchase dated 3 October 2014 and a formal agreement for sale and purchase dated 12 November 2014 the Warehouse was sold for $750,000,000. Two sums of deposits, $74,000,000 and $76,000,000, were paid by the purchaser on 3 October 2014 and 30 October 2014 respectively. The sale was scheduled to complete by 31 March 2015. 6.By the time when P took out the application on 6 February 2015 she had already received her due share out of the deposits according to the consent order. From the correspondences of the parties adduced to court, it is quite clear that it was only after some exchange of blows and with some delays that she finally got her share. All these were said to have precipitated P’s application. The intention of the application was crystal clear. It was to secure P’s position. She wanted to ensure that she would be able to receive her share of the proceeds of sale within the time stipulated in the consent order. This is what she was entitled to. 7.As said, the application was disposed of in the first call-over hearing on 11 March 2015. It is fair to say that, as a matter of fact, Mr Lai, on behalf of R, did not really object to the application. I therefore gave orders in terms of paragraphs 2, 3, 4 and 5 of the summons. It was not necessary for the court to give an order in terms of paragraph 1 for the reason that shortly before the hearing R had signed the mandate for the HSBC account. In reliance of Mr Lai’s confirmation that HSBC did not require further steps to be taken or documents to be signed, P did not pursue her application in respect of the Bank of China account. 8.Since the 15-minute call-over hearing did not permit the court to deal with costs, the costs issue was reserved for the parties to have it sorted out amicably, if possible. Failing to come to any sensible solution, the parties now seek court’s adjudication. Both are seeking costs of the application. Legal Principles 9.It is trite that issue of costs is a matter of discretion for the court. In ancillary relief cases, it has been said by the Court of Appeal that because of the special dynamics of family litigation, the discretion may be broader than in civil matters generally: Z v X & C, (unrep., CACV 166/2011, 8 March, 2013) § 10. 10.As far as the general principles are concerned, the relevant rules can be found in Order 62, rule 3, RHC. Sub-paragraphs (1) and (2A) of the rule state as follows:
11.Sub-paragraph (2A) was introduced in the Civil Justice Reform in 2009. Thus, under the post CJR regime, the principle that “costs to follow the event” is no longer the prescribed usual order but is instead just an option as regards costs in interlocutory proceedings: Hong Kong Civil Procedure 2016 Vol 1, § 62/3/3B. The present position in this regard has been succinctly summarised by Hon To J in his judgment in Melvin Waxman v Li Fei Yu (unreported, HCA 1972/2012, 11 September 2013), which I gratefully adopt.
12.In the exercise of its discretion, the court will have to take into account, where appropriate in the circumstances, the special matters set out in Order 62, rule 5, RHC. I do not think I need to set them out here. P’s Case 13.P says her application was justified. She feared that the sale proceeds would not be distributed on time or worse still, would not be distributed at all and she might eventually be liable to the mortgage secured by the Warehouse. Her fear was founded on R’s track record of persistent and deliberate breaches of his undertakings as contained in the consent order. She relies on the following incidents to justify taking out of the application:
14.Since R refused her requests as set out in the inter parte correspondence, P had no choice but to take out the summons. In light of the underlying objectives in Order 1A, Rule 1, RHC, R could have agreed to the summons without having to trouble the court. R’s Case 15.In gist, R says that P’s fears are groundless. At all times, P was protected by his undertakings. There is no evidence to suggest that the distribution of the sale proceeds would not be completed in accordance with his undertakings. The measures sought by her under the application were unnecessary and did not in fact impose any “extra” security to the distribution of the sale proceeds. P’s application was a waste of time and money. The so-called repeated breaches of undertakings were either irrelevant to the issue or had all been clearly explained in R’s affirmations. Discussion 16.To start with, P should be regarded as the successful party in the application. As such, she is assisted by the general rule of costs to follow the event. The evidential burden is on R to adduce sufficient evidence or argument that some other or lesser order is appropriate. In the absence of evidence or convincing argument to the contrary, P would also have discharged the legal burden: see Melvin Waxman & Anor v Li Fei Yu & Anor, § 20. 17.The parties came to an amicable resolution of the matter in the 1st call-over hearing as a result of the court’s intervention. During the hearing, the court invited Mr Lai to indicate whether, without considering the costs consequences, R would be willing to accept the orders sought by P. That was positively responded to; and it was under such circumstances that the orders were made. Ms Yip, SC, now acting for R, submitted that R agreed to the proposals purely in the interest of settling the matter and that he had no intention of not making the distribution as P alleged. There is certainly no suggestion that R agreed to P’s allegations. 18.With what happened in the hearing, it is necessary to consider whether the taking out of the application was justified. This entails an examination of the grounds that P alleges to have caused the application. In the course of doing so, I remind myself that I have not heard any oral evidence. What I have before me are the diametrically opposed affirmation evidences of the parties. My task thus is to assess the veracity of their versions only on the basis of the affirmation evidence before me. (1) R’s failure to comply with § H(iv) of his undertakings to accept the first purchase offer reaching not less than $500 million for the sale of the Warehouse. 19.R accepts that he was ‘technically’ in breach of the undertaking in not accepting the $500 million offer but he did so for the benefit of the parties because eventually the Warehouse was able to fetch a price of $750 million. 20.I do not need to comment on whether the breach was a technical one or not. Suffice for me to say is that though there is some truth in R’s saying that it resulted in the happy increase of $200 million on the parties’ economies, this, however, is indicative of R’s attitude towards the compliance of the consent order – the very order that he consciously and willingly agreed to but subsequently chose to ignore it, at least in part. I accept his behaviour undermined P’s confidence that he would strictly comply with his undertakings in relation to the Warehouse. (2) R’s refusal to change the mandate to HSBC such that both signatures of P and R are required for dealing with the proceeds of sale. 21.P requested for the change of the mandate as early as on 6 October 2014. The initial response was positive. By his solicitors’ letter dated 10 October 2014, R said he was agreeable to the change. He confirmed his agreement once again on 14 October 2014. But by 31 December 2014, it is abundantly clear that he reneged on his words. As set out in his solicitors’ letter, R claimed that he was “agreeable” to the change, as opposed to “agreed”, that there was no refusal; only that there was no agreement. His stance changed again shortly before the hearing: between 17 February 2015 and 6 March 2015, R signed the change of mandate and it was only on 6 March 2015 that P was told of this fact. No reason was proffered as to why there was such a drastic change of stance. I consider P has made out this ground. 22.I also need to mention that in the same letter of 31 December 2014, R claimed that he was not obliged to agree to P’s proposal regarding the joint instructions to be given to WKLL and that it would be sufficient for him to have made deduction of money out of the proceeds of sale for the repayment of the mortgage. The consent order did not oblige him to redeem the mortgage ‘before or upon” distribution of the dividends to the parties. It is clear that by then R adopted an argumentative approach, probably because of the freezing of the HSBC account upon P’s notification to the bank of her interest in the proceeds of sale. I need to return to this letter in the later part of this Ruling. (3) R ignored her proposal to give instructions to WKLL, solicitors for the sale of the Warehouse, to transfer the net proceeds of sale to P and R by way of split cheques. 23.The first time P made the proposal was on 17 October 2014, sending R’s solicitors her draft instructions but there was no response until 31 December 2014 when R’s solicitors turned it down, saying that the proposed instructions were merely proposals; as such, he was not obliged to agree to them. Since then, as far as the correspondences exhibited in the affirmations are concerned, there was a complete silence on the matter. It was only during the hearing that R was agreeable to the joint instructions. (4) R delayed in crediting her due share of the deposits. It was not until early December 2014 that she received the monies. 24.It would appear that the initial deposit and the further deposit were eventually distributed to the parties on 2 December 2014. According to P, they should have been paid within 14 days of receipt, ie by 23 October 2014 and 19 November 2014 respectively. Both parties are pointing their fingers against each other on why there was a delay in the distribution of the deposits. R says the delay was mainly attributed to the time taken up for the parties to agree on the amount of dividends payable (in particular, whether the estate agent’s commission, the legal costs of the sale and certain outstanding payments should be taken into account), to agree on the terms of the Company’s resolution and also due the suspension of the HSBC account caused by P. 25.I consider there is some truth in R’s explanations. It appears from the correspondences that there had been discussions between the parties on the contents of the draft board minutes and on the items to be deducted and it was not until 27 November 2014 that P returned her signed board resolutions for the disposal of the deposits. Prior to that, it was not until 20 November 2014 when agreement was reached on how the estate agent’s commission was to be paid; and as late as 24 November 2014 P still had further amendments to the draft. I accept that the payment of deposits was further complicated and delayed by the “freezing” of the HSBC account. This could not be said to be due to R’s fault. (5) R failed to redeem the mortgage for the Warehouse 26.P says despite the fact that the initial deposit of $74 million was more than sufficient to pay off the mortgage, R failed to do so in compliance with his undertakings. Quite to the contrary, he created a further encumbrance with the mortgagee bank on 9 December 2014. 27.It is true that R just made deduction an amount of money sufficient to discharge the mortgage out of the initial deposit but did not proceed to redeem the mortgage immediately. This triggered P’s letter of 24 December 2014 setting out her complaints including the redemption issue and that was responded to by R’s letter dated 31 December 2014 in which it was mentioned that deduction did not mean ‘redemption’. This is contrary to what he suggested, via his solicitors’ letter dated 14 October 2014, to pay off the loans ‘now’ and distribute the balance immediately thereafter. 28.In my view, the redemption issue must be approached objectively. The objective fact is that the mortgage, the assignment of rentals and the second legal charge, all in favour of the Bank of China, were registered against the Warehouse at the Land Registry and specifically mentioned in the Eighth Schedule to the formal Agreement for Sale and Purchase. According to Clause 34(b) of the Agreement, the Company as the vendor should discharge the Warehouse from these encumbrances on or before completion. There is certainly no suggestion nor is there any evidence indicating that R was prepared not to complete the sale according to the terms of the Agreement. 29.Seen in this light, it may be that the letter of 31 December 2014, in so far as it related to the redemption of the mortgage, served no useful purpose but only added fuel to the antagonism and worries of P. P’s complaint appears to be that if R had already made a deduction sufficient for the redemption of the encumbrances, he should have redeemed the mortgage well before the completion. It may well be her preferred way but in my view, R cannot be said to be in breach of the undertaking if deduction was made before distribution and redemption took place later but on or before the completion. 30.P’s another complaint is that R created a further encumbrance with the Bank of China on 9 December 2014. I have carefully considered the facility letters dated 16 December 2013 and 16 December 2014. What I can gather is that the facility was originally on an annual basis and was secured by the Warehouse. The 2013 facility was to mature on 31 December 2014 and the 2014 facility letter, which was to replace the 2013 facility, provided for the maturity date to be on 30 April 2015. Though I have not heard evidence in this regard, I can infer that the facility was only extended to 30 April 2015 due to the anticipated redemption of the Warehouse by 31 March 2015. It is also striking to note that P too endorsed her signature on the relevant banking documents for the continuance of the facility beyond 31 December 2014. Given that P had been so cautious in protecting her interest and she was all along being advised and represented by her solicitors who at all times were unwavering in asserting P’s stance, it is hard to believe that she did not agree with the creation of the facility but merely signed the documents to avoid any animosity and potential hostile confrontation with R. In any event, I agree with WKLL’s confirmation that the facility was not a new encumbrance. It is also important to note that the facility was not secured by the Matrimonial Home. For these reasons, I do not find any substance in the complaint. (6) R credited the initial and further deposits into her personal account before HSBC’s confirmation with her 31.P complains that despite HSBC’s confirmation that no withdrawal from the Company’s account would be allowed unless with the consent from P and both signatures of the parties appeared in any negotiable instruments, the initial and further deposits were credited to her personal account contrary to this confirmation. 32.I see little merit in the complaint. To start with, it was entirely HSBC’s own decision as to whether to process the transaction. Further, as HSBC explained in their letter dated 6 January 2015, all the cheques in question were signed by P and R, signifying their consent and agreement that they would not dispute the substance of the payment. HSBC considered this represented joint instructions for them to process the payments. 33.Thus analysed, P only succeeds in establishing some of the grounds. This, however, does not necessarily mean that her worries or fears were entirely ill-found. Quite to the contrary, I can see her fears were more than imaginary in light of R’s letter dated 31 December 2014. Of course, I understand that according to R despite that letter, there was nothing that P needed to worry. 34.It was most unfortunate that R retracted from his previous position on some of the matters and sternly rejected the others. These further polarized the parties. After having rejected P’s various proposals on 31 December 2014, R could have made his own suggestions upon which the parties might work towards their goal of distributing the proceeds within 14 days of completion of sale. On the contrary, I do not find R had ever made any suggestions on how to implement the sale; for instance, there was no draft minutes of board resolution on the disposal of the proceeds of sale nor was there anything from him on how to work out the undertakings as regards the distribution of the proceeds. That remained to be the situation up to the hearing. On the evidence before me, it is quite clear that Mr Kwan, the Company’s accountant, was the one responsible for preparing the necessary documentations and overseeing the procedure for the parties but he worked under the directions of R only. I have no doubt that R was very much in control of the process. That naturally would have a decisive impact on when the proceeds were to be distributed. Against this background and also with the ‘pick and choose’ attitude of R in the compliance of the consent order, coupled with what were stated on the 31 December 2014 letter, the apparent stalemate since 31 December 2014 and R’s absence of his own suggestions, notwithstanding that P failed to convince the court on some of her grounds for taking out the application, I am driven to the conclusion that it was not unreasonable for her to have come to court for assistance. 35.It should also be noted that the orders sought were against both parties, not just against R. The intention is crystal clear: this was meant to be for the implementation of the sale, to ensure that the sale would go smoothly so that both parties would receive half of the net proceeds of sale in good time. In a way the application benefits both parties. In the absence of his own suggestions, R could have readily agreed to the steps proposed by the other side but he only did so during the hearing. 36.With the conclusion that I have come to, I am satisfied that the costs should be in P’s favour. However, for the reason that she failed in some of her grounds, I consider it would only be fair that she is to get half of the costs. I also agree with Ms Yip that the application did not warrant the instruction of two counsel when R was attended by his solicitor only. Costs Order 37.I give an order that the respondent do pay the petitioner half of her costs of the application, with certificate for one counsel, to be taxed if not agreed.
Ms Audrey Eu, SC and Mr Au Lut Chi, instructed by Ernest Li & Co, Solicitors for the petitioner Ms Anita Yip, SC and Ms Cindy K S Lee, instructed by Lam and Lai, Solicitors for the respondent | |||||||||||||||||||||||
Cases cited in this judgment
Further hearings and rulings under FCMC 11425/2011