Ab Aka Abw v. Maw

FCMC 6310/2015

[2018] HKFC 188

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES NO. 6310 OF 2015

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DECISION
(Costs & Leave to Appeal)

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1.On 8 May 2017, after a 9-day trial on the Petitioner Wife’s application for ancillary relief, and on the basis of equal sharing of the matrimonial assets which I found to be broadly about HK$106M between the parties excluding certain unvested benefits from the Respondent Husband’s employment package for the period of 2014 – 2016 (“A3 Shares”) as CEO of A3, a multi-international insurance company publicly listed in London, I awarded the Wife HK$53M for her half share of those assets plus a Wells sharing of the A3 Shares as and when they vest and become saleable in a reducing percentage at 50%, 25% and 12.5% over the next three years on a clean break basis between the parties, and that the Husband shall continue to be wholly responsible for the all the expenses of their eldest daughter then at university in UK, and to pay the Wife for each of their two younger daughters residing with her and under her care HK$33,000 per month as child maintenance and HK$31,333 per month for their respective share of accommodation costs in Hong Kong plus their school fees and education expenses.

2.At the conclusion of the trial I acceded to the parties’ request to reserve the question of costs as it was clear that it would be disputed every bit as acrimonious as they did in their ancillary relief trial.

3.The parties now seek costs against each other, the total combined amount of which incurred up to the trial exceeded HK$42M, of which I described in my judgment as a truly mind-boggling amount incurred just over two years of litigation and staggeringly disproportionate even to the highest case that could be put forward by the Wife as to the total matrimonial assets. On the part of the Wife there is also an application for leave to appeal against my judgment.

4.Before proceeding to deal with the applications, I find it relevant to recite the introduction which commenced my said judgment to demonstrate the enormity of the parties’ conflicts and more pertinently how they had conducted their litigation with such disregard to the fourth principle painstakingly made by the Court of Final Appeal in that landmark decision of LKW v DD [2010] 13 HKCFAR 537 for divorcing parties to refrain from engaging in costly and often futile retrospective investigations of the failed marriage to the depletion of the parties and the courts’ resources, notwithstanding the many warnings made by this Court to these parties long before the trial, and for which they blamed, and apparently still do, wholly the other side of being guilty of such faults.

5.The introduction of my said judgment was as follows:

“1. This is the ancillary relief application of the Petitioner Wife, now aged 49, against the Respondent Husband now aged 50, upon the dissolution of their 20-year marriage essentially for an equal sharing of their matrimonial assets, of which she has put in excess of HK$150M before taking into account of what she believes to be very substantial unvested shares and benefits under the Husband’s employment package as CEO of A3, a multinational insurance company publicly listed in London, for the period of 2014 to 2016 which according to her would be worth as much as another HK$56M and would therefore bring the total assets for sharing to about HK$200M, and for monthly spousal maintenance pending full payment of her share of those benefits as and when they became vested by the end of 2019, as well as proper financial provisions for their 3 daughters now aged 18, 15 and 12 respectively.

2. The Husband however insists that this is a needs case instead of a sharing case, with the needs of both parties to be catered for by both of their own earning capacity and their marital assets which he puts much less at just over HK$100M excluding those unvested benefits under his employment earned after their separation, according to him in January 2013, as post-separation accruals, upon which the yardstick of equality shall apply to achieve a clean break situation, and with the interests of their children as the main ongoing priority and whom he will continue to maintain generously.

3. Clearly at the heart of the parties’ dispute is the huge gulf in their inclusion and valuation of the matrimonial assets in their respective Schedule of Assets, in particularly as noted above over the Husband’s potential remuneration and benefits under his appointment as CEO of A3 in December 2012, whether such benefits including his long term incentive plan, bonus schedule, shares options and pensions under his employment collectively called the A3 Benefits should be treated as post-separation accruals and hence according to the Husband excluded from the matrimonial assets but disputed by the Wife who insists that their marriage did not end until much later in about May 2014, or whether such benefits should all be taken into account for the purpose of sharing as proposed by the Wife, and if so in what proportion or amount and when they should be paid.

4. There are of course also many other issues such as those over the Wife’s own earning capacity and her future inheritance from her parents of which the Husband believes to be substantial, or as to various cash transactions made by the Husband prior to and after separation including more than US$1M to his parents which the Wife argues should be added back as unjustified or unaccounted for by the Husband, or the exact date of their separation which according to the Husband will be relevant to any sharing of his post-separation accruals, as well as litigation conduct raised by both sides with the Wife accusing the Husband of failure to make full and frank disclosure as to his A3 benefits as well as his many other dealings in various investments and trust assets, and as a result has unnecessarily and unfairly added to their legal costs, while the Husband blames her for having “lost sight of the wood for the trees” by insisting identification, auditing and then division of almost every last cent accumulated or spent during their marriage, and for being obsessed with the minutiae and an unquenchable thirst for information however unnecessary and unproductive through the court which has been unduly difficult, prolonged and expensive.

5. Expensive indeed, as their combined legal costs, I am told, have exceeded HK$42M in total, a “horrendous” amount as described by the Husband, and in my view a truly mind-boggling amount incurred in just over two years of litigation with no other major battle ground between the parties than their financial disputes, and staggeringly disproportionate even to the highest case that can be put forward by the Wife as to their total assets, of which the parties have included in their respective Schedule of Assets of more than 140 items which were updated and valuated constantly throughout the proceedings, and the fact that the trial bundles had totalled 19 with almost 7000 pages of financial materials and information, with almost as much materials amassed in correspondence between solicitors in their own correspondence bundles, not to mention transcripts of numerous conversations between the parties taped by the Husband during the marriage, while both parties had seen fit to retain separate legal teams in London as well including senior silks, all of which had no doubt combined to bring their legal costs to such an insane amount, of which no doubt I will have more to say later in this judgment, but meanwhile it would be necessary to first set out the relevant background of the marriage which are by and large non-controversial between the parties save for the exact date of their separation and the circumstances surrounding it.”

6.At the conclusion of my judgment, I also gave my following view about the costs of the proceedings in the hope that the parties might be able to finally bring closure to their litigation:

“289. I have been asked by both parties, for reasons apparent above, to reserve my decision on the costs of the ancillary relief proceedings so that they can run argument for costs against the other at some other date upon the delivery of this judgment, which I shall do but nevertheless propose to give some preliminary view on that issue in the hope of saving the parties further time and costs, which is that it would seem to me not unfair or inappropriate that there be no order as to costs including those reserved as a result of my findings and overall decision, so as to enable the parties to finally bring closure to their sad saga and financial disaster and to let go of no doubt the greatest regret in each of them of what they have lost in this litigation which is not just those HK$42M in costs, and so that they may move on with their new life and more importantly the future upbringing and education of their three children.”

7.That was sadly not to be, and so onto my consideration of their applications, starting first with the Husband’s reasons for costs against the Wife.   

Husband’s Application for Costs

8.The Husband’s claim for all the costs of the ancillary relief proceedings including those reserved by the FDR Judge is essentially on the basis that the Wife’s final award under my judgment even taken into account of her share in the A3 Benefits has failed to exceed any of his 6 Calderbank offers made to her at various stages of the proceedings before the trial, of which he summarized in his skeleton submission as follows:

H’s Offer	Date	Asset Pool	Lump Sum to Wife	W’s Response
1st Offer	19/9/14	$116.5M	$57.8M	None
2nd Offer	3/12/14	$113.2M	$57.8M	Request for Disclosure
3rd Offer	23/4/15	$137.2M	$73.5M	None
4th Offer	25/2/16	$126.9M	$73.85M	Counter Offer
5th Offer	7/4/16	$114.1M	$72.14M	No Reply
6th Offer	25/5/16	$114.1M	$75.14M	Request for Disclosure

9.By contrast to his offers, the Husband submits that the Wife’s following Calderbank offers reflect her erroneous view of the asset pool:

W’s Offer	Date	Asset Pool	Lump Sum to Wife	H’s Response
1st Offer	11/2/16	$280M	$104.7M & PP	Rejected
2nd Offer	4/3/16	$134-160M	$93.4M	Rejected

10.The Husband’s case is that the law ordinarily provides for costs to follow the event, and as he has made 6 Calderbank offers which the final award to the Wife did not exceed any and hence he can be regarded as the successful party, and that Wife’s conduct as found by the Court in the judgment and the new satellite litigation commenced by her in England in the Court’s determination of costs in his favour.

11.Mr Coleman SC (with Mr Egerton) submits for the Husband that it is abundantly clear from the judgment that the Husband had sensibly sought on numerous occasions to bring the proceedings to an earlier close than at a contested trial, that his offers were made at times when the total assets were higher than by the time of the trial primarily because of legal fees, that the huge sums of money expended on costs could and should have been avoided, but that the wife refused to engage in proper discussion to settle and at times refused to engage at all, that as a result of her overall approach already identified and the subject of adverse comment in the judgment.

12.Mr Coleman further submits that the Court’s own emphasis that it would take a broad brush approach, invoking the well-known fourth corner-stone of LKW was ignored by the Wife, and notwithstanding the judicial entreaty that the Court was not going through a forensic accounting exercise, it was precisely what the Wife had continued to try to do, and the way the trial was conducted by her amply demonstrated her approach throughout, as she was incapable of taking a broad brush approach but rather sought to split hair, with resultant destruction included a huge sum of assets in costs, irretrievably ‘burned’ by her insatiable quest for an “audit” because she was obsessed with the minutiae with an unquenchable thirst for information however unnecessary and unproductive, and thought there is and was exactly one single right answer.      

13.The Husband therefore seeks his costs since his first Calderbank offer made on 19 September 2014 on a party and party basis with certificate for two counsel to be taxed if not agreed, as his costs as at trial were in the region of HK$24M and now about HK$27M excluding the costs of the new litigation commenced by the Wife in England. He has provided litigation costs allowance of HK$18M to the Wife, and argues that by the judgment she received 50% of the total matrimonial assets at HK$53M plus the Wells sharing, but has failed to exceed any of his Calderbank offers in particularly those since April 2015, with his highest made on 25 May 2016 shortly before the trial at HK$75M being 65% of the asset pool, of which she did not even come close to bearing and her own offers appear to relate to a parallel case not the actual assets in this case.

14.These offers and the usual no response from the Wife or her another request for disclosure, the Husband argues, can be compared to her assertions as to the asset pool at similar dates which may explain her failure to engage or respond sensibly, and though she constantly shifted her position as to the total assets, the Husband submits that it will be recalled that right until trial, it was her insistence that maximum vesting value be given for division at once to contingent and speculative future receipts, and for a long time she even refused to make provision for tax.

15.Mr Coleman submits for the Husband that the Wife was under an obligation to respond to the Calderbank offers and make an effort to explore a settlement, her inability to reach a decision without first seeking the audit of the marriage is reflected not least in her complete failure to respond to the Husband’s two offers of settlement namely those made in September 2014 and April 2015, and it is submitted that the Court should discourage litigants from refusing to negotiate by considering costs sanction, and as the Wife failed in making a response to the Husband’s Calderbank offers, hence sanctions must be made against her, otherwise there would be injustice to the Husband who was the ‘successful party’ in the ancillary relief proceedings, as there are no special circumstances for the Court not to apply the rule of costs following the event.     

Wife’s Application for Costs

16.The Wife also seeks the costs of the entire ancillary relief proceedings as the starting point is that a claimant is entitled to her costs if she recovers more than a nominal award while the paying party can only avoid costs consequences by a valid Calderbank offer, and in the present case she was never in a position to evaluate any of the Husband’s offers primarily due to his non-disclosure and the issues of ownership/control as to the W Trust which he said everything he offered from the trust assets was subject to the agreement of the trustees, his attempt to exclude assets he said accrued post separation, his gift to his parents as well as his claim that his Red Rock investment value had plummeted, all of which were unclear that she was not in any position to negotiate with sufficient information in respect of any of his offers.

17.Mr Sussex SC (with Mr Clough) for the Wife accepts that to award costs to a claimant who rejected sensible offers of settlement and recovered less than the offer would be unfair, as the paying party who makes full disclosure and makes an offer that exceed the award is protected by Calderbank offers and may avoid paying costs and claim costs, but its terms must be clear so the claimant knows precisely what she will be getting, and there must have been full disclosure so the claimant can evaluate the offer which is part and partial of the Court’s overriding duty of fairness, and failure to make full and frank disclosure disenables the claimant from making an informed decision, as it is a positive duty, and reverse engineering and the riposte “it would have made no difference” is facile and unacceptable.    

18.Mr Sussex therefore submits that while in civil proceedings as a matter of general principle costs should follow the event so the claimant is entitled to costs unless that position is displaced by a valid Calderbank offer, there are differences in ancillary relief proceedings in which the Court has an inquisitorial role to achieve the overarching objective of fairness between the parties, that there are public interest considerations including the proper maintenance of a wife by her former husband especially where the interests of children are engaged, and that she is in reality dependent on the disclosure and evidence of the husband to ascertain the extent of her proper claim.   

19.Mr Sussex argues that the full and frank disclosure requirement is a basic and primary obligation, and it is particularly significant in this case where the Husband must disclose before the Wife was in a position to consider any offer, but as the Husband’s Form E was deficient in particular as to its failure to disclosure his A3 remuneration and benefits of which he ascribed no value, and the same to the W Trust of which he maintained were outside his control, and after the Wife had made requests for the required information by three successive questionnaires, the FDR Judge ordered the Husband to make proper disclosure by her orders of 22 September 2014, 10 February 2015, 26 May 2015, and 9 October 2015.

20.Mr Sussex submits that full and frank disclosure regarding the Husband’s A3 Benefits was particularly pertinent as their total net face value of the unvested share awards for 2013 and 2014 was more than HK$45M at about the date of his Form E, while the subsequent disclosure on 4 February 2015 via the Deloitte’s letter still failed to disclose his 2014 unvested A3 LTIP and ABP shares with a net face value of HK$19.2M, or of his 2013 and 2014 Dividend Equivalent Shares.

21.Mr Sussex submits that the Wife had been kept in the dark by the Husband’s refusal to be honest and forthcoming as to the value of his A3 share awards, that from his Form E in September 2014 until the ancillary relief trial the Husband endeavoured to exclude those shares from the matrimonial assets which made settlement negotiations virtually impossible since he either gave a nil value to these very valuable shares or delayed disclosure, and continued in his attempt to exclude them from consideration by insisting that they were non-matrimonial assets since he was awarded them after the date of their separation which was wholly devoid of merit and was ultimately decided against him.

22.Mr Sussex submits that the value of these shares was therefore very significant, and that the Husband inflated his and the Wife’s costs significantly by not disclosing them at all at first and denying that any part of his settlement should be considered until May 2016, and even then only including some of them, with the net effect that the total costs of the parties to the end of the trial in the region of HK$42M, with the Wife’s entitlement to the matrimonial assets accordingly reduced by HK$21M.

23.It is therefore an extraordinary submission, Mr Sussex argues, that the Wife should now be penalized by paying all the costs of the Husband which means that she will have to pay twice, which would be devastating to her by eating into her remaining assets upon which she need to support herself including rehousing, while the Husband remains someone who has a very large remuneration package and will quickly be rebuilding back his capital asset base.

24.Mr Sussex submits that the judgment already reflects the Court’s “disapproval” of the Wife’s approach to disclosure and discovery in the Wells sharing award, hence it would be unconscionable and unfair for the Husband to be allowed to benefit from reduced financial obligation in the judgment and then from an order for costs in his favour.  

Discussions

25.There is no question of the duty in both parties in ancillary relief proceedings to make full and frank disclosure of his or her means form the very beginning, and which obligation must be fully complied with before any meaningful negotiation can commence, especially in the so-called big money cases involving not only numerous assets and income but many of which have to be properly valued, as in the present case, before any offer can become effective, or to have “teeth”, to afford costs protection, as stated in Rayden and Jackson on Relationship Breakdown, Finance and Children, 17^th ed, Chap 23.35:

“The person to whom the offer is made is normally protected as to costs up to the date of the offer, but thereafter, assuming that sufficient information is available on which a reasonable assessment of the offer may be made, the offeree is at risk, in the sense of having to pay either the other side’s costs or at least his or her own costs …

It has, however, been said that Calderbank offers require to have teeth in order for them to be effective and that there are certain preconditions to their efficacy, notably full and frank disclosure by both parties of all relevant assets. Thereafter, the respondent to the 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 his or her position clear and to indicate in figures what he or she is asking for (a counter-offer).”

26.The requirement for Calderbank offers to have teeth to be effective was discussed by Butler-Sloss LJ, as she then was, in Gojkovic v Gojkovic (No.2) [1991] 2 FLR 233 at 238:

“It is … clear that Calderbank offers require to have teeth in order for them to be effective. This is recognised by the requirement in RSC Ord.62, r.9 (and the equivalent CCR Ord.11, r.10) 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 LJ said in McDonnell (about at p.38, the Calderbank offer should influence, but not govern, the exercise of discretion.

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 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 County Court Rules 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.”

27.Here, as pointed out by Mr Sussex for the Wife, the Husband is the financially dominant party and it is he who had the primary task of “laying his cards on the table face up”, and that it is only after that process had been completed satisfactorily that the Wife could evaluate any of his Claderbank offers and made an informed decision as to whether to accept or them or make a counter proposal.     

28.By the commencement of the trial, those “cards” of the Husband, according to the Wife comprised of more than 100 items and amounted to more than HK$150M based on her final Working Asset Schedule, as pointed out in my judgment and is worth repeating here to illustrate the enormity of the issues over disclosure and discovery between the parties throughout the proceedings:

“51. Despite my warning to the parties at an earlier PTR hearing that a broad brush approach is exactly what I proposed to do for that first step, the latest Assets Schedules produced by them [C16/5573 – 5579] in such detailed spreadsheets and with such minutiae especially on the part of the Wife which comprised of more than 100 items amounting to more than HK$150M according to her final Working Asset Schedule annexed to her Closing Submission, or just over HK$100M according to the Husband based on Appendix 1 to his Closing Submission, with a huge gulf of more than HK$50M separating the parties essentially over the whereabouts of some of the marital assets and their values/valuation which require the court’s determination, and that is before taking into account of the husband’s unvested A3 Shares worth according to the Wife in excess of HK$57M but which the Husband argues are uncertain post-separation accruals which she is not entitled to share, as well as whether certain funds should be added back to the total marital pot …”

29.For which I eventually in my judgment held the Wife accountable for her excessive approach to disclosure and discovery of the matrimonial assets for the reasons as set out below:

“269. It seems clear to me that from the very outset of the proceedings, the Wife had expected a full, transparent and detailed disclosure by the Husband of each and every aspect of his financial resources in his Form E, as she herself had done with her own Form E, and when she found his Form E not reciprocating with the same transparency and details, the entire proceedings began to descend into open season for discovery of everything about the Husband’s finances in minute details on the justification that having failed to do so in his Form E, he must have something to hide from the Wife.”

30.Whilst I did not find such conduct of the Wife justified and accordingly reduced her Wells sharing of the Husband’s A3 Benefits to reflect the Court’s disapproval of her excessive approach to disclosure and discovery of the matrimonial assets, neither did I find the Husband totally blameless, as I found in my judgment as follows:

“279. Of course as the saying goes that it takes two to tango, and the Husband in these proceedings cannot be said to be entirely blameless, with the most obviously glaring one being his gift payments of more than US$1M to his parents during the marriage without any previous consultation or discussion with the Wife, and which she only found out later in these proceedings, which probably triggered off her suspicion or distrust over everything concerning his finances.

280. It also did not help when the husband recorded various losses in some of his investments which involved his friends for whom the Wife apparently did not hold much regard, and which just further fuelled her suspicions.”

31.The fact is that the Husband was unsuccessful with the two major issues raised by him at the trial, namely the date of the parties’ separation and his argument against the Wife sharing of his A3 Benefits as post-separation accruals which no doubt significantly increased the time and costs of the trial for which he must shoulder his share of the blame.

32.There were also other reasons which complicated the disclosure and discovery process, as I found in my judgment as follows:

“281. The disclosure process was likely also compounded by the fact that the Husband was living thousands of miles away from Hong Kong in London with a significant time difference and was obviously totally immersed in an extremely busy and demanding job, all of which no doubt conspired to complicate and delay his instructions to his lawyers in Hong Kong and in his retrieving, collecting and collating the numerous and voluminous financial documents and materials sought by the Wife, thus further fuelling her suspicion and determination to get to the bottom of almost everything apparently oblivious to the resultant legal costs and expenses.”

33.If however the court must determine costs applications in accordance with the rules, and as clearly stated in Gojkovic supra that the starting point in a case where there has been an offer is that if the applicant receives 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, as otherwise it would not only be unfair to the other party, but also necessary to ensure that a party will not be allowed to indulge in unreasonable litigation with impunity. How then is one to resolve these conflicts or problems?      

34.These problems encountered in the proper construction of the rules in fact lied at the heart of the criticism of Mr Mostyn QC sitting then as a deputy High Court Judge, as he then was, in GW v RW (Financial Provision: Departure from Equality) [2003] EWHC 611 (Fam), [2003] 2 FLR 108 where he set out his objections in principle to the general rule that costs should follow the event:

“[85] It is very easy to see why in an era where the wife’s claim was perceived to be against the husband’s money for a sum necessary to meet her reasonable requirements, costs should, prima facie, follow the event. Her position was comparable to that of an ordinary civil claimant. It is much more difficult to apply the analogy in the post-White era where the court’s function is (per Thorpe LJ in Cowan v Cowan [2001] EWCA Civ 679, [2002] Fam 97, [2001] 2 FLR 192 at para [70]) to determine the parties “unascertained shares” in the pool of assets that is the fruit of the marital partnership.

[86] In this case I have ascertained W’s share in this pool to be 40% and H’s to be 60%. In such circumstances what is the event that the costs are supposed to follow? It is an intellectual concept with which I find it hard to grapple … this is a submission that is often made: “… the wife has had to come to court to get her money”. But surely the husband has equally had to come to court to get his? Each party has had to come to the court to obtain an order which fairly disposes of the issues between them.”

35.Mr Mostyn raised further objections in that the existing procedure forces parties to engage in a form of ‘spread betting’ by requiring them to guess the outcome of the case and take a position accordingly without making an award for those who might guess better than others, and went on to conclude:

“[92] In my judgment, a safer starting point nowadays in a big money case, where the assets exceed the aggregate of the parties’ needs, is that there should be no order as to costs. The starting point should be readily departed from where unreasonableness by one or the other party is demonstrated. This approach is, I believe, consistent with the spirit of the judgment of Butler-Sloss LJ in Gojkovic v Gojkovic and Another [1992] Fam 40, sub nom Gojkovic v Gojkovic (No 2) [1991] 2 FLR 233 where due allowance is made for the seismic shift in the law since that decision was given. It reflects the terms of CPR 44.3(5). It also reflects the disapplication by FPR 10.27(1)(b) of the general rule within CPR 44.3(2) of the unsuccessful party paying the costs of the successful party.

 [93] It may also reduce the extent of satellite costs assessment litigation, which itself can be protracted and acrimonious, and which prolongs the agony between the parties.”    

36.These problems have since been recognised and reported by the UK Costs Sub-Committee of the President’s Ancillary Relief Advisory Group in 2003 and discussed in Rayden and Jackson on Divorce and Family Matters, 18^th ed, at 52.19:

“Problems have been identified with the current costs regime in ancillary relief proceedings. The first is the de-stabilising effect that costs can have on financial settlements that have been carefully constructed by the court. Having considered the facts and circumstances of a case the court arrives at a settlement that, in its judgment, does justice between the parties. If at the conclusion of judgment it is revealed to the court that one party has failed to reach the high water mark of a Calderbank offer, the consequences of failing to ‘beat’ a Calderbank offer by an order to pay the other side’s costs can undermine completely the substantive order for ancillary relief that the court has just made. The second problem is that the system of closed offers has introduced a degree of procedural gamesmanship. This, in turn, leads to uncertainty and has, in effect, also introduced an undesirable element of gambling into ancillary relief proceedings. Calderbanks have been likened to a form of spread betting. Orders for costs can be disproportionate and, in some cases, produce real financial hardship as well as undermining the court’s division of the matrimonial assets. Lastly, making orders for costs which involve a detailed assessment can result in expensive satellite litigation and delay.”

37.This report has since been endorsed by the English Court of Appeal in Norris v Norris; Haskins v Haskins [2003] 3 FLR 1124, CA where both cases concerned contested applications for financial provisions on divorce in which both judges had awarded the wives roughly 50% of the matrimonial assets and went on to consider the offers and counter-offers made by the parties before making costs orders. In the first case the judge took into account the fact that the final award was higher than the husband’s Calderbank offer, but gave the wife only 80% of her costs to reflect the fact that she had lost on a major issue, but the husband had argued before the judge that where assets were divided equally and neither party had beaten their own Calderbank offer there should be no order as to costs, whereas in the second case the judge considered the husband’s offers had been inadequate but balancing that with the consideration that although the wife’s final counter-offer was extremely close to the final lump sum order, she had failed to negotiate until shortly before the final hearing, he awarded the wife 85% of her costs of the application. The husband in both cases appealed against the costs orders.

38.In dismissing both appeals, the Court of Appeal (Dame Elizabeth Butler-Sloss P, Thorpe and Mantell LJJ) examined in details the correct approach of the court to the treatment of costs in family financial disputes, of which Butler-Sloss P recognised as issues of general importance at the beginning of her judgment at 1126:

“[1] The two cases before this court raise similar issues of general importance, that is to say, the correct approach of the court to the treatment of costs in family financial disputes. One feature relevant to both the cases is that they come within the bracket sometimes described as big money cases. The main issue raised is the proper approach of the court to the making of confidential offers and counter-offers by the parties which are then disclosed to the judge after he/she has made an award in an ancillary relief application, otherwise called ‘the Calderbank offers’.”

39.Her Ladyship proceeded to first consider the background to costs orders and how the Calderbank doctrine was adopted as the established procedure in matrimonial financial claims and subsequently written into the rules under the Family Proceedings Rules 1991 in the aftermath of the Court of Appeal’s decision in Gojkovic v Gojkovic (No 2), and confirmed that decision must be read in the light of the 1991 Rules:

“[10] We have been told by counsel in the two appeals that the approach to the award of costs in ancillary relief cases, where Calderbank offers have been made, has been dominated by the decision of this court in Gojkovic v Gojkovic and Another [1992] Fam 40, sub nom Gojkovic v Gojkovic (No 2) [1991] 2 FLR 233 and less attention, it appears, has been paid to the Family Proceedings Rules 1991 as amended by the Family Proceedings (Amendment No 2) Rules 1999 and the judicial exercise of discretion provided by rr 2.69B and 2.69D (see below).

…

 [16] Whatever may have been understood by the profession from my judgment in Gojkovic v Gojkovic and Another [1992] Fam 40, sub nom Gojkovic v Gojkovic (No 2) [1991] 2 FLR 233 it has been overtaken by and has to be read in the light of the Family Proceedings Rules 1991 as amended...”

40.Whilst Her Ladyship recognised the difficulties expressed by Mr Mostyn in GW v RW (Financial Provision: Departure from Equality) [2003] as set out above and exacerbated by the removal of r 2.69C thereby presenting problems in the construction of r 2.69B, she insisted that it is the duty of the court to apply the rules and to do its best to make sense of them unless or until they are amended:

“[21] I recognise the difficulties which arise and which have been so trenchantly expressed by Mr Mostyn QC as set out above. The removal of r 2.69C increases the awkwardness of the language of r 2.69B and has presented problems. It does not, however, make that rule incomprehensible. In any event it is not for judges to deem a rule or a section of an Act of Parliament incomprehensible or unworkable. If passed by Parliament, whether it be primary or secondary legislation, it is the duty of the court to do its best to make sense of it. Judges do not have the right to dump the awkward passage wholesale. In my judgment therefore, Mr Mostyn QC in his judgment in GW v RW (Financial Provision: Departure from Equality) [2003] EWHC 611 (Fam) [2003] 2 FLR 108 was wrong to treat the rule as incomprehensible and to substitute his own approach by making a decision which was not based on the existing rules.

[22] Mr Le Grice QC, for Mr Haskins, made submissions to the effect that since the decisions in White v White [2001] 1 AC 596, [2000] 2 FLR 981 and Lambert v Lambert [2002] EWCA Civ 1685, [2003] 1 FLR 139, the traditional approach to the award of costs required to be changed in order to do justice between the parties. He referred to the court’s move away from the concept of ‘reasonable requirements’ in the division of family assets, a concept which Mr Mostyn QC in GW v RW {Financial Provision: Departure from Equality) said, at para [84], had now been ‘comprehensively condemned as discriminatory’. It was submitted that in light of the radical in approach to the division of marital assets post-White, and in particular the ‘yardstick of equality’ approach, the proper starting point should now be that there should be no order as to costs. This was the approach of Mr Mostyn QC in GW v RW (Financial Provision: Depart from Equality). It was also the approach of the Costs Sub-Committee of the President’s Ancillary Relief Advisory Group in its report (see below), which said at para 4(b):

‘Family proceedings arise out of the breakdown of a marriage, which may be seen as a misfortune falling on both parties. The fact that the court has to assist the parties to re-adjust their finances should not of itself imply blame on the part of either party … As Mr Mostyn QC points out at para [86] of his judgment [in GW v RW], it may often be that “each party has had to come to the court to obtain an order which fairly disposes of the issues between them”.’

 [23] the court is, nonetheless, obliged to apply the rules unless or until they are amended. Rule 2.69, as amended, provides the current code on Calderbank offers to be followed until any further rule changes are made. Subrules 2.69(1) and (2) give statutory authority to the Calderbank practice in ancillary relief proceedings. The starting point r 2.69B is whether the offerer offers more or less than the court order. If less, he/she will pay the costs incurred after 28 days after the offer was made, unless the court considers it would be unjust to do so.”

41.Her Ladyship further explained that the court must take into account all the circumstances of the case including the list set out in r 2.69D and that its effect on r 2.69B is to give the court greater latitude in making costs orders in those difficult or problematic situations mentioned above:

“[24] Rule 2.69D and its effect on 2.69B merit closer consideration. In r 2.69D the court must take into account all the circumstances of the case including the list set out therein. This include, in (a), the terms of any offers. That must include counter-offers. It also requires, in (e), the court to take into account the respective means of the parties. In my view, (e) enables the court to look at the whole position of the parties after the order has been made and see whether costs may fall disproportionately on one party rather than the other. It may enable a judge or district judge to mitigate, to some extent, the uncomfortable consequences of a Calderbank situation in a case where there is some but not a substantial amount of property and/or money to divide and costs will have to be paid from the available capital. The judge, in such a case, may make an order, often just enough to buy a suitable property for the wife, and then find that effect of the Calderbank offers may totally destabilise his order. Equally, of course, the Calderbank process must have teeth which can bite. Both parties are under an obligation to engage in genuine negotiation with the other side, otherwise one party may have to be penalised in costs. In medium asset cases I do not underestimate the difficulties. Rule 2.69D does, however, give the court a greater latitude in making costs order than may so far have been widely recognised.

 [25] In my judgment, therefore, r 2.69B and 2.69D can be managed and, where the court considers it unjust to apply r 2.69B, it can make a different costs order to reflect the injustice of the case. Mr Pointer QC, in his thoughtful and comprehensive skeleton argument, sets out in a bar chart a series of permutations arising from a court order to a wife of £1 million. I take one hypothetical situation. If a husband offers £800,000 and the wife asks for £1,200,000, neither has achieved the figure of the order and each is wide of the mark by the same amount. In broadly comparable situations, not tied to exact percentages since each case must be decided on its own facts, the result might be termed, as Mr Cusworth for Mr Norris suggested, a draw. In my view, in some offer and counter-offer cases, the proper approach might well be, under the present procedure, to make no order as to costs and leave each party to pay his/her own costs.”   

42.Her Ladyship however accepted that the difficulties arose from r 2.69 set out by Mr Mostyn in GW v RW supra did urgently require a rethink for further amendments to the rules governing awards of costs in ancillary relief cases, and endorsed the recommendations made in the said report of the Costs Sub-Committee of the President’s Ancillary Relief Advisory Group:

“[28] The difficulties which undoubtedly arise from r 2.69, set out by Mr Mostyn QC with clarity in his judgment in GW v RW (Financial Provision: Departure from Equality) [2003] EWHC 611 (Fam), [2003] 2 FLR 108, do now urgently require a rethink and it is time for further amendments to the rules governing awards of costs in ancillary relief cases. The present rules may affect disproportionately the payers in big money cases. The effect of costs is, however, to be felt across all ancillary relief claims. Although I have criticised Mr Mostyn QC for the cavalier way in which he dismissed the Family Proceedings Rules 1991, his approach to the reconsideration of costs requires careful thought, and I agree with the overall direction of his judgment for the future.

 [29] The Costs Sub-Committee of the President’s Ancillary Relief Advisory Group, to which I refer above, under the chairmanship of Bodey J, recently reported to the main committee. We have been provided with a copy of the report. It makes a series of excellent suggestions, many of a radical nature, which would meet the current requirements in relation to costs in family financial disputes. I agree with them and endorse them. I hope time may be found to bring them into effect by amendments to the Family Proceedings Rules 1991 in the near future.”    

43.Her Ladyship lastly referred to a letter from the senior costs judge on 27 January 2003 which had reinforced her view that the present approach of the courts in family financial matters needed reconsideration, and which she cited as follows:

“As you know we took over the assessment of costs in family proceedings comparatively recently. Large numbers of bills are payable out of the CLS Fund and, because of the rigorous funding regime, are comparatively modest. Where a party obtains an order that the costs be paid by the other spouse (usually the husband) and costs recovered go to reduce the statutory charge on property recovered or preserved (usually a share of the matrimonial home). In such cases solicitors have a vested interest in maximising the costs recoverable from a paying party because those costs are recoverable at commercial rates. The effect of this is twofold, the detailed assessment proceedings are very hard fought, and, perhaps more importantly, the underlying family proceedings may be pursued with unnecessary extra vigour to ensure an adequate return for the legal representatives.

Whereas in non-family civil proceedings the resolution of the substantive dispute frequently takes the heat out of any animosity between the parties, and enables settlement of the costs to be achieved in a significant number of cases, in family proceedings that animosity, which is in any event likely to be at a very high level, continues unabated during the assessment proceedings. The successful spouse on one side vows to bleed the other dry of every penny if at all possible, whilst the paying spouse goes out of his or her way to deny the other the possibility of any recovery. The number of settlements in assessments arising out of family proceedings is very low. This in turn means that the assessment hearings themselves last for longer than similar assessments in non family proceedings. Where a party is LSC funded the cost of the assessment proceedings is not added to the statutory charge and is therefore borne by the CLS Fund.

The purpose of this letter is to suggest that it may be worth giving serious thought to doing away with fee shifting in family proceedings. The Family Proceedings (Miscellaneous Amendment) Rules 1991 disapply CPR 44.3(2) (costs follow the event). It is therefore a relatively short step to providing that in family proceedings no order for costs will be made unless a particular party has behaved in such an unreasonable manner that the court feels that a sanction should be imposed. I would suggest that if this idea were to be adopted the court making such an order should decide what amount should be paid by way of costs there and then.

The level of venom in detailed assessment in family proceedings is such that I am firmly of the view that the removal of costs as an area of conflict would have an overall beneficial effect. If costs were never in issue the heat would be taken out of the situation far more quickly and any incentive in legal representatives to pursue remedies over vigorously in the hope of recovering greater costs would also disappear.”

44.The warning and proposals expressed in that letter were endorsed by Her Ladyship who concluded her view for urgent changes to the proper approach to costs in ancillary relief disputes by stating:

“[31] I am extremely grateful to the senior costs judge for his timely warning as to the adverse effect of the costs assessment process on family financial litigation. His sensible proposals require urgent consideration and provide a spur to taking action to introduce a radical approach to costs in all ancillary relief or similar disputes.”

45.Thorpe LJ sitting in the same court agreed with the proposals for changes and added his following views:

“[63] What then is the rationale for change? First, as these appeals illustrate, r 2.69B and D are difficult to construe and apply to any case in which there has been a progressive Calderbank negotiation with the exchange of several offers and several counter-offers. These rules were drafted at a time when the predominant culture endured that if the judge’s award clearly exceeded the husband’s best Calderbank offer then he paid the costs. Of course in the aftermath of this court’s decision in Gojkovic v Gojkovic and Another [1992] Fam 40, sub nom Gojkovic Gojkovic (No 2) [1991] 2 FLR 233 the obligation on the applicant to counter-offer in response to an unacceptable Calderbank offer was plainly established. However, that did not impact much on the culture. That was perhaps understandable throughout a time in which the applicant’s award in substantial cases was calculated by reference to her reasonable requirements. If a husband’s Calderbank proposal had not sufficiently recognised her reasonable requirements then he should pay her costs even if the wife had put her case higher than the judge’s assessment. Of course the culture encouraged the husband to put forward generous proposals, the more so if he perceived the wife to be unreasonable, in order to avoid the costs liability. Equally if the wife’s unaided reaction was to reject the husband’s Calderbank offer it enabled those advising her to issue a clear warning of the risks of going forward to trial. Thus it cannot be doubted that the Calderbank conventions as then understood made a significant contribution to the resolution of ancillary relief cases in the high range.

 [64] However, for all the reasons given by Mr Mostyn QC in his judgment in GW v RW (Financial Provision: Departure from Equality) [2003] EWHC 611 (Fam), [2003] 2 FLR 108 ancillary relief cases are now litigated under very different principles. He had long been an advocate for the proposition that in ancillary relief, as in Children Act cases, there should be no order for costs unless exceptional circumstances justify an order. He has found an ally from a quarter which I doubt he anticipated. The experience of the senior costs judge, having taken over from the Principal Registry the task of assessing costs in ancillary relief cases, is in my judgment extremely significant. His view has undoubtedly influenced the report of the costs sub-committee. The committee has also factored in the considerations identified by Mr Mostyn QC in his judgment. The committee, upon which the relevant professional associations are duly represented, has endorsed the direction indicated by the senior costs judge and by Mr Mostyn QC. The report has been adopted by the President’s Ancillary Relief Advisory Group without qualification. More importantly the report has the support of officials from the Lord Chancellor’s Department and the Legal Service Commission. Our judgments in these appeals add further support for the reform movement. To introduce the new regime it will be necessary not only to consider the required amendments to the Family Proceedings Rules 1991 but also the application of CPR 44.3 to ancillary relief proceedings. The ultimate shape is a matter of policy and the report of the sub-committee offers a carefully considered detailed model…”     

46.His Lordship concluded in the same paragraph of his judgment his endorsement of the report of the sub-committee for amendments to the Family Proceedings Rules 1991 by referring again to the said letter of 27 January 2003 from the senior costs judge and citing the following passage:

“[64] … If I were expressing my own view of the objective of the amendments I could not do better than to cite the following sentences from the letter of 27 January 2003 from the senior costs judge to the President:

‘The Family Proceedings (Miscellaneous Amendment) Rules 1991 disapply CPR 44.3(2) (costs follow the event). It is therefore a relatively short step to providing that in family proceedings no orders for costs will be made unless a particular party has behaved in such an unreasonable manner that the court feels that a sanction should be imposed. I would suggest that if this idea were to be adopted the court making such an order should decide what amount should be paid by way of costs there and then.’

 [65] The senior costs judge’s proposal demonstrates simplicity, clarity and overall fairness. Those should be the standards to which we aspire in all aspects of ancillary relief proceedings.”      

47.The proposition that in ancillary relief cases, as in children cases, there should be no order as to costs unless exceptional circumstances justify an order, does sound attractive to me given the similarly high level of animosity encountered here as in this case but has yet to be seriously considered either by our courts or the professions, there does seem to be a growing practice in cases where one party, usually the non-earning wives, is able to fund her litigation with money from the asset pool either by way of a maintenance pending suit order or with the other party’s consent, thereby taking the heat out of any animosity between them and enabling settlement of the issue on costs at the end in an increasing number of cases in our jurisdiction.

48.In the case now before me, as noted above and in my judgment almost all of the Wife’s costs were met by the Husband’s contributions by litigation funding (save for two previous reserved costs orders of 10 February 2015 and 8 December 2015 made by the FDR Judge totalling HK$5M which were to be offset against her final award), all of which no doubt came from the matrimonial assets and from which the Husband had also drawn to meet his own legal costs, hence his claim now for his costs against her for failing to accept his Calderbank offers, the amount of which as noted ran up to HK$24M which even if to be taxed would no doubt still be very substantial, of which Mr Coleman submits can either be met from the balance of the amount due to the Wife under the Wells sharing which would likely be all extinguished, but of which Mr Sussex argues as amounting to penalising the Wife twice, and which may also impact on the estimated capital required to meet her future needs, let alone to guard against any unforeseen eventualities in the absence of the safety valve of a nominal maintenance order for periodical payment and given the vast disparity in earnings and earning capacity between the parties.      

49.My judgment in awarding the Wife half of the total matrimonial assets at HK$53M plus her reduced Wells sharing was made to achieve fairness between the parties at the end of their lengthy marriage, and upon which together with the earnings from DIA Holdings and her projected income generated from the award the Wife was expected to be able to meet all her living expenses and future needs including all the unforeseen eventualities for the next 30 odd years or more, all of which on the basis of a clean break situation thereby freeing the Husband from all future financial obligations towards her despite a vast disparity of earnings and earning capacity between them.  

50.In the premises and for the reasons given, and having taken into account of the HK$5M under the two previous orders to be set off against the Wife’s Wells sharing of which I find to be unfortunate and quite likely unintended under the circumstances when they were made, and by again taking a broad brush approach I believe it is only fair and just between the parties that there be no order as to costs of and incidental to the ancillary relief proceedings including all the reserved costs and of this application too.

Wife’s Application for Leave to Appeal

51.Mr Sussex submits for the Wife that her complaints against the judgment are essentially on the basis of a number of errors both factual and legal as identified in the draft Notice of Appeal dated 12 January 2018 as follows:

(1)   Erred in calculation of the matrimonial assets amounting to at least HK$15M;

(2)   Failure to properly assess the Wife’s needs and how they might be satisfied;

(3)   Wrongly made an order that did not properly cater for the Wife’s needs and a fortiori failed to provide for them generously;

(4)   Erred in the percentage awards in relation to the unvested A3 shares awards for 2015 and 2016 in so far with the taking into account of allegation of litigation misconduct which is wrong in principle;

(5)   Failure to deal with the costs issue correctly;

(6)   Procedurally improper and unfair to permit the Husband to introduce into evidence edited transcripts of taped conversation.  

52.The Husband opposes the application and Mr Coleman submits that at the trial the Wife accepted equal sharing of the matrimonial assets on a clean break basis which was the same position of the Husband and which was indeed the order made by the Court, and as there was no material difference in the law presented during argument at the trial, the Wife’s present application therefore rests almost entirely on challenging the Court’s determination of facts as to the valuation of the asset pool, where the vast majority of which were found not to be an issue, and after hearing the parties with the single joint expert reports on the unvested A3 Shares not challenged by the parties, the Court assessed the asset pool at HK$106M which was much closer to the Husband’s valuation of HK$100M compared to the Wife’s of HK$192M, and hence there is simply no prospect of a successful appeal by the Wife.

53.Mr Coleman further submits that as nowhere in the Wife’s draft notice of Appeal is it suggested any error of law in the judgment, her purported complaints therefore all relate to discretionary issues which is not a fertile ground for an appeal, as the Court was perfectly entitled to arrive at the findings of facts and conclusions as set out and amplified in the judgment.

54.Mr Coleman argues that the Wife was represented throughout the proceedings by specialist solicitors and Senior Counsel, and as the trial lasted 9 days during which the Court had the benefit of oral evidence and detailed written submission that the draft Notice of Appeal simply does not demonstrate any real prospect of success, and that it is a further illustration of the Wife’s inability to accept finality and escape from her own unrelenting obsession for details, and that her application should be dismissed with costs to the Husband.  

55.The law on applications for leave to appeal is clear, and the appropriate test as set out in Section 63A of the District Court Ordinance, Cap. 336 is that either the appeal has a reasonable chance of success or that there is some other reason in the interest of justice why the appeal should be heard.

56.A reasonable prospect of success means an appeal with prospect that are more than “fanciful” but which do not need to be shown to be “probable”, and as pointed out by Mr Coleman and as stated in Hong Kong Family Court Practice (2^nd edition, LexisNexis Butterworths) at page 311 §4.543:

“A judge’s order on ancillary relief is always and necessarily an exercise of discretion. An appellate court does not interfere with a judge’s discretion merely because it might have taken a different view. It would interfere only if the judge’s exercise of discretion was based upon a misunderstanding of the law or of the evidence before him or if the judge’s decision was plainly wrong.”

57.With these in mind I shall now turn to consider each of the Wife’s proposed grounds.   

Ground 1 : Miscalculation of Assets

58.If indeed there were errors in the calculation of the matrimonial assets, they should be corrected here and now rather than at the Court of Appeal, but when specifically asked about them at the hearing the Husband insisted that there were none, and hence it is necessary to go into the process of my assessment and calculation of the three items of assets in the judgment which the Wife argues as erroneous as follows:

Red Rock Loan and MBS Option Fee

59.The Wife submits that the Court made no findings as to the value of these assets by mistakenly believing that they were an asset of the W Trust which was plainly a mistake as to the ownership of these assets, and that the Court should not have accepted the Husband’s written down value and instead should have made an adverse inference against the Husband for his failure to properly account for them so that their current value could be established by proper accounting documents and be included in the asset pool.

60.The loan of US$550,000 was first disclosed by the Husband in his Form E as one made to a company Red Rock Mineral of his friend SB, while the Call Option Fee of US$250,000 was in relation to MBS Software Solutions also of SB, both of which the Husband claimed to have little chance of being repaid as a result of failed investments, and for which he offered to pay half of whatever amount to the Wife if and when they were repaid.

61.It was therefore clearly wrong for me to state in paragraph 79 of the judgment that the Husband’s asserted current net value of Red Rock and MBS combined at US$150,000 should and can be verified by the W Trustees when they were plainly not assets of W Trust, but the fact that their current value was ultimately not verified does not necessarily follow that it must have been miscalculated, and on the basis of my findings in the preceding paragraphs in my judgment that these were failed investments of the Husband and that the Wife’s suspicion that he and his friend SB were hiding assets was unfounded and without any evidential basis, I am not satisfied that this ground has any reasonable prospect of success on appeal.   

Unaccounted Bank Withdrawals by Husband Totalling HK$3.9M

62.The Wife submits that the Court erred in finding that the sum of HK$3.9M was “the accumulated total amount of various bank withdrawals from his many bank accounts over a period of time” which were in fact 3 specific tranches of US$100,000, SG255,000 and NZ350,000 amounting to HK$3.9M that the Husband was obliged to disclose but failed to explain, and that this Court was wrong to treat his dogmatic assertion that the money had gone without any proof or evidence as conclusive, and to have regarded that the Wife did not make a specific allegation as to where these funds had gone as she could not speculate on what the husband had done but was entitled to require him to make full and frank disclosure.

63.The above statement regarding the sum of HK$3.9M must be read within the context of my discussion of the issue of Add-Back in the presiding paragraphs starting from [171] when I referred to the Wife’s queries over a number of transactions amounting to more than HK$31M between 2011 and 2015, of which he had given various explanations with documentation but which the Wife still US$3.9M missing and unaccounted for, and in respect of which I held in [174] as follows:

“However, in the absence of any evidence that the Husband has hidden, concealed or disposed of this HK$3.9M with the intention to defeat or obstruct the Wife’s financial claims, and having heard him for days in evidence … I have no hesitation to find that he had been truthful and forthcoming about all his financial resources, and hence the only proper basis for this alleged missing sum, which was essentially the accumulated total amount of various bank withdrawals from his many bank accounts over a period of time, to be properly added back into the marital pool would be that they were the result of his conduct that is inequitable to disregard, such as overspending on his part with the element of “wantonness”, “reckless fritting” or “extravagance” as was held in Norris v Norris [2003] 1 FLR 1142 or Vaughan v Vaughan [2008] 1 FLR 1108, or that it is “obvious and gross” as in LKW v DD above.”

64.I then went on to consider various authorities over similar issue and concluded in [177] as follows:

 “In the present case there is no evidence either to suggest that the Husband had committed similar non-marital expenditure, let alone to describe it as “wanton”, “reckless” or “extravagant”, as the Wife’s main complaint is simply his failure to be transparent or to clearly account for each and every withdrawal that eventually made up the total amount of HK$3.9Mwith any supporting documentation, which were as the Husband has explained to be simply impossible for him to trace given the passage of time, and which is in those circumstances disapproved by Ribeiro PJ in LKW v DD as above as wholly disproportionate…”

65.It was therefore a finding of fact with the benefit of hearing the Husband for days in evidence, and as such I am not satisfied that this complaint is reasonably arguable on appeal with prospect of success either.     

Failure to Add Back HK$3M

66.It is the Wife’s submission that the Court failed to make definitive findings about this sum and erred in simply accepting the Husband’s account that it was either reserved for legal fees or maintenance for the Wife which was however disputed by her and the sum of HK$3M remained unaccounted for which should have been added back to the assets pool with therefore an extra payment of HK$1.5M due to the Wife.

67.For the same reasons given above, I am not satisfied that this ground is reasonably arguable on appeal or has any prospect of success.

Grounds 2 & 3 : Erroneous Findings as to Wife’s Needs

68.Mr Sussex submits for the Wife that in awarding HK$53M to her to meet her needs the Court failed to make precise finding as to the required costs of accommodation in Hong Kong which was estimated by the Husband at HK$30M and by the Wife at HK$38M, and erred in assuming that the Wife’s income stream of HK$180,000 per month would be generated by the lump sum of HK$53M, which would require risky speculation for such a level of return which is practically impossible, unsupported by evidence, and would lead to diminution in the level of income, and hence the Court’s conclusion that the Wife would have a total income of HK$2.2M to HK$2.3M based on a projection of HK$180,000 per month is not capable of being supported on any proper analysis of the figures before the Court.

69.These assumptions of the Wife’s income stream were however made on the basis of the unchallenged income of DIA Holdings and the Wife’s own projection of the annual returns on the lump sum award which was in turn made on her accepted basis of equal sharing of the matrimonial assets and in the exercise of my discretion, with the total value of which based upon my findings of facts. In the premise I am not satisfied that it can be reasonably arguable with any prospect of success.   

Grounds 4 & 5 : Wife’s Reduced Share in Husband’s Bonus Awards 

70.Ms Sussex submits that it is wrong in principle for the Court to rule that the Wife should have a reduced share in the bonus awards that had been made to the Husband to reflect the Court’s disapproval of her supposed excessive approach to the Husband’s disclosure without making proper analysis of the view taken by the court at interlocutory stages where as many as 4 orders were made against the Husband to effect proper disclosure, and which should have been dealt with by order for costs instead.

71.However, given the Wife’s argument above that the order for costs should either be in her favour or that there be no order, this ground of hers therefore appears to me inherently contradictory, and given my finding in the judgment that her conduct, which is not under appeal, which should reflect the Court’s disapproval, and if it should not be demonstrated in her Wells sharing, how then should it be done? Accordingly I do not this ground reasonably arguable.

Grounds 6 & 7 : Edited Transcripts of Taped Conversations

72.Mr Sussex submits that the Court was wrong in allowing the Husband to introduce at the trial transcripts of conversation between the parties as evidence in support of his case as to the date of their separation without any prior disclosure, and that although the Wife succeeded on the issue of the date of separation, it does not alter the fact that it was unfair and prejudicial to her, and that it increased the duration and the costs of the trial.

73.This complaint is actually factually incorrect which may be explained by the fact that Mr Sussex only came into the picture after the trial when the Wife made a wholesale change of her entire legal team, as evidenced by the fact that it was never raised as an issue during the trial since the taped conversations were disclosed by the Husband in his main affidavit filed for the ancillary relief proceedings long before the trial with the tapes supplied to the Wife’s then legal teams for inspection and the editing done with their agreement so as to save the Court’s time. There is simply no merit in this complaint of the Wife.            

74.In conclusion and for the reasons given, I am not satisfied there is any reasonable prospect of success on appeal under any of the Wife’s draft or proposed grounds, and accordingly refuse her application, and for the same reasons given above and as the application was heard on the same occasion I also make no order as to costs in respect of her application.     

75.Lastly it remains my wish to express my gratitude to counsel for both sides for their most valuable assistance rendered to the court.  

Mr Charles Sussex SC and Mr Neal Clough instructed by M/S Massie & Clement for the Petitioner.

Mr Russell Coleman SC and Mr Robin Egerton instructed by M/S Oldham, Li & Nie for the Respondent.