R, Er v. H, If

FCMP 96 / 2018

[2018] HKFC 229

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

FAMILY COURT

MISCELLANEOUS PROCEEDINGS NO. 96 of 2018

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Coram: Her Honour Judge Sharon D. Melloy in Chambers (Not open to public)

Date of Hearing: 2 November 2018

Date of Judgment: 12 December 2018

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J U D G M E N T
(Litigation funding)

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Introduction

1.This is an application by an Applicant mother for litigation funding. As the parents are not married the application has been brought under section 10 (2) of the Guardianship of Minors Ordinance, Cap 13. As will be seen, although in my experience the application is somewhat rare, the father is not disputing jurisdiction and he accepts that the court has the ability to make the order that the mother seeks.  

2.In so far as maintenance itself is concerned it is agreed that the father shall continue to make monthly payments to the mother for the benefit of the minor children, twin boys aged 8 years, in the sum of HK$65,000 per month i.e. HK$32,500 per month per child. In addition, the father says as follows in his affidavit dated the 5 October 2018:

11. In addition to this interim financial support, I also provide financially for the Children by meeting the following costs:

(i) The shortfall in school fees not met by CP;

(ii) Behavioural optometrist and glasses for T;

(iii) Occupational therapy for T;

(iv) Medical costs not met by my employment medical insurance policy.

3.Consequently, I take it from this that the father also has no difficulty in undertaking to pay for the school fees and medical expenses of the children generally. This undertaking should also be included in the preamble of the order.

4.In addition to the maintenance for the children, the mother is also seeking leave to relocate to the United Kingdom with them, hopefully with effect from sometime in the summer 2019. At present the father does not consent to this application and it seems likely that there will be a trial on the matter. Consequently, the mother seeks a further sum of HK$50,000 per month as litigation funding. She says that this will not cover all of her legal bills, but that it will go some way towards defraying what are likely to be significant litigation costs. It is estimated that a trial may cost in the region of HK$1 million. She says, and I accept this to be the case, that this will cripple her financially.       

The central issue

5.From a legal perspective then, the only issue to be determined is whether or not this is an appropriate case to award an element for litigation funding, and if so, in what amount?

Background

6.The parties met in Hong Kong in about 2001. The mother is British, but she spent time in Hong Kong during her childhood and teenage years, as both her parents worked in Hong Kong during that period of time. She undertook her tertiary studies in the United Kingdom and then developed a career in the media/journalism field back in Hong Kong. The father for his part is a pilot for a well known airline in Hong Kong. He is Australian. The mother is now 41 and the father 47 years of age. The twins were born in April 2010 and the mother has been their primary caretaking parent since that time. Unfortunately, unhappy differences arose between the couple and they separated in or around January 2014. The mother has not re partnered, but the father is now in a new relationship and he has had a further child. He has not married.   

7.On the 10^th August 2018, the parties agreed as follows:

1.  The Respondent do have all the rights and authority that the law would allow him as father of the children, namely CMH, a boy born on XX April 2010, and TWH, a boy born on XX April 2010 (herein collectively called “the Children”), had he been married to the mother when the Children were born.

2.  The Applicant and the Respondent do have joint custody of the Children with sole care and control to the Applicant and reasonable access including staying access to the Respondent.

Unfortunately, there are still some outstanding issues with respect to access and there has been no agreement as yet with respect to relocation.

8.According to the parties Form H’s, and as indicated above, it is the mother’s case that a full trial on relocation and access will cost in the region of just under HK$1 million – i.e. HK$956,000. She says that she currently has unpaid legal costs of around HK$170,000. The father for his part has not provided an estimate for trial, but says that he has total fees to date of just over HK$600,000. The mother says her fees to date amount to just over HK$460,000.

Litigation costs

9.Ms Irving for the mother helpfully took me through the case law from the United Kingdom on the issue of litigation funding in unmarried cases and referred inter alia to the following cases:

5.  Re S (Child: Financial Provisions)[2005] 2 FLR 94.

6.  M-T v T [2007] 2 FLR 925.

7.  G v G [2010] 2 FLR 1264.

8.  CF v KM(Financial Provision for Child: Costs of Legal Proceedings) [2011] 1 FLR 208.

9.  R v F (Schedule One: Child Maintenance: Mother's Cost of Contact Proceedings) [2011] 2 FLR 991.

10.  H v H FCMC 1969 of 2007 judgment of 3 October 2007.

11.  MG and JG v JF and JFG [2015] EWHC 564 (Fam) (10 March 2015).

I do not intend to go through these in detail here, but suffice it to say that it was of some interest to see how the law had developed in this area.

10.There are only a few cases on this discreet point in Hong Kong, and both sides referred me in particular to the High Court case of WGL v ASB (HCMP 489 of 2013, 30 November 2017. As a general point I accept as pointed out by Ms Rattigan for the father that:

With regard to Legal Costs funding, this is a non-matrimonial application, proceedings are under the Guardianship of Minor’s Ordinance (“GMO”) so the Court must exercise caution considering any grant of legal costs funding.

This is because there is no ability to offset any overpayment in an order for financial ancillary relief upon divorce.

11.In so far as the law on the funding of litigation costs generally is concerned, it also accepted that the principles as set out in Currey v Currey [2006] EWCA Civ 1338, can also be relied upon notwithstanding the fact that these are not matrimonial proceedings. For the avoidance of doubt Currey states inter alia as follows: 

“the conditions for a ‘costs allowance’ are as follows:

(1) That the applicant spouse has no assets, or none that can reasonably be deployed (at para [19], [20]).

(2) That she can provide no security for borrowing, or none which can reasonably be offered (at paras [19], [20]).

(3) That she cannot reasonably obtain legal services by offering a charge on the outcome of the litigation (at para [20] and see Sears Tooth, per Wilson J).

(4) That she cannot secure publicly funded legal help ‘at a level of expertise apt to the proceedings’ (at para [20])”

There is also a requirement to undertake an overarching enquiry

At para [20], Wilson J held that the initial, overarching enquiry should be into whether the applicant for a costs allowance could demonstrate that she cannot reasonably procure legal advice and representation by any other means. Therefore, to the extent that an applicant has assets (as in C v C), she has to demonstrate that they cannot reasonably be deployed (whether directly or as the means of raising a loan) in funding legal services …… Other factors may well come into play.  The subject matter of the proceedings would always be relevant, as would the reasonableness of the applicant’s stance in the proceedings.

12.It is also accepted that as applications for litigation funding form part of maintenance pending suit/interim maintenance applications in matrimonial proceedings, it follows that applications of this nature must of necessity also be approached on a broad brushed basis.  

13.Reference was also made to the leading Court of Appeal decision in Hong Kong on the issue of maintenance pending suit and litigation funding generally, namely HJFG v KCY [2012] 1 HKLRD 95, 28 October 2011. In that judgment The Honourable Mr Justice Hartmann said inter alia as follows:

78. Section 3 of the Ordinance, of course, still required the Judge to be satisfied that any contribution towards the wife’s ongoing legal costs was reasonable.  That meant that he had to be able to conduct some analysis of the nature and extent and purpose of the contributions sought.  On the part of the wife, that required some breakdown of her anticipated costs. 

79. Aside fron1. the fundamental requirement of supplying a sufficiently detailed breakdown of anticipated costs …

14.I accept therefore that it is important, in any application for litigation funding, that the Applicant is able to supply the court with “a sufficiently detailed breakdown of anticipated costs”. Although there has been some complaint of this by the husband, I largely accept that the mother has done this, although it is somewhat broad brush. In addition to the Form H, the mother has also produced a schedule of estimated costs, which further itemizes the estimated costs going forward and arrives at a similar figure of HK$952,500.

Discussion

15.It is the mother’s case that she needs some assistance with the legal costs. She is not asking the father to bear all of these costs and she accepts that she will also need to continue to contribute. She says that it is simply inequitable to expect her to bear all of them given the fact that the father has a much higher salary than her and access to other funds, including the net income from a number of properties. He is also living with another partner who is also working and he splits his living costs with her. She says that without some assistance there can be no “equality of arms”. I agree.

16.The father complains that the mother should be able to fund her own legal expenses from her small company B.D. The mother says this of B.D. in her 3^rd affidavit of the 26 October 2018:

My financial condition

4.  My graphic design business “B.D.” is far from well-established.  I built this small business alone and from scratch.  When the business was first launched in 2014, there was no formal accounting or book-keeping.  The business has always been a sole undertaking and started as nothing more than a small sideline.  I have used my personal finances to pay for business expenses on occasion and not repaid myself back from the business.  As at 31 March 2017, the liability owed by the business to me was in the sum of $631,181.27.

5.  I only started to designate an account for my business later on in around 2016 when I had a website for the business and when the number of orders from customers increased. The Respondent has already been provided with bank statements of the said account.  Copy of the bank statements of the account designated for “B.D.” held with HSBC with no. XXX-XXXXXX-XXX from September 2017 to August 2018 can be found in exhibit marked “IFH2-2” to the 2nd Affidavit of the Respondent.

6.  The account for “B.D.” is currently held in the name of “G.C.” since this account was originally set up for my freelance copywriting work in 2007 which ceased several years ago when I became a full time mother and when I cancelled the business registration.

7.  I do not agree with the observation made by the Respondent in paragraph 9 of his 2^nd Affidavit.

17.I largely accept what the mother says in this respect. Although there are some funds in the business (on the father’s case HK$880,000), I accept that she will need to rely on these funds to pay for the running costs of the business, to pay for her own expenses and the short fall of maintenance for the children (on her case about HK$30,000 per month) plus the balance of the legal costs.

18.It also seems to me that on a broad brush basis that the father has the financial resources to pay, with a net income of over HK$200,000 per month an asset base of approximately HK$38 million.

The Currey principles

19.For the avoidance of doubt I accept that it is not possible for the mother to obtain security against the property that she claims that she has an interest in and which is held solely by the father in any event. As indicated above it is also accepted that it would not be reasonable for her to dip into the funds held by her company any more than she is doing at present. I also accept that she is unlikely to be able to borrow funds in the circumstances and that it would be virtually impossible for her to obtain legal services by offering a charge against the outcome of the litigation. Given that she is receiving maintenance of HK$65,000 per month and that the father is also paying for other expenses for or on behalf of the children, it seems to me that it would be extremely unlikely that she would be eligible for legal aid. When looking at the matter overall I accept that as far as possible there should be some equality of arms with respect to the proposed trial next year.

Decision

20.Bearing all of the above in mind, I will make an order in terms of paragraph 2 of the mother’s summons dated the 24 August 2018, such order to take effect from the 1 January 2019 up until the proposed relocation trial.    

Costs

21.Costs shall follow the event in the normal way. Thus I shall make an order nisi to be made absolute in 14 days’ time that the Respondent do pay the Applicant’s costs of and arising out of the summons dated the 24 August 2018 on a party and party basis to be taxed if not agreed. There shall be certificate for counsel.

Further directions

22.There shall be a Pre-trial Review on the 8 March 2019 at 9:30 a.m. with respect to the mother’s proposed relocation summons and the arrangements for the boys generally. Both parties do personally attend that hearing.

Ms Frances Irving, instructed by Ho & Ip for the Applicant

Ms Mairead Rattigan instructed by Gall for the Respondent