H v. W
Read the full judgment text of FCMC 8332/2017 on BabelCite. This Family Court judgment was delivered on 11 June 2020 before Deputy District Judge Thelma KWAN.
Matrimonial Causes – Litigation funding – Variation of maintenance pending suit – District Court – Wife’s application for litigation funding dismissed due to available assets and inappropriate capital transfer – Husband’s application for variation of MPS Order dismissed as he has ability to pay – Matrimonial Proceedings and Property Ordinance s.11 – Currey v Currey [2006] EWCA Civ 1338 – AEM v VFM [2008] 3 HKLRD 36 – HJFG v KCY [2012] 1 HKLRD 95 – No order as to costs
Legal issues: Litigation funding application · Variation of MPS Order
Outcome: Wife’s application for litigation funding dismissed; Husband’s application for variation of MPS Order dismissed.
Cites 3 cases
|
FCMC 8332/2017 [2020] HKFC 123 IN THE DISTRICT COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION MATRIMONIAL CAUSES NUMBER 8332 OF 2017 ________________________ BETWEEN
________________________ Coram: Deputy District Judge Thelma KWAN in Chambers Additional financial disclosures: From Respondent 17 March 2020 From Petitioner 19 March 2020 Submissions from Respondent: 30 March 2020 and 6 April 2020 Submissions from Petitioner: 30 March 2020 and 6 April 2020 Date of Judgment: 11 June 2020 ________________________ J U D G M E N T (Litigation funding and variation of maintenance pending suit) ________________________ 1.This judgement is concerned with two applications:
2.By an Order of the Court made on 4 March 2020, the applications were directed to be dealt with by way of paper disposal. As these are standalone applications, they were transferred to me, sitting as a Deputy judge, so that it could be dealt with as expeditiously as possible. Issues 3.Under the wife’s application, the Court is to consider if and how much the husband should pay for litigation funding to the wife. 4.The Court is also to consider whether the alleged change of circumstances of the husband warrant any variation to the MPS Order. The Background 5.The previous MPS judgement had set out in part the parties’ background. To recap the essentials, the parties are respectively aged 37 and 40, they were married in February 2013, the daughter of the family were born in October 2015, and the husband issued the divorce petition on 29 June 2017. 6.Following the MPS Order, the husband is to pay the wife, $14,000 per month and interim maintenance of $38,500 for the child of the family, in addition to the undertakings to pay for the daughter’s school fees, ECA up to $2,000 and medical and dental insurance for the wife and daughter. 7.It is recalled that the husband had a few sources of income at the time of the wife’s first MPS application:
8.Even before the last MPS Hearing on 13 August 2018, the husband had resigned from his salaried position at APC whereupon his total monthly income was reduced by around $100,000; and claimed to be no longer receiving the US$2,000 from the gold investment income, it was noted that there were no reasons nor supporting documents given. 9.Following the MPS Order, a number of events had taken place. 10.He had sold his business interest in X Ventures to his father for US$201,973.99 in January 2019, although the wife claimed that the husband remains a principal in the business. 11.He closed down his online business after consulting legal advice, so that income of $40,000 is no longer available to him. 12.Husband claimed that due to IRS intervention, his income from the gold fund has stopped since July 2019. 13.The husband’s payment under the MPS Order had lagged in August 2019, and then he stopped paying since October 2019. He caught up with October and November payments when chased and only partially paid for December. He then appeared to lag behind again in January and February 2020. 14.The husband had filed a summons for joint care and control of the child in June 2019, and the wife filed a relocation summons in March 2020. 15.Both parties supplied updated financial disclosures from August 2018 to January 2020 in March 2020. The wife’s application 16.The wife’s application for litigation funding is only with regard to the care and control hearing coming up, originally scheduled in May 2020 and subsequently re-fixed to July 2020. The husband initially issued his summons for sole care and control then amended it to shared care and control, a 7 days trial has been set down with numerous witnesses including relatives and friends, domestic helpers, experts and social work officer. 17.Both sides have complained about each other’s litigation conduct which have led to protracted proceedings and increased costs, these were elaborated at length in their affirmations, but will not be reiterated here. Despite both parties had stated their wishes to resolve matters out of court, nothing has come out of these intentions and various proceedings are still on-going. 18.Both parties have engaged legal representation, the costs that they had incurred were substantial and as of December 2019, amounted to more than $10M; with the husband spending 50% more than what the wife has spent. This is an appalling drain on the family resources, and clearly would be money better used for the daughter; there was an incident in January 2020 when the husband allegedly could not come up with money to pay for her school. The husband had since claimed that he could no longer afford his lawyers and have filed to act in person as of 17 December 2019. 19.The wife’s legal representation has estimated the cost of the care and control hearing to be $1,924,000; and a further $4,101,000 going forward for a possible preliminary issues and ancillary relief hearing. She had provided a detailed breakdown of the legal costs required. 20.The husband filed his 14th Affirmation on 4 March 2020, this was supposed to be his reply to the wife’s affirmation in opposition to his variation summons. However, his affirmation contained further responses with regard to the wife’s litigation funding summons, this is without leave and will be ignored for the purpose of this decision. The husband’s application 21.The husband’s application for variation of maintenance taken out on 16 December 2019 asked the Court to reduce his obligations under the MPS Order. He did not propose a figure, except to ask for a variation to such amount as the Court sees fit. It is worth noting that this has come about less than 14 months since the handing down of the MPS judgement. 22.In addition to the abovementioned events which happened after the first MPS hearing in August 2018 to the time of the husband’s application, it is the husband’s contention that the wife has more assets than he does; and that he is no longer able to borrow any further sums. 23.The husband complained about the amount of expenses the wife claimed and also that she had double counted some of them. He was also very persistent in ensuring that the amounts he paid for the daughter indeed went to what it was claimed for. The Law on Legal Costs Provision 24.So far as the law on the funding of litigation costs is concerned, Currey v Currey [2006] EWCA Civ 1338 continues to be referred to in Hong Kong. This states inter alia that:
25.At para [20], Wilson J further held “In my view, 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.” 26.The Court’s discretion is wide, and is also to consider the “subject matter of the proceedings”, and the “reasonableness of the applicant’s stance in the proceedings”. ([Para 21] refers) The Analysis on the litigation funding application The wife’s resources 27.The wife admitted her entitlement to an income of $37,000 from her gold investment of $2.34M, although there has been problem with this payment since July 2019 due to some issues with IRS as aforementioned. It does not appear to be in dispute between the parties, that there has been difficulty in securing this monthly sum, as the husband has the same source of income and he received $96,163. Originally thought to be a bank account compliance issue, the wife had in January found out from the husband that the IRS is investigating the gold investment and that the funds are frozen; it is unclear when the investigation will be over, but the husband has indicated this should be lifted in due course. 28.The wife also has the use of a supplemental credit card which is capped at $20,000. This is settled by the husband, but the amount will be set off from the sum he pays to her. 29.The husband insisted that the wife should return to work. Apparently, the wife ran her own recruitment business during the marriage, but closed the business in around March 2018; she had indicated that she would return to work when the daughter enters primary school, She is now 4 years old, and will turn 5 in October 2020. 30.Husband had also engaged a forensic accountant to do an analysis on the wife’s company finances and listed out a number of challenges. This is not the forum to look into these numbers, which will need to be investigated in context, and given to the wife to respond. The issues raised by the husband will therefore not have any bearing on this decision. 31.The wife has been drawing on her business account, this account had around $2,141,000 in August 2018, from then to June 2019, she moved almost $1.7M to her personal account, no doubt to supplement her expenses which is understandable. The MPS Order gave her only $14,000 from the husband for general expenses, she is expected to pay for her own personal expenses, and the entertainment and travel expenses of the daughter when she is with her. 32.According to her 9th affirmation dated 6 February 2020, her most updated account statements showed she had the following assets:
Her business account balance is erroneously reported, the February 2020 statement shows only a balance of $385,835. 33.There should also be “gold investment” of $2.34M, as stated in her Form E dated September 2017. This should be the source of her monthly income. It is difficult to expect her to draw on these funds as it is generating an income for her, and at the moment it is frozen under the IRS investigation. But it would not be correct to say that she is without resources; or that it is impossible for her to convert this investment into some other form of investment with return. 34.However, by a letter from her lawyers dated 6 April 2020, the wife has apparently transferred US$150,000 to Singapore to secure a 20% interest in a company she hopes to work in. This amount was taken from the wife’s personal account and her business account. Her latest position in her bank accounts after this tallies HK$144,792 and $248,106 respectively. I am assuming she still has the assets in her securities account. 35.The Singapore company to which this capital sum has been transferred, is apparently owned by a man with whom the wife has a relationship and intends to marry after the divorce; this latter information was provided by a letter from the wife’s lawyers to the husband. A letter from this Singapore company to the wife stated that the injection amount for the stake holding into the company is a “generous offer” only available up to 31 March 2020. 36.I do not consider such removal of the wife’s capital amount to be appropriate during the course of the divorce. This amount could have gone towards more than half of the litigation funding for the care and control hearing. It is unfortunate that the wife has made such a move and at such timing; and on the basis that she does have assets she could have deployed, but chose not to, I will dismiss her application for litigation funding. 37.For the sake of completeness, I am of the view that the wife has no assets which could be offered as security for borrowing; she is unable to obtain legal service by offering a charge against the outcome of the litigation, nor is she likely to be eligible for legal aid. The Law on Variation of Maintenance 38.The husband’s summons is based on Section 11 of the Matrimonial Proceedings and Property Ordinance, which reads as follows:
39.In the case of AEM v VFM [2008] 3 HKLRD 36 , Cheung JA explained the modern approach in dealing with an application for variation of maintenance at para 14 of the Judgment, in particular the following sub-paragraphs:
40.The legal principles arising therefrom have been clearly established in case law. The court is to approach the matter de novo, having regard to the current circumstances of the case as is reasonable, and to make an Order applying fairness as the yardstick. 41.Furthermore, as this is an assessment of interim maintenance, it is trite law that the proper approach is on a broad brush basis as set out by the Hong Kong case presided by Hartmann JA in HJFG v KCY [2012] 1 HKLRD 95:
The Analysis the Variation of maintenance Wife’s current expenses 42.The wife set out her current expenses in her 8th Affirmation, her general expenses were in line with what the court ordered under the MPS judgement.
43.Her personal expenses are irrelevant for the purpose of this variation application as the court did not rule that the husband had to pay for her personal expenses. But comparing her current personal expenses to that which she declared for her first MPS application, she had reduced her spending, and is likely to be living below the standard of living enjoyed during her marriage. This is an expected outcome when a family is separated into two households, even if resources have remained the same. 44.As for the daughter’s expenses, there is a marginal increase from $10,500 as assessed by the court, to $12,300 (not $20,300 as stated by the husband as the judge ruled that each party should be responsible for their own entertainment and holidays costs for the daughter).
45.He challenged her expenses on rental, utilities, household and for the domestic helper. I am of the view that these are misconceived; her expenses were assessed to be reasonable in the MPS judgement; even looking at this anew, I do not find these numbers to be so excessive to warrant a downward adjustment. 46.While the wife has submitted increased numbers for the daughter in her affirmation, she has explained the increased numbers for transport and for books and stationery. I accept that as a growing child her expenses will no doubt increase, and the wife is not asking for any additional amounts. Husband ability to pay 47.It appeared that the husband was making $250,000 in 2016, then $152,000 in 2017 and now $119,029 according to his affirmations filed under the present summons. 48.A high-level review on the husband’s statements showed that he had been receiving a sum of US$12,250 since at least the beginning of the divorce, which appeared to have translated into a regular income of $96,163 from January 2019. This seems to tally with his claim of income from a gold fund. This amount appeared twice in the months of April and May 2019 and ceased in July 2019. There is very little clarity on the source and details of this particular income. The husband called it “gold fund income” and “income generated from unrefined gold trading business” in his January 2018 affirmation, “partnership income” in his answer to the first questionnaire, then “commission income” in his answer to the second and third questionnaire. This income suffered the same fate as the wife’s income of HK$37,000, which appeared to be from the same source, and seemed to be caught in the same IRS investigation previously mentioned. The wife claimed that her income of HK$37,000 is generated from a HK$2.34M in gold investment, it begs the question how much the husband has invested to generate this income. 49.Husband claimed to be providing advisory services in mergers and acquisitions and that he had made two deals which brought in a total of US$35,000 / $274,400 in 2019, but no supporting evidence was given. 50.Husband had approximately US$200,000 flowing through his personal account between October and December 2019, which was unexplained. 51.The husband claimed to have maxed out his ability to borrow but has not produced much evidence to this effect. There is only an existing loan from HSBC, the repayment amount stated in his affirmation in opposition is $13,528. To support his loan rejection allegation, he exhibited a Whatsapp messages on which he relied to say he could not borrow further. It is my view that this so called “rejected loan application” does not come close to supporting his inability to borrow. It is not clear with whom he was communicating in this conversation, there is no application form, there is no formal rejection letter, it is unclear what institution was involved, and the exchange was undated. This is far from acceptable for a claim that he is not able to borrow further. 52.He claimed to be $6.9M in debt owed under credit card, personal loan from HSBC and loans from friends, but provided no breakdown nor supporting information. On the latter point, he produced 5 promissory notes:
53.Of these loans, the following observations can be made:
I hold that these loans from friends may well be soft loans, and he has not yet exhausted all his sources of borrowing. 54.From the husband’s affirmation, his expenses are as follows:
55.Throughout the period from the last MPS hearing in August 2018 to his application herein, his apparent income was from his gold fund investments and his borrowings which he used to pay his legal fees of at least $3.2M (up to November 2019) and various expenses above. It is unfortunate that paying his wife maintenance under the MPS Order is not considered a priority. On his own admission, he was out of funds when he needed to pay for the corporate debenture of his daughter’s school, and he needed to scramble to borrow $140,000 from a friend in January 2020 to make the payment. 56.The husband’s father passed away in September 2019, and he claimed to receive nothing except for approximately $378,519, and exhibited his father’s will dated June 2019 which gave everything to his mother and failing, to his only sister. As the only son, his name was not even mentioned in the Will. The wife has responded to this with suspicion, and I do concede that this may warrant further investigation in due course. 57.I remain sceptical on the timing of the sale of his business to his father and closure of his businesses soon after the MPS Order, then followed by the cessation of the income payment from the gold investment where no evidence was proffered on the IRS investigation other than Whatsapp messages exchange. 58.I conclude that the husband has more resources than what he claimed, and in particular, he has the ability to borrow further either from financial institutions, or from friends who were able to lend him money and did not demand repayment in accordance with the promissory note they signed. Conclusion 59.In conclusion, I dismiss the wife’s application for litigation funding. 60.I also rule that the maintenance payments under the MPS Order are not excessive, and the husband does have the ability to pay. It follows that and the husband’s application to vary down the MPS Order is dismissed, and the previous MPS Order stands. Costs 61.As both applications have been dismissed, I made no Order as to cost for both cases. Order 62.Consequently, I shall make the following Orders:
The Petitioner acted in person Messrs Boase Cohen & Collins represented the Respondent |
Cases cited in this judgment
Further hearings and rulings under FCMC 8332/2017