Kcma v. Abc and Others
Read the full judgment text of HCMC 1/2019 on BabelCite. This High Court CFI judgment was delivered on 18 October 2022.
1. Before the Court are applications by the Official Solicitor (on behalf of the Children), the petitioner W, and the 1 st respondent H for variation of a costs order nisi.
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HCMC 1/2019 [2022] HKCFI 3164 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE MATRIMONIAL CAUSES NO 1 OF 2019 ________________________ BETWEEN
________________________ Before: Hon B Chu J in Chambers (Not Open to Public) Date of Hearing: 29 August 2022 Date of Decision: 18 October 2022 ________________________ DECISION (Variation of Costs Order Nisi) ________________________ INTRODUCTION 1.Before the Court are applications by the Official Solicitor (on behalf of the Children), the petitioner W, and the 1st respondent H for variation of a costs order nisi. 2.This Court handed down a judgment on 12 November 2021 (“Judgment”) after an ancillary relief trial in the divorce proceedings between W and H (collectively referred to herein as “Parties”). The nomenclature and abbreviations in the Judgment will be followed in this decision, unless otherwise indicated. Pursuant to the Judgment, an order for ancillary relief was made on the same day (“AR Order”). 3.The AR Order contains a costs order nisi (“Costs Order Nisi”), which provides that:
4.After the Judgment, OS, W, and H have respectively issued a summons for variation of the Costs Order Nisi (respectively referred to as “OS’s Variation Summons”, “W’s Variation Summons”, and “H’s Variation Summons” and collectively “Variation Summonses”). 5.In OS’s Variation Summons, OS seeks an order that the Costs Order Nisi be varied to the extent that the Children’s costs as ordered by the Court be paid by H on an indemnity basis. 6.In W’s Variation Summons, she seeks an order that the Costs Order Nisi be varied to the effect that that her costs as ordered by the Court be paid by H on an indemnity basis. 7.In H’s Variation Summons, he seeks that the Costs Order Nisi be varied to the following:
8.As seen in paragraph 612 of the Judgment and paragraph 5 of the AR Order, the payment schedule of the lump sum ordered to be made by H to W and the exact structure of the final order were outstanding matters to be determined further by the Court (“Outstanding Matters”). 9.The Outstanding Matters were eventually dealt with on 24 January 2022 (“Further AR Order”), and that the costs of (1) the hearing of 24 January 2022, (2) the latest PwC Report, and (3) withdrawal of the BVI stop notices were directed to be dealt with at the hearing of the Variation Summonses. THE ERRORS IN THE JUDGMENT TYPOGRAPHICAL ERRORS 10.On re-reading the Judgment, this Court noticed that there were typing errors in relation to the valuation of the family assets, as follows:
11.This Court intends to issue a corrigendum regarding the above typographical errors subject to any further comments from the Parties and/or OS within 21 days of this decision. DOUBLE COUNTING 12.The valuation date for Intero was agreed to be at 30 September 2020 (“Valuation Date”). The valuations for 3 items of assets of Intero, namely the balances in the DBS and Deutsche Bank accounts and the balance in the CL securities account were agreed to be a total of HKD 60.13m as at the Valuation Date. 13.As set out in paragraph 544 of the Judgment[7], an amount of HKD 14.5m was stated in the Scott Schedule to have been paid out of the US Trusts after the Valuation Date, being HKD 6.6m to W, HKD 5.3m to H, and HKD 2.6m to OS. It is set out in paragraph 545 of the Judgment that[8], according to the PwC supplemental report on US tax liability (which was produced by H), the total amount withdrawn from the US Trusts after the Valuation Date for litigation funding for H and W was HKD 6.6m each, However, at the present hearing, H clarified that he did not receive the sum of HKD 1.3m in December 2020, and that the figure of HKD 14.5m (including HKD 2.6m to OS) set out in the Scott Schedule being the total amount paid out of the US Trusts after the Valuation Date should be correct. 14.As seen in the table in paragraph 545 in the Judgment, the amount received by W for her litigation funding prior to the Valuation Date should be HKD 4,875,000. In paragraph 547, the approach of the Court was that H was assumed to have obtained or withdrawn more or less the same amount, ie HKD 4,875,000 from the Family Pot for his own litigation funding/costs prior to the Valuation Date. Thus, the total amount to be notionally added back to the Family Pot at Valuation Date for computation for the total amount for division should be HKD 9,750,000, being the total amount of litigation funding/costs withdrawn by the Parties from the Family Pot prior to the Valuation Date. 15.The amount of litigation funding withdrawn from the US Trusts/the Family Pot after the Valuation Date, ie HKD 14.5m should not have been added back before division. 16.Upon adding back the amount of HKD 9,750,000, in paragraph 549 of the Judgment, the total Family Pot at the Valuation Date should be in the region of HKD 166,241,003, being HKD 156,491,003[9]+ HKD 9,750,000. 50% of the Family Pot as at Valuation Date should therefore be HKD 83,120,501.50. 17.At the present hearing, the Court had said that the amount of HKD 6.6m received by W post Valuation Date should be deducted from HKD 83,470,501.50, making a total of HKD 76,870,501.50. 18.On reflection, as W had also received HKD 5,875,000 prior to the Valuation Date, thus for paragraph 550, the correct amount of litigation funding received by W from the Family Pot, prior to the Valuation Date and after the Valuation Date, should still be HKD 11,475,000 and that this amount should be deducted from her share of the family assets. 19.As a result, the final award paid by H to W should be HKD 71,597,942.50, being HKD 83,120,510.50 less HKD 11,475,000, and also less W’s own assets of HKD 47,559. 20.In paragraph 607 of the Judgment, I rounded up the figure for the lump sum to the nearest hundred thousand. Adopting the same approach, the amount of the lump sum to be paid by H to W should be HKD 71.6m, instead of HKD 79.4m. 21.As I have said at the hearing, I understand that the Parties, in particular W may need time to consider what was indicated above and to obtain proper advice as to their respective options. They are to inform this Court of their agreement, if any, within 21 days of this decision. COSTS AS BETWEEN H AND W H’S VARIATION SUMMONS IN RELATION TO COSTS BETWEEN H AND W 22.H seeks a variation on the following grounds:
H’s Calderbank Letter 23.First, the total family assets set out by H/his solicitors in the Calderbank Letter on a broad brush approach were as follows:
24.H’s proposals for W in the Calderbank Letter were amongst other things that (i) H and W to request the Trustee that in consideration of the transfer of assets set out, they to agree to the partial early settlement of half of the outstanding Promissory Note; (ii) H and W to request the Trustee of the Education Trust of 1 share in Bremen to be transferred to W free of debt and encumbrances and valued at HKD 43,145,700; (iii) upon transfer of 100% ownership of Bremen in consideration of 50% redemption of the Promissory Note, W to cease to be a beneficiary of the Family Trust; (iv) H to pay W a lump sum of HKD 8m; and (v) each to retain their personal effects and chattels. 25.H’s proposals for the maintenance of the Children in the Calderbank Letter were, in addition to his undertakings regarding payment of school fees and payment/reimbursement of their medical expenses subject to certain conditions, (i) HKD 10,000 per month per child for their maintenance and so long as they reside with W for over 50% of the time in Hong Kong; (ii) HKD18,500 per month per child for their respective share of accommodation costs in Hong Kong so long as they reside with W in Hong Kong. 26.As for costs, H’s proposal was that there be no order as to costs including all costs reserved. 27.According to H’s counsel Mr Marwah, H’s offer of Bremen, which holds all the US Trust assets, means the land in _____ ___ and Intero[11], plus HKD 8 m less half of the Promissory Note. This offer based on the values of the assets found by this Court of about HKD156m[12] would provide W with HKD 89m, ie 57% of the total assets and that H would receive about HKD 67.13m, ie 43% of the total assets. 28.However, H’s proposals in the Calderbank Letter were clearly based on a value of the total assets estimated by him to be only HKD 101,985,310 or about HKD102m and not based on the Court’s ultimate finding at the trial of the value of the Family Pot of about HKD 156m. 29.The main disputes in these ancillary relief proceedings, apart from whether the H’s dispositions should be set aside, concerned the identification and valuation of the assets of the Family Pot. 30.According to H’s 1st From E filed on 1 February 2017, his assets were only HKD 46,379,244, of which HKD40,950,000 were his interests in the Family Trust, the Education Trust, the ________ Insurance Trust and what H described as the “________ investment land trust”[13]. In Part 5.1 of his 1st Form E, H did make disclosure of the US Trusts and the M_______ Apartment of USD 2.3m. He had annexed a copy of the List of Assets of Intero and their valuations totalling about HKD 50.65 m without any value for the GP Shares[14], and also a copy of the List of Assets of Bremen and their valuations totalling about HKD 42.38m[15]. 31.According to his 2nd Form E filed on 9 April 2018, his assets were only HKD1,703,425 and his liabilities were HKD11,731,159[16]. In his 1st answers of 28 July 2017 to W’s 1st questionnaire (“1st Answers”), he again set out a list of assets of Intero which were valued to be HKD 50.65m, or about HKD 51m with an unknown value for the GP Shares[17] and he further set out Bremen’s list of assets (ie the 3 parcels of land in _______ less liabilities of HKD195,000) which he valued to be HKD42,481,300. H maintained that Bremen’s assets were to be HKD 42,481,300 in his 2nd answers of 9 April 2018 to W’s 2nd questionnaire (“2nd Answers”). 32.Anyway, according to the Calderbank Letter, his assets were HKD 6,992,969 (or about HKD 7m) and the assets of the Trusts were HKD 93,724,691 (or about HKD 94m) namely a total of about HKD 101m. Bremen was stated in the Calderbank Letter to be valued at HKD 43,145,700, which was slightly different from the figures in his 1st Form E or his 1st and 2nd Answers, but say HKD 43m. 33.First, in the valuation of the total assets held by H, W and by the Trusts of about HKD 102m in the Calderbank Letter, H did not seem to have included the M_______ Apartment. When W’s solicitors pointed this out in their reply letter of 9 July 2019 to the Calderbank Letter (“Reply Letter”)[18], in H’s solicitors’ letter of 22 July 2019[19] (“Further Letter”), H claimed that the M_______ Property was included in the draft asset schedule set out in the Calderbank Letter. However, the M_______ Apartment was valued in H’s Form E to be USD 2.3m , or about HKD 18m @7.8[20]. Since according to the Calderbank Letter, H’s assets were stated to be only HKD 7m, the M______ Apartment could not have been included under H’s assets. If the M_______ Apartment was included under the assets of the “Trusts”, then the assets under the US Trusts would be only about HKD 76m (ie HKD 94m less about HKD 18m), but according to H’s then valuations in his 1st Form E and his 1st and 2nd Answers, the assets of Intero and Bremen had alone come to a total of about HKD 94m. All this showed that M_______ Apartment had not been included in the asset schedule in the Calderbank Letter, otherwise there would be obvious problems regarding H’s own valuations of the assets. H’s response in the Further Letter that he had included the M_______ Apartment in his Trusts assets in the Calderbank Letter did not make sense. 34.Second, it was not clear how H arrived at his valuation in the Calderbank Letter of about HKD 43m for Bremen. In any event, contrary to his present argument, he had clearly not included Intero or Intero’s assets in Bremen’s valuation in the Calderbank Letter, or again there were problems regarding H’s own valuations of the assets held by the US Trusts. 35.Third, pursuant to Clause 1.5 of the Promissory Note, the share(s) in Intero had been transferred to the Trustee/the Family Trust as collateral, and thus the share in Intero was held in the name of the Trustee. It was not clear in the Calderbank Letter as to whether the share was to be transferred back to Bremen and to be offered to W. 36.Fourth, H proposed that the share in Bremen be transferred to W free of debt and encumbrances in consideration of a 50% redemption of the Promissory Note. It was not clear whether H’s proposal was that the Promissory Note was to be reduced by 50%, ie by USD 5.25m, but the remaining 50% or HKD 5.25m would still payable by Bremen to the Family Trust. 37.Further, as pointed out by W’s counsel Ms Cheng, even assuming that W did not need to pay for the redemption and that the valuation of about HKD 43m was adopted for Bremen, H’s offer would only have provided W with a total value of HKD51,145,700 (HKD43,145,700 + HKD8m), or about HKD 51m. This did not beat the ultimate award to W. 38.Mr Marwah tried to argue that what H was offering W was 50% of the total assets. However, one of the main disputes was over the valuation of the assets, in particular over the valuation of the GP Shares. It was not H’s proposal in the Calderbank Letter, nor his position then, that he was prepared to personally pay W 50% of the valuations of the total assets (including all assets of the US Trusts and the M_______ Apartment) as eventually found by the Court. As pointed out by this Court at the present hearing, had this been H’s then proposal in the Calderbank Letter, the main disputes between H and W which needed to go to trial would be over the valuations of the various assets in the Family Pot and this would have much shortened the length of the trial. 39.Even though H’s proposal in the Calderbank Letter for the periodical payments for the Children was a total of HKD 28,500 per month per child, which appeared to be higher than the Court’s ultimate award of HKD 20,000 per month per child, in fact what H had proposed was only HKD10,000 per month per child for general maintenance, and this was lower than the Court’s award. H’s proposal of HKD 18,500 per month for each child’s respective share of accommodation was based on 1/4 of W’s then rental and was subject to H’s condition that they reside with W in Hong Kong. For reasons set out in paragraphs 567 and 568 of the Judgment, the Court found that the apportionment of each child’s share of rental being 1/4, or in total 3/4 for the Children’s share was arbitrary and not reasonable. W could not therefore be criticised for not accepting H’s proposal for the Children in the Calderbank Letter. 40.In the Further Letter, H seemed to have missed W’s point that without proper valuations, she and/or her legal advisors could not give due consideration to his proposals, and that her complaints were that H’s estimates of valuations were never substantiated and had changed at times, and that the lack of disclosure alleged by W was that H had failed to make any meaningful disclosure to support his estimated valuations. 41.As for H’s disclosure, although H disclosed the major items of assets of Bremen and Intero, the valuations were based on his own estimates/best knowledge. In particular, H did not place any value on the GP Shares in his Form Es and 1st and 2nd Answers until his own expert Mr Choy produced a valuation on those GP Shares at HKD 13.24m. As pointed out in paragraph 411 of the Judgment, the most significant difference between the experts was the value of the GP Shares, with H’s expert’s valuation of HKD 13.24m and W’s expert’s of HKD50.72m-52.24m initially. The Court found that the valuation to be at least HKD46.98m. Further, the Court found in paragraph 433 that the lack of financial information had clearly hampered the experts in carrying out their valuations. 42.As set out by this Court in paragraphs 415- 417 of the Judgment, there were Transfer Restrictions and Purchase Rights by the Group regarding the GP Shares in the Employee Shareholder Agreement including that the employee could only transfer the GP Shares to a third party subject to certain terms therein. Further, in paragraph 439, this Court pointed out that section 2.6(b) of the Employee Shareholder Agreement provided for the event of divorce of the employee shareholder, a method for calculating the price per share in accordance with the most recent audited financial statements. H was asked by W to provide value of the GP Shares with supporting documents, all he said in his 2nd Answers was that in the event his employment was terminated voluntarily prior to him reaching 55 years old, the Group would have the right to purchase all the shares for USD 1 and upon his reaching 55 years, the aggregate purchase price for the GP Shares would be the “Fair Market Value” to be determined by the Board[21] and he then asked W to seek from the Trustee any underlying documentation. 43.No audited financial statements were ever produced by H. H’s evidence was, so far as this Court can understand, he had requested his employer but his request was declined and that he was not entitled to the audited financial statements as he was not a director. It was not clear whether H had referred his employer to those relevant provisions in the Employee Shareholder Agreement. In any event, there was no reason why he could not have obtained at least an indication from his employer as to the “Fair Market Value” for the price per share for the GP Shares upon his reaching 55 years of age which could at least provide a basis for negotiation/mediation. It would appear that the first time that there was any valuation for the GP Shares was in the H’s expert Mr Choy’s 1st Sirius Report of 21 January 2021. 44.As mentioned earlier, W’s solicitors had made it clear in the Reply Letter that for W to be properly advised on H’s proposals, she and her legal advisors needed to be satisfied as to a proper valuation of the assets. W could not be criticized, nor was she being unreasonable for not accepting H’s proposal in the Calderbank Letter or for not making any counter-proposal, because without proper valuations, she was simply not in a position to do so at that time. Indeed, in the Reply Letter, W’s solicitors had proposed the parties to engage single joint expert (“SJE”) to value each disputed item of the family assets to which H and his legal advisors had not responded at all. 45.Having considered all the above, I find H’s proposals in the Calderbank Letter were far from clear nor sufficient, and his response to W’s Reply Letter was not constructive nor conducive to any settlement. In any event, H’s proposal of about HKD 51m was much less than this Court’s ultimate award for W. 46.I do not find the Calderbank Letter would assist H in his present application. W’s unreasonable failure to negotiate 47.H complained that W took an obdurate approach to mediation throughout these proceedings, and that she unreasonably refused over a dozen offers of mediation/private FDR from H. 48.Mr Marwah has attached an Annex A setting out the chronology of mediation/negotiation attempts made by H. 49.To have a meaningful or constructive mediation, there must be full disclosure and proper valuations of the family assets. I do not find that W was unreasonable to refuse mediation until after Form Es had been filed and exchanged. Further, it was W’s case that she did not know that H had set up the US Trusts until H had disclosed it in his 1st Form E and the Court found this in her favour in paragraph 232 of the Judgment. As also seen in a letter dated 24 April 2017 from W’s solicitors to H’s solicitors, W was at that time trying to obtain H’s proposals on the move and the summer vacation and also W had sought an undertaking from H on the trust matters, and W’s solicitors had said that disclosure aside, if the more pressing side matters could not be resolved between the Parties, they were concerned whether mediation would be constructive[22]. 50.W then raised her 1st questionnaire on H’s Form E, and H’s answers were not filed until 28 July 2017. Thereafter, H continued to propose mediation and complained that there was no response from W. That W would need time to consider H’s answers would not be unreasonable and in any event, there was a hearing coming up before Judge Melloy on 29 August 2017. It appeared that a private FDR was raised during that hearing, and on 1 September 2017, W did follow up and propose a private FDR. Suffice to say, there were issues over who should be appointed to conduct the private FDR and litigation funding and after a series of correspondence, eventually it was only on 14 December 2017, they agreed to Mr Pilbrow to conduct the private FDR, but thereafter there arose a dispute over the payment of the fees, in the midst of which W then raised her 2nd questionnaire. H eventually filed his 2nd answers on 6 April 2018. 51.This was followed by issues over litigation funding and W’s application for maintenance pending suit, which led to the MPS Order on 11 December 2018 when on the same day, Judge Melloy transferred the ancillary relief applications up to this Court. 52.Thereafter, W indicated she would agree to participate in private FDR without valuation reports if H was to pay and further asked H to make an offer, and this led H to send the Calderbank Letter mentioned earlier on 10 May 2019. As set out earlier, H’s estimated valuations of the total assets in the Calderbank Letter were problematic. On 24 June 2019, the Court directed H and W to use their best endeavours to attend mediation or private FDR and further that W was to lodge an agreed schedule of assets by way of a Scott Schedule with estimated valuation. 53.As mentioned, in the Reply Letter, W had suggested that there be SJEs to prepare valuations but there was no response from H. On 24 September 2019, this Court gave directions for valuation of the family assets set out in the Scott Schedule, namely SJEs be appointed and failing agreement on the SJEs, the parties were to submit to the Court one name each for the Court to decide. The Court also ordered H and W to attend mediation as soon as possible. However, the issue of costs of mediation and litigation funding continued to be matters of disagreement between H and W. They were also not able to agree to the SJEs, nor was W able to submit names of her expert. The matter dragged on until 19 June 2020 when this Court finally decided that failing further agreement by the deadline, they were to each file their respective valuation report and this Court gave directions for filing of expert evidence. The Court also directed, subject to OS’s consent, that OS be appointed for the Children in respect of W’s 1st s17 Application, and that a PTR be fixed on the earliest possible date after the FDR hearing. 54.As seen later in this decision, the parties did at one stage agree to a SJE, namely Borelli Walsh, for valuing Intero, but then H reneged on his agreement as he found the SJE too costly, and later he also found there was a conflict of interest on the part of Borelli Walsh and he then proceeded to instruct his own expert. 55.The FDR eventually took place on 2 February 2021. I note that the valuations of the 3 parcels of land held by Bremen by H’s expert were made available on 18 and 21 January 2021. H’s valuations of the M______ Apartment and K_____ M____ were only available on 1 February 2021. As said, H’s expert Mr Choy provided his 1st Sirius Report on the valuation of Intero on 27 January 2021. In short, most of the expert reports from H were only made available around end of January 2021. Having said this, W’s expert reports were not available and it was thus not surprising that the FDR on 2 February 2021 was unsuccessful. 56.Suffice to say, having considered the chronology in Annex A, it appears that why mediation or a private FDR did not take place prior to 19 June 2020 was mainly due to the parties’ disagreement over litigation funding or costs for the mediation/private FDR, and also the valuations of the major assets had not been agreed. It cannot be said that W was unreasonable in failing to mediate or to participate in a private FDR. I will deal with the costs of the FDR separately later in this decision. Costs included in W’s lump sum award 57.This ground is in connection with whether the amount of litigation funding withdrawn from the US Trusts after the Valuation Date should have been added back by the Court to the Family Pot before division. 58.As stated earlier, this Court accepts that it should not have been added back. This is not a ground for variation of the Costs Order Nisi. W’s unreasonable litigation Conduct K_______ M_____ 59.What H seems to be arguing is that because W insisted on pursuing her case that H had a beneficial interest in K__ __ M___, time and costs were unnecessarily incurred on valuing this property, and as W failed on this issue, her litigation conduct was unreasonable. 60.In fact, W also did not succeed on her claim that her needs included the purchase of a property in Hong Kong for her residence. 61.Even though W did not succeed on all the issues, the time and costs spent on the above issues were relatively minimal compared to all the other issues. As said by this Court, W was the overall successful party. I do not find W should be deprived of her overall costs by reason of her failure on those two issues. W’s Injunction Application 62.H complained that W had misled the Court in her Injunction Application in her allegation that H was in breach of his 1st Undertaking by charging the LP Investments held by Intero under a Deed of Charge on 1 September 2017 for a loan of USD 200,000[23] (“Charge Deed”) when in fact H charged his personal LP Shares. 63.H did disclose Intero’s LP Investments in his 1st Form E, but there was no proper disclosure of his personal holding of the LP Shares under Part 2 “Assets”. Under Part 3.1 of his 1st Form E in relation to “Income”, all H disclosed was his basic monthly income plus a bonus of value “unknown”[24]. H then produced a bundle of documents in Annexure 3.1 including his employment agreements and tax returns, among which there was a letter dated 28 February 2014 from his employer summarising for the year ended 2013, the value of the cash and the value LP Shares (calculated at the NAV at time of issuance) awarded to H, and a “holdback” value[25]. Without any proper explanation from H, his remuneration package was unclear, and he did not disclose under Part 2 “Assets” the number of LP Shares held in his personal name or their value as at the date of his 1st Form E. H’s disclosure in relation to his income and assets was simply not satisfactory. 64.It was thus unsurprising that W had asked him to explain his employer’s letter dated 28 February 2013. H’s answers were brief, and in relation to the LP Shares, all he said was that this was the bonus portion that were paid as unit shares in the Group’s land or fund units[26]. He then produced in Annexure 57.2 annual summaries for 2014, 2015 and 2016 from his employer indicating the amount of LP Shares awarded to him[27], again with no explanations. All those summaries stated was that his employer would hold those LP Shares on H’s behalf. 65.It was only in his 2nd Answers filed on 9 April 2018 that H stated that those LP Shares were award shares given to H as compensation and those were not held by Intero, and that the LP Investments held by Intero were made directly by Intero itself[28]. Then, in H’s 5th affirmation filed on 4 July 2018, he suddenly disclosed a copy of the Charge Deed[29] (the copy produced did not bear his employer’s signature). The “Charged Interest” in the Charge Deed was defined as H’s indirect beneficial interest in PAAOF held by PTL (said to be a trading company). Although the Charge Deed was dated 1 September 2017, the transfer of H’s interest was on 18 December 2017. There was no disclosure of this in H’s 2nd Answers, nor of any statements from PTL. 66.At the present hearing, it was submitted on behalf of H that as none of Intero’s LP Investments included any units/shares in PAAOF, W should have been in no doubt that H charged his own shares and not Intero’s. 67.At the hearing for the Injunction Application, Mr Todd had in his written submissions referred to, amongst other things, H’s conduct in borrowing with property held by the US Trusts, namely the Charge Deed. This Court did not recall that this was corrected by H’s then counsel. At that hearing, H had opposed the Injunction based on simply that Judge Melloy had found W had not made out a prima facie case for an interim injunction, and that Judge Melloy had accepted H’s 2nd Undertaking. 68.Suffice to say, as seen above, H’s own disclosure in relation to his personal LP Shares was piecemeal and vague. Even in his 2nd Answers, it was not spelt out clearly as to where exactly, or in which account, the LP Shares awarded to H were held, the total number of units and the updated value thereof. It was not surprising that W and/or her counsel appeared to be confused as to what shares H had charged under the Charge Deed. 69.In any event, as seen in paragraph 28 of the Court’s Injunction Decision, there were some 6 items of W’s complaints about H’s breach of his 1st Undertaking[30]. In paragraph 43 thereof, this Court found that there was non-compliance of the 1st Undertaking, whether in actual terms or in spirit, and in paragraph 44, this Court had pointed out that the M_______ Apartment was settled into the I_______ Trust after the 1st Undertaking and that for reasons set out in that decision, this Court found that there remained a real risk of dissipation of assets by H of the assets and funds of the US Trusts and of the I_____ Trust and/or the M______ Apartment if H was not restrained. This Court also found that H’s 2nd Undertaking was not sufficient. 70.H’s complaints about W misleading this Court about him charging the US Trust assets had been made in H’s narrative affirmation prior to the trial[31]. As pointed out by Ms Cheng, W was not really cross examined on this issue during the trial. 71.There was no appeal from this Court’s decision on the Injunction Application nor was there any application by H to set aside the Injunction on the ground that W had misled the Court. As this Court had pointed out, in paragraph 51 of the Injunction Decision, if there was any need for H to make any request for distributions or withdrawals from the US Trusts and if W’s consent was unreasonably withheld, he could always seek leave from the Court. There was never such an application made by H after the granting of the Injunction. 72.I do not find that this is now a valid ground for variation of the Costs Order Nisi. The BVI Proceedings 73.H said he had made full disclosure of the “US tax structure” and the assets of the US Trusts in his 1st Form E on 1 February 2017 and that he had not taken any steps to transfer Intero or Bremen, and that W knew that Intero’s shares were held by Bremen and that Bremen’s shares were held by the Trustee. It was unnecessary for W to issue the BVI proceedings. 74.Originally, H was the sole director and shareholder of both Intero and Bremen. In November 2015 H had disposed of his one share in Intero into the Family Trust and in July 2016, H had disposed of his one share in Bremen into the Education Trust. Then, one month prior to his 1st Form E filed on 1 February 2017, the Family Trust was moved from New Hampshire to Nevada and there was also a new trustee appointed for both US Trusts. The Family Trust then purportedly sold its one share in Intero to the Education Trust and there was then the Promissory Note executed. Thereafter, as set out in the Judgment, there had been further revisions and amendments of the trust deeds and “Investment Director” of the Education Trust which were not properly disclosed by H. 75.Even though H had made disclosure of the setting up of the US Trusts in his 1st Form E, when W raised her 1st questionnaire and sought various further information and documents, H’s answer was invariably that he had requested the information/documents from the Trustee. Further, when asked the basis of the Promissory Note being the amount of USD10.5m, all H said this was a value advised by the previous trustee. When H was asked about the basis of the valuation he placed on each item of Intero’s asset, he said it was based on his best knowledge. Similarly, in H’s 2nd Answers, again, for various information/documents W sought on the US Trusts, his answer was invariably that the request should be made to the Trustee. H’s answers were clearly evasive and unsatisfactory. In fact, the Trustee’s position was that the financial information of the US Trusts should be with the Investment Director/Investment Advisor who was H initially. 76.As said in the Injunction Decision, the then evidence indicated that H had been dealing with the funds of the US Trusts freely as he liked, being initially the sole “Investment Director”, and that in light of H’s lack of full and frank disclosure of his finances, there remained a real risk of dissipation by H of the assets and funds of the US Trusts. Such assets were held through Intero and Bremen and H was the sole signatory of the banks accounts. 77.Ms Cheng submitted that W’s commencement of the BVI Proceedings for Stop Notices was entirely necessitated by H’s conduct and the need to preserve family assets. In light of H’s unsatisfactory disclosure, I agree. In my view, this is not a valid ground for varying the Costs Order Nisi. W’s applications for litigation funding 78.As set out in this Court’s decision on litigation funding of 21 May 2019, W made two applications for litigation funding, namely by way of the 1st Summons dated 22 March 2017 but issued on 27 March 2017 and then the 2nd Summons issued on 12 August 2019. It was submitted by Mr Marwah on behalf of H that the costs of both those summons were entirely avoidable and incurred due to W’s intransigence on the issue of litigation funding. H sought no order as to costs for these summonses. 79.As pointed out by Ms Cheng, this Court had already made no order as to costs of W’s 2nd Summons under the Costs Order Nisi. 80.The 1st Summons was dismissed on 11 December 2018 by Judge Melloy with costs reserved[32]. Ms Cheng submitted that Judge Melloy dismissed W’s application for litigation funding on the basis that H and W were beneficiaries of the Family Trust. However, in relation to W’s 1st Summons regarding litigation funding, Judge Melloy had said that it was hard to see how the matter could otherwise be resolved, other than by W accepting the money offered by H, and consequently, although there were question marks handing over the trust, W should accept the sum of HKD 975,000 offered on the basis of “without prejudice to her right to argue about this at a later date”[33]. As seen in paragraph 1 of the Melloy Judgment, at the hearing of 26 October 2018, agreement had largely been reached with respect to W’s application for maintenance pending suit and only the issue of litigation funding was then outstanding and hotly contested[34]. 81.Having considered the Melloy Judgment and that W’s application for litigation funding was dismissed, I agree that W’s refusal to accept the sum of HKD 975,000 offered was unreasonable and I am prepared to vary the Costs Order Nisi to the extent that there should be no order as to costs of W’s 1st Summons in relation to litigation funding, including no order as to costs of the hearing on 26 October 2018 and the hearing on 3 December 2018. W’s late instruction of experts and the FDR 82.On 24 June 2019, this Court fixed trial dates, gave case management directions and imposed deadlines for the agreement of the valuations and appointment of SJEs, and that failing agreement of the SJEs, H and W were to each submit name of one SJE to the Court for decision on appointment. This Court further set a deadline of 3 May 2020 for the submission of expert reports, ie 12 months before the commencement of the trial. The availability of expert valuation reports would have assisted the Parties in negotiating for a settlement. 83.However, the Court’s directions were not complied with. By 19 June 2020, a year down the road, H and W were still not able to agree on the valuations and/or the appointment of SJEs, and on that day, this Court set a final deadline of 14 days for H and W to agree failing which they were directed to each instruct their own expert. It was also on the same day that this Court appointed OS to represent the Children as guardian ad litem in respect of W’s 1st s17 Application. The deadline for the valuations and/or the SJEs to be agreed expired on about 3 July 2020, ie 14 days from 19 June 2020. 84.The FDR hearing was originally fixed on 4 November 2020. Prior thereto, on 21 July 2020, the FDR judge, Lisa Wong J (“FDR Judge”) had also directed that (i) H and W were to agree on an updated Scott Schedule of assets and liabilities and the values of the same, failing which they should identify the matters of disagreement and to state their respective positions on such matters and (ii) they should lodge and exchange their respective offers and proposals and position papers for the FDR hearing[35] (“FDR Directions”). 85.As seen in the solicitors’ correspondence, by 16 July 2020, H and W did in fact agree to (i) the SJE proposed by H for Intero, namely Borelli Walsh (ii) the SJE for the I_______ properties, and (iii) the SJE for Duxbury calculations[36] and H’s solicitors had also prepared draft letters of instructions for W’s comments. While comments on the draft letters were being exchanged by the Parties’ respective solicitors, H’s solicitors suddenly wrote on 28 September 2020[37] to propose an alternative for the SJE for the valuation of Intero on the basis that the fee quotations of Borelli Walsh were highly excessive, and further later on 5 October 2020[38], H’s solicitors wrote again to say there was a conflict of interest on the part of Borelli Walsh. 86.In W’s solicitors’ reply letter of 29 September 2020[39], W indicated that she would not agree to the alternative SJE proposed by H, nor the SJE proposed by H for the properties in _______. As for H’s suggestion for the SJE for Duxbury calculations, W said she was still considering this. As for the SJE on US tax, W asked H to disclose his relationship with the SJE proposed by him. As for the proposed valuations for M_______ Apartment and K_____ M_____, W said she saw no point in engaging a SJE. What is clear is that by end of September 2020, the appointment of the SJEs, in particular for Intero, had not been agreed. This was long past the deadline of 3 July 2020 imposed by this Court. 87.Eventually, on 8 October 2020[40], H’s solicitors wrote to W’s and urged W to agree H’s proposals on the SJEs and if W failed to reply by 12 October 2020, H would proceed to instruct his own remaining outstanding experts to prepare for the FDR. Thereafter, there was no response. W’s solicitors only responded on 21 December 2020[41] to say she would appoint Borelli Walsh whether jointly with H or otherwise, and also proposed an alternative for the SJE on US Tax. However, by then, H had already instructed his own expert for Intero and on US tax and H again pointed out to W in relation to the conflict of interest of Borelli Walsh. H’s solicitors wrote again on 11 January 2021, pointing to W that as she did not respond to his letter of 12 October 2020 until late December 2020, it was no longer possible to change to SJEs as he had already appointed his own experts for Intero and US tax by then. 88.As mentioned earlier, H’s expert valuations were subsequently made available to the FDR Judge shortly before the FDR, whereas W failed to produce any of her own expert valuations at all, nor did she comply with the FDR Directions imposed by the FDR Judge, and/or failed to provide a written offer to H. 89.W should be fully aware that the Court had imposed a deadline for SJEs to be agreed by 3 July 2020. Although H had reneged on his initial proposed appointment of Borelli Walsh over the charges, it turned out that there was also a conflict issue. W’s response in the letter of 29 September 2020 indicated that she did not agree to H’s proposed change of SJE for Intero. By that time, if W did not agree to any of H’s proposals on the SJEs, she really ought to have got on to instruct her own experts, rather than continue to send letters to comment on H’s proposals. In any event, H had made it clear that W was to reply by 12 October 2020 on the appointment of the SJEs failing which he would instruct his own experts. There was no response from W. Latest, after 12 October 2020, W should have proceeded to instruct her own experts immediately. W did receive HKD 1.5m for litigation funding on 21 July 2020. Although there was a deficit after paying her solicitors’ then outstanding bill, her solicitors were prepared to continue to carry out work for W and had produced 6 bills for their work done between August and December 2020. There was no reasonable explanation from W as to why some of the work could not have been directed towards instructing W’s own experts, knowing full well that the deadline imposed by the Court had expired and that the FDR was approaching. It was further not clear why in W’s solicitors letter of 30 December 2020, she was still referring to appointment of SJEs and making proposals thereon. It was obviously far too late. 90.W clearly failed to instruct her own experts to prepare valuations in time for the FDR, in particular in relation to the valuation of Intero. W failed to comply with this Court’s directions that the Parties should instruct their own experts in the event of there being no agreement by 3 July 2020, nor did she comply with the FDR Directions given by the FDR Judge. 91.It was H’s evidence that W failed to make any offer of settlement in advance of or during the FDR hearing[42]. There was no evidence in W’s 16th affirmation to contradict what H had said. All W pointed out was that in H’s then counsel’s note of 26 October 2018 prior to a hearing before Judge Melloy, H had invited the Court to dispense with a FDR[43]. It would appear from that note the reason why H had sought the dispensation was because he was disappointed that a private FDR had not taken place by then. 92.The Parties were represented by well known matrimonial firms and they should be well aware of PD 15.11 and that it was mandatory for the Judge to direct a FDR unless that there was a direction that a FDR would not be appropriate. Obviously, if the Parties attended a private FDR which was not successful, then it might be said that there was no point in them participating in a further FDR conducted by a judge, but when no private FDR had taken place for whatever reasons, W being the petitioner and applicant should herself have sought directions from the Court for a FDR before a judge under PD 15.11. It would appear that this was only raised by this Court after the matter had been transferred up and as said earlier, this Court then directed a FDR. Under Order 1A rule 1 of RHC, Cap 4A, the parties to any proceedings and their legal representatives are under a duty to assist the Court to further the underlying objectives set out therein which include helping the parties to settle the whole or part of the case. In exercising its discretion as to costs, under Order 62 rule 5 of the RHC, this Court may take into account the underlying objectives set out in Order 1A rule 1. 93.Having considered all the above said, I have come to the view that W’s delay in preparing her own expert reports and her failure in complying with the FDR Directions was not reasonable and such must have contributed to the FDR being unsuccessful. Time and costs were unnecessarily wasted by her unreasonable conduct. I am prepared to vary the Costs Order Nisi and to order W to pay H’s costs of and incidental to the FDR as from 12 October 2020 onwards including the costs of the Order of 18 February 2021 of the FDR Judge. In light of this and what will be set out later in this decision in relation to OS’s costs, it follows that OS’s costs of and incidental to the FDR should be paid and indemnified by W. Conclusion on H’s Variation Summons as between H and W 94.To summarise, I have found the Calderbank Letter did not assist H, nor were there any other valid grounds to support H’s application for W to pay his costs of the ancillary relief proceedings after 10 May 2019, save that having considered the circumstances of this case including W’s unreasonable conduct towards litigation funding and her late instruction of her own experts for valuations of assets for the FDR, this Court is prepared to vary the Costs Order Nisi to the extent that:
95.As for the scale of costs in (2) above, H’s costs, if not agreed, are to be taxed on party and party basis. I see no reason why two counsel would be necessary for the FDR, and I only allow certificate for one counsel for H. 96.As for H’s Variation Summons in relation to OS’s costs, I propose to deal with this part of H’s Variation Summons later in this decision when considering OS’s costs. W’S VARIATION SUMMONS 97.The main grounds for W’s application for the Costs Order Nisi to be varied to H to pay her costs on indemnity basis was based on (i) lack of disclosure on H’s part and (ii) H’s evidence. 98.It was submitted by Mr Marwah on behalf of H that W had made a series of unfair allegations against H in support of her application for indemnity costs and that:
99.In relation to (2) above, this Court had pointed out in the Injunction Decision that H and W apparently had a different understanding as to the words “then status” in the 1st Undertaking. In any event, as said earlier and in the Injunction Decision, the Court found there had been non compliance of the 1st Undertaking on the part of H, and for this and other reasons the Court had granted the Injunction sought by W. 100.As for (3), I do not quite understand H’s argument that his removal as the “Investment Director” of the US Trusts, or of Intero and Bremen, was an “inevitable result” of the Injunction. In fact, it would appear that H’s removal was to circumvent the Injunction. In any event, so far as the Education Trust was concerned, H’s evidence was the Trustee had removed him as the “Investment Director” from 1 August 2017[44]. This was in fact prior to H giving his 1st Undertaking, although there was no proper disclosure by H of this at the time nor was there any supporting documentation. 101.Ms Cheng had referred the Court to L v C [2007] 3 HKLRD 819. In that case, the trial judge had held the wife therein guilty of material non-disclosure of her assets. On appeal, Stock JA, as he then was had endorsed the following passage quoted by him from Rayden and Jackson on Divorce and Family Matters, 18th ed:
102.Ms Cheng also referred this Court to ML v YJ (No 2) [2008] 6 HKC 313. In his judgment, Lam J, as he then was, found that the husband had embarked on the concealment of his assets on a massive scale, and that assets of substantial work were put under the names of his nominees to facilitate his scheme of misleading the court, and that the tactics he deployed to frustrate proceedings in Hong Kong and his subsequent absence from the trial were also relevant conduct for the purpose of costs[45]. Lam J then said[46]:
103.What can be seen above is that shortcomings in disclosure may attract adverse costs order on indemnity basis. 104.In relation to W’s 1st s17 Application, insofar as the dispositions into the US Trusts, this Court accepted W’s evidence and found that that there was no sufficient evidence that there had been consent or agreement from W to the setting up of the US Trusts, and that the transfers of assets to the US Trusts would have the consequence of defeating W’s claim for financial provision. As for the M_______ Apartment, the Court found that H’s case was like a moveable feast and that his disposition of the M______ Apartment into his father’s name would have the consequence of defeating W’s claim for financial provision. 105.Upon the above findings, the burden would then fall upon H to displace the Presumption and the Court found that H was not able to discharge the burden on him. 106.Mr Marwah submitted that there was no finding in the Judgment by this Court of any undisclosed items of assets and that H had disclosed all the major items of assets including those of Intero and Bremen, and that H had complied with his duty of full and frank disclosure. 107.The major problems with H’s disclosure lie in his manner of disclosure and his own valuations of his assets with lack of supporting documentation. For example, as set out earlier, in his 1st and 2nd Answers, in response to W’s requests for financial information of the US Trusts he referred W to the Trustee, but the Trustee then said the financial information was with the “Investment Director”. H was clearly evasive and piecemeal in his disclosures. Further, as mentioned earlier, in his 1st Form E, in relation to his income, all he stated in the actual form was his present income and disclosed bonus of “unknown value”. He then attached annexures without a proper explanation of his remuneration package and as a result, W then had to plough through those documents to try to understand his remuneration package. As described by OS, H’s disclosure was “exceptionally undesirable”. Although H had set out the major items of the assets of the US Trusts, as said earlier, there was a lack of documentations and information as to how he arrived at his valuations of the various items. 108.One of the major issues was the valuations of the assets of Intero, among which was the GP Shares which all along H had stated was of “unknown value”. His attitude in maintaining his stance that the GP Shares were of unknown value as they were not vested was in my view highly unsatisfactory and unreasonable. 109.H’s 1st Sirius Report of 27 January 2021 was the first time that an independent valuation of Intero was provided by H, and this was some 5 years since W commenced the divorce proceedings in 2016 and 4 years after H’s 1st Form E. Even in the 1st Sirius Report, his expert Mr Choy had stated that the schedule of assets and liabilities of Intero was provided by the “Investment Director”. There was no independent verification by Mr Choy who had assumed the information provided to him was accurate or correct. Further, Mr Choy had also pointed out that no financial statements of the Group were provided to him and that his opinion was that had those statements been provided to him, his opinion might be different. What was clear was that even H’s own expert had to make quite a number of assumptions based on whatever information provided by H. In particular, for the LP Investments held by Intero, H had failed to provide the underlying investments of the funds, and this again had handicapped the experts and this Court had in the Judgment agreed with W’s expert Mr Yeo that it was surprising that H was not even able to provide information of the underlying investments of the funds he had invested. 110.It was the finding of this Court in the Judgment that the experts carrying out valuations of Intero were hampered over H’s deficient disclosure, and the Court had to draw adverse inferences against H. 111.As set out in the Judgment, the Court had also found H’s evidence lack of reliability and credibility on almost all the disputed issues, and often contradicted by contemporaneous documents. Also, as pointed out by Ms Cheng, H was also producing documents suddenly during the trial. Conclusion on W’s Variation Summons 112.In my view, H’s litigation conduct in particular his manner of disclosure and failure to provide proper valuations of his assets with supporting documentations was highly unreasonable. I am of the view that for those costs ordered to be paid by him to W, such should be on indemnity basis. OS’S COSTS H’S VARIATION SUMMONS IN RELATION TO THE OS’S COSTS 113.In H’s Variation Summons, he has applied to vary the Costs Order Nisi such that 50% of OS’s costs be paid by W, on party and party basis, taking into account the litigation funding. 114.H’s case is that OS should only be awarded not more than half of his costs (to be paid by W)[47]. It was submitted on behalf of H that[48]:
OS’s appointment 115.In relation to OS’s appointment, Mr Marwah had referred to Re LB (Wardship: Costs) [2012] HKLRD 266, HCMP 813 of 2011, 21.10.11 to support his argument that as OS was appointed by the Court’s own motion, OS should not be awarded more than half of his costs. Re LB was a wardship proceeding. In that case, Poon J, as he then was, had appointed the OS on his own motion as guardian ad litem of the child in question to protect and represent the child’s interest when the mother’s case was based on the alleged abuse of the child by her primary carer, the father’s then partner. Poon J’s comment that the OS was appointed guardian ad litem on the judge’s own motion might well persuade the court to make no order as to the OS’s costs, was thus clearly made in the context of wardship proceedings or children proceedings. 116.In the present case, this Court had pointed out in paragraph 51 of the Joinder Decision[49], that under rule 72(1) of MCR, this Court had to direct that the Children be separately represented unless it was satisfied that the proposed variation would not adversely affect the rights or interests of any of the Children and further under rule 72(2) of MCR, the Court may give the same direction in an application for an avoidance of disposition order which may affect the rights or interest of the Children. 117.The present proceedings are not wardship proceedings, nor children proceedings. The provisions of rule 72 of the MCR are clear and in particular under rule 72(1), it is mandatory for the Court to direct the Children be separately represented in an application for a variation of settlement order unless this Court is satisfied that the proposed variation does not adversely affect the rights or interests of the Children. The burden was clearly on the Parties to persuade the Court otherwise. 118.By her 1st s17 Application, W sought to set aside the dispositions made by H of Interto and Bremen into the US Trusts and also the disposition of the M______ Apartment to his father R4, and alternatively to the setting aside applications, W also sought a variation of settlement order. Yet, as mentioned in the Joinder Decision, neither H nor W had sought any directions from the Court under rule 72 of Matrimonial Causes Rules (“MCR”). It was under such circumstances that this Court then directed the Parties to seek the relevant directions. 119.On 21 February 2020, in an endeavour to avoid involving Children in the ancillary relief trial, W’s solicitors did send an open letter to H’s solicitors inviting H to agree to all assets subject to W’s 1st s17 Application be treated as held and owned by H and ownership of all other assets to follow the legal titles. This in my view was a sensible approach to which H should have agreed. As seen in his solicitors reply on 27 March 2020, H rejected this proposal. 120.The hearing for directions eventually took place before this Court on 19 June 2020. It was open for H to persuade this Court at this hearing that any setting aside orders and/or variation of settlement sought by W in her 1st s17 Application would not adversely affect the rights or interests of the Children and that the Children did not need to be separately represented. It was further open to H to submit that another fit person other than the OS should be appointed as guardian ad litem for the Children. However, H did not put forward any such argument or proposal. 121.It was in light of the statutory provision of rule 72(1) of the MCR that this Court made the order on 19 June 2020 that OS be appointed, subject to his consent, to represent the Children. I am therefore the view that the present case can be distinguished from Re LB. 122.W’s solicitors wrote to OS on 13 July 2020 and on 20 July 2020 OS replied (“OS 1st Letter”)[50] It was stated therein that having perused and considered the documents sent to them by W’s solicitors, OS understood that the financial interests of the Children would inevitably be affected/disturbed by W’s application for ancillary relief, and as such it was necessary and appropriate to appoint a separate representative for them in order to safeguard their interests, and that OS was in principle agreeable to act as guardian ad litem for the Children in respect of W’s 1st s17 Application on condition that his costs to be incurred including the fees of his legal team to be engaged are properly provided (“Condition”) and had sought W’s proposal to provide for the OS’s costs for the OS’s deliberation. 123.W’s solicitors replied to say W was financially dependent on H, and that the costs of the Children’s separate representation should be met either by H or the trusts in question in the first instance (if appropriate) and to remain as an issue to be determined by the Court, pending the outcome of the relevant applications and considering all circumstances. 124.As there was no consensus between H and W over the meeting of OS’s costs, OS then wrote direct to H’s solicitors on 27 July 2020 to seek the views of H on W’s proposal that the OS’s costs be met by H or the trusts in the first instance. H’s solicitors however replied on 10 August 2020 that OS should contact the Trustee direct. OS did not agree to this suggestion and wrote on 17 August 2020 to remind H’s solicitors that it should be the duty of the parties to make proper provision of OS’s costs for separate representation for the Children to facilitate fair and just disposal of the disputes between the parties[51]. In response to this, H’s solicitors then replied and asked for OS’s estimate of costs up to and including the FDR hearing which was initially scheduled on 4 November 2020, and OS provided an estimate of HKD 400,000. Thereafter, H’s solicitors wrote on 23 September 2020 and said that H did not personally have the funds requested by OS and proposed again that OS should seek litigation funding from the Education Trust as the Children are beneficiaries of that trust[52]. 125.OS eventually wrote to the Court on 24 September 2020[53]. It was stated that OS in principle was prepared to give consent to act as guardian ad litem for the Children but reiterated the Condition. OS had pointed out in his letter that this case did not concern custody and welfare of minors but was purely a private property dispute, in which the OS being a public officer was duty bound to seek costs as appropriate. OS further stated that as no consensus was reached between H and W regarding OS’s costs, OS had no alternative but to withhold his consent to act and sought directions from the Court. Subsequently, on 6 October 2020, H and W undertook before the FDR Judge to agree to enter into and to lodge before this Court a consent summons for litigation funding for OS to be released from the US Trusts[54]. 126.As pointed out by Poon J in Re LB[55], OS can only be appointed if he has given his consent to act and this enables the OS, where he thinks fit, to ask the party seeking to appoint him for a full or partial indemnity for his costs. Mr Lau Ca Chun of the OS had made two affirmations in support of the OS’s Variation Summons. In paragraph 4 of his 1st affirmation, he had referred to the Condition and stated that this reflected OS’s request to be indemnified for costs properly incurred by him as permitted under section 4 (2)(a) of the Official Solicitor Ordinance Cap 416 and that he believed that the Condition, namely that the OS’s costs were to be indemnified, was made clear. 127.In the present case, although OS did not expressly seek a written indemnity from the Parties regarding his costs, as found later in this decision, this Court accepts OS’s intention by imposing the Condition was to impose terms for his costs to be fully indemnified by the Parties and this was made clear in his letters. What is clear is that the Parties did on 6 October 2020 undertake before the FDR Judge to agree to $400,000 being released from the US Trusts to OS for his litigation funding for OS to attend the FDR. Further, subsequent to that, the Parties also agreed to further litigation funding be released from the US Trusts for OS to participate in the trial. H also indicated no objection to OS to approach the Trustee direct to obtain litigation funding. I find that by providing such undertaking and payment of the litigation funding, the Parties had by conduct accepted and agreed to OS acting for the Children on the terms imposed by OS. 128.In any event, OS’s failure to expressly seek a written indemnity on costs from the Parties is not a valid ground for H to now argue that OS should not be awarded more than half of his costs. 129.Further, the total amount of HKD 2.6m paid to OS as litigation funding was paid on account of OS’s costs. Whether the amount was sufficient or not is a matter for taxation, if there is no agreement. The fact that OS had already received HKD 2.6m for litigation funding is not a valid ground for the variation sought by H. OS’s failure to interview the Children 130.H also complained that OS did not interview the Children to obtain their views. Although section 3(1) of the Guardianship of Minors Ordinance, Cap 13 would apply to “administration of any property belong to or held in trust for a minor of the application of the income of any such property”, there had been no submissions that the s17 Applications were “administration applications” or section 3(1) would be applicable to a setting aside application and/or variation of a settlement application. In any event, there was no sufficient evidence that the Children who were about 17, 15 and 11 years old at the time of the trial would be able to understand the terms of the trust deeds and the effect of W’s 1st s17 Application and/or to know whether there would be an adverse effect to their rights or interests if any setting aside orders/variation of settlement orders were made. H was represented by a team of well known matrimonial counsel and solicitors, and if he was of the view that the Children should be interviewed by the OS, he could have himself sought direction for the Children to be interviewed by OS, rather than complaining about it now. 131.I do not find OS’s failure to interview the Children is a valid ground for depriving OS of his costs, whether in part or in whole. OS’s presence at the trial 132.As for OS’s presence at the trial, OS’s position was made clear in their Opening Submissions. H argued that by then, OS’s concerns in the OS 1st Letter that the Children’s interests would inevitably be affected were clearly no longer present, and that his attendance at the trial was not necessary and that OS should have sought to be excused. 133.OS’s position in his Opening Submissions was that, subject to the oral evidence given in the trial, OS took the provisional view that he (on behalf of the Children) had genuine difficulties in supporting H’s case under W’s 1st s17 Application for reasons set out. In their Closing Submissions, OS confirmed that they would not object to the setting aside of the US Trusts, or the varying of the US Trusts save that in the event of any variation of settlement orders, OS had put forward certain provisions. As for the M_______ Apartment, OS’s view was that the Children’s interests would vary materially according to the factual cases put forward by H at different times in relation to the M_______ Apartment. 134.H himself had instructed Senior Counsel for the trial, and when OS’s provisional views were made known in the List of Issues or in their Opening Submissions, H could himself have sought directions from this Court as to whether OS’s presence or attendance was necessary for the entire duration of the trial. This was not raised at the time. In any event, OS had also made his position clear that his final view would have to depend on the oral evidence given at the trial, in light of, in particular, H’s unsatisfactory evidence over M_______ Apartment. As OS was there to represent the Children’s interests, it is not for H to now argue that OS had played only a very limited role, and in any event, there was no sufficient evidence to support what he said. This is not a valid reason as to why OS should be deprived of all or part of his costs. 135.Having considered the above, I do not find H has established any valid grounds for OS to be only awarded not more than half of OS’s costs. W to pay 50% of OS’s costs 136.It was submitted on behalf of H that W should pay for OS’s costs. As stated earlier, OS’s appointment was as a result of W’s 1st s17 Application and W’s applications were necessitated by H’s dispositions of family assets. W succeeded in her 1st s17 Application and was the overall successful party in the ancillary relief trial. There was no reason why H should not be ordered to pay all costs of and occasioned by the 1st s17 Application including OS’s costs, save for the costs of W’s litigation funding applications and of the FDR, as ordered earlier in this decision. Conclusion on H’s Variation Summons in relation to OS’s Costs 137.Having considered all above, H’s application to vary the Costs Order Nisi in respect of OS’s costs is in my view without any valid grounds. OS’S VARIATION SUMMONS 138.OS seeks a variation of the Costs Order Nisi for his costs be paid on indemnity basis. 139.OS’s submissions are essentially based on the following:
Ground (1) 140.Section 4 and Schedule 1 of the Official Solicitor Ordinance Cap 416 (“OSO”) provide respectively as follows:
141.The circumstances leading to the appointment of OS by this Court have been set out earlier. First, as the appointment was expressly stated to be subject to OS’s consent, OS had a discretion whether to give his consent or not and under section 4(2) of the OSO, OS was entitled to impose terms before giving his consent to act. 142.Second, as set out earlier, H had suggested that OS to contact the Trustee of the Education Trust direct, as OS was acting as guardian ad litem for the Children. This however was rejected by OS in their letter of 17 August 2020. OS had pointed out that the OS had no power to control, manage or otherwise to deal with the Children’s finance and that in the circumstances, OS did not consider it appropriate to make request to the Trustee direct even if the Children were beneficiaries of the Education Trust. OS then reiterated that it should be the duty of the Parties to make provision for the OS’s costs. 143.Third, when on 23 September 2020, H’s solicitors wrote to say H did not consider there was anything inappropriate about requesting litigation funding from the Trustee of the Education Trust and again invited OS to approach the Trustee, OS’s response was to write to the Court on 24 September 2020 stating the Condition and indicating that in the absence of any concrete arrangement for his costs to be properly provided, OS had no alternative but to withhold his consent to act as the guardian ad litem for the Children. 144.Mr To submitted that the wording of the Condition closely follows those of section 4(2)(a) of the OSO, namely the words “properly provided ” in the Condition follows those words in section 4(2)(a), and although the Condition does not expressly refer to “indemnity”, it must refer to the entirety of the costs or all the costs by referring to “costs to be incurred ”. 145.In my view, the Condition could have been better worded to state clearly that OS would only give his consent to act for the Children provided his costs were indemnified in full by the Parties either solely or jointly. Notwithstanding this, having considered the letters between OS and the Parties, I find that the OS’s intention for his costs to be fully indemnified by the Parties is clear in his letters. In particular, he had stated given the private nature of the property dispute, OS was duty bound to seek costs. There was no reason why the OS would see fit to spend the public funds on a “private property dispute” if the OS did not also intend to recover the full costs or indemnity costs. Further, OS had also made it clear in his letters that it was the duty of the Parties to make provision of OS’s costs and had clearly rejected H’s proposal that he was to approach the Trustee of the Education Trust directly for his costs. 146.I am thus prepared to accept that OS’s intention by imposing the Condition was to impose a term under section 4(2) of the OSO that he be fully indemnified by the Parties for his costs and such intention was made clear to the Parties in OS’s letters. There were no reasons for the Parties to expect that OS’s costs should be met from public funds, whether in part or in whole. In any event, as found earlier, H and W had by conduct accepted and agreed to OS to be indemnified by the Parties for his costs. Ground (2) 147.OS had refereed the Court to the case of B v B [2010] EWHC 543 (Fam) in which the Official Solicitor in England sought to be indemnified for his costs from a husband whom he acted for as guardian ad litem in the husband’s divorce proceedings. 148.Mr Justice Bennett had in his judgment in B v B cited passages from 3 earlier authorities:
149.As seen B v B, the issue was whether the Official Solicitor should be indemnified by Mr B for acting on his behalf as his guardian ad litem. What is clear from what was cited from earlier authorities and what was held by Mr Justice Bennett himself is that a next friend or a guardian ad litem should not be discouraged to act for a protected party and should prima facie be indemnified as to costs unless the next friend/guardian ad litem has not been conducting the proceedings with propriety. As seen in paragraph 41 of B v B, OS’s position can be said to be analogous to that of a trustee. In the present case, I have earlier rejected all H’s complaints about OS. W had made no complaint over OS’s conduct in these proceedings. There was simply no evidence that OS had conducted these proceedings other than with propriety. 150.Having considered the above, I accept that OS should be indemnified for his costs. 151.As seen in B v B, the costs of a next friend/guardian ad litem acting for a protected person in a litigation should prima facie be indemnified by the protected person (or his/her estate) for whom the next friend/guardian ad litem acts. 152.However, as in any contentious litigation, a next friend/guardian ad litem acting for a protected person is entitled to seek costs on behalf of the that person from the unsuccessful party in the litigation. Ground (3) 153.In the present case, OS acts for the Children. The Children are innocent parties herein and they were involved in the ancillary relief proceedings as a result of W’s 1st s17 Application, which was necessitated by H’s dispositions of family assets. There was no reason why the Children should be liable for costs. As W was successful in setting aside H’s dispositions, and was overall the successful party in the ancillary relief proceedings, save for those costs of the litigation funding applications and the FDR mentioned earlier, this Court had ordered H to pay W’s costs, and such costs should include the OS/the Children’s costs. Earlier, I have found that H’s litigation conduct in particular his manner of disclosure and failure to provide proper valuations of his assets with supporting documentations was highly unreasonable and have ordered that the costs payable by him to W to be on indemnity basis. It follows that H should also pay the Children’s costs, ie OS’s costs, on indemnity basis. Conclusion of OS’s Variation Summons 154.OS had not sought any order of costs against W. However, as said earlier, I have found W’s litigation conduct in delaying to instruct her experts in valuing the assets in time for the FDR and failing to comply with the FDR Directions unreasonable. I have ordered W to pay for the costs of the FDR, including OS’s costs. In line of what was said under Ground (1) and (2), I am of the view OS’s costs of and incidental to the FDR should be indemnified by W. 155.Having considered all the above, I am prepared to vary the Costs Order Nisi to the effect that OS’s costs ordered against H should be on indemnity basis save that, as said earlier, OS’s costs of and incidental to the FDR shall be paid and indemnified by W. OTHER COSTS 156.At the hearing on 24 January 2022, this Court also directed that the costs of (i) that hearing, (ii) the latest PwC report, and (iii) withdrawal of the BVI stop notices be dealt with at the present hearing. 157.The hearing on 24 January 2022 was in relation to the Outstanding Matters. These matters were largely resolved at the hearing for the benefit of both the Parties. In my view there should be no order as to costs. 158.As for the updated PwC report dated 20 January 2022, although this was foreshadowed in paragraph 610 of the Judgment, the report was essentially for W’s own benefit to minimise her US tax if any is payable. I will not order any reimbursement by H. 159.As for the withdrawal of the BVI Stop Notices, in line with the costs order for the BVI proceedings, the costs of withdrawal of USD 1,854.25 should be borne by H. 160.As for costs of H’s Variation Summons as between H and W, and W’s Variation Summons, neither of them has been entirely successful and I make no order as to costs. As for H’s Variation Summons in respect of OS’s costs and OS’s Variation Summons, OS is the successful party, and H should pay OS’s costs on indemnity basis.
Ms Bonnie YK Cheng, instructed by Stevenson, Wong & Co., for the Petitioner Mr Shaphan Marwah, instructed by Bowers, for the 1st Respondent The 2nd Respondent, absent The 3rd Respondent, absent Oldham, Li & Nie, for the 4th Respondent, absent The 5th Respondent, absent The 6th Respondent, absent Mr Ken To, instructed by the Official Solicitor, for the Children [1] This was the 2nd Summon defined in this Court’s decision on litigation funding of 21 May 2020, see para 3(8), A1:99 [2] So defined in the Court’s decision on litigation funding of 21 May 2020, at para 3(3), A1:98 [3] Last line, at S, A2:326 [4] Last line, at P, A2:354 [5] Between K and L, A2:355 [6] At A2:198 [7] A2:367 [8] A2:368; the supplemental report was dated 23 April 2021, see para 51 of the Judgment, A2:193 [9] As amended earlier to be HKD 156,491,003 instead of HKD 156,211,003 [10] B6:2049-2051 [11] At para 12 of H’s Costs Submissions [12] Paras 541,542, A2:366-367 [13] A3:461 [14] B1:937 – Annexure B, H’s 1st Form E [15] B1:938 – Annexure C, H’s 1st Form E [16] A3:586 [17] A3:504 [18] B6:2052-2054 [19] B6:2055-2056 [20] Part 5.1(2), A3:467 [21] See Answer 96, A3:543 [22] B6:2119-2120 [23] B1:969-987 [24] A3:462 [25] B1:958 [26] A3:521 [27] B1:960-962 [28] Answer 263, A3:568 [29] The copy produced by H had not been signed by his employer [30] A1:76 [31] At para 163, A4:679 [32] A2:402-404 [33] At para 16, Melloy Judgment dated 11 December 2018, A1:18 [34] At A1:13 [35] B6:2061 [36] B8:2651 [37] B8:2675 [38] B8:2688 [39] B8:2677 [40] B8:2691 [41] B8:2693 [42] Para 11, H’s 16th affirmation, A4:885 [43] See para 8, A4:904 and B8:2802 [44] At para 74, A4:647; see also para 126, Judgment, A2:224 [45] At paras 19-20 of his judgment [46] At para 21, supra [47] See para 62, H’s Costs Submissions [48] Para 66, H’s Costs Submissions [49] A1:36 [50] B7:2505 [51] B7:2515 [52] B7:2518 [53] B7:2503 [54] See recital, A2:420 [55] At para 30, Re LB, per Poon J |
Cases cited in this judgment
Further hearings and rulings under HCMC 1/2019