Ysg (Yx) v. Lyag
Read the full judgment text of FCMC 15288/2015 on BabelCite. This Family Court judgment was delivered on 15 December 2022 before Deputy District Judge Peter Barnes.
Matrimonial causes – Costs – Leave to appeal – Indemnity costs – Black-hole theory – Ancillary relief – District Court – Applications for leave to appeal costs order dismissed – Costs of summons summarily assessed
Legal issues: Husband's application for leave to appeal costs order · Wife's application for leave to appeal costs order · Costs of the summons for leave to appeal
Outcome: Applications for leave to appeal dismissed. Costs of summons awarded.
Cited by 7 cases · Cites 2 cases
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FCMC 15288/2015 [2022] HKFC 270 IN THE DISTRICT COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION MATRIMONIAL CAUSES NO. 15288 OF 2015 ----------------------------
---------------------------- Coram: Deputy District Judge Peter Barnes in Chambers (By paper disposal) Respondent’s Summons: (1) Respondent’s Summons and Submissions: 26 October 2022 (2) Petitioner’s Submissions in Reply: 9 November 2022 Petitioner’s Summons: (1) Petitioner’s Summons and Submissions: 9 November 2022 (2) Respondent’s Submissions in Reply: 20 November 2022 Date of Judgment: 15 December 2022 ------------------------------------------------------------ J U D G M E N T (LEAVE TO APPEAL – COSTS) ------------------------------------------------------------ The Applications 1.On 12 October 2022 I handed down a Judgment varying the costs order nisi (“Costs Judgment”) made in the Judgment dated 2 June 2022 on the parties’ respective claims for ancillary relief (“AR Judgment”). The nisi order for costs was that there be “no order” as to costs i.e. that each party would bear their own costs of the proceedings. The stated reason for this was that neither party had fully succeeded on their respective claims. 2.The Costs Judgment followed an application by the Respondent (“Husband”) to replace the order nisi with an order for costs in his favour, citing a number of pre-Trial Sanctioned offers, alternatively that they should be regarded as Calderbank offers, and in both cases arguing that those offers had not been beaten by the final ancillary relief award to the Petitioner (“Wife”). Alternatively, he said that the Wife’s litigation conduct, in particular her pursuit of a “black-hole” theory of missing money, was unreasonable, had cause the lengthening of the proceedings and thus the incurring of costs, and had rendered difficult if not impossible any chance of settlement. He also sought an order that his costs be taxed on an indemnity basis. 3.The Husband’s application was successful to the extent that the Court varied the order nisi and ordered that the Wife pay 20% of his costs of the ancillary relief proceedings, to be taxed on an indemnity basis. The reasons for this varied Order are fully set out in the Costs Judgment. In concluding that the Husband’s application was justified, the Court found that the Wife’s pursuit of her theory that the Husband was hiding millions of dollars in cash or other assets, a theory which was rejected by the Court in its AR Judgment, had hampered prospects of settlement of their respective claims and had added unnecessarily to the costs incurred by the parties and the length of the Trial itself, and that this should be reflected in an order for a proportion of the Husband’s costs of the proceedings to be paid by the Wife, to be taxed on an indemnity basis: Costs Judgment, §40 – 46. 4.Both parties now seek leave to appeal from the Costs Judgment/Order, the Husband by Summons dated 26 October 2022 and the Wife by Summons dated 9 November 2022. 5.The Husband regards the award of only 20% of his costs as inadequate and not properly reflecting his pre-Trial offers, the litigation misconduct of the Wife, and his success on most of the significant issues raised at Trial. 6.The Wife for her part says that the effect of the order that she pay a proportion of the Husband’s costs “penalizes her twice”, and in effect awards the Husband a higher proportion of the matrimonial pool of assets which contradicts the aim of achieving a fair distribution of such assets. 7.The Wife is pursuing an appeal against the AR Judgment. Her application to this Court for leave to appeal was dismissed by a Judgment handed down on 12 October 2022. She has renewed her application in the Court of Appeal. The Law 8.Section 63A of the District Court Ordinance, Cap. 336 provides that leave to appeal a judgment or order shall not be granted unless the Court is satisfied the appeal has a reasonable prospect of success or there is some other reason in the interests of justice that the appeal should be heard. An appeal with a “reasonable prospect of success” is one with prospects that are more than fanciful but which do not need to be shown to be probable: SMSE v KL [2009] 4 HKLRD 125. 9.As both Summonses seek leave to appeal a costs order, the parties must show that it is reasonably arguable that this Court erred in principle or its decision was plainly wrong: see LLC v LMWA [2009] 2 HKLRD 529, at [7] per Lam ACJHC (as he then was). The Grounds of challenge The Husband’s Summons 10.The Husband now advances nine (9) grounds of appeal:
11.The Husband’s written submissions begin with this distillation of how he says this Court erred in confining the award to 20% of his related costs:
12.Ground 1. The contents of the Husband’s several WP/Sanctioned offers, and the Wife’s responses to them are recorded in the Costs Judgment at §§16 – 22. Having considered both parties’ arguments on the Husband’s application to vary, I decided as follows:
13.The Husband now submits that the “relatively small sums for the child maintenance which H had not proposed were (a) not W’s claim (b) were easily subsumed in the much greater sum that was offered and, (c) were always capable of being varied – they were not an immutable part of the offer as the Judge held.” 14.I reject this submission. First, even if, monetarily, the sums were “relatively small” as the Husband suggests, or can be said to have been “subsumed in the much greater sum that was offered”, they were not insignificant. Secondly, the Wife’s request was for ongoing child maintenance, including lump sums to provide for the two children through to their independence: it was an important part of her claim for ancillary relief. Thirdly, the fact that the Court possesses the power to vary an order for child maintenance is neither here nor there: the offers were put on the basis that the Wife accept them in their entirety including the Husband’s insistence that the Wife’s entitlement to child maintenance for N had ceased and the same would happen upon C turning 18 and reporting for military service in Singapore. 15.The Wife in her submissions in Reply referred the Court to the considerations of the Chief Justice’s Working Party on Family Procedure Rules contained in its Final Report released on 14 February 2022, which includes a Proposal (Recommendation 64, Proposal 65, cf paragraphs 125 – 128 of the Final Report) that Order 22 should not apply to family proceedings; and to the remarks of Lam VP (as he then was) in AVT then known as MAM v VNT (unreported, CACV 234/2014, 21 December 2015, at [13] – [15] where the learned Vice President emphasised the importance of the Court taking into account all the circumstances of the case, (as required by sub-rule (6) of O. 22, r. 23) including the terms of the sanctioned offer, the stage in the proceedings at which it is made, the information available to the parties when the offer is put, and the conduct of the parties with regard to the giving or refusing of information to enable the offer to be properly evaluated. 16.In this respect, the Wife additionally submits that the Husband’s offers (or some of them) were made at a time when the Husband had not made full and complete disclosure and they were “not all encompassing but contained material conditions and omissions”. On the first point she recites the progress of disclosure including that further significant documents were supplied pursuant to the Order of 20 October 2021, a few months before the Trial. On the second point she says, in the alternative, that the offers made no provision for the Children’s maintenance, or “woefully inadequate” provision (para 12). 17.For now, and pending the introduction of new Family Procedure Rules which might follow the recommended reform, O. 22 r. 23 continues to apply to proceedings in this Court. But the costs consequences of failing to accept an offer only apply when either of the conditions set out in r. 23(1) is satisfied. Rule 23(1)(a) does not apply here – there was no “sanctioned payment” into Court. Nor in my view does r. 23(1)(b) apply. I remain of the view that the Wife did not fail to obtain a judgment “more advantageous than” the sanctioned offers in that none of the offers adequately provided for maintenance for the Children, as compared with the award in the AR Judgment. Ground 1 is not reasonably arguable. 18.Nor do I consider Grounds 2 and 3 of the Husband’s draft Grounds to be reasonably arguable. In varying the order nisi, I took into account all of the Husband’s offers to settle, and the Wife’s responses to them. One of the significant elements justifying the variation was the fact that, even though the Wife responded to the offers put, she did so in each case on the basis that the Husband was vastly under-representing his true asset position, and, for the reasons set out in the AR Judgment, this was an erroneous position for her to maintain. 19.Ground 4 is not reasonable arguable. I took into account the Open offer – which proposed a 50/50 split of the assets but contended that the Wife’s entitlement to child maintenance for N had ceased – in deciding on the Husband’s application to vary the costs order nisi. 20.Ground 5 challenges the quantum of the variation, and asserts that the Court failed to provide a reasoned basis for the award to the Husband of 20% of his costs. Not so. The Costs Judgment records that the Wife succeeded on some points at trial, and the Husband on others (the Husband in his other Grounds, to which I will come, says this is a perverse finding when he was by far the more successful party). Despite this, and because of the Wife’s position in maintaining through to the end of the Trial (and, apparently, now before the Court of Appeal) her black hole theory of missing millions, not only did this stymie settlement negotiations, but the legal costs incurred by both parties in advancing their competing claims were significantly greater than they otherwise would have been. An award of 1/5th of the Husband’s costs relating to these claims was, in my view, a fair and proportionate award reflecting the Wife’s conduct and the consequences of it. The Court agreed with the Husband’s claim that these costs should be taxed on an indemnity basis, a significant departure from the usual basis for taxation but one which was justified. 21.In developing Ground 6, the Husband refers to the significant issues at trial and asserts that “To say that there was equality of outcome on the various issues was perverse. No reasonable Judge could have reached that conclusion.” 22.On a number of significant issues, the Husband was successful, including on the Wife’s black hole theory. This was, I accept, one of the most significant issues in the correct assessment of the matrimonial “pot” (see AR Judgment, §36). However, in my view, in matrimonial cases the Court does not award costs by reference solely to the value in dollar terms of one issue or another. I accept that if one party pursues an issue of trivial importance, financial speaking, and even if that party were successful on such an issue, it would carry little weight in the Court’s exercise of its discretion. That was not the case here. 23.The Wife was successful in resisting the Husband’s claim that her refusal to accede to the leasing out of the K Property was unreasonable and the lost rental should be reflected by an appropriate further adjustment to her ultimate award. The Husband argues (as he did in his original application to vary the order nisi) that the Wife had misled the Court by insisting that the K Property could not be lawfully leased after 2016, a contention which he says was debunked at the start of the Trial and that the Wife should not have continued to maintain it. I note, however, that the issue of Governmental permission to rent out was only one of the factors in the non-renting of the K Property. Another factor was the uncertainty as to whether the parties could have found a tenant, in the condition it was, without significant renovation (§82). Assuming the Court had not found (as the Husband submits was an error on the evidence before it) that the K Property could not be lawfully rented after 2016, it does not necessarily follow that the Court would have concluded that there was loss associated with the Wife’s refusal to consent to the Husband’s request that it be rented out. 24.There were other issues on which the Wife was successful. She succeeded in demonstrating that the Husband’s Wine collection had significantly increased in value in the months between the SJE’s report and the Trial. The Husband says the same result could have been achieved by the expert simply updating his estimates by correspondence. This was of course possible, but that would assume that the process of engaging in written communications with the SJE would have been more efficient and will have saved legal costs compared with having him called as a witness at the Trial. Such correspondence is often – in significant money cases such as this – the product of a team of solicitors and frequently involves counsel in commenting on drafts and advising on responses. Very significant costs can be incurred in a short space of time. It is important also to consider whether an “updating” report could have been obtained from Mr. Wainwright (the SJE) within the relatively short period prior to trial. The Wife might well have argued that a pre-Trial updating report was still too conservative an estimate of the value of the collection. All in all, I am not convinced by the Husband’s arguments on this point. 25.On the question of maintenance for the Children, I rejected the Husband’s case that the Court had no power to order him to continue to pay maintenance after N, (as in future C will) turned 18 and reported for compulsory military service. I do not accept at all that this finding (see AR Judgment, §§166 – 173) is insignificant, as the Husband now suggests, or that it would be correct for the purpose of the Court’s discretion on costs to label it as “a small issue dwarfed by the “Black Hole” and Singapore property issues”. The Husband maintained steadfastly throughout the Trial and in Closing Submissions that his obligation to maintain the elder of the two Children ceased upon his entry into national service and that the same would be the case for the younger child when his time comes. The Court found otherwise. 26.Nor did the Court accept the argument that there was no utility in the multiple Single Joint Experts to be called to give evidence: Costs Judgment, including the wine expert, §§35 – 38. I maintain these views despite the Husband’s repetition of his arguments that it was a waste of time for them to be called. 27.Ground 6 is not reasonably arguable. 28.The subject matter of Ground 7 has already been addressed above: I took into account the Wife’s negotiating posture, and, to be clear, this included a consideration of the time-lapse between the first of the Husband’s Calderbank offers (19 September 2019) and the first from the Wife (20 April 2021). I accept that there was an opportunity for fruitful discussion in the period leading up to the FDR which did not apparently take place, including because of the Wife’s position that the Husband was hiding assets and had failed in his duty of full and frank disclosure. The Wife says there was inadequate disclosure to this point, but I do not consider this should have prevented her from exploring settlement with the Husband and advancing a counter-proposal, at least to resolve parts of her ancillary relief claim or narrow down the issues in dispute. This factor formed part of the basis on which I varied the order nisi. I do not consider Ground 7 to be reasonably arguable. 29.Ground 8 relates to the non-rental of the K Property, and this has already been discussed above in the context of the competing issues point. It is not reasonably arguable. 30.Ground 9 is standalone and relates to the costs of the application to vary itself. The Husband’s application was for much more than 20% of his costs, to be taxed on an indemnity basis. He did not fully succeed. The award of 50% of his costs of the application was well within the Court’s discretion. Ground 9 is not reasonably arguable. 31.Consequently, the Husband’s Summons for leave to appeal the Costs Judgment/Order is dismissed, with an order that he bear the Wife’s costs of resisting it. The Wife’s Summons 32.The Wife’s grounds of appeal can be summarised as follows:
33.Ground 1. In her submissions on this Ground, the Wife refers to her application now filed in the Court of Appeal for leave to appeal the AR Judgment in which she has filed an affidavit exhibiting newly obtained reports from a forensic accountant supporting her black hole theory: Submissions §§7 – 8. This new evidence is not before this Court. 34.The Wife says that she was under financial constraints and for this reason could not afford to engage such an expert at the Trial. The Husband says this is not correct, referring to the new evidence the Wife has filed in the Court of Appeal which indicates the Wife engaged one or more accountants in 2021 and paid significant sums for their services (Respondent’s Reply, §12). 35.This Court is not in a position to consider this evidence – none has been filed in support of the Wife’s Summons (I note that the August 2018 revised procedure for dealing with applications for leave to appeal does not envisage affidavit evidence being filed other than to explain any delay in seeking leave). I would simply comment that, if the Wife had in a timely manner applied to the Court for the appointment of a Single Joint Expert to consider her black hole theory, and if the Court was satisfied that this was appropriate but that the costs of such SJE could not be shared due to the Wife’s financial constraints at the time, it might have been open to the Wife to argue that the Husband, being the financially better-off party, should bear the costs of the SJE at first instance, such costs to be taken into consideration in the final award. I say this with the caveat that of course I have not seen the evidence the Wife has now filed in the Court of Appeal. 36.The Court arrived at its conclusions including on the Wife’s black hole theory on the basis of the evidence presented at Trial. If new information has now been produced which supports a different finding, this is a matter, with respect, for the Court of Appeal to consider. 37.Further, the Wife’s failure to support her case that the Husband had successfully siphoned off and hidden vast sums of money with professional accounting analysis was but one of the many elements the Court considered when dismissing this black hole theory: AR Judgment §§65 – 68. There were six other reasons for rejecting it: AR Judgment, §§55 – 70. 38.Ground 2. The Wife maintained throughout her pursuit of what I found was an ill-founded theory of calculated and long-standing dissipation of income by the Husband. I found that it was unreasonable for her to do so: Costs Judgment, §39, and that the effect of this was to scupper the prospects of pre-Trial settlement; to prolong the proceedings unnecessarily; and to increase the costs incurred: §40. I considered the applicable legal principles (§45) and then concluded that the Wife’s pursuit of her theory and the manner in which she presented it justified an award of indemnity costs (§46). I therefore do not agree with the Wife’s submission where she says (paragraph 5 of her Submissions) that no adverse findings were made against her which could give rise to such an order. 39.I reject the submission that the Court “over-relied” on the Wife’s failure to call a forensic account to support her case. It was – as noted – one of the factors in the Court’s rejection of her theory, and a very significant one. The assessment of this theory would have been considerably aided by an impartial expert who could provide the Court with his/her views as to whether the theory had substance. The Wife chose to proceed to Trial without this evidence and without challenging the order at the PTR rejecting her late application to adduce it and this (together with the other reasons set out in this part of the AR Judgment) led to the Court rejecting her case that the Husband had hidden assets. 40.In arriving at the Costs Judgment/Order, I considered the authorities on the circumstances in which it is “appropriate” to order indemnity costs. I have reviewed them again, and those additionally cited by the Wife in her Submissions both in Reply to the Husband’s Summons and in support of hers. On her behalf it is submitted that her proposals and litigation conduct were “well within the bounds of a reasonable litigant with an arguable case.” Much of her conduct was perfectly reasonable. But in my judgment, on a very significant point – the “black-hole” theory – it was unreasonable to a point which fully justified the order I made. 41.Ground 2 is not reasonably arguable. 42.Ground 3. This is not reasonably arguable. I considered the impact of the variation on the Wife’s award: Costs Judgment, §48. The Court was provided with both parties’ estimates of the costs they had incurred in relation to the question of ancillary relief. The Husband’s Form H dated 31 January 2022 filed shortly before the Trial estimated his costs (including counsel fees) to that date as HK$12,959,989 and anticipated costs of the Trial as HK$2,140,000, i.e. about HK$15,100,000 in total. Assuming all would be allowed on a taxation of costs on an indemnity scale, 20% of this is approximately HK$3,020,000. I found in the AR Judgment that there were assets surplus to needs: this was a sharing case. The Wife was awarded HK$53,500,000 in three separate lump sums, with HK$35,500,000 payable within six months of the AR Judgment. She is in a position to be able to meet the varied order on costs without it negatively impacting on her ability to meet her needs or those of the Children. 43.The Wife’s Summons dated 9 November 2022 is dismissed, with an order that she pay the Husband’s costs incurred in opposing it. COSTS 44.The Husband asks for a Summary Assessment under Order 62 rule 9A. He has provided separate Statements of Costs for the work on his Summons and in opposition to the Wife’s Summons, both dated 2 December 2022. I consider the Husband’s costs of resisting the Wife’s Summons, including counsel fees to be reasonable and I allow it in full at HK$62,207. 45.The Wife has not been able to separate her costs in preparing her Summons and opposing the Husband’s. I accept this may be difficult: both Summonses broadly relate to the same issues and a lot of the work done contemporaneously – e.g. conference with counsel are very likely to have involved the discussion of both Summonses. 46.Her Statement of Costs for Summary Assessment filed with her Summons on 9 November 2022 claims solicitors’ fees and disbursements in handling both Summonses at HK$59,870 and counsel fees (for two counsel, John Scott SC leading Ms. S. Allison) at HK$177,000. 47.I accept that there is some difference in terms of complexity between the Husband’s application and the Wife’s (including the number of grounds raised). I also accept that it was not unreasonable for her to seek the advice and representation of leading counsel, given what is at stake and that (I assume) Mr. Scott SC has already been engaged by her for the intended appeal against the substantive AR Judgment to the Court of Appeal. 48.I consider it likely that more work was expended on the Wife’s Summons than in resisting the Husband’s Summons (this was the case with the Husband’s team as seen in the separate Statements of Costs) and I assess the Wife’s claim for costs of opposing the Husband’s Summons at HK$30,000 for solicitors’ costs/disbursements and HK$70,000 for counsel fees, i.e. HK$100,000. ORDER 49.I confirm my order as follows: 50.The Respondent’s Summons dated 26 October 2022 for leave to appeal the Costs Judgment/Order dated 12 October 2022 is dismissed with an order that he pay the Petitioner’s costs of opposing the Summons which are summarily assessed at HK$100,000 (HK$30,000 solicitors costs and HK$70,000 counsel fees). 51.The Petitioner’s Summons dated 9 November 2022 for leave to appeal the Costs Judgment/Order dated 12 October 2022 is dismissed with an order that she pay the Respondent’s costs of opposing the Summons which are summarily assessed at HK$62,207 (HK$12,207 solicitors costs and HK$50,000 counsel fees).
Mr. John Scott, SC and Ms. Sasha Allison instructed by PC Woo & Co for the Petitioner Mr. Richard Todd instructed by CRB for the Respondent | ||||||||||||||
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