Ww v. Lpq Formerly Known As Lln and Lsm and Others
Read the full judgment text of FCMC 8485/2019 on BabelCite. This Family Court judgment before Deputy District Judge Peter Barnes.
Maintenance Pending Suit – Litigation Funding – District Court – Matrimonial Causes – Capacity to Pay – Financial Resources – Whether Respondent entitled to further funding – Whether Petitioner has capacity to pay – Award of $500,000 granted – Costs reserved
Legal issues: Entitlement to MPS/litigation funding · Capacity to pay · Quantum of funding
Outcome: Application for MPS/litigation funding granted.
Cites 3 cases
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FCMC 8485 / 2019 [2024] HKFC [29] IN THE DISTRICT COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION MATRIMONIAL CAUSES NO.8485 OF 2019 ----------------------------
---------------------------- ------------------------------------------------------------ J U D G M E N T (MPS/LITIGATION FUNDING) ------------------------------------------------------------
The Application 1.The 1st Respondent (“R1”) applies by Summons dated 25 January 2024 for MPS/litigation funding to enable her to re-engage solicitors and counsel for the remainder of this Trial of the parties’ respective claims for ancillary relief. The Trial has been adjourned to 19th June 2024, with 20th, 21st and 24th June 2024 reserved. 2.The Trial was scheduled to be heard over four days, from 16th to 19th October 2023. It could not be completed within the time allotted, and was adjourned part-heard to 22nd January 2023, with 23rd to 26th January 2023 also reserved for its completion. 3.R1 was represented by solicitors and counsel in the lead-up to the October Trial and at that hearing. On the first day of the Trial, R1 unsuccessfully applied for an adjournment of the trial and this application took most of the first day to be addressed. The commencement of R1’s oral evidence did not start until the 17th October 2023 and was not completed until 19th October 2023. 4.It was not the only reason the Trial could not finish in four days, as the Order of 19th October 2023 (“19th October Order”) adjourning the Trial makes clear. This Order also granted leave for the parties to file further evidence relating to the Section 17 application, on R1 and the 2nd Respondent (“R2”)’s competing assertions as to their authorship of trademarks previously registered in the name of a company, LS, and for Single Joint Experts to be appointed to value LS and seven landed properties in Hong Kong and the Mainland. 5.R1 had been granted litigation funding for the Trial by a Judgment and Order dated 13th January 2023 (“January 2023 Order”) of His Honour Judge I Wong. This was in anticipation of and intending to cover R1’s legal expenses for a four-day Trial, which had originally fixed by Order dated 14th December 2022 for hearing on 25th April 2023 with 26th, 27th April and 2nd May reserved. The Trial could not proceed on those days, and was ultimately re-fixed for the October dates. 6.Having regard to the adjournment of the Trial and the fixing of five more days for its completion, and taking into account the additional steps to be undertaken in between, the 19th October Order further provided that, in the event R1 wished to make a further application for litigation funding, she must do so within 14 days. The Court made this direction having heard from R1 during cross-examination that she had spent well in excess of the amount of litigation funding provided by the January 2023 Order: her estimate was that she had spent approximately $900,000, having instructed two firms of solicitors following Wong J’s Ruling. She said further that she still owed her solicitors money for work they had already done. 7.R1 did not file any application for MPS/litigation funding within the 14 days. Her former solicitors required their bill to be paid and to be placed in funds before they did any further work on the case. Nor did R1 make her own further application for litigation funding, that is, until the present Summons was filed on 25th January 2024. 8.R1 applied for legal aid on 3 January 2024. That application is still pending: the Legal Aid Department has requested further information from R1. I note that this is not her first application for legal aid to fund these proceedings – a previous application made was refused. 9.R1’s solicitors had applied on 3rd November 2023 by Summons pursuant to Order 67 for an Order that they had ceased to act for R1. That application was not heard until 22nd January 2024, on the first day of the resumed Trial. I heard the application on 22nd January 2024 and granted the Order on the same day. 10.R1 has therefore been acting in person since 23rd January 2024. On the afternoon of 22nd January 2024, after I had released her solicitors, she exhibited considerable emotional distress. She asked to use the bathroom, and I learned shortly thereafter that she had collapsed, and, with the assistance of the Court staff, who rang for an ambulance, she was taken to the Ruttonjee Hospital, and admitted. In the circumstances, on the morning of 23rd January 2024, I adjourned the Trial for two days to 25th January 2024, and directed that R1 provide information on her medical condition by the next day, which she did. 11.On 25 January 2024, R1 was in attendance, and after hearing from her and Mr. Hart for the Petitioner (“P”), R2” and the 3rd Respondent (“R3”), I granted leave for her to file a Summons seeking further MPS/Litigation Funding, and gave directions for it to be heard and determined on an urgent basis. The reason for this was to enable the Trial to proceed, potentially, on additional dates in the remaining temporary judicial appointment of myself, that is through to 9 February 2024. 12.A litigant in person who is fully fit, physically and mentally, is often at a disadvantage to one who is represented by able lawyers, particularly at a Trial, with all the complexities and challenges that involves. In matrimonial litigation, with the attendant emotional strain, the challenge is particularly acute. A self-represented litigant who has health issues, is at a further disadvantage. I am in no doubt that if R1 is to present her case properly, she will greatly benefit from legal representation. 13.Having heard argument on the urgently filed application on Friday 26 January 2024, I directed the parties to file/lodge further documents relating to their respective financial positions, and this was done. The Summons was adjourned to Tuesday 30 January 2024 for further consideration. At that point, the Court had confirmed that the Trial (which should have been completed by the Friday 26 January 2024, all being well) would continue on 30th and 31st January with 1st, 2nd, 5th and 6th February reserved. 14.During the hearing on 26 January 2024, the Court asked R1 to make urgent efforts to contact solicitors who might be available and willing to assist her in the remaining dates of the Trial. I accept that this was asking a lot, but I had very much in mind that she had not acted promptly in applying either for private litigation funding or legal aid to secure representation for herself for the resumption of the Trial. It is in all parties’ interests that this case be heard and determined as efficiently as possible. It is very clear that the prolongation of this litigation is causing considerable emotional and physical stress to the parties, particularly P and R1. There must be finality for the good of all concerned. 15.Upon resuming on 30 January 2024, R1 informed the Court that she had made some efforts, but all the lawyers she had contacted told her they were not available on the remaining days of the Trial and could not therefore assist. 16.As R1 had not been able to find solicitors (and counsel) who might have been willing to step in and represent her for these remaining dates, the Summons became, at that time at least, completely academic, and I adjourned it sine die. 17.The Court proceeded with evidence from the two SJEs on 31st January and 1st, 2nd February 2024. R1 was in attendance on each of those days and was able to put her case to the two experts, with the assistance of the Court. 18.The remaining days of the Trial, namely 5th and 6th February 2024, were to be used to complete the evidence, with R2 to give his evidence first, followed by P. I reserved 7th February 2024 in case two days was not enough. Again, my decision to continue with the Trial was with the ultimate aim of completing the evidence. I reassured R1 that I would render all appropriate assistance to her when the evidence was presented. 19.On 5th February 2024, when R2 was due to go into the witness box, R1 again exhibited considerable distress, and made certain statements that she saw little point in continuing with the matter and that she wanted to harm herself. She complained about much of the affirmation evidence being in English and that it was too much to ask her to represent herself in these circumstances. She repeatedly said that she had no money and urged the Court to grant her maintenance for her own living expenses. She confirmed that she wanted to seek urgent medical attention for her mental stress. The case was adjourned to the morning of 6th February 2024 to allow her to do so, on condition that she provide the Court with a medical certificate. The Court then directed that further submissions would be heard on the Summons for the following day, 6th February 2024. 20.R1 was absent on the morning of 6th February 2024, but attended in the afternoon. I had already assured her that I would not be hearing any evidence from the remaining witnesses in her absence. R1 supplied the Court with a medical certificate which stated that she had been diagnosed with depression and had been admitted to hospital on 5th February, and requested time to deal with this condition, asking that the Trial be adjourned for at least 2 months for her to receive proper treatment. 21.On 6th February 2024 I completed hearing submissions of the parties on the Summons. I then reserved my judgment, indicating that it would be handed down shortly. I then adjourned the Trial to 19th June 2024. Prior applications for litigation funding 22.This is now the third application by R1 for litigation funding in these proceedings for dissolution of her marriage of some 25 years with P (marriage 1993, first Petition 2018). They have two adult sons. 23.By Summons filed 30th January 2019, R1 sought MPS for herself and to provide for litigation funding. By Order dated 23 July 2019 (“July 2019 Order”) she was granted MPS of $60,000 per month for her personal expenses and litigation funding of $50,000 per month from 1 August 2019. An amount of $660,000 for both personal expenses and litigation funding for the period 1 February 2019 to 1 July 2019 was also ordered to be paid by P, but this was reduced on appeal by the Court of Appeal by Order dated 14 January 2020. The Court of Appeal maintained both the monthly figures of $60,000 per month personal expenses and $50,000 per month for litigation funding, but specified that the latter should be up to the FDR or further order, whichever is earlier. 24.The (unsuccessful) FDR took place on 29th July 2021. The litigation funding of $50,000 per month then ceased to be payable. 25.On 28 October 2020 P applied by Summons (“Variation Summons”) to vary both of the monthly sums, specifically for the figure of $60,000 to be halved to $30,000 and the litigation funding to cease. He took no further steps to pursue the application, however. It is accepted by Mr. Hart that the P has not made payments in accordance with the Orders of this Court and the Court of Appeal for MPS for the R1’s personal expenses, there is a very considerable amount due, which R1 is seeking to enforce by a further Judgment Summons. P’s argument is that he is simply not in a position to pay this overdue maintenance. 26.On 7 November 2022, R1 reapplied by Summons for litigation funding, to cover the Trial, seeking a sum of $1,100,000. That was opposed, and that Summons and P’s Variation Summons were heard together by Wong J on 14th December 2022. On 10 January 2023, Wong J delivered a Ruling dismissing the Variation Summons and allowing R1’s Summons, awarding $500,000 to R1 for her costs of the Trial, payable by 4 monthly instalments of $125,000 each (“January 2023 Order”). This was based on an estimation provided by R1’s then counsel of the combined costs of the PTR, scheduled for 13 March 2023, and the Trial itself of $430,000, with the balance of $70,000 intended to fund further mediation: see the Ruling, para 51. The Law 27.Jurisdiction to award maintenance pending suit to a spouse is provided for in section 3 of the MPPO. The words “pending suit” mean that by definition, such orders are limited to the time it will take for the divorce proceedings to be determined. 28.It has long been recognized that an application for MPS can include litigation funding: KGL v CKY [2003] 2 HKLRD 301; HJFG v KCY [2012] 1 HKLRD 95. As the Court of Appeal has said in the appeal from the July 2019 Order, the burden is on R1 to show that she cannot reasonably procure legal representation from her own resources or through publicly-funded assistance, and this includes demonstrating that she cannot deploy her assets either directly or as a means of raising finance for legal representation at a level apt to the proceedings: see Reasons for Judgment and Decision on Costs, §20. 29.The Court is required to be satisfied that the contribution to legal costs is reasonable, and this includes some analysis of the purposes for which it is sought and an estimate of the likely expense, with breakdown: see HJFG v KCY, at §79. Analysis 30.In this case R1 did not provide a breakdown, but the Court has very much in mind that the previous estimate for a four-day Trial hearing plus PTR was a combined figure of about $430,000: see Ruling of Wong J, at §51. It was on this basis that the learned Judge awarded $500,000, which as I say included an allowance for costs of mediation. 31.I have referred above to the difficulties confronted by unrepresented litigants. It is relevant in this case that if R1 was to continue unrepresented, she would, I expect, feel very much that she is alone in the Court and without any support, facing the other parties, who are all represented. This is compounded by the fact that the proceedings are heard by a monolingual judge, in English, a language in which she is not fluent: most of her written evidence is in Chinese, and many of the other parties’ evidence is in English. Mr. Hart has told the Court that P will be giving his evidence in English and even if I were to direct that the English affirmations be translated into Chinese, that would not alleviate all of the difficulties R1 would face in cross-examining him effectively. 32.Fairness requires the Court, certainly in cases where there is a degree of complexity – and this is one such case – to ensure “equality of arms”: HJFG v KCY at §123. 33.R1 has twice satisfied the Court that she is deserving of litigation funding and that P should provide her with such support, to the FDR (the combined effect of the July 2019 Order and the Order of the Court of Appeal) and then to the conclusion of the Trial (the January 2023 Order). 34.I am satisfied, for the following reasons, that her financial position since the January 2023 has not improved. Indeed, it would appear to have significantly worsened. The documents provided by her included updated bank statements, statements of credit card accounts, and statements of her insurance policies. The overall picture is of a party who has all but exhausted her available resources. To the extent that she has equity in assets, it is not reasonable to expect her to deploy these assets to meet her legal expenses. 35.As I have noted, in early January 2024, R1 applied for legal aid and her application is pending. Mr. Hart, for P, R2 and R3, suggested that this was a delaying tactic – something done merely to attempt to delay the Trial set to resume on 22nd January 2024 – by the automatic statutory stay. That stay was promptly lifted by the Court. 36.During an exchange with Mr. Hart on 6th February 2024, he further accepted that the prospects of R1 being successful in her application for legal aid were slim. I have therefore proceeded on this basis. 37.Mr. Hart’s submission on this Summons was that R1 had not demonstrated that she does not have the resources to cover further legal costs, based on the documents exhibited to her affirmation in support. He submitted that R1 was guilty of non-disclosure on her previous application which led to the January 2023 Order, and that this misrepresentation of her financial position was continuing. He further submitted that the Court should not make the Order sought as R1 had not produced the names of potential solicitors and the fees they would charge. He finally submitted that P simply did not have the financial resources to be able to pay for R1’s legal costs. 38.In my view, at least on the broad-brush analysis, which is central to rulings on applications for maintenance pending suit, I am not in a position to conclude that R1 is deliberately hiding financial resources which can and should be applied towards obtaining legal representation. 39.Mr. Hart referred to statements produced by R1 of her account with the Bank of China, which he said had not been disclosed by her prior to the January 2023 Order. 40.These accounts show that for many years R1 has been engaged in foreign exchange speculation. She was cross-examined by Mr. Hart on these contracts on 17th October 2023. What was put to her was that she had engaged in margin trading in Japanese Yen, using a very significant amount of the family savings. This speculation has not been successful, indeed quite the opposite. According to those BOC bank statements, the net loss is some HK$14 million. I note that during his questioning of R1 on 17th October 2023, Mr. Hart did not suggest anything other than that the investment had been a loss: what was put to her was that this investment was made without any consultation with P, who, he said, had no knowledge of it. Specifically, it was not at any stage of the cross-examination suggested by Mr. Hart to R1 that if she closed the forex contracts, she could recoup what is left of that investment and apply that towards paying lawyers for the remainder of the Trial. 41.R1 confirmed that one source of funding of her own expenses, given P’s non-payment of the $60,000 maintenance for so many years, and for her lawyers was to obtain loans against her insurance policies. There are three of them, all with HSBC. The latest available annual statements issued by HSBC were provided by R1 and these confirmed that R1 has obtained substantial loans against the surrender values of each of the policies. According to her Form E dated March 2023 but filed April 2023, these loans totalled approximately HK$4,677,000, with the remaining surrender value of the three policies, net of repayment of the loans, of approximately HK$668,000. 42.The latest statements of the policies show that the loan balances have increased and the remaining surrender values correspondingly have decreased since her last Form E, and significantly so. For two of the policies the latest statements were to April 2023 and for the third, to September 2023. The net figure – the remaining surrender value – is likely to be even less now, as further interest will have accrued, and it is doubtful whether HSBC would be prepared to advance any further sum or sums to R1 against the surrender values of the policies. 43.The Court was also provided with bank statements including credit card statements of R1 and her companies. These further demonstrate that her financial position has not improved since the January 2023 Order. 44.R1 produced accounts from her former solicitors TCW (who were acting for her from January 2023 to September 2023) and CSC (September 2023 to January 2024). Mr. Hart submitted that these demonstrated significant overspending on lawyers well beyond the amount awarded by the January 2023 Order. There is no doubt that R1 did spend much more than the $430,000 allotted for the PTR/Trial, and she accepted this when she gave evidence in October 2023. Whether or not this was necessary and reasonable remains in doubt. In particular, there is a question whether her switch from TCW to CSC, and a change of counsel, were justified. 45.Nonetheless, I am satisfied that R1 is not able, from her current resources, to meet reasonable legal expenses so as to re-engage lawyers for the remainder of the Trial. 46.On the question of P’s capacity to pay, Mr. Hart submitted that he has no such capacity. His income from his work as a director of LS is modest: HK$20,000 per month plus HK$30,000 housing allowance, and his only other income is $11,900 per month rent from one of his properties. He gives his total monthly expenses as HK$85,243, however I note that his general expenses are confined to management fees of $2,147, and the remainder are his personal expenses and $10,000 which he pays to one of the sons as lunch/pocket money. 47.In dismissing the Variation Application, Wong J did not accept P’s assertion that his financial position had changed considerably for the worse since the July 2019 Order: see Ruling, §§29 - 43. At §43 he found that P’s disclosure was “obviously deficient”. 48.Despite this Ruling, P has not made any further payment of the arrears of maintenance for spousal support due under the July 2019 Order. 49.I provided P with an opportunity to file an affirmation updating his financial position since January 2023 and to explain why his position was that the Ruling was incorrect in the conclusions it reached (no appeal was made from the Ruling). 50.P filed two further Affirmations on R1’s Summons, his 20th and 21st. 51.In his 20th Affirmation, P says
52.In the same Affirmation, P then confirmed what Mr. Hart had told the Court on 25th January 2024: that Mr. Hart’s firm is not being paid for the work on this case and has not been paid since Mr. Hart was first engaged. P then says that in fact Hart Giles had initially paid the deposits required by the SJEs before they commenced work, HK$80,000 to Mr. McDonagh (the expert engaged to value LS) and HK$30,000 to Mr. Chan (the property expert). He was able to repay HK$80,000 with assistance of a loan from LS. 53.In his 21st Affirmation, P provided an explanation of some of the deposit entries in the updated bank statements he had supplied with his 20th. These show he has received additional support from his wife, whom he married last year. 54.Significantly, P provided a further update on the present value of his insurance policies. As with R1, the P has several (x3) insurance policies, with significant surrender values. The updated cash/surrender values are:
55.P explains at paragraph 9 of this Affirmation that:
56.I have considered P’s paragraph by paragraph response set out in his 21st Affirmation to §§24 – 43 of Wong J’s January 2023 Ruling. Wong J had found that P had not explained a rapid deterioration in his bank balance, and that this was sufficient to dispose of his Variation Application (Ruling, para 31). He went on, however, to test the veracity of P’s case against some basic figures he had provided, and in essence, found that this explanation did not make sense as “allowing for one moment that the husband’s financial situation as claimed by him were true, even on his own version, there should be a shortfall of $1,396,000 or thereabouts. However, his evidence is that as at the date of the hearing he still had $446,266 in his bank accounts. These figures do not tally with his version; his version is not internally consistent.” (Ruling, para 40). 57.On this, P’s explanation was that “[t]he shortfall was principally because Mr. Hart did not get paid”. I confess I cannot understand this. Wong J’s table at §38 of the Ruling included a figure of HK$1,388,000 being costs paid to his former solicitors, not to Mr. Hart’s firm: see §37. 58.In any event, I find that it is not necessary for me to determine whether the explanation now provided by P in the 21st Affirmation – which essentially disagrees with this part of the January 2023 Ruling – is correct. 59.In my judgment, P does have the capacity to meet a reasonable award of litigation funding for the 1st Respondent’s future legal fees, should she re-instruct solicitors and counsel for the Trial in June 2024. The current surrender value of his insurance policies, against which he can raised further funds is in excess of HK$5,000,000. Mr. Hart fairly conceded that P could obtain such further loan facility from HSBC on one or more of these policies in the event that the Court found in favour of R1 on this Summons. 60.During submissions on 6th February 2024, Mr. Hart proposed that P might be able to raise money on properties held by LS, but that this would only be possible if R1’s Form A Notices currently registered on the titles to these properties are removed. I have concluded that P will not need to do this to raise a reasonable amount for litigation funding. 61.The remaining question is how much I should award. Mr. Hart suggested a figure of HK$200,000. 62.In my view that is insufficient. I have seen her former solicitors’ fees and those of counsel. CSC’s costs for the October 2023 Trial were $413,866, but this included the services of a senior partner, two other solicitors and a trainee solicitor. Counsel fees amounted to $360,000 but this included two counsel who attended all four days of the hearing. 63.The January 2023 Order budgeted, broadly speaking, $400,000 for the 4-day Trial, to include Opening Submissions and all other pre-trial steps. I have to consider that it is likely R1 will engage solicitors not previously involved in this matter, either because her previous solicitors will require their outstanding accounts to be paid before agreeing to be re-engaged, or for other reasons. 64.I have expressed my views that in this case it is vital that R1 obtain legal representation. It is easy to anticipate that without the benefit of advice and representation of experienced lawyers in the lead-up to and during the third tranche of the trial in June 2024, there will be further costly disruptions, and the potential derailing of the Trial once again. 65.I will grant the 1st Respondent the sum of $500,000. If that errs on the generous side, this can be redressed when it comes to the final judgment. It goes without saying that in ruling on claims for ancillary relief, the Court factors in payments made on an interim basis by one party to the other, including payments for litigation funding. In matters of complexity and prolixity, such funding can be very considerable. By the conclusion of this case P will have advanced substantial sums pursuant to the three orders of this Court, and the Court of Appeal. These sums will be taken into consideration and form part of the Courts consideration when it comes to deliver Judgment on the claims. 66.My Order will be as follows: UPON the 1st Respondent’s Summons seeking litigation funding filed 25th January 2024 AND UPON READING the Affirmation of the 1st Respondent filed in support, together with documents sent to the Court by emails dated 29th January 2024 and further financial documents lodged on 29th January 2024, and further upon reading the 20th and 21st Affirmations of P IT IS ORDERED that
67.So that it is clear, unless otherwise ordered, none of the $500,000 is to be paid by the newly instructed solicitors to any third party, other than to counsel engaged for the remaining days of the Trial. For the avoidance of any doubt, this means that the R1 cannot use any of this sum to pay an outstanding amount due to her previous solicitors. In the event that she re-instructs her previous solicitors, they are not to apply any of the $500,000 towards their outstanding fees, or disbursements, or any counsel fees which may still be outstanding from work performed prior them ceasing to act. 68.Further, the R1 must work within the budget of $500,000 which is intended to cover all solicitors and counsel work through to the end of the proceedings, including final written submissions. The newly instructed solicitors and counsel are also expected by the Court to work within that budget, so that R1 is fully represented to the end of these proceedings.
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Cases cited in this judgment
Further hearings and rulings under FCMC 8485/2019