Bc v. Msh also known as H, Mso and Others

FCMC 13741/2019

[2024] HKFC 23

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES

NUMBER 13741 OF 2019

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BETWEEN

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DECISION ON COSTS
( Trial of ancillary relief and section 17 application )

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The parties’ stance on costs

1.On 1 November 2023, I handed down my judgment (“Judgment”)[1] on the ancillary relief matters between the petitioner wife and the 1^st respondent husband, including an application taken out by the husband pursuant to section 17 of the Matrimonial Proceedings and Property Ordinance, Cap 192 (“Section 17 Summons”) in respect of the various sums that were transferred by the wife to her parents, the 3^rd and the 4^th respondents herein (“wife’s parents”).

2.At the end of the Judgment, I allowed the parties 28 days to attempt to agree on the issue of costs of the ancillary relief matters and the Section 17 Summons. Unfortunately, no agreement could be reached. I thus directed that the costs issues should be dealt with by way of paper disposal.

3.In this decision, I shall adopt the same abbreviations and defined terms used in the Judgment, unless stated the otherwise.

4.The parties’ stance as reflected in their written submission is as follows:

(1) The wife is of the view that there should be no order as to costs of the ancillary relief, and the Section 17 Summons;

(2) The wife’s parents, who were joined into these ancillary relief proceedings solely for the purpose of the Section 17 Summons, submit that there should be no order as to costs of the Section 17 Summons;

(3) The husband asks that the wife and the wife’s parents should pay his costs of the ancillary relief proceedings, in particularly the Section 17 Summons.

5.The 2^nd respondent , being the father of the husband, has also lodged his written letter confirming that he would not seek any costs against any of the parties herein. He was joined into these ancillary relief proceedings solely for the determination of the beneficial ownership of Luen Tak Building, and had conceded in the hearing of 13 September 2022 before this court that the husband was the actual beneficial owner of the same. A costs order was already made by me in the same hearing in favour of the wife. Thereafter, with the leave of the court, the husband’s father did not participate any further in the ancillary relief proceedings and the trial. There is thus no remaining costs issue vis-à-vis the husband’s father and the remaining parties of this case.

Applicable legal principles

6.The starting point on the legal principles on costs is that costs should follow the event, except when it appears to the court, judged by all the circumstances of the case, that some other orders should be made (See: Order 62 rule 3 of the Rules of the High Court; Re Elgindata Ltd (No 2) [1993] 1 All ER 232 at 237f-g; CEPK v LKKH [2019] 1 HKLRD 681 at [30]).

7.In the exercise of its discretion, the court will take into account, where appropriate in the circumstances, the special matters set out in Order 62 rule 5(1) of the Rules of the High Court, such as the underlying objectives set out in Order 1A rule 1; any written "without prejudice save as to costs" offer; the conduct of all the parties; whether a party has succeeded on part of his case, even if he has not been wholly successful. Order 62 rule 5(2) explains what “conduct of the parties” should be taken into account by the court. Include, such as whether it was reasonable for a party to raise, pursue or contest a particular allegation or issue, or the manner in which a party has pursued or defended his case or a particular allegation or issue.

8.While these principles apply equally in contested family proceedings, they may be displaced more easily in the family court, as Butler-Sloss LJ (as she then was) said in Gojkovic v Gojkovic [1992] Fam 40 at 54:

“That starting point, in my judgment, is that costs prima facie follow the event (see per Cumming-Bruce LJ in Singer (formerly Sharegin) v Sharegin [1984] FLR 114, 119) but may be displaced much more easily than, and in circumstances which would not apply, in other Divisions of the High Court. One important example is, as the judge pointed out, that it is unusual to order costs in children cases. In applications for financial relief the applicant (usually the wife) has to make the application in order to obtain an order by consent; and if money is available and in the absence of special circumstances, such an agreement would usually include the applicant’s costs of the application. If the application is contested and the applicant succeeds, in practice in the Divorce Registries around the country where most ancillary relief applications are tried, if there is money available and no special factors, the applicant spouse is prima facie entitled to, and likely to obtain, an order for costs against the respondent. The behaviour of one party, such as in material non-disclosure of documents, will be a material factor in the exercise of the court’s discretion in making a decision as to who pays the costs.”

9.Locally, Hartmann JA (as he then was) echoed in HK v BD, CACV 252/2009 & CACV 71/2010, date of judgment 15/10/2010, that due to the special dynamics of family litigation, the family court enjoys a much wider discretion on costs than general civil court. Costs are not to be judged by breaking down the litigation into many components, like a profit and loss account, but by way of an “overall impression”. Here is what His Lordship explained:

“78. In family matters, as in all civil proceedings, the basic principles are that costs are in the discretion of the court but that costs should follow the event except when it appears to the court that, in the circumstances of the case, some other order should be made. In family matters, because of their particular dynamics, the exercise of discretion is broader-based than in other civil proceedings. However, as was observed by Butler-Sloss LJ in Gojkovic v Gojkovic [1992] Fam 40, there still remains the necessity for some starting-point. That starting-point, as we have indicated, is that costs prima facie follow the event.

79. On behalf of the wife, the oblique criticism was made that the judge proceeded on the basis of “honours even”, that seemingly being the essential reason why he came to his determination that both parties should bear their own costs. We do not see that the judge can be criticised in that respect. If costs were to prima facie follow the event, it was necessary for the judge to identify who had been successful and who had not.

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95. But there were of course many issues which the judge in the present case had to take into account in considering how best to exercise his discretion as to costs. It is a long established principle that, after analysing the case of each party, costs must be judged by way of overall impression. They are not to be assessed by breaking down the litigation into its many component and interlocking parts in order to draw up some kind of profit and loss account…” (my emphasis added)

The trial and the Judgment

10.The husband and the wife are both in their late 40s, highly educated and later became high-income earners. They were married in 2008, but started to live apart since June 2018. Their background is set out sufficiently at [14] to [18] of the Judgment.

11.There are 3 children born within the wedlock. The children are now about 15, 13 and 8 respectively. The wife has their care and control.

12.The final ancillary relief trial, which took place for 5 days before me, ran roughly in this way:

(1) Day 1 of the trial was spent on housekeeping matters, such as clarifying and updating of various joint tables[2], on clarification of the open offer of the husband and the wife; and on giving time for the parties to consider/give their revised open offer, if any;

(2) Oral evidence was received by the court from Day 2 of the trial. The wife gave her oral evidence first. Her evidence continued until about noon of Day 3. The oral evidence of the wife’s father started at around noon of Day 3 until around 3.35 pm of the same day. Then, the wife’s mother took the witness stand and finished her oral evidence shortly before 4 pm;

(3) The husband’s oral evidence took Day 4 and Day 5 of the trial.

13.The respective case of the husband and the wife is summarised at [3], and [5] to [12] of the Judgment. The issues for trial cover 3 major areas, namely the computation of the parties’ assets, the sharing ratio of their assets, and the amount, sharing ratio and backdating of the children expenses. The specific issues for trial (excluding the Section 17 Summons which I have more to say later in this decision) can be seen at [13] of the Judgment, which are reproduced in the following for easy reference:

(1) Whether the cash withdrawals of the wife in the total sum of about $1,080,100 are reckless spending or concealed asset which should be added back to her ledger?

(2) Whether the wife’s withdrawal of AUD125,000 should be added back?

(3) Whether the husband had non-disclosure on the crypto investments? Whether the crypto investments are “wanton” spending and should be added back to his ledger?

(4) Should there be a departure of sharing the assets?

(5) Whether the wife’s Australian Funds and Australian MPF should be shared by the husband?

(6) What should be the amount of children maintenance to be paid by the husband? And should children maintenance be backdated to the date of petition?

14.On issue (1), I rejected the husband’s allegation that the wife had recklessly spent or concealed the said sum of $1,080,100, and refused to add back this sum into the pot at the wife’s ledger.[3]

15.On issue (2), I ruled that the wife was unable to explain the whereabouts of AUD125,000 that she withdrew from her HSBC Advance account on 2 July 2019. Accordingly, this sum was added back to the pot.[4]

16.As to issue (3), I was of the view that the husband’s disclosure of his crypto investments were “far from full and complete” and some were “simply incomprehensible”. The disclosure about his investment at Yieldnodes.com is “not correct”. His voluntary disclosure of further documents about his crypto investments was made very belatedly, with the latest disclosure made at 7 pm on Day 2 of the trial. [5] I was of the view that the husband was “in total disregard” of his “positive” duty of full and frank disclosure. [6] Hence, I made these remarks in the Judgment:

“70. Due to his failure to provide timely, full, complete and correct material on his crypto investments, the wife, and more importantly the court, is unable to readily ascertain from his Form Es and attached documents the true position and value of his crypto investments.

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75. All these would be duly taken into account by the court if the question of costs of the ancillary relief including this trial would have to be argued and ruled.”

17.With regard to issues (4) and (5), I accepted that the wife’s Australian MPF was a unilaterally acquired asset, and could be carved out from the sharing pot. The same rationale would be apply to the husband’s Canadian MPF. The wife failed to prove that there was no mingling of her Australian Funds with the family pot. Accordingly, her Australian Funds had to be shared with the husband.[7] I rejected the wife’s other proffered reasons (namely conduct of the husband; needs of the wife and the children) for departing from the equality principles.

18.At [130], I ruled that the total assets for sharing were worth $46,013,900,[8] of which $19,400,640 was held by the husband, and $26,613,260 held by the wife. These assets should be shared equally between them, which means that the wife would have to pay the husband $3.6 million as equalisation money.

19.On issue (6), I ruled that the monthly expenses of the 3 children way forward were $81,000 per month, to be back-dated to the commencement date of the Interim Maintenance Order, namely from 1 May 2021. I reject the husband’s objection to back-date the maintenance for the children.

The Section 17 Summons

20.At this stage, it is necessary to provide some background in relation to the Section 17 Summons which will appear in the following.

21.The Section 17 Summons was taken out by the husband on 23 February 2022. He sought to “set aside” dispositions made by the wife to her parents, but failed to state or identify the dispositions and/or the amount to be set aside. It was only upon the directions of the court that he later filed his affirmation (dated 5 October 2022) to identify the relevant dispositions. At [12] of the affirmation, he sought to set aside a total amount of $3.6 million that were transferred to the wife’s parents, which he said, were meant to defeat his claim for ancillary relief.

22.Importantly, the husband’s counsel, Mr Jeffrey Li, confirmed to the court in the pre-trial review hearing (which took place about 2 months before the trial) that the Section 17 Summons sought to set aside $3.6 million only.

23.However, the husband changed his position on Day 1 of the trial. Through the opening submission of Mr Li, he claimed that a total of about $5.49 million were transferred to the wife’s parents, and should thus be set aside and added back to the family pot.[9]

24.In the result, I had to adjourn and give time (i) for the parties to attempt to agree on the sums that were transferred by the wife to her parents at the material times (which should be readily identifiable by cross-checking with the wife’s bank accounts and/or her replies to questionnaires), and (ii) for the wife to consider if she would take the procedural issue that the husband should amend the Section 17 Summons as to the amount to be set aside.

25.It was under such circumstances that the parties finally worked out an agreed Table A, showing that the wife had transferred a total sum of $5,343,137.43 (ie Section 17 Sums) to her parents between 8 April 2019 and 1 September 2021. Besides, the wife’s counsel, Mr Shaphan Marwah, very fairly informed the court that he would not take issue with the procedures and would not require the husband to formally amend his summons.

26.Briefly, the wife claimed that the Section 17 Sums were transferred to her parents for repayment of loans made to her and/or as their monthly allowances pursuant to the agreements made between them. The wife’s parents were originally living in Australia. The wife claimed that they agreed to be relocated to Hong Kong, in order to assist the wife in taking care of the 3 children of the family, on the wife’s promise to give them $30,000 per month as their allowances.

27.The husband obviously objected to the wife’s case. He readily said that all of her explanations were fictitious, though he did not dispute that the wife’s parents did move from Australia to live in Hong Kong and thereafter rendered assistance in taking care of the children of the family. He also said that the Section 17 Sums were transferred to the wife’s parents with the sole aim to deprive him of sharing her money which was actually part of the family pot.

28.At trial on Day 3 when the wife’s father was being cross-examined, he agreed to the question put by the husband’s counsel that he had to pay back the moneys to the wife upon the conclusion of these proceedings. In re-examination, the wife’s father continued to say that he would pay back the moneys to the wife, but clarified that he would deduct what he deserved (which was in the sum of $3.9 million) and pay back $1.5 million to the wife, irrespective of the final outcome of this trial.

29.With such evidence from her father, the wife came back on Day 4 of the trial and indicated through her counsel that she agreed to add back the Section 17 Sums to her ledger. She made a revised open offer, but still wanted a sharing ratio of 60% of the family pot, which was not accepted by the husband. The trial thus went on for Day 4 and Day 5.

30.Due to the matters set out above, this court has never made any formal determination on the Section 17 Summons, nor made a formal order to “set aside” the transfer of the Section 17 Sums from the wife to her parents.

Costs between the husband and the wife

31.The husband submits that costs should be awarded in his favour, in particularly the Section 17 Summons which, he says, took up 3 days of the 5-day’s trial. He is of the view that the wife should have been sensible and should have conceded to the Section 17 Summons and his suggestion of adding-back the Section 17 Sums at the pre-trial review hearing. Yet, she made her concession only after significant time, effort, and financial resources were expended. He urges the court to take into account such litigation conduct and make the wife bear the financial consequences of her unreasonable litigation tactics.

32.In response, Mr Shaphan Marwah, counsel for the wife, submits that there should be no order as to costs between the husband and the wife, including the Section 17 Summons, because:

(1) the husband himself is guilty of non-disclosure of his financial documents which amounts to serious litigation misconduct;

(2) neither the husband nor the wife has been entirely successful in the trial;

(3) the Section 17 Summons was dealt with without any findings of facts; there was no formal order made to set aside the dispositions of the Section 17 Sums.

33.In my view, the following matters should be taken into account on the question of costs between the husband and the wife.

34.First, I agree with Mr Marwah that looking at the final ancillary relief order made in the Judgment, neither the husband nor the wife can be regarded as the overall winner of the case. I shall not repeat what I have said at [13] to [19] of this decision.

35.Second, Day 1 of the trial was spent on house-keeping matters, including the husband’s last minute change of stance on the amount of alleged dispositions that was to be set aside under the Section 17 Summons. I have set out the relevant chronology at [21] to [25] of this decision. The husband’s last minute change on the amount of dispositions to be set aside could have affected the milestone of the ancillary relief litigation (namely this trial), but for the pragmatic stance taken by Mr Marwah for the wife of not objecting to such belated change, so that the trial could go ahead and finished as scheduled.

36.Day 2 and part of Day 3 of the trial were spent on hearing the wife’s oral evidence. Not only did her oral evidence cover the Section 17 Summons, but it also touched on other issues for trial, some of which were raised by the husband but yet his case was not accepted by the court, eg the wife’s spending of $1,080,100.

37.It is thus erroneous for the husband to say that the trial of the Section 17 Summons took up 3 days of the trial. Further, it is unfair for him to suggest that the wife should bear his costs of Day 1 of the trial. This suggestion is in disregard of his own belated change of stance in respect of the amount of dispositions that he sought to set aside in the Section 17 Summons.

38.Third, the husband adamantly labels the wife’s concession on the Section 17 Summons as a belated and unreasonable litigation conduct. Yet, he conveniently overlooks his own conduct as to the disclosure of his financial condition throughout the ancillary relief proceedings.

39.He failed to comply with the unless order dated 3 March 2022 to provide (i) a schedule of rental income and expenses, and property tax returns of his properties; (ii) documentary evidence of the income received by him from Homeaway.com for his properties; and (iii) proof of sale of his Ferrari car.

40.More importantly, he made very unsatisfactory and very belated disclosure as to his crypto investments. I am not to repeat what I have said in the Judgment, in particularly [66] to [75] therein, as well as [16] of this decision, save and except I have ruled in the Judgment that the husband had not discharged his “positive” duty to disclose but chose to drip-feed the documents on his crypto investments as and when he found it convenient to do so.

41.At [75] of the Judgment, I have said that the husband’s conduct on disclosure “would be duly taken into account by the court if the question of costs of the ancillary relief including this trial would have to be argued and ruled”.

42.Plainly, regarding the disclosure of his crypto investments, the husband was playing a “hide and seek” game, a conduct that was condemned by Lam PJ (then Lam J) in L v L [2006] 1 HKFLR 121. In my view, such litigation conduct of the husband should be “severely penalised in costs”, in order to show the disapproval of the court, had the wife sought costs against him on this issue (See: OG v AG [2020] EWFC 52 at [38]).

43.Further, I hold the view that it is erroneous of the husband to merely focus on the Section 17 Summons and the so-called concession made by the wife and/or her parents, without looking at the overall picture of the ancillary relief matters, in particularly his conduct on disclosure of his crypto investments. Such a stance falls into the error explained by Hartmann JA in HK v BD (supra) that costs “are not to be assessed by breaking down the litigation into its many component and interlocking parts in order to draw up some kind of profit and loss account.”

44.Balancing all the matters set out above and looking at all the matters in the round, I hold the overall impression and view that there should be no order as to costs between the husband and the wife in the ancillary relief matters, including the Section 17 Summons and all costs reserved.

Costs between the husband and the wife’s parents

45.The husband puts forward similar argument that the wife’s parents engaged in “unreasonable litigation tactics, causing unnecessary delays and expenses throughout the proceedings”, and thus they should be made responsible for such conduct by bearing the costs resulting from their actions.

46.On behalf of the wife’s parents, Mr Marwah submits that there should be no order as to costs, and lists out those matters which counsel says are relevant to the costs issue at [4] of his written submission.

47.In my decision, the following matters are relevant in considering how I should exercise my discretion on costs.

48.First, the crux of an application under section 17 of the Matrimonial Proceedings and Property Ordinance, Cap 192 is that there was or will be dispositions of any asset(s) by a party, with the intention of defeating the claim for financial provision of the other party, in which case the court has the power to “set aside” such a disposition.

49.There was no formal findings by this court that the Section 17 Sums were transferred to the wife’s parents with a view to defeat the husband’s ancillary relief claim. No formal order for “setting aside” the Section 17 Sums was made.

50.Second, the wife merely compromised, upon the conclusion of her parent’s oral evidence, that she would agree to add back the Section 17 Sums into the pot to her side of the ledger.

51.The oral evidence given by the wife’s father in the cross-examination and later clarified in re-examination was that he would give back $1.5 million to the wife upon the conclusion of these proceedings, irrespective of the outcome of the Section 17 Summons, because he was the father of the wife. This is, more likely than not, taken as an act of a father showing his love for his daughter, rather than an admission that the wife had parked her moneys with him with an intention to defeat the husband’s claim for financial provision.

52.Third, Mr Marwah is right in pointing out that the oral evidence of the wife’s parents on the Section 17 Summons took up a very minimal time of the trial. Their oral evidence started at around the noon of Day 3 until about 4 pm of the same day.

53.I reiterate that it is erroneous for the husband to say that the trial of the Section 17 Summons took up 3 days of the trial. I have already described sufficiently the background and the trial of the Section 17 Summons at [20] to [30] of this decision, which I shall not repeat.

54.Fourth, it is ruled in the Judgment that the total assets of the husband and the wife in this case are worth over $46 million[10]. The Section 17 Sums are $5,343,137 only, which is about 11-12% of their total assets. Strictly speaking, there was no need for the husband to join the wife’s parents into the ancillary relief proceedings in order to pursue the Section 17 Summons. There was sufficient funds in the pot, and more particularly under the wife’s ledger, to do a notional add-back, even if (just assuming) the Section 17 Sums were transferred to the wife’s parents by her in order to defeat his ancillary relief claim. As such, his application to join the wife’s parents is rather unnecessary and not costs-saving.

55.Due to the matters aforesaid, I am of the view that a fair costs order should be an order of no costs of the Section 17 Summons between the husband and the wife’s parents, including costs reserved between them.

Disposition on the costs issue

56.For all the matters set out above, I shall make an order that:

(1) There shall be no order as to costs of the ancillary relief matters, including the Section 17 Summons between the husband and the wife, including all costs reserved and the trial;

(2) There shall be no order as to costs of the Section 17 Summons between the husband and the wife’s parents, including all costs reserved and the trial.

57.As the husband fails in his costs application, I see no reason why he should not bear the costs of the wife and the wife’s parents. Hence, I shall order that the husband shall bear the costs of the wife and the wife’s parents in respect of this costs application, to be taxed if not agreed. I will grant certificate for counsel.

58.This order shall be drawn up by the wife’s solicitors.

59.Including this decision on costs, the family court has already delivered 4 judgments/decisions in this case. It is hope that the husband and the wife can take this decision as the last chapter of their protracted litigation. From now on and for the sake of their children, they should turn a new page of their life and concentrate on how to co-parent their children way forward.

Mr Shaphan Marwah instructed by Holmes Lawyers for the petitioner (wife)

The 1^st respondent (husband) acting in person

The 2^nd respondent (father of the husband) acting in person

Mr Shaphan Marwah instructed by Holmes Lawyers for the 3^rd and 4^th respondents (parents of the wife)