Ad (also known as At) v. Rt

HCMC 1/2022

[2025] HKCFI 645

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MATRIMONIAL CAUSES NO 1 OF 2022

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DECISION

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A.  INTRODUCTION

1.On 3 July 2023, this Court handed down a Decision (“the Litigation Funding Decision”) and ordered the respondent husband (“H”) to pay litigation funding to the petitioner wife (“W”)’s lawyers in the sum of $120,000 per month with effect from 1 October 2022 until further order (“the 2023 Order”).

2.By summons filed on 2 December 2024 (“the Summons”), H seeks to vary the 2023 Order downwards to $10,000 per month, on the ground that the trial of the ancillary relief application has been completed, and therefore there should be minimal to no legal fees to be incurred.

B.  LEGAL PRINCIPLES

3.In WNWG v PBF (CACV 130/2011, unreported, 27 March 2012), Lam J (as Lam PJ then was) had the following to say on variation of a periodical payment order:

“12. As regards the approach that the court should adopt in considering an application for variation and the weight to be attached to the original order, Tang V-P said in HCTT v TYYC [2008] 5 HKC 86 at paras 15 to 16,

‘15. But as Garner v Garner [1992] 1 FLR 573 shows that does not mean that the earlier order, whether made by consent or not, carries no weight. How much weight should be given to the earlier order must depend on the circumstances. Cazalet J said in the English Court of Appeal:

“Almost invariably, an application to vary an earlier periodical payments order will be brought on the basis that there has been some change in the circumstances since the original order was made; otherwise, except in exceptional circumstances, the application will, in effect, be an appeal. If an order is not appealed against, or is made by consent, then the presumption must be that the order was correct when made. If it was correct when made, then there will usually be no justification for varying it unless there has been a material change in the circumstances. However, because of the impact of continuing inflation, because children grow older and cost more to support and because, for example, the cost of living in its increase may hit one party harder than another, it will usually follow that, if time has passed, there will inevitably have been some changes in the circumstances, and in particular in the financial circumstances, of the parties concerned.

Following Lewis v Lewis, by which decision this court is bound, a court on the hearing of an application to vary is fully entitled to look at all the relevant matters set out in s. 25 of the Matrimonial Causes Act 1973. On occasions, the court may be slow to accede to an application to vary a consent order; not least because the parties’ solicitors might otherwise be deterred from either seeking to negotiate such a provision or to achieve finality. Another factor which may influence a court will be the time that has passed since the original order was made. If an application consequent on an order is brought very soon after that order has been made, the court, in normal circumstances, is likely to attach more weight to the earlier order than if it had been made some years previously. Likewise, the court would expect to pay full regard to any special terms agreed between the parties at the time the original order was made – as, for example, when endorsements on briefs or contemporaneous correspondence show that an agreed order has, for some particular reason, been set at an artificially low figure. Shortly stated, the court must decide what weight it should attach to the original order and all the surrounding circumstances. However, once an application to vary is before it, the court is fully entitled to make an order considering all the circumstances afresh, paying such regard to the old order as may be thought appropriate.”

16. Thus, although the jurisdiction to vary is untrammelled, normally the earlier order would not be varied unless there has been a material change in circumstances.’

13. And further at para 37, His Lordship said,

‘Justice requires that proper weight should be given to the consent order.’ ”

4.In AEM v VFM [2008] 3 HKLRD 36, Cheung JA also explained in [14] that:

“ […]

3. The traditional approach to variation was not to re-fix afresh the amount of maintenance but to consider the amount of change in the actual means of the parties so that the new order should merely be increased or decreased roughly in proportion to the change in the means : Foster v. Foster [1964] 3 All ER 541, Jackson’s Matrimonial Finance and Taxation 7^th Ed. Ch. 3. 131.

4. The modern approach, as required by section 11(7), is for the Court to consider all the circumstances of the cases. The Court is not required to proceed from the starting point of the original order but look at the matter afresh : Flavell v. Flavell [1997] 1 FLR 353 at 357B following Lewis v. Lewis [1977] 1 WLR 409 and Garner v. Garner [1992] 1 FLR 573.

5. Any change in any of the matters to which the Court was required to consider when making the original order was one of the circumstances to be considered.

6. Almost invariably, an application to vary an earlier periodical payment order will be brought on the basis that there has been some changes in the circumstances since the original order was made, for example, continuing inflation; the increased costs in supporting a growing child and that one party may be more adversely affected than another by the increase in the costs of living : Garner v. Garner.

7. An increase in the wealth of the husband was a relevant factor to be taken into account : Primavera v. Primavera [1991] 1 FLR 16 and Cornick v. Cornick (No. 2)[1995] 2 FLR 490.

8. At the same time the basis and intended effect of the original order are relevant factors to which the Court on variation should pay regard […]”

5.The applicable legal principles regarding litigation funding have been set out in WW v LLN formerly known as LSM [2020] 2 HKLRD 487, [2020] HKCA 178 by the Court of Appeal as follows:

“20. The principles for granting litigation funding are well-established:

(1) In order to obtain litigation funding, the burden is on an applicant to demonstrate that she cannot reasonably procure legal representation by any other means. This includes showing that she cannot secure publicly funded legal help at a level of expertise apt to the proceedings. To the extent that she has assets, the applicant has to demonstrate that they cannot reasonably be deployed, either directly or as the means of raising a loan to fund legal services;

(2) The subject matter of the proceedings and the reasonableness of the applicant’s stance in the proceedings will always be relevant.

(3) The period over which costs allowance is to be paid is also relevant. If the application was made before the FDR hearing, it may well be wise to order that the costs allowance should fund the applicant only up to that hearing. If the FDR fails, it would be for the new judge, on the basis of the materials properly before him, to determine whether a new allowance for legal costs should be granted and if so, in what amount.

HJFG v KCY [2012] 1 HKLRD 95, [80]-[83]; Currey v Currey [2006] EWCA Civ 1338.

21. The court should be alert to the risk of injustice arising from irrecoverable and/or unmerited sums paid for litigation funding, which would call for extra caution in the balancing exercise. As stated by Thorpe LJ in Moses-Taiga v Taiga [2005] EWCA Civ 1013, at§20:

‘… the whole purpose of alimony pending suit is to sustain the petitioner pending the court’s determination. There is manifestly a risk of unjustified and irrecoverable payments, but that has to be balanced against the risk of a denial of access to justice for the petitioner, if she has not the means to sustain herself and the litigation pending its determination.’ ”

6.In Rubin v Rubin [2014] 1 WLR 3289, it has also been held that:

“13 ..... (iv) The court cannot make an order unless it is satisfied that without the payment the applicant would not reasonably be able to obtain appropriate legal services for the proceedings. Therefore, the exercise essentially looks to the future. It is important that the jurisdiction is not used to outflank or supplant the powers and principles governing an award of costs in CPR Part 44. It is not a surrogate inter partes costs jurisdiction. Thus, a LSPO should only be awarded to cover historic unpaid costs where the court is satisfied that without such a payment the applicant will not reasonably be able to obtain in the future appropriate legal services for the proceedings.”

7.In BC v DE [2017] 1 FLR 1521, Cobb J also had the following to say:

“22. My concern is to ensure that the mother and father have equality of arms, and equal access to justice in this case. I do not, as Mr Turner sought to persuade me, treat equality of arms as ‘equality of payments’ – a suggestion that, pound for pound, the father should ensure that the mother is more or less equally provided for in relation to her costs as he is. However, for as long as any client has incurred significant outstanding legal costs with his or her solicitor, there is no doubt but that they become bound […] to each other by the debt; this may well impact on the freedom of, and relative strengths within, their professional relationship. Further, the solicitor may feel constrained in taking what may be important steps in relation, for instance, to discovery, or in relation to exploring parallel non-court dispute resolution. The debt may materially influence the client’s stance on possible settlement, and the solicitor’s advice in relation to the same: a client – without independent resources – is in a vulnerable position, and may be more inclined to accept a settlement that is less than fair simply because of the concerns about litigation debt. This would not be in the interests of this, or any, child in Sch 1 proceedings. A level playing field may not be achieved where, on the one side, the solicitor and client are ‘beholden’ to each other by significant debt, whereas on the other there is an abundance of litigation funding. Though there is an increasingly familiar and commendable practice of lawyers acting pro bono in cases before the family courts, particularly where public funding provision previously available has been withdrawn, legal service providers, including solicitors and barristers, are not charities, nor are they credit agents. It is neither fair nor reasonable to expect solicitors and the bar to offer unsecured interest-free credit in order to undertake their work; there is indeed a solid reason for lawyers not to have a financial interest in the outcome of family law litigation.

23. I agree with Mr Turner that there is an ordinary expectation that the provision of funding ought to be ‘reasonably’ available – ie imposing no unreasonableness on the applicant nor on the provider of advice and/or representation – as Wilson LJ said in Currey v Currey (No 2) [2006] EWCA Civ 1338, [2007] 1 FLR 946, at [19]: ‘Mrs C did have assets and could give security for borrowings; the point was, however, that it was unreasonable to expect her to do so’.

24. On the significant point of principle in issue in this case, my view is as follows. In Rubin, Mostyn J was not considering legal costs funding in ongoing proceedings; he was dealing with truly ‘historic’ costs which had arisen in two separate sets of proceedings (ie divorce and child abduction), which had, importantly, concluded. The financial proceedings had been stayed (proceedings were now ongoing in California), and the mother and children had returned to California, pursuant to orders made by Hogg J under the Hague Convention on the Civil Aspects of International Child Abduction 1980. There was, as Mostyn J observed, no further litigation in this country, and no litigation in prospect. I consider that Mostyn J was right to reject a legal costs funding application as a vehicle to recoup the costs of either or both of these concluded claims. But that type of application is distinguishable from the type of situation here, where the legal costs funding claim arises in relation to costs reasonably and legitimately incurred within ongoing proceedings prior to the determination of the legal costs funding application […]

25. […]

26. I would just make this further point. I would not regard it as necessary for an applicant to demonstrate that his or her solicitor has actually ‘downed tools’ or will do so before he or she could legitimately make an application for a legal costs funding order where ‘historic’ costs have been incurred. Such an approach could be problematic. I agree with the essence of Mostyn J’s approach – namely that a clear case would need to be shown that the solicitors are reaching the end of their tolerance – but the approach described in para [16] of Rubin v Rubin [2014] EWHC 611 (Fam), [2014] 1 WLR 3289, [2014] 2 FLR 1018 ought not to be applied too strictly, otherwise it would work materially to the disadvantage of the honourable solicitor who is prepared to soldier on (perhaps somewhat against their better commercial judgment) for the good of the client or the case.”

8.All in all, I am of the view that the most important yardstick of the Court is to consider what is reasonable in the circumstances.

C.  DISCUSSION

9.H has raised quite a number of arguments in support of this application. I will deal with them in turn below.

10.Firstly, H reminded this Court that when W made the application for litigation funding which led to the 2023 Order, she was originally asking for the monthly sum of $290,000. However, ultimately the monthly litigation funding amount was cut down by this Court substantially to $120,000 which was considered at the time as a reasonable figure.

11.W’s application for a monthly sum of $290,000 was supported by her estimation that her prospective legal fees would be in the region of $5 million which this Court opined at the time to be on the high side. This Court then observed in the Litigation Funding Decision that:

“24. On the other hand, H proposes that only HK$25,000 per month should be paid […] the proposed monthly sum of HK$25,000 is an unrealistically low figure. Indeed, even the sum of HK$50,000 as ordered under the 2020 Decision is too low in the light of the subsequent development of the case. As pointed out by W, according to the Form H filed by H on 16 September 2022, the amount of costs to be incurred by H up to FDR was in the sum of HK$3,667,992, which is equivalent to a monthly sum of around HK$126,482.

25. According to H’s Form H dated 13 April 2023, it was estimated that the costs after FDR and up to and including the trial would be HK$1,060,000. However, it is noted that H did not put down any estimation on disbursements. Therefore, it seems that the estimation of HK$1,060,000 was arrived at without taking into account the fees payable to the valuation experts. Indeed, in the Form H which H subsequently filed on 9 May 2023, it was estimated that H’s total costs of ongoing or anticipated proceedings up to the conclusion of the trial was over HK$1.5 million.

26. Taking into account the aforesaid matters, I am of the view that if litigation funding is to be ordered, it should be set at the level of HK$120,000 per month.”

12.It can therefore be seen the reasoning behind the picking of the monthly sum of $120,000 – this Court has taken into account H’s estimated costs of $1.5 million at the time.

13.However, it is undeniable that the estimation of $1.5 million by H as at 9 May 2023 was far less than the amount of legal costs incurred by him subsequently. As pointed out by W’s counsel, H’s estimated costs as at 2 September 2024 (covering the period between FDR and the conclusion of a 19-day trial) were over $4.3 million.

14.In such circumstances, I do not think it is fair for H to keep reiterating that W has overspent, in the sense that she has spent more than $120,000 per month on legal fees. Indeed, if H’s estimation of costs was of a higher amount at the time when the 2023 Order was made, this Court would no doubt have picked a higher monthly figure as the reasonable amount payable by H to W.

15.In this regard, two further matters should be mentioned:

(1)  The sum of $120,000 was not meant to be the upper limit of costs which W was allowed to spend per month. It was only a sum of money which this Court considered reasonable for H to be asked to fund W;

(2)  It should not be forgotten that by the time when the Litigation Funding Decision was handed down, W was in debt to her former solicitors for the sum of over $1.3 million. Hence, it can be inferred that part of the litigation funding which she received pursuant to the 2023 Order had been used to pay off such debt.

16.H further submitted that the costs incurred by both sides have been inflated by reason of W’s unreasonable conduct of these proceedings. Given the nature of the application before this Court at this moment, I do not think it is appropriate for the Court to discuss such conduct herein, save to point out that, even if the costs incurred by reason of the alleged unreasonable conduct are to be deducted from H’s actual legal fees, it is still highly probable (to say the least) that the total amount would be more than the $1.5 million estimation. In other words, with the benefit of hindsight, this Court would still have fixed an amount higher than $120,000 as the reasonable litigation funding figure back then.

17.Secondly, it was argued that H should not be asked to foot the bill when it was W who has steadfastly incurred legal fees at an “alarming and disproportionate rate”.

18.With respect, I am of the view that this submission is misconceived, because even if the Summons is dismissed and H’s payment is to be continued, he in effect is not asked to “foot the bill” as such.

19.A simple calculation may illustrate the point. According to H, up to 29 August 2024, he had paid W a total of $3.79 million as litigation funding[1]. Even if the Judgment of the ancillary relief application is only handed down in early September 2025[2], H would only be required to pay $1.56 million from September 2024 to September 2025 ($120,000 x 13 months). The total amount of litigation funding paid by H is therefore $5.35 million ($3.79 million + $1.56 million), which is far less than the total amount of the bills which W is obliged to pay her solicitors (around $11.8 million).

20.In fact, the said amount of $5.35 million is only equivalent to around 63.7% of the total amount of legal costs incurred by H (the total estimated costs up to the conclusion of the trial were around $8.4 million as per H’s Form H4 dated 2 September 2024). Even if H’s view is right that his legal costs should be less but for W’s unreasonable litigation conduct (as to which I express no view in this Decision), the sum of $5.35 million is in all likelihood still insufficient to cover the total amount of H’s own legal costs.

21.Thirdly, reliance has been placed on the case of HJFG v KCY [2021] 1 HKLRD 95, in which Hartmann JA stated at [82] that:

“Applicants should not expect an order that the allowance be paid until the final determination of all proceedings”.

22.I am afraid the above sentence had been quoted out of context. What Hartmann JA said was that:

“82. The period over which an allowance for legal costs was to be paid was also considered by Wilson LJ to be a factor of considerable relevance. Applicants should not therefore expect that an order that the allowance be paid until the final determination of all proceedings will be the inevitable order. It was observed that if the application for an allowance for legal costs was made before the FDR hearing, it may well be wise to order that the costs allowance should fund the applicant only up to that hearing –

‘The FDR appointment is a watershed and all reasonable inducements to both parties there to negotiate positively in the light of informal judicial indications should be in place. The knowledge of a spouse in receipt of a costs allowance that, absent settlement at or in the immediate aftermath of the FDR, she will have to apply for a further allowance, which may or may not be granted, seems to me to amount only to a reasonable inducement, as opposed to improper pressure, to reach settlement.’

83. In this regard, as Wilson LJ pointed out, if the FDR hearing fails, it will be for the new judge, on the basis of material properly before him – for example, rival open offers of settlement – to determine whether a new allowance for legal costs should be granted and, if so, in what amount.

84. Those observations accord with my understanding of the Hong Kong FDR procedures.”

23.What was said by Hartmann JA is therefore unhelpful in the circumstances of the present case.

24.Fourthly, H submitted that while it is alleged by W that she is now owing nearly $3.6 million to her legal team, such outstanding legal fee was incurred with knowledge on the part of both W and her legal team that the monthly legal budget was only $120,000. If her legal team chose to allow W’s overspending in the way she did, that is their choice, and H should not be made responsible.

25.As it has been pointed out above:

(1)  With the benefit of hindsight, taking into consideration especially the actual amount of legal costs incurred by H, the litigation funding of $120,000/month was indeed inadequate to cover W’s legal costs;

(2)  The monthly sum of $120,000 should not be regarded as the maximum amount which W was allowed to spend as legal fees anyway;

(3)  W owed her former solicitors a sum of $1.3 million as outstanding legal costs at the time when the 2023 Order was made;

(4)  H is not asked to pay off W’s outstanding legal fee bills entirely, but only around another $1 million (counting from 5 December 2024 which was the last day of the trial), which in my view is reasonable in the circumstances. Reference should also be made to the calculation and analysis at [19] – [20] above.

26.Fifthly, H argued that now that the Ancillary Relief Trial has been completed, the bulk of the work which the litigation funding was intended to address has been completed. In such circumstances, H should not be asked to pay significant amount of litigation funding on a monthly basis, and BC v DE (supra) may be distinguished. Indeed, it was his evidence that:

“[…] my application to vary litigation funding is not based on my change in circumstances. Rather, it is based on the fact that there are no other matters to be dealt with in these proceedings now that the Ancillary Relief Trial has been concluded and the parties are simply waiting for the judgment to be handed down.”[3]

27.I disagree with this argument in the circumstances of the present case:

(1)  In the circumstances where the monthly sum of $120,000 is inadequate, on the strength of BC v DE (supra), this Court is entitled to take into account the amount of outstanding legal fees payable by W to her lawyers;

(2)  I do not agree that BC v DE (supra) is distinguishable, because while the trial herein has been completed, in the light of the complexity of the whole matter, this Court has indicated that it will require parties’ further submissions on schedule of payment after the Judgment is handed down. That being the case, the Court has to take into account the importance of W being able to retain her lawyers for that purpose;

(3)  Viewed in such light, the fact that there is not much further legal fee to be incurred is irrelevant.

28.Sixthly, H questioned how much W is in fact owing her lawyers since she has not exhibited any document in support of her allegation that she owed $3.6 million to her lawyers as at 19 December 2024. H also queried whether W’s lawyers would really cease to act for her in the event this Court accedes to H’s application to vary the 2023 Order, on the basis, inter alia, that her solicitors have not filed any affirmation in support of such threat.

29.While it is true that W has not produced any document in support of the alleged debt and none of her solicitors has made any affirmation to confirm the threat, I am prepared to accept W’s assertions for the purpose of the Summons because:

(1)  Taking into account W’s Form H4 filed back in August 2024, it is not surprising that W is indeed owing her lawyers more than $3 million legal fees;

(2)  It may be inferred that W’s affirmation filed for the purpose of opposing the Summons was at least settled, if not prepared upon her instructions, by her solicitors. This Court would not come to the conclusion lightly that her solicitors would knowingly let her put in false evidence in such an affirmation.

30.Seventhly, H argued that after the Judgment on the ancillary relief application is handed down, W will be in receipt of an award from which she will be able to settle her outstanding legal bills if necessary.

31.This argument is misconceived. The question here is whether H should be required to continue his monthly payment of $120,000 to W in the meantime, so that she can keep her legal team until the end. Question of settlement of the entire legal costs incurred by W in this action is not a matter which this Court will take into account.

32.Eighthly, H contended that if W took the view that the amount of monthly litigation funding in the sum of $120,000 is insufficient, she should have appealed against the 2023 Order or applied to adjust the monthly amount upwards. With greatest respect, this argument is incomprehensible. What W was saying, in effect, was that since the monthly amount of $120,000 was inadequate, the Court should not allow H to pay less right now. The fact that W has not taken any of the two suggested steps above cannot be used by H in support of his Summons.

D.  ORDER

33.For the above reasons, the Summons is hereby dismissed.

E.  COSTS

34.I make a costs order nisi that the respondent shall bear the petitioner’s costs of the Summons.

35.The above order nisi shall become absolute in the absence of application to vary (which, if any, shall be made by letter, and will be disposed of on paper) within 14 days hereof.

36.Unless any application for variation of the aforesaid costs order nisi is made within time, the petitioner shall lodge and serve her statement of costs within 7 days after the expiry of the said 14-day period. The respondent shall lodge and serve his statement of objection within 7 days thereafter. Summary assessment of the costs of the Summons will be conducted on paper (no matter whether any statement of objection is lodged by the respondent within time) thereafter. The costs assessed shall be paid by the respondent within 14 days after assessment.

Mr Shaphan Marwah, instructed by Hugill & Ip, for the petitioner

Ms Madeleine Booth, instructed by Haldanes, for the respondent