Case Document

100%Judiciary

HCMC000004A/2001

HCMC 4/2001

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MATRIMONIAL CAUSES NO.4 OF 2001

(Transferred from the District Court : FCMC 4932/2000)

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BETWEEN
	F	Petitioner

	AND

	F	Respondent

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Coram: Hon Hartmann J in Chambers

Dates of Hearing: 3 and 4 September 2003

Date of Handing Down Ruling: 15 October 2003

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R U L I N G

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Introduction

1.This is a ruling as to costs. It arises out of a judgment handed down by myself on 14 January 2003 ('the January judgment') in which I determined the claims of the petitioner, whom I will call the wife, for various forms of ancillary relief against the respondent, the husband. In that judgment, being in no position on the evidence then available to me to make a decision as to costs, I said that I would, if necessary, hear from the parties in respect of that issue.

2.The parties were unable to agree costs. In consequence, the wife issued proceedings seeking an order in her favour in respect of all outstanding costs. The husband opposed that application. Leaving aside certain discrete matters which arose during the course of litigation and in respect of which costs were reserved, in respect of costs generally he seeks an order that each party bear their own costs.

3.The husband is a man of considerable affluence. When the trial commenced, his accountants estimated his net worth at over HK$400 million. 'Big money' cases of this kind invariably give rise to complex issues, more especially when the parties are at loggerheads in respect of almost all fundamental issues, as the parties were in this case. In this regard, in the January judgment I said the following (para.18) :

"In summary, the wife has proposed that awards should be made in her favour approximating HK$99 - 100 million. The husband has proposed awards in her favour approximating HK$25 - 26 million. The gulf reflects a difference of HK$73 - 74 million. This huge divergence is due in large measure to disputed factual issues but springs equally from conflicting views as to the applicable law."

4.The trial itself ran for 18 days. It commenced in June 2002, took up a number of days in August and September and only ended in December 2002.

5.By the conclusion of the trial, the husband estimated his legal bill to be some HK$5.369 million. The wife estimated her bill to be a little less, some HK$5.027 million.

6.It is apparent that for both parties by far the greatest percentage of their legal costs were accounted for by the costs of the trial itself. Indeed, Mr Pilbrow, the husband's leading counsel, on his analysis of the wife's costs, estimated that some five sixths - over 80% - of her costs went to funding the trial.

7.At the centre of the husband's opposition to the wife's demand for costs is his contention that the trial ballooned to its inflated proportions because the wife persisted in pursuing a large number of issues which in the January judgment were either totally or materially rejected. To support this, those representing the husband made a detailed analysis of the history of the trial - based, it appears, on a study of the transcript - and concluded that only 15% of the trial time was spent on issues which were determined in the wife's favour.

8.While, in respect of costs, a court in family matters has a largely unfettered discretion to do what is just in the circumstances, that discretion must of course be exercised judicially; that is, in accordance with certain accepted principles. Before looking to the merits it is therefore necessary to consider these principles.

A consideration of applicable principles

9.The founding principles as to the award of costs in civil proceedings generally have been stated in In re Elgindata Ltd (No.2) [1992] 1 WLR 1207. Nourse LJ (at 1214) said that the principles are these :

(i) Costs are in the discretion of the court.

(ii) Costs should follow the event exept when it appears to the court that in the circumstances of the case some other order should be made.

(iii) The general rule that costs follow the event does not cease to apply simply because the successful party raises issues or makes allegations on which he fails. But where that has caused a significant increase in the length or costs of the proceedings he may be deprived of the whole or a party of his costs.

(iv) Where the successful party raises issues or makes allegations improperly or unreasonably, the court may not only deprive him of his costs but may order him to pay the whole or a part of the unsuccessful party's costs.

10.I am satisfied that these principles apply equally in this jurisdiction. The first, second and fourth are recognised and/or provided for in O.62 of the Rules of the High Court. While, as Nourse LJ said (at 1214), the third depends on well established practice.

11.In light of the husband's detailed 'time-to-subject' analysis of the trial, it is useful, I believe, to heed the observations of Beldam LJ in In re Elgindata (No.2) in which he said (at 1218) :

" It was no doubt convenient for the judge to consider the factual issues in four groups, but by concluding on a purely numerical basis that costs should be borne in the proportion three-quarters to one-quarter the judge apparently assumed, first, that the costs of the groups of issues would all be equal and, secondly, he made no allowance for the fact that proof of some of the facts in the groups of issues on which he had deprived the petitioners of all costs was essential to establish the petitioners' right to an order that the respondents buy their shares. In my view it is only if it is possible so to isolate an issue in the case that it can properly be said that it is unnecessarily pursued as having no bearing on the real questions in the suit that it would be proper to deprive the successful party of all costs of that issue. Otherwise a more general assessment should be made."

I would adopt those observations as a correct determination of principle.

12.Contested family proceedings, being civil in nature, are subject to the founding principles that I have outlined. However, it has long been accepted that, because of the special dynamics of family litigation, the discretion is broader than it may be in civil matters generally. The seminal case on the point, long followed in this jurisdiction, is Gojkovic v. Gojkovic [1991] 2 FLR (CA) 233 in which Butler-Sloss LJ said :

"... there still remains the necessity for some starting-point. That starting-point, in my judgment, is that costs prima facie follow the event (see Cumming-Bruce LJ in Singer v Sharegin [1984] FLR 114 at p.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."

13.Butler-Sloss LJ spoke of the great majority of cases in which assets were not substantial, observing that-

" The incidence of legal aid, the inadequacy of the financial assets available, for instance, to house both parties or even one spouse and the children, are major circumstances which may affect or even distort an order for costs that would otherwise have been expected to be made."

However, in respect of cases where the assets are substantial and an order for costs can be made, emphasis was laid on the requirement that the parties attempt to settle their differences by negotiation. In so doing, a tool of importance is the use of Calderbank offers. In looking to the nature of the policy on which Calderbank offers have assumed such importance, reference was made to the judgment of Oliver LJ in Cutts v. Head and Another [1984] Ch 290 :

"As a practical matter, a consciousness of a risk as to costs if reasonable offers are refused can only encourage settlement whilst, on the other hand, it is hard to imagine anything more calculated to encourage obstinacy and unreasonableness than the comfortable knowledge that a litigant can refuse with impunity whatever may be offered to him, even if it is as much or more than everything to which he is entitled in the action."

Butler-Sloss LJ said that it was clear that "Calderbank offers require to have teeth in order for them to be effective". Accordingly -

" ... the starting-point in a case where there has been an offer is that, prima facie, if the applicant receives no more or less than the offer made, she/he is at risk not only of not being awarded costs, but also of paying the costs of the other party after communication of the offer and a reasonable time to consider it."

14.But that being said, while Calderbank offers should be a material influence in the exercise of discretion in costs, they should not govern it entirely. Butler-Sloss LJ emphasised that a broad range of matters may have to be taken into account :

" There are many reasons which may affect the court in considering costs, such as culpability in the conduct of the litigation; for instance ... material non-disclosure of documents. Delay or excessive zeal in seeking disclosure are other examples. The absence of an offer or of a counter-offer may well be reflected in costs, or an offer made too late to be effective. The need to use all the available money to house the spouse and children of the family may also affect the exercise of the court's discretion. It would, however, be inappropriate, and indeed unhelpful, to seek to enumerate, and possibly be thought to constrain in any way, that wide exercise of discretion."

The starting point

15.The principle clearly stated in Gojkovic v. Gojkovic is that, as a starting point, costs prima facie follow the event. In the present case, that begs the question : who was in reality the successful party? In my view, quite plainly the successful party was the wife.

16.In the January judgment, my various awards made in favour of the wife came to a total value of some HK$56.03 million. At the commencement of trial, while the wife claimed what I considered to be an excessive figure of HK$99-100 million, the husband's position was that HK$25-26 million would be equitable. The husband's figures fell woefully short of the value of the awards made; indeed, they were less than half of the value of the awards made. It can be said, therefore, that the wife had to come to court to obtain a just award. Accordingly, she was in reality; that is, in substantive terms, the successful party. This conclusion is amply supported by the history of the Calderbank offers and counter offers.

The 'Calderbank' offers

17.In the present case, the husband made two Calderbank offers. The first was made in August 2000 in the sum of approximately HK$26.5 million. The second was made in July 2002 in the sum of approximately HK$38.28. This second offer, the highest made by the husband, fell short of the awards made in the January judgment by some HK$17.75 million, hardly inconsequential.

18.But what of the wife? In June 2001, the wife made a Calderbank offer in order to settle the dispute in a sum of approximately HK$53.2 - 53.4 million. This was some HK$2.5 million less than the amount eventually awarded to her. If that offer had been accepted, the dispute would have been resolved at a fairly early stage of the proceedings and the need for a lengthy trial in which costs were sanguine would have been avoided entirely.

19.But the wife did not make only one offer of settlement. In August 2002, during an adjournment of the trial, the wife made an offer of settlement in a sum of approximately HK$57 million. This exceeded her eventual award but by a figure of less than one million. Within a relatively limited compass therefore, having regard to the great affluence of the husband, the wife consistently sought a settlement that was in broad accord with the court's eventual award. The husband, however, advanced his offers of settlement at a figure materially lower.

20.If, as Butler-Sloss LJ said, Calderbank offers are to be effective, they must have teeth. In the present case, as I have said, the husband rejected the wife's first offer which was less than her eventual award. From that moment on he was at risk in costs. His own offers fell far short of the awards eventually made. This, in my view, while not fully determinative of the matter, is of considerable weight in considering whether the wife is entitled to her costs in full.

The wife's 'failures' at trial

21.In rejecting the wife's claim for costs, the husband contended that the trial was unnecessarily prolonged by reason of the fact that the wife pursued a large number of issues which, to a greater or lesser degree, did not find favour with the court. In support of this submission, a detailed 'time-to-subject' analysis was provided. As I said earlier, according to this analysis, only 15% of the trial time was spent on issues which were determined in favour of the wife.

22.Leaving aside what I consider to be the long-established principle that costs are determined not by dividing litigation into quantifiable subjects and figures like a profit and loss account but rather by way of overall impression, I have a number of difficulties with the husband's 'time-to-subject' analysis :

(a) As Beldam LJ observed in In re Elgindata (No.2), not all subjects canvassed during a trial are of equal importance. A critical issue may take a relatively short time to be disposed of while it is axiomatic, I believe, that issues of less importance may, if they are contentious or complex or a witness testifying to the issues is overly long, take a relatively longer period.

(b) The fact that a particular issue at trial took a particular time to be canvassed, does not define who was most responsible for the use of that time. One party, for example, may advance an issue in respect of which he is unsuccessful in a manner that is commendably brief while the opposing party may spend an inordinate time opposing that issue. In such circumstances, who is to be penalised, the party who advanced the unsuccessful issue or the party who successfully opposed it but did so in a time-wasting manner?

(c) The fact that an issue advanced by one party has not found favour with the court does not mean that the issue was not necessary, if only peripherally, to assist the court in considering the overall strength of that party's case. This, in my opinion, is especially important in ancillary relief proceedings in which, in terms of s.7(1) of the Matrimonial Proceedings and Property Ordinance, Cap.192, a broad range of matters must be taken into account, the one invariably interlocking with others so that, by that interlocking process, a full picture is woven. As Beldam LJ observed in In re Elgindata (No.2), it is only if it can properly be said that an issue that has been advanced has no bearing on the real questions in the suit that it would be proper to deprive the successful party of his costs in respect of that issue.

23.I do accept that the wife advanced a number of issues at trial which I found to be exaggerated or not proved on the evidence. But the general rule that costs follow the event does not cease to apply because a party has in certain instances been found to exaggerate his case or because he has failed on certain issues. In the present case, I did not find those assertions of the wife which were exaggerated to be flagrantly or persistently so, not set against the great affluence enjoyed in the course of the marriage. It is the nature of the adversarial system that the best case is advocated. Of course, that must be done within rational boundaries. In my view, the wife's assertions, even if some were pitched too high or were rejected on the evidence, always remained within those boundaries. It is often necessary in ancillary relief matters, which are determined on the basis of the exercise of a broad discretion, to speak of numerous and interlocking matters in order to attempt to paint a picture of a way of life within the confines of a marriage. For the parties themselves that will inevitably mean expressing subjective views; some may be accepted, some rejected, some accepted in part. In the present case, while a number of the wife's submissions may not have found favour, they were all, in my opinion, relevant issues, respectably capable of argument against the complex, multi-faceted history of how the parties came together, lived their married life and separated.

24.I have looked to the many issues isolated by the husband which, to a greater or lesser degree, went against the wife. None of those issues, in my opinion, were vexatious, irrelevant or advanced without any cause whatsoever. By way of illustration, let me take one example. There was considerable argument as to the calculation of the real rate that I should apply in assessing an appropriate lump sum for a Duxbury calculation. In light of contemporary economic uncertainties, the wife pressed for a lesser real rate of return which meant that the capital sum awarded to her should be higher in order to ensure sufficient income from that capital. She was not successful in this respect. But, in my judgment, it could not be said that this issue was irrelevant - indeed the opposite is the case - or that it was unnecessarily brought. The appropriate real rate of return has recently been the subject of considerable debate in the United Kingdom with the courts not being unanimous in their views. In light of current depressed rates of return on capital investments, the wife advanced sound arguments backed by expert opinion. Is she to be penalised, even though in reality she was without doubt the successful party in the case, on the basis only that she was not successful in this and other allied matters? In my judgment, that would not accord with principle nor be just in the circumstances.

25.I appreciate that the husband's central premise is founded not on a study of each isolated issue but on the cumulative effect of these failed issues. But, if each issue was neither irrelevant nor unnecessary but, to the contrary, was, in my view, of real relevance, often supported by law and often of sufficient weight as to be difficult to resolve, then I do not see that looking to the sum total of those issues changes the result.

The 'White v. White' submission

26.In October 2000, in the case of White v. White [2001] 1 AC 596, the House of Lords expressly disapproved of the long-standing approach previously adopted by the courts of England and Wales in determining 'big money' cases; namely, that of looking to the non-breadwinner's 'reasonable requirements', and set new principles in place.

27.Hong Kong, sharing essentially the same legislative provisions as England and Wales, has adopted the earlier approach of 'reasonable requirements'. However, with the advent of White v. White the question arose whether Hong Kong should adopt the principles set by the House of Lords, either in part or whole, or whether our courts should continue to be guided by the existing jurisprudence. It was argued on behalf of the wife that the White v. White principles should be adopted. The husband opposed that argument, contending that existing principles remained binding. Having heard extensive submissions, I ruled that at first instance our courts remained bound by the existing jurisprudence and that while White v. White may offer valuable guidance, it may only do so within permissible limits.

28.I went further, however, by finding that in any event the wife's case fell far short of what may be described as a classic White v. White case. In this regard, under the heading - "Would the awards have been different under White v. White?" - I said (para.211) :

Because of my earlier findings as to law, this is essentially a hypothetical question. But, as I said earlier, in my view this has never been a classic White v. White case and frankly, even if I had followed the principles laid down by the House of Lords, having regard to the particular circumstances of this case, I do not see that my awards would have been materially different; indeed, really any different at all."

29.On behalf of the husband, it was submitted that the wife failed both in law and in fact to convince the court that White v. White principles should be applied in her case. Mr Pilbrow pointed to the fact that a material portion of the trial was taken up with submissions concerning the applicability of the House of Lords case in Hong Kong. To compound this, he said, because of the challenge in law, 'enormous costs' were wasted by the husband in making the kind of disclosure that would not (in all probability) have been necessary if the existing 'reasonable requirements' approach had been accepted by the wife as determining the applicable principles.

30.The wife, of course, was in a position where, if she wished to pursue her submissions in respect of White v. White in a higher court, she had to make her case at first instance both by way of submissions and, in my view, by way of evidence too. In addition, even though the wife may have failed in advancing the White v. White issue, it cannot be said that it had no bearing on the real questions in the suit. To the contrary, it was central to those very issues. White v. White was a watershed judgment. The degree to which it would have an impact on Hong Kong jurisprudence was a matter of considerable debate in the profession. The issue raised was therefore not only of direct relevance it was of considerable importance in this field of law. Indeed, as I understand it, one of the principal reasons why this case was transferred from the District Court to the Court of First Instance was so that the issue - its public importance being recognised - could be determined at this level.

31.It is true that the wife failed. But this was largely because I found that at first instance I was bound to follow existing jurisprudence, that jurisprudence having been set by our Court of Appeal. It is also true that I found the wife's factual circumstances did not place her in a 'classic' White v. White context. But it was an open question, and a relevant one, her case being a 'big money' case, whether the principles should be applied to her.

Conclusion as to costs generally

32.It is important, I think, to note that, in advancing her case, the wife had to rely on a broad range of assertions. The husband was able to limit his opposition to a more restricted number of issues, in essence to denials of applicability or assertions of exaggeration. Strategically, that is how the respective campaigns were conducted. But the fact remains that the core question; namely, the assessment of an equitable financial settlement for the wife, was not only determined in favour of the wife but was determined in accordance essentially with her own offers of settlement made to the husband to either avoid the need entirely for a trial or to avoid the need to prolong it. The wife did not, in my opinion, conduct the trial in a manner worthy of criticism. Her failure on a number of issues, including the central issue of White v. White, does not, in my view, lead to the conclusion that the wife should be denied her costs. Indeed, by way of general impression I am satisfied that it would be unjust in all the circumstances to deny the wife her costs or diminish them.

Matters in respect of which costs were reserved

33.During the course of proceedings, in both the District Court and this Court, a number of interlocutory hearings took place, costs being reserved. I list them as follows, in each case stating my determination as to the appropriate order :

(i) 2 August 2001

This was essentially a call-over hearing. I see no reason to hold either party culpable. The appropriate order is one of costs in the cause.

(ii) 17 December 2001

This was a directions hearing, essentially neutral in nature. Again, I see no reason to hold either party culpable. The appropriate order is one of costs in the cause.

(iii)
2, 13 and 16 May 2002

These hearings were the result of the issue of injunction proceedings by the husband to prevent the wife from divulging prohibited information to the press concerning her marriage and the forthcoming ancillary relief proceedings.

The husband came to learn of this when the journalist concerned contacted his solicitors. The matter was settled on the basis of certain undertakings by the wife.

The wife submitted that the issue of proceedings was precipitous; that she had no intention to divulge prohibited information and had been careful to speak only of those matters which the law permitted. I believe there is some weight in this criticism. On the other hand, the wife's actions, so close to trial and without prior notice to the husband, must be considered objectively to be precipitous.

I am of the opinion, the matter having been settled by way of undertakings, that the appropriate order should be no order as to costs.

(iv) 17 May 2002

This hearing arose out of a failure by the wife to supply further and better particulars. It followed an earlier summons issued by the husband and granted in his favour with costs. I have considered the constricted time frame but I am satisfied that costs should be awarded to the husband.

(v) 10 June 2002

An adjournment was sought on the first day of the trial. Both parties agreed that an adjournment was necessary but for different reasons. Shortly before trial, the wife had received a further report as to the husband's wealth. Her counsel said then would be assisted if given further time to digest details. The husband's counsel complained that the pagination of various bundles served on them caused confusion.

Having heard submissions, I am unable to apportion culpability. The adjournment, in my view, must be taken as part of the general costs of the trial. The costs therefore are to be costs in the cause.

(vi) 14 June 2002

The wife sought further and better particulars in respect of the report as to the husband's wealth. I granted the application. In the result, the husband made further extensive discovery.

It was submitted on behalf of the husband that the application was entirely unnecessary. As proof of this, Mr Pilbrow pointed to the fact that when the author of the report gave evidence, she was not cross-examined by the wife's counsel. But, of course, discovery may have made the need for cross-examination redundant.

In light of a number of revelations made in the report, I cannot say that the wife's desire to obtain further and better particulars was unjustified. In my judgment, the appropriate order is costs in the cause.