Hjfg v. Kcy

CACV 127/2011

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 127 OF 2011

(ON APPEAL FROM HCMC NO. 11 OF 2010)

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BETWEEN

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Before: Hon Cheung JA and Hartmann JA in Court

Date of Hearing: 28 September 2011

Date of Handing Down Judgment: 28 October 2011

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J U D G M E N T

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Hon Hartmann JA:

Introduction

1.This appeal arises out of various orders for maintenance pending suit made by Poon J in the Court of First Instance on 19 May 2011.  It gives rise to issues relevant to the award of such maintenance in what these days are described as ‘big money’ cases.

2.The parties to the appeal were married to each other in 1987.  Two children were born to the marriage: a daughter, the elder, and a son.  At the date of the hearing before us, the petitioner (‘the husband’) was 55 years of age, the respondent (‘the wife’) five years younger.

3.During the course of their marriage, the husband and wife acquired very great wealth.  The contribution of the parties to the building of that wealth is a matter of considerable dispute.  It is the wife's case that, having worked with her husband in building the matrimonial estate through various business enterprises, when the marriage broke down she was effectively excluded from the businesses, certainly the principal businesses.

4.The contribution of the parties to the building of the matrimonial estate is a matter for the final ancillary relief hearing. It is not relevant to this appeal.  Suffice only to say that, in addition to business interests in Hong Kong built up over the course of the marriage, the evidence suggests that today the main source of the family wealth comes from a decision to exploit the burgeoning economy of Vietnam by setting up investment funds.  There are today a series of such funds concentrated on various sectors of the Vietnamese economy and on the economies of other countries in the Asia-Pacific area.  The control and management of the funds is vested in a complex architecture of companies.  I understand that certain of the funds are quoted on the London stock exchange.

5.When the judge at first instance made his orders for maintenance pending suit, he took into account that in late 2009 the husband had declared his assets to have a net value of some $1.05 billion.  The husband had further declared that in 2009 he had enjoyed an income of some $6.5 million per month by way of salary, dividends and bonuses.

6.The husband had submitted that, because of crises in world financial markets, his income this year (2011) and next year would be substantially reduced. However, with no direct evidence to support that prediction, there having been no dividend or bonuses declared as yet, the judge was not prepared to place any reliance on it.

7.As for the wife, the judge noted that she had declared her assets in late 2009 to have a net value of some $35.5 million but there had, on her assertion, been a major reduction of her capital position so that by the date of her affidavit of 27 October 2010 she had cash available to her in her bank accounts of only some $1.36 million.

8.It was in September 2009 that the husband petitioned for divorce. During the course of the litigation, the wife discovered that the husband had for several years been involved in a romantic liaison with a woman in Vietnam, there being two children of that union.  In the result, in July 2010 a decree nisi of divorce was granted to the wife on her cross petition for adultery.  Proceedings to determine an equitable distribution of the matrimonial estate – ancillary relief proceedings – then ensued and are still on-going.

9.The wife’s application for interim maintenance was not founded on a complaint that the husband had denied her financial support but rather on the complaint that he had been paying considerably less than the amount to which she was reasonably entitled, due regard being had to the lifestyle that was enjoyed prior to the breakdown of the marriage. 

10.By way of illustration, the wife asserted that before the breakdown of the marriage she enjoyed unlimited access to credit card spending but now the husband had imposed a total monthly limit of $550,000.  By way of further illustration, prior to the breakdown of the marriage she and her husband had joint use of the family Bentley motor vehicle and Mercedes vehicles.  However, since the breakdown she had been “relegated” to using the children’s car – the make not being given – which was badly in need of repair.

11.The wife’s application included a provision for the two children of the marriage, more particularly for the son.  The wife accepted that the husband met all the major expenses for the two children including the son’s fees in respect of the boarding school he attended in Europe.  However, she sought financial assistance for the time when the son was back in Hong Kong on school holidays when, according to her, he spent the majority – but not all – of his time with her.  She also sought provision to finance a number of holidays each year with the children.

12.It was the husband’s evidence that since the separation he had paid the rent, utility charges and management fees for the former matrimonial home in which the wife lived alone, except for those occasions when the son stayed with her during his school vacations.  He accepted, as the wife said, that he had limited her credit card spending to $550,000 per month but spoke of meeting other major expenses such as medical insurance and certain of the wife’s travel expenses.  In addition, as the wife agreed, he met all of the children’s major expenses.

13.The husband estimated that the aggregate of the moneys he had paid by way of day-today support to the wife post separation had been a sum of over $730,000 per month.  The husband said that he was willing to continue maintaining the wife and the two children as he had been doing or to consent to an order to pay $730,000 per month to cover the wife’s monthly needs and those of the son when he was staying with her during his school vacations.

14.The husband did not agree to make any contribution to the wife’s on-going legal costs.  As I understand it, this was because, having said in late 2009 that she had net assets of some $35.5 million, the wife had not demonstrated that she could no longer reasonably procure legal advice other than by looking to him.  Nor had she attempted to present any sort of legal budget that was subject to analysis in order to determine whether it was or was not reasonable.

15.The husband’s offers were not acceptable to the wife.  Among other matters (which are not the subject of this appeal), the wife sought maintenance pending suit for herself and, to a limited extent, her son, in the sum of $1,827,700 per month.  In addition, she sought provision for on-going legal costs in the sum of $770,000 per month.  The total of these two claims was $2,597,700 per month.

16.In her affidavit of 11 May 2011, the wife said that this was materially less than the sum which her accountants had calculated she was spending per month.  Her accountants, she said, had summarised her expenses between September 2009 and December 2010 and in that regard had calculated that the average monthly spending ranged between $2.3 million and $2.4 million.

17.One of the wife’s central complaints was that, because of the husband's control of the funds, she was now limited to spending just $550,000 per month on her credit card allowance.  In the result, she said, she had had to use her “limited savings” to pay for items –

“…which cannot be covered by credit cards, such as substantial capital calls on pre-separation investments. This also means I have been prevented from pursuing post-separation investments which has caused me further financial disadvantage.”

18.The wife said that she had been forced to secure a loan against her Hong Kong apartment and to borrow money from family and friends.

19.After a two-day hearing, Poon J made the following orders.

20.First, he ordered that the husband pay interim maintenance for the benefit of the wife and son in the sum of $2 million per month until further order, that sum to include provision for legal costs in an amount which he did not specify. 

21.Second, he ordered that the interim maintenance of $2 million per month be backdated by seven months to November 2010, the arrears in the sum of $14 million to be paid to the wife within 14 days.  In making this order, he chose not to make any order of set-off, deducting from the $14 million the sums of money which the husband had been paying as and for the support of the wife (and the son) since November 2010.  

22.Third, he ordered that the husband ‘be at liberty’ to pay a lump sum of $22 million ‘as interim maintenance’ within a month.  If that payment was made together with the arrears of $14 million – a total of $36 million – then his first order that the husband pay $2 million per month as and for interim maintenance until further order would fall away.  In practical terms, by means of this order, the judge gave to the husband the opportunity to make an advance capital payment to the wife, that payment to be deducted from the capital sum that would eventually be awarded to her.

23.Fourth, he ordered that all the interim maintenance payments, whether made pursuant to his first and second orders or pursuant to what may be described as the ‘lump sum option’ –

“… shall be made on account of any ancillary relief award that the wife may receive whether in these proceedings or otherwise and shall be set off against any such ancillary relief award.”

24.Fifth, he ordered that the costs of the application for maintenance pending suit be to the wife in any event, to be taxed if not agreed.

25.The husband has appealed these orders.

The grounds of appeal

26.By way of summary, it can be said that Ms Lucy Stone QC, the husband’s leading counsel, advanced the following grounds of appeal.

27.First, the judge fell into error in the way in which he purported to apply the approach to interim maintenance in ‘big money’ cases adopted by Coleridge J in Charman v Charman (unreported, Family Division of the High Court of Justice, 11 February 2005).  In particular, in adopting the approach, the judge failed to provide any analysis or explanation as to the basis upon which he determined that $2 million per month was an appropriate sum to meet the “immediate and reasonable needs” of the wife (and son) pending the disposal of the wife’s claim for ancillary relief.

28.Second, when he backdated the amount of monthly interim maintenance by seven months, the judge erred by failing to take into account that during that seven months the husband had been paying maintenance to the wife (approximately $730,000 per month) and to offset that sum.  If he had done so, it would have reduced the backdated sum of $14 million by over $5 million.

29.Third, the judge erred in the circumstances of the case in finding that the wife had established a claim for a contribution towards her on-going legal costs.

30.Fourth, in any event, the order that the husband pay to the wife interim maintenance of $2 million per month was so high, even in relation to the highest reported awards in recent years in England and Wales, that, absent special factors, of which there were none, the order was plainly wrong.

31.Fifth, in the circumstances of this case, the judge erred in awarding costs to the wife.

A brief look at established principles 

32.Before turning to the individual grounds of appeal, it is necessary, in order to be able to consider the issues in context, to give some brief consideration to certain uncontentious principles governing applications for maintenance pending suit, principles to which in large measure the judge himself made reference in his Reasons for Decision.

33.Jurisdiction to award maintenance pending suit to a spouse is statutory, being governed by the provisions of s.3 of the Matrimonial Proceedings and Property Ordinance, Cap. 192.  By that section the court is given a discretion to make an order requiring either party to the marriage to make to the other such periodical payments for his or her ‘maintenance’ as the court thinks ‘reasonable’, subject to the condition that the duration of any such order is limited to the period of what may broadly be called the divorce litigation.

34.By definition, therefore, maintenance pending suit is restricted to payments which constitute ‘maintenance’, which are reasonable in the circumstances and which will endure for no longer than it takes to determine the divorce litigation. ‘Maintenance’ is a broad concept. I do not seek to define its exact meaning but it seems to me that it must be restricted to those payments necessary to meet the recurring costs of living at whatever standard of living is appropriate. That being the case, no matter how great the wealth of the parties and how unevenly distributed that wealth may be at the time an application for interim maintenance is made, the court has no jurisdiction to make orders which for all practical purposes result in a form of pre-trial capital re-balancing. In the present case, the judge recognised the long-established approach of looking to the “immediate and reasonable needs” of the wife and son.

35.As to the amount of maintenance pending suit that may be paid, the Ordinance provides only that it must be ‘reasonable’, that is, having regard to the circumstances of the case, that it must be fair. 

36.An important factor in determining fairness is a consideration of the marital standard of living.  In this regard, each case must be considered according to its own circumstances.  It is not simply to be assumed that great wealth equates to great extravagance.  Some married couples who enjoy great wealth spend with comparative modesty and with a discipline born of discretion, others enjoy consumption on a grand scale.

37.The principles that have emerged over time to guide judges in matters of interim maintenance have been fashioned in the main to ensure fairness.  This is well illustrated in the judgment of Nicholas Mostyn QC, sitting then as a deputy High Court judge, in TL v ML and Others (Ancillary Relief: Claim against Assets of Extended Family) [2006] 1 FLR 1263, at 1289, in which, having looked at earlier authorities, he derived the following principles that speak specifically to fairness or are based on the need to ensure it.  For present purposes, it is sufficient to cite the relevant principles without citing the judge’s reference to the source of those principles:

i.  The sole criterion to be applied in determining the application is ‘reasonableness’, which is synonymous with ‘fairness’.

ii.  A very important factor in determining fairness is the marital standard of living.  This is not to say that the exercise is merely to replicate that standard.

iii.  In every maintenance pending suit application there should be a specific maintenance pending suit budget which excludes capital or long-term expenditure, more aptly to be considered on a final hearing.  That budget should be examined critically in every case to exclude forensic exaggeration.

iv.  Where the affidavit or form E disclosure by the payer is obviously deficient, the court should not hesitate to make robust assumptions about his ability to pay.  The court is not confined to the mere say-so of the payer as to the extent of his income or resources.  In such a situation, the court should err in favour of the payee.

38.Finally, it is to be noted that in applications for interim maintenance, when the amount to be paid is for a limited period only and not all of the evidence is necessarily before the court, it is not appropriate, nor indeed in most cases possible, for the court to conduct a detailed investigation into the finances of the parties.  While, in order to determine what is or is not reasonable, some analysis is always required, that analysis can be conducted on a ‘broad brush’ basis.

Issues arising out of the judge’s adoption of the ‘Charman’ approach

39.In his Reasons for Decision, Poon J placed considerable emphasis on the approach to interim maintenance in big money cases adopted by Coleridge J in his 2005 decision in Charman.  Poon J identified two methods of approach articulated by Coleridge J, the two being independent of each other.

40.As to the first method of approach, while recognising that he had no jurisdiction to make such an order, Coleridge J suggested that in a big money case such as the one before him – a case in which it was inevitable that there would be a division of the marital assets, giving to each party very considerable capital sums – the best way to avoid the often complex and restrictive issues arising out of applications for interim maintenance was for the party being asked to provide financial support (the husband in that case) to make a capital payment to the party seeking support (the wife), that capital payment to be paid ‘on account’ of any sum she would eventually receive either when the case was finally determined.  In this regard, Coleridge J said the following:

“I indicated during argument that I thought the proper way of dealing with cases of this kind, where there is no shortage of liquid resources, is for the husband to make, as it were, a payment on account of the eventual sum.  I have indicated that I shall make an order this afternoon in any event in a conditional form.  The form of the order will give the husband the option of putting to bed, once and for all, all these interim debates about maintenance by payment to the wife of £5 million on account of any sum she receives eventually in settlement of the case and any costs liabilities which might arise. “

41.Coleridge J considered that an appropriate capital sum to be paid by the husband would be £36 million.  He said:

“I hope the husband will think very seriously about taking that course because it will deal with all debate about the question of interim support and issues relating to costs and things of that kind. If he pays that sum to the wife …then the wife’s applications for all forms of maintenance pending suit will be dismissed. Otherwise, I shall require him to pay maintenance pending suit at a rate which I will now set…”

42.Poon J adopted the same approach, encapsulating it in his third and fourth orders, namely, that the husband be at liberty to pay a lump sum of $36 million to the wife and, should he do so, the order for monthly payments of interim maintenance in an amount of $2 million would fall away and the $36 million lump sum payment would be set off against any final award of capital made to the wife.

43.As it was, the husband in the present case chose not to make a capital payment.

44.It should be said that in the hearing of this appeal no criticism was made of this approach.  I believe there is much to commend it.  In proceedings in which there are sufficient liquid assets and in which the ancillary relief litigation has a single focus, that is, an equitable distribution of the capital assets making-up the matrimonial estate, it allows for an early movement of capital from the one party to the other, avoiding the need for an interim maintenance order and enabling the party receiving the capital to provide for his or her own legal costs as well as enjoying the form of living he or she chooses, one that is not dictated by the restraints of an interim maintenance order. 

45.As in England and Wales, however, the courts of Hong Kong have no jurisdiction pursuant to s.3 of the Matrimonial Proceedings and Property Ordinance to make such an order.  It must be one adopted by the parties.

46.As to the second approach drawn from Charman, Coleridge J asked himself the following question:

“So assuming the husband does not take my invitation to pay that capital sum, what is the proper approach to an application of this kind, nowadays, in the context of wealth at this enormous level? What is the correct approach to answering the question as to the ‘reasonableness of provision’?”

47.In answer, he said:

“… I am sure that the court nowadays needs to look at this question of maintenance pending suit more broadly. Since the decision in White [White v White [2001] 1 AC 1996] has altered the focus of these cases to look not so much at what a party, usually the wife, needs but to what a party has earned, it seems to me that that part of analysis must also be factored into a maintenance pending suit debate if the court is to make an order which is in the overall sense reasonable: All aspects of the financial picture must be looked at to achieve a ‘reasonable’ figure.”

48.Recognising that there were several means by which this approach could be put into effect, in the case before him Coleridge J adopted the following methodology.

49.First, he took the husband’s latest open offer of settlement as representing the level of capital which, at the very least, the husband himself would expect to have to pay to the wife either by way of settlement or after determination by the court.  Second, he extracted from it those capital assets included in the offer which were not income bearing such as the former matrimonial home which the wife had always occupied.  Third, he calculated a reasonable rate of return on the capital that was income bearing and, having made provision for tax and the like, used the annual income as one of the yardsticks by which to measure the interim maintenance due to the wife.

50.It is to be noted that, in adopting this approach, Coleridge J did not abandon the obligation placed on him by statute to look to the reasonableness of any award made.  As he said:

“Of course, the court must have an eye to the level of expenditure as well and whether it, even in the context of these enormous figures, is reasonable.”

51.That being said, Coleridge J was not of the view that items of capital or long-term expenditure should be excluded.  In this regard, he said:

“The wife has produced a budget of £700,000 which she has pared down for the purposes of this application to £500,000. It is attached to a detailed skeleton argument which Mr. Ewins has prepared for the purposes of this afternoon. He has extracted from it items which conventionally used to be thought to be only items which should appear on a permanent budget. As I have already indicated, I am not quite sure whether that is appropriate nowadays in circumstances where a party has almost a vested rights to a large award based on the length of the marriage and the size of the financial cake, but that is the way it is put. So looking at the wife’s reasonable needs, it is said that, looking at the way she has been living, the amount she has been spending, particularly on holidays, the amount she would like to be able to spend is £500,000, that is to say about £14,000 a month. That, it is urged, is reasonable.”

52.As it was, having made the observation that “nowadays, in cases of this magnitude, one needs to strike a balance and have an eye at least to what the eventual outcome of this case is likely to be,” Coleridge J determined that a reasonable figure for maintenance pending suit for the wife was £30,000 a month.

53.In the case now before us, Poon J said the following in respect of this approach articulated by Coleridge J, namely, that, if the party being asked to pay maintenance pending suit declines to make a voluntarily capital payment on account then –

“…the court will have regard to the possible impact of White v White on the question of reasonableness. This is so because the Court of Final Appeal has now authoritatively endorsed the guidelines laid down by White v White in LKW v DD [2010] 6 HKC 528. It would appear [therefore] that what Coleridge J had said should also feature in maintenance pending suit applications in Hong Kong.”

54.Poon J did not elaborate on the manner in which this approach should be manifested.

55.It is to be noted that, some 10 months after Coleridge J delivered his Charman judgment, Nicolas Mostyn, in his judgment in TL v ML, to which I have referred earlier (paragraph 34), chose to follow the principle set down in F v F (Ancillary Relief: Substantial Assets)[1995] 2 FLR 45, namely, that “in every maintenance pending suit application there should be a specific maintenance pending suit budget which excludes capital or long-term expenditure, more aptly to be considered on a final hearing.”

56.I am of the view that the principles extracted from earlier leading cases by Nicholas Mostyn in TL v ML remain the principles that should guide judges in this jurisdiction.  They are well understood by judges and practitioners alike.  Whatever may have been the shortcomings in the final determination of ancillary relief proceedings of the old approach of ‘reasonable needs’, in the more restricted context of applications for maintenance pending suit the principles stated by Nicholas Mostyn ensure fairness to both parties.  More importantly, they are principles which manifestly comply with the restrictions imposed by s.3 of the Matrimonial Proceedings and Property Ordinance.  

57.In this last regard, in big money cases – and it is to be remembered that we are talking only of such cases – the income to be earned on the capital awarded to a spouse will, no doubt in the majority of instances, enable the spouse not simply to maintain himself or herself to the very highest standards but will in addition provide funds for other forms of expenditure which may not properly be classified as ‘maintenance’; capital expenditure of all kinds: investments, trusts, large charitable donations, purchase of commercial properties and the like.  Accordingly, if that same measure – namely, the income to be earned on capital – is to be used in assessing interim maintenance, whether as the sole measure or in conjunction with others, it may be argued that what is awarded by that means exceeds ‘maintenance’ as contemplated by s.3 of the Ordinance.

58.Returning to the judgment of Poon J, having adopted the approach of Coleridge J as integral to big money applications for maintenance pending suit in Hong Kong, the judge went on to say the following:

“The evidence filed by the parties raised a number of hotly disputed matters, such as the wife’s and husband’s contributions to the accumulation of the family assets, the extent of the family assets, whether the husband has siphoned off part of the family assets to his second family in Vietnam, whether the husband has unreasonably curtailed the wife’s expenses after separation. I do not propose to deal with them here. Strictly, these matters do not bear on the core issue of reasonableness of the maintenance claimed.”

59.The judge continued:

“The parties have each engaged a forensic accountant to examine the underlying documentary evidence and present their views on the wife’s expenditure prior to separation. However, the disputes relating to the wife’s expenditure are all factual, which can be addressed and disposed of without any expert’s assistance. Indeed, I do not find the experts’ evidence particularly helpful. Further, as already noted, the court adopts a broad brush approach in determining the amount of maintenance pending suit without any detailed investigation of the financial positions, which is however exactly what the accountants have been instructed to do here. I doubt if it is really necessary to enlist the forensic accountants, which will only escalate the costs involved.

Taking that matter in the round, including the wife’s lifestyle and spending pattern before separation in September 2009, and the costs that she has incurred and will incur, I am of the view that a reasonable amount of maintenance pending suit should be $2 million per month, inclusive of the element of legal costs.  It should run from the date of the application, that is, November 2010, and cover the time up to the substantive hearing of the ancillary relief application, estimated to be heard in May 2012.”

60.On behalf of the husband, Ms Stone submitted that the only implication to be drawn from the judge’s adoption of the approach of Coleridge J in Charman followed by a failure to articulate that he had conducted any form of critical analysis of the reasonableness of the wife’s claim for maintenance pending suit was that the judge considered that, following the judgment of the Court of Final Appeal in LKW v DD, he was entitled to determine the wife’s application on a broader, less critical basis. While Ms Stone accepted that of course an exhaustive analysis is not required, she submitted that nevertheless some critical analysis of the reasonableness of the claim has to be conducted.  Unfortunately, there was no indication in the judgment that any such analysis had taken place.

61.In response, Mr Coleman SC, leading counsel for the wife, said that there was nothing in the submission.  The judge had presided over a two-day hearing during which he was taken through the wife’s ample evidence as to her reasonable needs and the criticism of those needs.  The judge did not simply grant the wife her claims in full.  He clearly took into account the competing submissions and came to a rational decision well within the range of his discretion: it being remembered that the husband had offered $730,000 per month while the wife had claimed $1.8 million with an extra amount to cover on-going legal costs.  It was implicit in the judgment that a critical analysis had been conducted.  What the judge did not wish to do, and rightly so, was to descend into a detailed forensic examination as urged upon him by the husband’s counsel.

62.In the course of her submissions, Ms Stone advanced the proposition that there is no legal authority (not even Charman) for the court to determine an application for maintenance pending suit as though the sum to be determined is simply a sum on account of the wife’s substantive claim in the ancillary relief proceedings and on that basis to decline any analysis of the reasonableness of the amount claimed.

63.I agree with that proposition and it is broadly in that respect, I believe, that the judge fell into error.  More specifically, I believe he did so by failing clearly to distinguish between a capital sum to be advanced voluntarily and set off against any final award, this payment to be made in order to avoid the need to assess interim maintenance, and the payment of interim maintenance itself.  

64.In this regard, I start by noting that the judge’s order that the husband pay interim maintenance of $2 million per month to the wife backdated to November 2010 is in a number of respects almost a mirror of the order that the husband be at liberty to pay a capital sum to the wife of $36 million.

65.In respect of both forms of payment, Poon J ordered that the full amount paid by the husband was to be set off against any capital award eventually made to the wife.  In addition, both forms of payment included an unspecified provision for legal costs.

66.As I have said, having determined that the husband should pay $2 million per month as and for interim maintenance until further order, the judge went on to order that the full amount of such maintenance was to be set off against any award of ancillary relief that would eventually be made in the wife’s favour.  This was an unusual order.  Interim maintenance, as I have said, constitutes no more than periodical payments necessary to meet the recurring costs of living, even if in big money cases such costs are set at the extreme end of the spectrum.  Why then should such temporary maintenance be set off against any capital award to be made to the wife?  No reason was given.

67.There is a further concern.  To say to the wife that for all intents and purposes she must pay back the husband the day-to-day living costs advanced to her while the husband need give no similar account of his own day-to-day costs may be interpreted as discriminating in favour of the husband. In this regard, it is to be observed that, in the present case, if the ancillary relief proceedings are determined after trial in or about May 2012, as anticipated by the judge, the wife will have to account to the husband for interim maintenance received by her in a sum approximating $38 million.  It is a substantial sum by any objective measure.

68.As I have said, in looking to the order of interim maintenance of $2 million per month, the judge did not see it necessary to distinguish between the amount that was to constitute recurring living expenses and the amount that was to constitute a contribution towards the wife’s on-going legal costs.  In my view, however, a voluntary advance of capital to the wife to enable her to live as she wishes in all respects (including providing for legal services) is to be differentiated from an order made by the court that one party pay an amount to the other on a monthly basis assessed to be reasonable, that assessment including provision for on-going legal costs.

69.I shall return to the question of legal costs in greater detail.  At this juncture, however, it should be said that I believe the judge would have been better advised to have specified what portion of his order of $2 million per month was to go to recurring living expenses and what portion was to go to legal costs.  There have been a number of interlocutory proceedings in respect of which discrete orders of costs have been made.  It is likely that there will be further such proceedings and further such orders of costs.  At the end of the day there may be a need for some accounting in this regard.  In such circumstances, knowing exactly what sum the husband has contributed to the wife’s on-going legal costs may be of central relevance.  As matters stand, however, no such calculation can be made.

70.With respect to the judge, it is evident, I think, that he came to the view that in ‘big money’ cases today maintenance pending suit in all its forms is, for all practical purposes, to be dealt with as being analogous to a capital sum being paid on account, a sum therefore that will be set off against any final award made to the wife.

71.This would explain why nothing emerges from the judgment to suggest any other reason why, in ordering that the interim maintenance of $2 million per month be backdated, the judge did not take into account the fact that the husband had all along been paying maintenance which in aggregate, according to his counsel, came to more than $730,000 per month.  As I have said earlier, if the judge had considered that the order of $2 million per month was to constitute interim maintenance in its ‘traditional’ sense, he would surely have ordered that the maintenance already paid by the husband should be offset or in some other equitable way taken into account.  He did not do so.

72.It would seem to me also that this explains why the judge did not find it necessary to articulate any critical analysis of the reasonableness of the wife’s claims and instead considered the issue, as he expressed it, “in the round”.  Why should any greater form of analysis be necessary when in the end result the total amount to be paid to the wife by the husband will be returned to him by way of set off?

The contribution towards the wife’s on-going legal costs

73.On behalf of the husband, Ms Stone submitted that, in light of existing authority, the wife had not made out a claim for a contribution towards her on-going legal costs and that the judge was therefore wrong to order any contribution towards those costs.

74.Whatever may have been the position ten years ago, it is no longer disputed that the words of s.3 of the Ordinance are wide enough to empower the Hong Kong courts to include an element towards a party’s legal costs in an order for maintenance pending suit: see KGL v CKY [2005] 1 HKFLR 215.

75.In submitting that, in light of existing authority, the wife had not made out a claim for a contribution towards her costs, Ms Stone relied principally on guiding principles enunciated by Wilson LJ, as he then was, in Currey v Currey [2007] 1 FLR 946.

76.Those principles have been adopted in the Matrimonial Division of the District Court: see H v H (Interim Maintenance) [2007] HKFLR 311.  To my knowledge, however, they have not been adopted in this Court or the Court of First Instance.

77.Accordingly, before Poon J, the guiding principles set out in Currey, while of persuasive value, were in no way binding on him.

78.S.3 of the Ordinance, of course, still required the judge to be satisfied that any contribution towards the wife’s on-going legal costs was reasonable.  That meant that he had to be able to conduct some analysis of the nature and extent and purpose of the contributions sought.  On the part of the wife, that required some breakdown of her anticipated costs.

79.Aside from the fundamental requirement of supplying a sufficiently detailed breakdown of anticipated costs, I am of the view that the following principles articulated by Wilson LJ in Currey should in future be adopted as providing prudent guidance to both judges and practitioners in this jurisdiction.

80.In the view of Wilson LJ, the initial, overarching inquiry should be into –

“… whether the applicant for a costs allowance can demonstrate that she cannot reasonably procure legal advice and representation by any other means. Thus, to the extent that she has assets, the applicant has to demonstrate that they cannot reasonably be deployed, whether directly or as the means of raising a loan, in funding legal services.”

81.As Wilson LJ pointed out, satisfying that condition alone may not be sufficient.  In the broad exercise of discretion, a judge may consider that other factors must come into play –

“The subject matter of the proceedings will surely always be relevant; and, insofar as it can safely be assessed at so early a juncture, the reasonableness of the applicant’s stance in the proceedings will also be relevant.”

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.

85.Wilson LJ spoke of a legal costs allowance being structured, especially as to its duration, so as to best encourage a spouse in receipt of the allowance to act reasonably, looking in good faith to try and reach settlement.  In KGL v CKY (page 219), this Court adopted the same fundamental reasoning albeit by reference to the spouse paying the allowance:

“There is no reason why public funds should be expended to fund litigation when there are ample resources available within family funds. With proposals for more active juridical involvement in pre-trial proceedings to restrict the incidence of costs this is in line with the modern approach. The court can keep better control of litigation if it's funding is at least in part within its purview. The party that controls the funds will be less willing to use them on unnecessary interlocutory procedures if he or she will have to provide funding for the other side.”

86.In the present case, the wife sought a contribution towards her on-going legal costs in a sum of $770,000 per month.  It was estimated that this sum would be required for a period of 24 months.  Accordingly, assuming the litigation continued for that anticipated span, the total contribution sought to cover legal fees and disbursements was $18.48 million.

87.Despite the extent of the contribution sought – a fearfully large sum – the breakdown of the wife's "estimated" fees and disbursements (amounting to a total of $18.5 million) was contained in the following terse schedule:

"i.  solicitors and counsels fees (for both matrimonial proceedings and civil action):        $10,000,000

ii.  accountants:  $7,000,000

iii.  Secretary/paralegal/personal assistant support:       $1,500,000"

88.In her affidavit of 11 May 2011, the wife gave some history of her spending on legal costs. In this regard she said:

“…I have so far incurred a total sum of about $10 million since September 2009, of which a total sum of about $4 million has been paid to my solicitors, the sum of $2.5 million to my barrister and the sum of about $3.5 million has been paid to my accountants.”

89.The wife rejected any assertion that legal costs had been exacerbated by unnecessary and wasteful applications on her part. She said that her actions had been reactive rather than proactive.

90.Preparing a breakdown of anticipated legal costs in complex litigation of the kind in which the husband and wife now find themselves can be difficult.  That being said, I am of the view that the brief schedule allied to the brief reference to the wife's history of expenditure on legal costs deprived the judge of any real ability to determine the reasonableness of what was claimed.  Two matters raised during the appeal hearing illustrate the problem.

91.First, the monthly contribution towards the cost of solicitor and counsel fees was not sought in respect of the ancillary relief litigation only.  It was also sought in respect of an independent action in which the husband was the plaintiff and the wife was cited as one of the defendants.  What percentage of the costs and reimbursements would be absorbed in this second action was not stated.  The difficulties were compounded by the fact that, before us at least, it appeared to be accepted that this action had for all intents and purposes been discontinued against the wife and prior to that had for a considerable period of time been almost dormant.  On behalf of the husband, it was submitted that, in the circumstances, there was no need to make any on-going provision for this action.

92.Second, the last item in the schedule related to a claim for a personal assistant for the wife who would act in a paralegal capacity, doing so at a total cost to the wife of about $1.5 million.  Over the anticipated period of the continuing litigation, a period of some two years, this was equivalent to a monthly salary of $62,500.  Why the wife required such assistance in addition to the on-going fees being paid to her solicitors, her counsel and her accountants did not appear to be explained.  Before us, it was said that the wife required this assistance because she was no longer allowed access to the offices where she and her husband had once worked together and she was therefore denied secretarial support.  That explanation, however, spoke of support of a more mundane nature, filing papers and the like, not a job that required the full-time assistance of a paralegal.  In my judgment, unusual claims like this, even in big money cases, demand some rational form of explanation.

93.I have made earlier reference to my belief that it would have better if the judge had specified the exact amount that was to constitute the contribution to the wife’s on-going legal costs.  In this respect, it was submitted on behalf of the wife that in speaking of the element of legal costs as opposed to an element, the judge had to be read as saying that the full amount of legal costs claimed by the wife, that is, $770,000 per month, was granted to her, the balance of the $2 million being paid as and for recurring living expenses.  I do not agree.  If the judge had intended to state a specific figure for legal costs he would have done so.  There is no indication in the Reasons for Decision that he analysed the costs claimed and determined that the full amount claimed was reasonable.  It is also to be remembered that the judge ordered that the full sum of $2 million per month was to be paid to the wife on account of any ancillary relief award that she may receive and was to be set off against that award.  To that extent, therefore, the husband would be ‘credited’ with all of the interim maintenance he paid whether it was for legal costs or otherwise.  That being the case, it seems to me that the judge did not consider it necessary to break down the $2 million per month into constituent parts, whether for legal costs or otherwise.

The award was in any event too high

94.On behalf of the husband, Ms Stone said that, while it was trite to say that each case must be determined on its own facts and no direct comparison was possible, nonetheless it was useful to consider the order made in this case with the two biggest reported awards made for maintenance pending suit in England and Wales.

95.In this regard, Ms Stone referred to F v F [1995] 2 FLR 45 and to Charman. In the first case, she said, bringing the figures up to date by reference to the cost of living index, the wife was awarded £48,000 per month, or about HK $600,000, notwithstanding the fact that the husband in that case was possessed of approximately three times the wealth of the husband in the present case.  In the second case, again bringing the figures up to date, the wife was awarded about £37,000 per month, or about HK $462,500, notwithstanding the fact that the husband in that case possessed wealth about 60% greater than the wealth of the husband in the present case.

96.On the basis that maintenance pending suit was for the wife’s immediate and reasonable needs only, Ms Stone submitted that what emerged was that the award in the present case was “so vastly out of kilter” with those cases that it had to be plainly wrong.

97.While I accept that a consideration of other awards in other similar cases must be of assistance, if only to attempt to ensure some consistency of approach, I would be hesitant to place too much weight on any such consideration, particularly when comparisons are made between awards made by the courts of England and Wales and awards made in this jurisdiction.  The primary concern, although not necessarily the determinative one, must be the marital standard of living enjoyed by the parties themselves, a standard that is to be judged according to its own dynamics judged in the context of the nature of the society in which the couple have lived their married life.

Conclusion

98.In considering this appeal, what has emerged is that the judge at first instance was faced with a host of difficulties.  Almost every issue was contested and in respect of almost every issue there was a multiplicity of complexities.

99.Regrettably, however, for the reasons which I have given, I have been drawn to the conclusion that the judge fell into error in the manner in which he determined the wife’s application.  The award cannot therefore be allowed to stand.

100.In my view, to return the matter to the judge at first instance for the application to be considered afresh would result in unnecessary delay and in the expenditure of even greater costs.  We have had the benefit of being able to consider the same papers that were before Poon J.  We have also had the benefit of hearing from counsel in respect of those papers.  Accordingly, I am satisfied that fairness dictates that we should make an award of maintenance pending suit in substitution of the order that we have set aside.

A consideration of the wife’s claim

101.On the available evidence, it is apparent that, when the husband and wife were together, they enjoyed the very highest standard of living.  In his Form E the husband said that his monthly expenses were in the region of $1.35 million.  The wife contested this.  She said that his spending was far greater.

102.The wife spoke of the husband purchasing a private jet in or about December 2009, the operation of the jet requiring the hiring of two pilots.  She put the price of the aircraft at about $156 million.  She also spoke of the husband purchasing an 86 foot yacht in the summer of 2009 which would have been shortly before the parties separated.  In addition, the wife asserted that the husband had purchased a similar yacht for use in Vietnam.  The wife further spoke of the husband’s stable of premium motor vehicles and his liking for expensive wine at the very best restaurants.  She also spoke of the husband taking frequent “extravagant” holidays with the children to various exotic locations in the world.

103.The husband did not contest the fact that he enjoyed the fruits of his success.

104.I have no doubt that much of the husband’s lifestyle is enjoyed through a series of companies.  I make no criticism when I say that for the very rich that is the way of it.  Assets are protected on the advice of accountants by way of complex corporate structures.  The maximum tax benefits are thereby obtained.  No doubt the husband does have an obligation to entertain valued clients and to do so to the very highest standards.  But the fact remains that the husband controls the various companies and the lifestyle is, I am quite sure, designed to his own desires.

105.In light of this, I am satisfied that the reasonableness of the wife’s claim for interim maintenance must be judged according to the very high level of daily living that was enjoyed before the couple separated and which it appears the husband continues to enjoy.

106.The wife’s schedule of her monthly expenses was set out in her affidavit of 27 October 2010.  As I have said earlier, that schedule set her monthly expenses at $1,827,700.

107.I regret to say, however, that, even judging the level of the wife’s spending by the lavish standards on which I have just spoken, I am of the opinion that an examination of the schedule reveals a number of instances of forensic exaggeration. 

108.By way of illustration, in her schedule the wife claimed the amount of $380,000 per month as and for “business” travel.  As to the nature of this travel, she described it simply as “travel for office and board/clients/distribution meetings”.  The wife listed eight countries to which, to a greater or lesser degree of frequency, she said it was necessary to travel.  As to the demands of business travel, she said that it would be necessary for her to take a total of 124 trips a year.  On her estimate, the time taken up with this travel would amount to some 258 days a year.  The wife, however, did not explain how it was that, having been excluded from the principal businesses of the family, her remaining business interests were of sufficient substance to require her to travel so extensively.  Nor did she explain how it was that, if she had such substantial business interests, those interests should not themselves finance her travel.  As to the wife’s history of business travel, as Ms Stone pointed out, the records showed that in 2008/2009 the wife had taken just 22 business trips while in 2009/2010 she had taken 17 such trips.  The wife did not explain how it was that there had been such a radical increase in her need to travel outside of Hong Kong on business.

109.It should be said that the wife further claimed $150,000 per month for travel with the children during school holidays, this being for 10 journeys a year including (understandably) “five star” accommodation.

110.For travel alone, therefore, the wife claimed some $530,000 per month.

111.As to the time taken up with all of this travel, assuming that the holiday trips with the children took up three days each, this would add another month to the wife’s existing schedule of business travel.  On this basis, business and leisure travel outside of Hong Kong would leave the wife with approximately just two and a half months in Hong Kong in each year.

112.The wife’s figures concerning international travel were in my view entirely unconvincing, smacking, as I have said, of tactical exaggeration.

113.I turned to a second illustration.  As to matters of general entertainment, the wife claimed $350,000 per month for “meals out of home including business and personal entertainment” and then claimed a further $250,000 per month for what appears to be almost the same category of expenditure, a category that she labelled “ entertainment/presents (for business and private).  This is a total of $600,000 per month for entertaining friends and business persons by way of eating out, attending functions, purchasing gifts and the like – a figure of approximately $19,700 per day.  Again, however, the wife did not explain how it was that, if she had to spend large amounts per month on entertainment for business purposes, the businesses themselves did not finance such entertainment.  The wife continually asserted in her affidavits that she was a business woman of experience and acumen.  That being the case, she must surely look to placing those expenses to best advantage for purposes of tax and the like.  There was, however, no explanation in this regard.  As to the expenses of entertainment, it should also be said, almost by way of a footnote, that the wife required a further sum of $15,000 per month for entertainment for the two children and for the purchase of gifts on their behalf, presumably to be given to others at birthday parties and such events.

114.The wife further sought $70,000 per month in order to purchase her own car and to pay for petrol, car parking and the like.  Over a two-year period, this would amount to a total sum of $1.68 million.  In this regard, as I have said earlier, the wife complained that she was no longer able to use the family Bentley and the Mercedes motor vehicles and had been “relegated” to using the children’s car.  While I can well understand the wife desiring a prestige car befitting her material wealth, in my view her claim in this regard presented two problems.  First, for all intents and purposes the wife was seeking a capital payment to purchase a capital asset, namely, a car worth well over $1 million, even if the capital payment was to be spread out over a period of time.  Second, the wife, who never spoke of renting a vehicle, did not condescend to describe the car that she sought to purchase to enable the court to determine whether, if the purchase of such a car could be included in the description of maintenance, it was a reasonable purchase.

115.Although the wife claimed $1,827,700 as and for her monthly living expenses, she said that her accountants had conducted an investigation which revealed that her monthly expenses were in fact well in excess of this.

116.I have looked at these extra expenses.  In my view, however, nearly all of them are misplaced in an application for maintenance pending suit.

117.For example, the wife has put on record a claim of $1.65 million seemingly to reimburse her for a sum paid to a company called ‘O’ Ltd to cover office and administrative expenses and expenses related to the purchase of furniture and equipment.  ‘O’ Ltd, it appears, is an investment vehicle in which the wife has invested a sum of about $8 million.  Whichever way it is viewed, as Ms Stone pointed out, absent far more compelling explanation, it is difficult to see how such an item can form a legitimate claim pursuant to which the husband must pay the wife periodic payments by way of interim maintenance.

118.Equally, it appears that the wife has spent something in the region of $2.75 million hiring public relations consultants.  We have not been made privy to the exact purpose for hiring these public relations consultants.  In part, it appears that they were hired in order to promote the wife’s case concerning her interest in the family business interests in Vietnam.  During the course of the appeal hearing, when this matter was raised, I indicated that, absent full and compelling argument, I would be loath to authorise this kind of expenditure on promoting the position of one party in matrimonial proceedings, proceedings that in this jurisdiction – absent the rarest of cases – are meant to be confidential and which may look to matters of the utmost privacy such as the interests of the children of the marriage.  If, however, as was said during the course of the hearing, these expenses were incurred in a corporate context, the manner in which they can properly be claimed from the husband by way of interim maintenance and their reasonableness must be explained.  This was not adequately done.

119.By way of summary, having considered the wife’s schedules in light of the criticisms made of them and in light of the submissions made in support of their reasonableness, I have been drawn to the conclusion that a reasonable sum of interim maintenance to meet the wife’s recurring costs of living would be a sum of $800,000 per month.  I am satisfied that, pending a final determination of the ancillary relief dispute, this will enable her to maintain the very high standard of living which she enjoyed with the husband before the breakdown of the marriage.

120.The $800,000 per month, which is to be paid with effect from 1 November 2011, is to be backdated by 12 months.  This is subject to the condition that any payments made by the husband to the wife to provide support during that period of 12 months (from 1 November 2010 to 31 October 2011) are to be offset against the backdated payments.

121.As the $800,000 per month is paid as interim maintenance in order to meet the living expenses of the wife, it is not paid ‘on account’ nor automatically will it be subject to any set off against any capital award made to the wife in the determination of the ancillary relief proceedings.

122.The issue of a contribution towards the wife’s on-going legal costs is more difficult to decide, mainly because of the lack of detail supplied by the wife in support of her claim.  On behalf of the husband, it has been submitted that, in light of the Currey principles, I should reject the claim.  It is to be reiterated, however, that, no matter how much wisdom is contained in the Currey principles, they were not binding on the judge at first instance. 

123.While I accept that the evidence as to the issue is not of substance and is justifiably open to criticism, nevertheless what does emerge in my view – sufficiently at least for the purposes of an interim application, one that can be amended if necessary when final determinations are made – is that the wife has either lost or no longer has access to much of her capital base.  In the circumstances, it would appear that she will no longer be able to meet her reasonable on-going legal costs unless some order concerning a contribution to her is made.  As to the level of that contribution, I bear in mind that the ancillary relief proceedings are focused on complex corporate structures operating outside of this jurisdiction.  That will no doubt add a level of complexity to the proceedings not encountered in other cases.  I also take into account that, with the funds available to the marital estate, fairness demands that an attempt should be made to achieve some equality of arms.  But that being said, it does not mean that the financial floodgates are to be opened without any reference to what in all the circumstances is reasonable.  If either party embarks on misguided, profligate proceedings they will no doubt be punished in costs.  If that should happen to the wife, the order that I now make will not protect her.  Taking all circumstances into account, I am of the view that it would be fair to order that the husband pay to the wife a contribution to her on-going legal costs (which are to include the costs of forensic accountants) in the sum of $500,000 per month.

124.The $500,000 per month is to be paid with effect from 1 November 2011 until further order or until the FDR hearing whichever takes place earlier.

125.Should there be an FDR hearing and should it not be fully successful so that a trial hearing is required, it will be for the trial judge to determine whether there should be a further contribution by the husband to the wife’s on-going legal costs and, if so, how much.

126.In my judgment, it would be in the best interests of both parties if, instead of paying periodic interim maintenance and making periodic contributions towards the wife’s on-going legal costs, the husband was to make a sufficiently substantial capital advance to her.  That must, however, be a sum which will enable the wife not only to maintain herself on a day-to-day basis and to meet her legal bills until final determination of the ancillary relief proceedings but also to begin to order her life again in a manner she chooses, for example, to purchase a new motor vehicle or to rejuvenate her investment businesses.  I would assess that sum at a minimum of $75 million. The benefit to the husband will be that the capital sum voluntarily advanced will be set off against any final award of capital that the wife will receive.  The husband is therefore given liberty within 14 days of the date of this judgment to make a capital payment to the wife in a minimum sum of $75 million.  Should he make that payment there will be two consequences.  First, the order to pay interim maintenance of $800,000 per month, (including backdated maintenance), and a contribution towards the wife’s legal costs of $500,000 per month will be set aside effective from 1 November 2011 and, second, the capital sum paid to the wife shall be offset against any final award made to her in the ancillary relief proceedings.

127.This leaves the question of costs.  I am of the view that the most equitable order in respect both of the hearing at first instance and the appeal is an order that there be no order as to costs; in short, that each party bears their own costs.

128.To the extent set out, I would therefore allow the husband’s appeal.

Hon Cheung JA:

129.I agree with the judgment of Hartmann JA.  The appeal is therefore allowed to the extent set out in his judgment.

Ms Lucy Stone QC, Mr David Pilbrow SC & Ms Sara Tong, instructed by Messrs Robertsons, for Petitioner/Appellant

Mr Russell Coleman, SC & Ms Mairéad Rattigan, instructed by Messrs Withers for Respondent/Respondent