Lml v. Lsc
Read the full judgment text of FCMC 12291/2011 on BabelCite. This Family Court judgment was delivered on 3 May 2013 before Her Honour Judge Sharon D. Melloy.
Matrimonial Causes – Litigation Funding – Matrimonial Proceedings and Property Ordinance s.3 – Currey v Currey principles – Reasonableness – Equality of arms – Petitioner wife applied for litigation funding to cover preliminary issues hearing – Wife has savings of HK$1.3 million – Husband receives funds from family companies – Court finds wife's cost estimates inconsistent – Court orders husband to pay additional HK$300,000 – Wife to use own savings – No order as to costs – Call over hearing directed
Legal issues: Award of litigation funding · Amount of litigation funding
Outcome: Application for litigation funding granted in part; Husband ordered to pay additional HK$300,000; No order as to costs.
Cites 4 cases
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FCMC 12291 / 2011 IN THE DISTRICT COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION MATRIMONIAL CAUSES NUMBER 12291 OF 2011 ----------------------------
------------------------------------ J U D G M E N T ------------------------------------ Introduction 1.This is an application by a Petitioner wife for litigation funding, pursuant to s.3 Matrimonial Proceedings and Property Ordinance, Cap 192 (MPPO). 2.In so far as maintenance itself is concerned, it is agreed that the husband shall continue to make monthly payments to the wife of GBP4, 000 per month as maintenance pending suit/interim maintenance for herself and the only child of the family K, who is now 17 years of age. In addition the husband undertakes to continue to pay for K’s school fees, tuition fees and extracurricular costs in the sum of GBP1, 900 per month. (See court order dated the 1 June 2012). Thus in total the husband is currently paying GBP5, 900 per month to the wife for herself and K. 3.In addition the husband contributed an additional HK$400,000 to cover the wife’s legal costs, up to and including the Financial Dispute Resolution hearing – which was originally set down for the 19 April 2013. 4.On the face of it this was a fairly straightforward case that has recently taken a more litigious turn, with the husband asserting very late in the day, that shares held by him in family companies are in truth beneficially owned not by him, but by his father. He says that this is something that has always been known to the wife in any event. The husband’s father has now been joined in these proceedings as an intervener. Consequently this issue has been set down for a preliminary issues hearing in September. Unfortunately any hopes of a sensible settlement seem to have faded as a result with each side taking a more robust stand. Legal costs have begun to escalate on all sides as a result. In addition the wife has issued a section 17 application to set aside an alleged dilution of the husband’s shares in one of the family companies. Although the parties were previously involved in mediation – this has also come to a standstill. The central issue 5.From a legal perspective the only issues to be determined at this stage are whether or not this is an appropriate case to award an element for litigation funding, and if so, in what amount? Background 6.The parties married in September 1995 in the United Kingdom, which is where they have lived for most of their marriage. They are both ethnically Chinese with roots in Hong Kong. They were very young when they married – only 20 and 21 years old respectively and they were both students. They had one child, K, who has just turned 17 years of age. It is not disputed that originally both parties were financially supported by the husband’s father – i.e. the intervener. The husband’s mother also assisted in child care. Initially after completing their education both parties worked in the financial field. The wife has not worked, however, for the last 10 years and has concentrated her efforts on raising the parties’ son. The husband meanwhile is a Management Consultant with a large accountancy firm. The wife is now 39 and the husband 38 years of age. It seems that the marriage later ran into difficulties with each side making allegations against the other. The parties eventually separated in August 2011 and the husband subsequently relocated back to Hong Kong, which is where his parents and second sister live. The wife remained in the UK with K. The litigation to date 7.Initially it seems that the husband’s case was that he owned 49.77% of the shares in the family business – L Ltd. However his case now is that his father is the beneficial owner of these shares and that they should not form part of the so called “matrimonial pot”. It is anticipated that all sides will raise arguments with respect to the “financial resources” of the husband. As I have said there are also issues with respect to the dilution of the husband’s share holding and the allotment of shares in L Ltd. There are also other related issues that will need to be determined. 8.It is accepted that the wife did not initially have funds in order to embark on this litigation and consequently it was agreed that the husband would pay the wife HK$400,000 for that purpose – which was meant to take the parties up to the Financial Dispute Resolution hearing. 9.It is clear that the situation has now shifted considerably and that the wife fears being disadvantaged as a result. The husband says that he has incurred legal costs to date of HK$665,500, of which HK$184,918 has been paid. I have some difficulty with this estimation given that it is clear from the documents produced by the intervener that the following sums have been paid by the family companies to the husband’s solicitors presumably on account of costs:
10.In addition the husband received HK$534,000 on the 24 December 2012 as a special dividend from the intervener’s second family company LBS Ltd. The husband’s father says that he gave him that sum “knowing that he [the respondent] needed money for use because of his divorce proceedings”. Thus it seems that the husband received a sum of approximately HK$834,000 to assist in his divorce of which HK$200,000 was paid to the wife’s solicitors as part payment of the HK$400,000. Either additional sums were paid to the husband’s solicitors for his costs – or some of this money was spent on maintaining himself and the family. 11.According to the intervener, the husband received HK$1,428,031 in total for his personal use from the family company during the financial year 1 April 2012 – 31 March 2013 (see paragraph 16 (e) of the intervener’s 2nd affirmation dated the 11 April 2013). This sum includes those sums referred to above. This amounts to approximately HK$119,000 per month. 12.The husband estimates that the preliminary issues hearing will cost him an additional HK$1.6 million. It is not clear how much the intervener’s costs will be – although they are also likely to be considerable. The wife originally estimated her costs for the hearing at HK$2 million. 13.The wife suggests that given that the husband receives funds from the family companies in addition to his salary, that this is something that the court can and should take into account when considering the issue of litigation funding. I accept that to be the case up to a point. 14.The husband for his part argues that the parties’ lifestyle has historically been modest. On his case he is currently paying maintenance in total of HK$70,800, from an income of HK$85,300. He says that he has outgoings of HK$138,025. It is not clear how the shortfall is met save from the additional monies received from the family companies and a recently acquired loan. He is living in a family property in Sai Kung rent free. Utilities and other outgoings appear historically to have been paid on his behalf. 15.The intervener says that although he had been willing to assist the husband previously that he will not do so going forward. He says that he will have his own legal costs to pay and that both sides will need to look to their own financial resources to fund this litigation as they see fit. Litigation costs 16.In so far as the law on the funding of litigation costs is concerned, it has been accepted by both counsel that Currey v Currey [2006] EWCA Civ 1338 is now routinely applied in Hong Kong and should therefore be relied upon in this instance. In Currey v Currey [2006] EWCA Civ 1338,
There is also a requirement to undertake an overarching enquiry
(See K v C (FCMC 5508/2005, 7 August 2007 and HRT v RHT (FCMC 5488/2006, 21 June 2007 unreported)). 17.In addition specific reference was made by counsel to the English case TL v ML [2006] 1 FLR 1263 and in particular to paragraph 124:
In this case the intervener’s position is far from being ambiguous or unclear. He has clearly stated that he will not fund either party going forward. 18.Reference was also made by both sides to the leading Court of Appeal decision on the issue of maintenance pending suit and litigation funding namely HJFG v KCY [2012] 1 HKLRD 95, 28 October 2011. In that judgment The Honourable Mr Justice Hartmann said as follows:
19.It is therefore essential, in any application for litigation funding, that the applicant is able to supply the court with “a sufficiently detailed breakdown of anticipated costs”. 20.In addition Hartmann JJA said
21.In that case the Court of Appeal ordered that the wife should receive HK$500,000 per month by way of a contribution towards her litigation funding, such sum to be paid until the FDR hearing or until further order. 22.There is also an issue with respect to the provision of litigation funding by the intervener, the respondent’s father. To that end reference is again made to paragraphs 84 – 88 of TL v ML, as redacted by Ms Yip, where Mostyn J said:
Discussion 23.The wife asks for a contribution towards her litigation costs. However the basis for this and the amount that she is actually seeking remained unclear even at the date of the hearing. In his Reply Mr Clough asked for HK$1.25 million or HK$250,000 per month for the next 5 months. Initially the wife had said that she needed HK$2 million for the preliminary issues hearing. 24.The wife’s schedule of costs in Form H format and as attached to her affirmation of the 8 April 2013, did not provide an estimate of costs going forward. It simply stated that HK$957,405 had been paid up to date (i.e. to include the current hearing). This was of little assistance to the court and I accept was not K v K compliant. Upon hearing and reading those criticisms the wife produced a second estimate of costs during the hearing. Ms Yip complains, with some justification it seems to me, that the husband has had little opportunity to peruse this document or to comment on it, given that it was produced on the day of the trial. I accept that this was unfair to the husband. Of equal concern is the fact that the second bill was difficult to read and seemed to bear little if any resemblance to the original Form H. The wife’s anticipated costs for the preliminary issues trial was then put at HK$1,817,400. Again these figures seem to have been largely plucked out of the air – with very little thought given to them ahead of time. 25.On the basis of these documents Mr Clough argued that the wife would need approximately HK$2,336,000 – although strangely this seems to include monies already paid (HK$400,000 by the husband and HK$136,000 by the wife). At the end of the day, as stated above, he sought HK1.25 million on the wife’s behalf. He accepts that the wife’s savings of HK1.3 million should be utilized by her as part payment towards her legal costs. 26.Finally the wife tried to make good her case after the event and filed a further breakdown of costs – which differs again from the previous two. Understandably Ms Yip is very critical of this. I think she is right to be. I accept that the wife’s figures “wax and wane and are all over the place”. The Curry principles 27.There is only one relevant property – namely the matrimonial home in the UK. I accept that it is not feasible for the wife to obtain security against this property in order to fund litigation in Hong Kong (point 2). I also accept that it would be virtually impossible for her to obtain legal services by offering a charge against the outcome of the litigation (point 3). Given that she is receiving maintenance of GBP4,000 per month and that the husband is also paying for other expenses for or on behalf of the child plus the fact that she has some savings, it seems to me that it would also be extremely unlikely that she would be eligible for legal aid (point 4). 28.Thus we are left with the fact that the wife presently has just over HK$1.3 million in bank accounts and in shares. Some of these monies came from the remortgage of the matrimonial home. The wife says in her updated Form E dated the 12 April 2013 that these monies should be put to one side for emergencies. Although Mr Clough seemed to concede this point and to have accepted that these funds would need to be utilized for legal fees, for the avoidance of doubt I confirm that to be the case (point 1). Thus the only issue is whether or not the husband should be required to pay anything in addition to this sum? Overarching enquiry 29.Notwithstanding the wife’s poor presentation of her case on the figures, I am conscious of the fact that there should as far as possible be equality of arms with respect to the hearing in September. I am also cognizant of the point made in TL v ML in paragraph 22 above. It seems however that the husband’s legal expenses have historically been met. It is important that the wife’s legal costs should likewise be met – although the sums seem very high in comparison to the husband’s. On the basis that the husband’s estimate of HK$1.6 million is correct I will order that the husband pay the wife an additional HK$300,000. I am satisfied that the husband does have the means to raise this sum – even if it means, as has been suggested by the intervener, that he sells his car. The wife will need to utilize her own savings of HK$1.3 million in addition for the purposes of the hearing. It is unclear to me precisely what the wife has paid and what is outstanding. I accept however the criticism that unbilled costs of HK$887,405 for a 19 day period from the 1 – 19 April seems extraordinarily high and out of all proportion to the work likely to have been done on the file during that period of time. Costs 30.Given that I have not come down entirely in favour of one side or the other and bearing in mind the criticisms that I have made in this judgment I will make an order nisi to be made absolute in 14 days time that there shall be no order as to costs. There shall be certificate for counsel. 31.Finally – a word of warning. This case has taken a turn for the worse. It is a case that in my view can and should settle – with a little good will on all sides. The alternative is likely to be huge and unrecoverable costs for all concerned. This is something that needs to be avoided if at all possible. With that in mind I will also direct that all parties attend a call over hearing on the 13 May 2013 at 12 noon for further directions.
Mr Neal Clough, instructed by Messrs Ip and Heathfield for the Petitioner Ms Anita Yip instructed by Messrs Yuen & Partners for the Respondent | ||||||||||||||||||||||||||||