Twc v. Lkl

FCMC 8460 / 2012

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES

NUMBER 8460 OF 2012

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J U D G M E N T
(Maintenance Pending Suit & Legal Costs Provision)

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The Application

1.This is the hearing of the petitioner wife (hereinafter called “W”)’s application for maintenance pending suit (hereinafter called “MPS”) for the daughter of the family (hereinafter called “K”) and her 3^rd application for legal costs provision pursuant to s.3 of the Matrimonial Proceedings and Property Ordinance, Cap 192 (hereinafter called “MPPO”).  The court has power to make orders for financial provision for a child of the family under s.5 of the MPPO.

The background

2.The background of the parties and the history of the present litigation were set out in T v L Judgment (Maintenance Pending Suit) (FCMC 8460/2012, 13 November 2012), T v L Judgment (Maintenance Pending Suit: Legal Costs) (FCMC 8460/2012, 25 June 2013), TWC v LKL Judgment (Care and Control) (FCMC 8460/2012, 12 December 2013), TWC v LKL Judgment (Maintenance Pending Suit: Legal Costs) (FCMC 8460/2012, 19 September 2014) and TWC v LKL Judgment (Ruling on Costs) (FCMC 8460/2012, 5 December 2014).

3.By the said Judgment of Deputy District Judge A. Yim dated 13 November 2012, it is ordered that the respondent husband (hereinafter called “H”) shall pay W the sum of HKD25,000 per month as maintenance pending suit.  By my Judgment dated 12 December 2013, the care and control of K was granted to H with reasonable access to W.  By two Summons both filed on 29 May 2015 (and an Amended Summons filed on 23 June 2015), W applied for an order that H shall pay her the sum of HKD23,000 per month as MPS for K pending the determination of the question of ancillary relief (hereinafter called “AR”) and the sum of HKD45,000 per month towards her legal costs in respect of her application for AR.  By a Consent Order dated 1 June 2015, the arrangements for K were varied to the effect that the care and control of K was granted to W with reasonable access to H.  In view of W becoming the daily carer of K and upon the fact that H openly offered to pay W an additional sum of HKD13,000 per month for K in settlement of her application for maintenance for K, on the same day I made the order that H shall pay W the sum of HKD13,000 per month for K pending the determination of the present applications. 

The law

4.The parties do not dispute the applicable legal principles on applications for maintenance and provision for legal costs.  The law in this regard can be found inthe said Judgments dated 13 November 2012, 25 June 2013 and 19 September 2014 respectively.  The overreaching principle is reasonableness: see HJFG v KCY [2012] 1 HKLRD 95 at p.106. 

The issues

5.In C v F [2006] HKFLR 41, HHJ Bruno Chan stated at paragraph [45]:-

“Although the sole statutory guideline in considering maintenance pending suit is that the award shall be ‘reasonable’, the court will nevertheless bear in mind all the factors drawn to its attention relating to the marriage and the parties to it and perhaps the two most outstanding matters in every case, as in this one, are the standard of living of the parties, and the ability of the husband to pay.”

6.In the present applications, H does not gainsay W’s pronouncement of her impecuniosity, her affirmation on K’s current standard of living and monthly expenses or even H’s potential liability to make provision for K, and W’s legal costs.  The parties agreed that in relation to W’s application for MPS to K, there is no dispute on the question of K’s reasonable need and H’s ability to pay is the only issue.  That means I can safely presume K’s reasonable need should not be less than HKD23,000 per month for the purpose of the present application.  About the application for legal costs provision, the parties agree that there are two issues, namely: -

(a) H’s complaint that W did not provide a skeleton bill of costs;

(b) H’s ability/ inability to pay.

Skeleton bill of costs

7.Obviously, the real question behind the complaint about the lack of W’s skeleton bill of costs is: Even if the court is persuaded that H should pay further legal costs provision to W, what is the reasonable amount?  No doubt a sufficiently detailed breakdown of W’s anticipated costs in future will help the court make a decision on whether the amount sought is reasonable.  In HJFG v KCY supra at p.122 Hartmann JA expressed similar view that:

“122. The issue of a contribution towards the wife’s ongoing legal costs is more difficult to decide, mainly because of the lack of detail supplied by the wife in support of her claim.”

8.In another Court of Appeal case, K v K (CACV 80 of 2010, 31 August 2010),Roger VP said in para 14:

“It seems to me that the appropriate course would be for a court to be told what the foreseeable anticipated costs are likely to be. That can be done in much the same way as the detail in which a court is told when security for costs is asked for. In other words, not an elaborate bill of costs, but a simple back of the envelope type bill of costs itemising out what counsel’s fees are likely to be and what solicitor’s expenses are likely to be. That can be done in a very simple sort of way but not in a complicated sort of way. Then the court should try and make the appropriate order. If it is to be on a monthly basis, the order should come to an end when it is foreseen that the expenses would be fully covered.”

9.Notwithstanding that W did not lodge with the court a skeleton bill of costs in support of her applications, she provided some information on the amount of costs already incurred and an estimate of the amount of costs to be incurred by her.

10.With H’s past contribution to her legal costs, W settled HKD528,000 out of the total legal costs that she has already incurred.  She is still owed to Messrs. Chan and Chan, her former solicitors, outstanding legal fees in the sum of HKD300,000 including counsel fee of HKD113,500 of her former counsel.  Since 25 February 2013, she has retained Messrs. T.K. Tsui & Co. at the rate of HKD4,500 per hour for a partner and HKD3000 per hour for an assistant solicitor.  To date, her outstanding legal costs were estimated to be over HKD3M. 

11.It is W’s contention that because of the allegedly uncooperative attitude of H, vast expenses and time will be required for her to prepare the upcoming FDR or AR trial.  In her Notes lodged with the court for this hearing, W attached a list of orders and directions sought, by which she called for, among other things, the court’s leave to her to file and serve further questionnaire on H’s 7th Affirmation and updated Form E, the court’s leave to the parties to adduce single joint expert evidence on valuation of the landed properties that H’s late parents were interested as well as their shareholdings in a number of companies.  At the same time, W also asked for an order that FDR be dispensed with in case the parties’ further out of court negotiations and/or attempt on mediation fails.  Against the backdrop, her solicitors estimated that the ongoing costs to be incurred from the present stage of the proceedings to the FDR or AR trial should be about HKD500,000 to 600,000, taking account of :- (i) solicitors costs, (ii) counsel fees, (iii) disbursements for forensic accounting expenses and property valuation, however excluding outlay involved in any investigative work that might be carried out.  W requested legal costs provision in the sum of HKD45,000 per month.  In other words, she expected that it will take about 11 to 13 months to conclude the FDR or AR trial.

12.If the parties can successfully reach a settlement agreement out of court, then of course W will procure a consent summons that contains the terms of the parties’ agreement to be filed for the court’s approval, which should bring the matter to an amicable ending.  If the parties cannot reach a settlement agreement out of court, for my part I hold the view that FDR should be fixed, probably with 1 day reserved, instead of having the case proceeded directly to a pre-trial review.  It is common that FDR can bring about a settlement through the combined effort of the parties’ active participation, the legal representatives’ assistance and the court’s input as a facilitator even though the parties have been previously unsuccessful in reaching a settlement out of court.  Given that H has already shown reluctance to provide full disclosure of his financial position, I accept that it might be necessary for W to take out further questionnaires and/or applications for specific discovery for her to prepare the FDR.  Taking a rough estimate of the work required in the circumstance, I hold that the ballpark figure of W’s anticipated future legal costs from now to FDR should be HKD240,000, 50% of which is solicitors fees and the remaining 50% is counsel fees.  I accept W’s estimate that probably the 1 day FDR can take place in about 12 months.  Subject to H’s ability to pay, an order that H shall pay W HKD20,000 per month up to FDR as provision for her legal costs should be reasonable.  For the sake of clarity, perhaps I should mention that the estimate of HKD240,000 does not cover costs for expert evidence on valuation proposed by W, if any.  If it is necessary to adduce expert evidence on valuation, more likely than not the costs to be incurred will be paid by H initially, with the direction that such costs shall be in the cause of the AR proceedings, in view of W’ limited financial ability and my finding on H’s ability to pay as follows.

H’s ability to pay

13.I turn to the issue on H’s ability to pay.

W’s case

14.W contended that H clearly has the ability to meet the proposed amount because:

(1) H retained leading senior and junior counsel at previous hearings;

(2) The spending on his legal fees appeared to have no impact on his lifestyle – he travelled overseas and continued enjoying a ‘party lifestyle’;

(3) H spent over HKD400,000 on private investigators;

(4) The value of the estate of his late parents was estimated at about HKD150M in his From E.  H being the sole beneficiary is going to inherit the whole estate;

(5) H has the ability to access funds/ loans/ advances from the sport goods business company operated by his late parents (hereinafter called the “Company”);

(6) H used to make legal costs provision to her.

H’s case

15.The gist of H’s case is: -

(1) H provided legal costs provision to W pursuant to the said Judgments dated 25 June 2013 and 19 September 2014 respectively.  At the time of the said Judgments the court indeed held the view that H had the ability to pay the said legal costs provision.  However, H’s financial situation has got worse since then. 

(2) At the same time H is the sole beneficiary of the estate of his late parents’ estate that was valued at HKD 150M, his assets are locked up.  The estate of the deceased consists of nine landed properties, seven of which are registered in the joint/ sole names of his later parents, among which two adjacent shops are rented out for HKD110,000 per month, one car parking space is rented out for HKD3,000 per month, another shop is rented out for HKD17,000 per month, one factory unit, one office unit, and another flat unit are left vacant (see paragraph 12 of his 7^th Affirmation).  The rental income from the said two adjacent shops of HKD 110,000 per month is paid to the receiver of the Company (hereinafter called the “Receiver”), who uses the income to cover rates, Government rent and management fees of all nine landed properties, maintenance to H’s grandmother, audit fee and Receiver’s fee, H’s legal costs and H’s credit card expenses, totally at HKD133,715 per month (see paragraph 17 of his 7^th Affirmation).  The rental income from the said car parking space of HKD3,000 per month and the said shop of HKD17,000 per month, totally HKD20,000 per month, is paid to the solicitors representing H in the probate and administration matter as retainer fee.  In relation to the said three landed properties left vacant, as those properties are still registered in the name of his late parents, despite previous attempts to let them out, no willing tenant could be found.

(3) The said flat and car parking space that H occupied are registered in the name of a BVI company that has two issued shares, one of which is held by the auditors of his late parents on trust for his deceased father, the other share is held by a gentleman that H has lost contact for three years.  H cannot sell the said flat or car parking space without participation of the said gentleman.

(4) He has been living on debt over the past few years.  His up to-date indebtedness to the Company was in the sum of HKD13,377,311.7.  H received from the Receiver monthly allowance in the sum of HKD60,000 per month from 2010 to November 2014.  Since December 2014, the monthly allowance has been reduced to HKD50,000, for the cash flow of the Company is so tight that the Receiver is unable to pay him HKD60,000 every month.  His current monthly expenses are HKD64,200 (see paragraph 18 of his 7^th Affirmation).  To make the ends meet, he used to take drawings from the Company, but from now on the Receiver is very strict in making any advancement to him in light of that the Company has been operating at a loss for the past few years.

(5) Due to the onset of his mental illness, he cannot work.

(6) He was not aware of the financial problem the Company faced when he, through solicitors, offered HKD13,000 to W for K’s maintenance.

(7) It is out of question that he can afford the amount sought by W or to provide any legal costs provision to her.  H’s current offer is to pay HKD10,000 per month for the interim maintenance of K.

My view

16.The court could adopt a broad brush-stroke approach to deal with MPS applications.  Further affirmation will be filed and witnesses will go to the box and be cross-examined during the trial when a detailed examination of the parties’ financial resources and needs will take place. With the benefit of further evidence and detailed cross-examination, the court will make its conclusion in the AR matter at the trial and any under/ overprovision in the MPS provision may be set off if it is fair and just so to do.

17.Despite that H receives HKD60,000/50,000 per month from the Receiver, free accommodation and the use of a sports car, H has been living on debts.  He said that due to the liquidity problem of the Company, he might not be able to borrow from the Company in future.  In the premises, he would have to use the rental income from the two adjacent shops of HKD110,000 per month to settle all expenses including those of the estate of the deceased and his expenses.  The expenses of the estate of the deceased comprise outgoings of the nine landed properties owned by the deceased in the sum of HKD58,215 per month (see paragraph 17 of his 7^th Affirmation). His monthly expenses are HKD64,200 (including MPS of HKD25,000 to W and HKD13,000 to K: see paragraph 18 of his 7^th Affirmation).  H affirmed that the Receive also used the said rental income of HKD110,000 per month to pay other monthly expenses viz maintenance to H’s grandmother in the sum of HKD5,000 per month, audit fee and Receiver’s fee of HKD20,000 per month, H’s legal costs of HKD30,000 per month and H’s credit card expenses of HKD25,000 per month.  For the present applications, I make no comment on H’s grandmother’s maintenance payment.  I regard that the said audit fee and Receiver’s fee should be paid by the Company’s income, nonetheless.  As to H’s credit card expenses, I hold the view that it must be significantly cut down.  H admitted that he spent too much with his credit card (see paragraph 17 of his 7^th Affirmation)  He was told by his psychiatrist that due to his mental illness, sometimes he lose control of his credit card spending.  With the assistance of the psychiatrist, he said he would try to control himself in future.  My simple advice to H is that he should immediately close his credit card account.

18.At any rate, the total of the expenses of the estate of the deceased in the sum of HKD58,215 per month and his monthly expenses of HKD64,200 per month exceeds the rental income of HKD110,000 per month from the said two adjacent shops.  At the first sight of it, he does not have the ability to make any additional payment to W or K.  If what H just said was true, not only he could not make any further legal costs provision to W, but also he would not afford sustaining legal representation.  It seems to me the fact that there is no indication that H will lose legal representation any time soon militates against his self proclamation of financial difficulty.  What makes H’s case more perplexing is that in the Company’s audited accounts for the year ended 31 March 2014, it shows that, besides H, Mr. So (H’s uncle and a witness for H in the care and control trial) was indebted to the Company, in the sum of HKD2,350,817.85.  H has not produced the Company’s audit account for the year ended 31 March 2015 or the current management accounts.  There is no evidence that Mr. So’s indebtedness was paid off.  Has the Company taken any step for the repayment of Mr. So’s debt?  If not, why?  If yes, the repayment of more than HKD2.3M should resolve the Company’s alleged cash flow problem.  Despite that the above rhetorical questions were raised by W through counsel, no answer was given.  It follows that one has to ask this question: Is the Company really facing cash flow problem?

19.In KEWS v NCHC [2013] 2 HKLRD 314 at pp.327 328 the Court of Final Appeal held that:-

“34. The width of the wording of s.7(1)(a) of the MPPO will include financial assistance made by third parties to the parties to a marriage. Accordingly, such assistance made by a third party to the husband or wife may be taken into account in the computation of the party’s overall financial resource.

35. As stated in para.2 above, such third party assistance may take various forms. The authorities, to which I shall presently turn, show commonly trust situations or where relatives have provided financial assistance. There are of course other factual situations.

36. In every case where third party assistance is involved, there are two critical evidential questions for the court to consider: (1) What is the extent of the financial assistance provided by the third to the husband or wife? (2) What is the likelihood of such financial assistance continuing in the foreseeable future?

37. It goes without saying that in the fact finding exercise, the court must look at the reality of the situation and have regard to matters of substance and not just form. In looking at reality, the court can take into account not only what a party actually has, but also what might reasonably be made available to him or her if a request for assistance were to be made.

38. In addition, in looking at what may occur in the foreseeable future, past conduct is often a useful guide.

39. Having ascertained the extent of the financial assistance provided by the third party and then finding on the evidence on a balance of probabilities that there is a likelihood of the continuation of such financial assistance in the foreseeable future, the court is then in a position in law first to take this into account in the identification of the financial resources of the parties and secondly, in determining the appropriate ancillary relief to be granted.  This is an approach that is entirely consistent with the court’s duty under s.7(1) of the MPPO”

20.The headnote to the report of Thomas v Thomas [1996] 2 F.C.R. 544 stated that:-

“The discretionary powers conferred on the court by ss.23 to s.25A of the Matrimonial Causes Act 1973 to redistribute the assets of spouses were almost limitless. However, the Judges who administered this jurisdiction had accepted the necessity of restraint. The precise boundaries of this judicial self-restraint had never been rigidly defined. But certain principles emerged from the authorities. One was that the court was not obliged to limit its orders to resources of capital or income which were shown actually to exist but might infer from the evidence the availability of unidentified resources. Another was that where a spouse enjoyed access to wealth but no absolute entitlement to it, the court would not act in direct invasion of the rights of a third party nor put a third party under pressure to act in a way which would enhance the means of the maintaining spouse. However, this did not mean that the court acted in total disregard of the potential availability of wealth from sources owned or administered by others. In the present case the court was confronted by a husband with immediate liquidity problems but possessing substantial means. On such a husband a heavy onus lay to satisfy the court that all means of access to liquid funds to support suitable outright provision for his wife had been thoroughly explored and found to be impossible. If he failed to do that he ran the risk of having the inference drawn against him that ways and means could be found of funding suitable provision for the wife’s capital needs.”

21.As stated by the English Court of Appeal in Thomas v Thomas, in the present case the court was confronted by a husband with alleged immediate liquidity problems but possessing substantial means.  In this connection, it is noteworthy that the estate duty of H’s late parents was recently cleared and instruction was given to solicitors to proceed with the application for the grant of the Letters of Administration from the Probate Registry.  Despite that the administration of the estate of the deceased has been in a state of limbo for over 10 years, in whatever way the Letters of Administration of the estate can possibly be obtained in a few months.  On such a husband a heavy onus is laid to satisfy the court that all means of access to liquid funds to support suitable outright provision for his wife had been thoroughly explored and found to be impossible.  If H failed to do that he ran the risk of having the inference drawn against him that ways and means could be found of funding suitable provision for W’s need.  By reason of the matters stated in the above paragraph 18, I regard H has not discharged the burden to satisfy the court that all means of access to liquid funds to support suitable outright provision for W had been thoroughly explored and found to be impossible.  On top of that, based on the fact that he is the sole beneficiary of the estate of his late parents and that he used to receive substantial monthly maintenance and regular drawings from the Company, if he is ordered by the court to pay further MPS to W and K, despite Mr. Chow’s ability to argue to the contrary, I am satisfied on the balance of probabilities that he will be able to obtain further advancement from the Company to meet his liability under a court order. 

22.Over and above the probability of H obtaining further advancement from the Company, there are other resources accessible to H.  It is noted that, three out of the nine properties owned by the deceased are left vacant.  Not to mention, H also admitted that the rent for those properties that have been leased out is not up to market value (see paragraph 21 of H’s 7^th Affirmation).  H sought an explanation suggesting no new tenancy could be signed since the properties were registered in the deceased’s sole name/ joint names.  Such explanation does not hold water as a matter of law.  The doctrine of tenancy by estoppel can be found in Industrial Properties (Barton Hill) Ltd & Others v Associated Electrical Industries Ltd [1977] 1 QB 580.  This is what Lord Denning MR said in rejecting the defence at pp.596 597:-

“If a landlord lets a tenant into possession under a lease, then, so long as the tenant remains in possession undisturbed by any adverse claim then the tenant cannot dispute the landlord’s title. Suppose the tenant (not having been disturbed) goes out of possession and the landlord sues the tenant on the covenant for rent or for breach of covenant to repair or to yield up in repair. The tenant cannot say to the landlord: ‘you are not the true owner of the property.’ Likewise, if the landlord, on the tenant’s holding over, sues him for possession or for use and occupation or mesne profits, the tenant cannot defend himself by saying: ‘The property does not belong to you, but to another.’”

23.If H lets a tenant into possession (no doubt something he can do), then so long as the tenant remains in possession undisturbed by any adverse claim, he can receive rent from the tenant.  It seems to me the fact that many landed properties of the estate are left vacant and the rent of the leased out landed properties is left not up to date shows that H is not concerned about money and not in financial difficulty as alleged.  There is no evidence adduced on the market rent of the nine landed properties of the estate.  Judging from the fact that the old tenancies were signed ten or more years ago and given the common knowledge that in general rent has gone up a lot since ten years ago, regardless of what H’s true case is, H can still take immediate steps to lease out the vacant landed properties and to renew the stale tenancies of the leased out landed properties so as to significantly increase his income.

24.For the purpose of the present applications, I am persuaded that H has the ability to pay the monthly sum of HKD23,000 to W for K and the monthly sum of HKD20,000 for 12 months.

Conclusion

25.The order dated 13 November 2012 is varied to the effect that: -

(a) H shall pay W the sum of HKD48,000 per month as MPS for W and K, the 1^st payment to be paid on 12 August 2015 and thereafter on or before the 12^th day of each succeeding month until further order of the court;

(b) H shall pay W the sum of HKD20,000 per month as W’s further legal costs provision, the 1^st payment to be paid on 12 August 2015 and thereafter on or before the 12^th day of each succeeding month until 12 July 2016 or further order of the court, on the condition that the said payments are to be punctually paid by W to her solicitors on account of her legal costs for the AR;

(c) The aforesaid monthly payments will be paid on account of any sum eventually received by W and/or K when the AR is determined;

and it is further directed that

(d) The parties shall lodge with the court a joint proposal of directions for the way forward within the next 14 days.

Costs

26.Taking the result at face value, W is the successful party.  For the time being, I can see no reason why costs should not follow the event.  It is ordered nisi that H shall pay W’s costs of the present applications, to be taxed if not agreed, in any event. The nisi order becomes absolute after 14 days of the date hereof unless a party has applied to vary the order.

Mr Giles Surman and Ms Christina Tseng instructed by Messrs T.K. Tsui & Co for the petitioner

Mr. Enzo WH Chow instructed by Messrs Sidney Lee & Co. for the respondent