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Judgment Cited authorities 82 Cited in 2 Precedent Map Related
Vincent
Judgment Date19 March 2020
Neutral Citation[2020] HKCFI 493
Judgement NumberHCMP2728/2017
Subject MatterMiscellaneous Proceedings
CourtCourt of First Instance (Hong Kong)
HCMP2728/2017 RE A

HCMP 2728/2017

[2020] HKCFI 493

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 2728 OF 2017

________________________

IN THE MATTER OF MATRIMONIAL PROCEEDINGS HCMC 3/2017 (transferred from FCMP 5026/2015)
and
IN THE MATTER OF INTENDED THIRD PARTY FUNDING

________________________

BETWEEN
A Applicant

________________________

Before : Hon Marlene Ng J in Court
Dates of Hearing : 25-26 June 2019
Date of Handing Down Judgment : 19 March 2020

_____________

JUDGMENT (1)

_____________

NO

CONTENTS

PARAGRAPH

I

INTRODUCTION

(A) OVERVIEW

1

(B) BRIEF BACKGROUND

3

II

PRESENT PROCEEDINGS

7

III

SOME PRELIMINARY MATTERS

(A) OS AND/OR SUMMONS

22

(B) APPLICATION TO AMEND OS

23

(C) SCOPE/AMBIT OF 1ST / 2ND DECLARATIONS

29

(D) HUSBAND AFF

31

(E) OPEN OR NOT OPEN TO THE PUBLIC

32

(F) ANNOYMISATION OF PARTIES

39

(G) PUBLICATION OF JUDGMENT

41

(H) AMICI NOT “CONTRADICTOR”

43

IV

ISSUES

49

V

MAINTENANCE AND CHAMPERTY

51

(A) UNRUH

52

(B) WINNIE LO

57

(C) POLICY AND EFFECT OF MAINTENANCE AND CHAMPERTY

59

(D) CATEGORIES OF RELEVANT CASE LAW

62

(E) MAINTENANCE AND CHAMPERTY NOT DEFENCE TO UNDERLYING CLAIM

65

- NO DEFENCE OR STAY

66

- BARE CAUSE OF ACTION

75

VI

JURISDICTION AND PUBLIC POLICY ISSUES

(A) WHETHER 1ST/2ND DECLARATIONS BY NATURE CIVIL MATTER OR INVOLVE DECLARATION OF NON-CRIMINALITY

83

(B) PURPOSE OF DECLARATION OF NON-CRIMINALITY

85

(C) POTENTIAL CRIMINAL LIABILITY FOR MAINTENANCE AND CHAMPERTY

87

(D) INTEREST IN 1ST/2ND DECLARATIONS

- FUNDEE

92

- FUNDER

93

- QUERIES

94

(E) JURISDICTION TO GRANT DECLARATION OF NON-CRIMINALITY

96

(F) WHETHER PRE-CLEARANCE DECLARATION OF NON-CRIMINALITY “MEANINGLESS”

114

(G) WHETHER “QUALIFIED DECLARATIONS” “MEANINGLESS”

- “MEANINGLESS” DECLARATIONS

122

- INTERFACE WITH ACCESS TO JUSTICE EXCEPTION

123

- “CHILLING EFFECT” ADDRESSED?

124

- NO LIS BETWEEN FUNDER AND FUNDEE

125

- HUSBAND’S STANCE

127

- FUNDER NOT A PARTY

129

- HYPOTHETICAL QUESTION

130

- NO BREACH OR THREATENED BREACH

131

- ADVISORY LEGAL OPINION

132

(H) PRACTICAL FEASIBILITY OF CARVING OUT DECLARATION OF NON-CRIMINALITY

136

(I) “EXCEPTIONAL CIRCUMSTANCES”

144

(J) WHETHER CASE FACT-SENSITIVE

147

(K) MISCELLANEOUS EXCEPTIONS

161

(L) ANALOGY WITH TRUSTEE’S BEDDOE APPLICATIONS?

162

(M) ANALOGY WITH FUNDING APPROVAL IN INSOLVENCY CASES?

175

(N) ANALOGY WITH FUNDING APPROVAL IN CLASS ACTIONS?

191

(O) SECURITIES AND FUTURES COMMISSION V TIGER ASIA MANAGEMENT LLC

205

(P) DECLARATIONS REGULARLY MADE?

210

- ENGLAND AND WALES

212

- AUSTRALIA

213

- NEW ZEALAND

216

- CANADA

219

- SOUTH AFRICA

221

- JERSEY

222

- IRELAND

223

- BERMUDA

235

- TRINIDAD AND TOBAGO

236

- CAYMAN ISLANDS

239

- HONG KONG

247

- SUMMARY

248

VII

ACCESS TO JUSTICE EXCEPTION ISSUE

250

(A) PUBLIC POLICY TO PROTECT RIGHT OF ACCESS TO JUSTICE

253

(B) PUBLIC POLICY TO ADDRESS MISCHIEFS OF MAINTENANCE AND CHAMPERTY

262

- 2 STRANDS OF POLICY FACTORS

266

- PROTECTING INTEGRITY OF LITIGATION PROCESS

269

(I) STRIKING OUT OR STAYING PROCEEDINGS FOR ABUSE OF PROCESS

273

(II) VOID OR UNENFORCEABLE CONTRACTS

278

(III) ADVERSE COSTS ORDERS AGAINST FUNDER

281

(IV) SECURITY FOR COSTS ORDERS AGAINST FUNDER

301

(V) DISCLOSURE

306

- PROTECTING AGAINST TENDENCY TO CORRUPT PUBLIC JUSTICE

311

- OTHER CONSIDERATIONS: TENDENCY TO CAUSE ABUSE

315

- OTHER CONSIDERATIONS: CONTEMPORARY PUBLIC POLICY

316

- OTHER CONSIDERATIONS: LFA TO BE CLOSELY WATCHED

318

(C) DEVELOPMENTS IN COMMON LAW JURISDICTIONS

319

- SOUTH AFRICA

321

- ENGLAND AND WALES

325

- AUSTRALIA

329

- NEW ZEALAND

332

- SINGAPORE

336

- BRITISH VIRGIN ISLANDS

343

- IRELAND

345

- CAYMAN ISLANDS

346

- HONG KONG

348

(D) EXPERIENCE OF THIRD PARTY FUNDING IN ARBITRATION CASES

- BACKGROUND

356

- AO AS AMENDED

364

- EXTENDING THIRD PARTY FUNDING TO GENERAL LITIGATION

368

(E) BALANCING EXERCISE BETWEEN PUBLIC POLICIES

380

(F) MATRIMONIAL LAW DIMENSION

- INEQUALITY IN ABILITY TO FUND LITIGATION

402

- IMPACT OF CONDITIONAL/CONTINGENT FEES

412

- LLC V LMWA

416

- YOUNG V YOUNG

418

- GOMEZ V AHRENS

423

(G) EXCEPTIONAL CIRCUMSTANCES BY REASON OF ACCESS TO JUSTICE EXCEPTION

425

VIII

COMMON INTEREST EXCEPTION ISSUE

438

IX

COURT GUIDANCE ISSUE

439

(A) EX PARTE APPLICATION

440

(B) INVOLVEMENT OF SJ

441

(C) INVOLVEMENT OF OPPOSING PARTIES IN UNDERLYING LITIGATION

442

(D) INVOLVEMENT OF FUNDER

445

X

CONCLUSION

446

I. INTRODUCTION

(a) Overview

1. Costs have become a defining feature of modern civil litigation. In deciding whether to pursue a claim, the parties and their lawyers have to assess the substantive merits as well as the economic viability of the claim. This not only affects the parties but also has impact on the civil legal system. There has been concern that legal rights may become illusory if they cannot be enforced as a result of the economic cost of litigating a claim.[1] Some jurisdictions have embraced third party funding for bringing proceedings (ie provision of capital by an unrelated funder, usually on non-recourse basis, to finance all or part of the fundee’s litigation costs in return for a portion of any financial recovery) to address such perceived concern. But such development has excited debate or even controversy (eg fear of exploitation of impecunious litigants and concern over commodisation of litigation to the detriment of proper administration of justice). It is not easy to elicit clear principles relating to third party litigation funding as common law jurisdictions differ widely on how to deal with such practice and market.

2. In Hong Kong, third party funding is still nascent and uncertain. The present proceedings foray into this novel area of the law to search for a uniquely local approach (be it legislative, regulatory and/or judicial) to resolve the tension between (a) the alleviation litigation funding provides for a civil justice system that some say is too expensive and (b) the caution against maintained litigation for protection of the integrity of the court’s process. I start with a brief summary of the background facts.

(b) Brief background

3. The Husband and the Wife were married in 2002. In 2015, the Wife petitioned for divorce in the Family Court (“FC”). Among the issues in the underlying matrimonial proceedings (“Matrimonial Proceedings”) were their ancillary relief claims. In 2016, the Husband applied under section 17 of the Matrimonial Proceedings and Property Ordinance Cap 192 (“MPPO”) to set aside certain alleged asset transfer by the Wife to her elder brother (being the 1st intervener in the Matrimonial Proceedings, “Brother”) (“S17 Application”). There was dispute over the beneficial ownership of the subject asset and income therefrom with the Husband arguing (and the Wife and the Brother disagreeing) that such asset/income be regarded as matrimonial property. The FC granted case management directions for the S17 Application, which was subsequently fully pleaded by the Husband (as claimant) and by the Wife (as the defendant) and the Brother (as the 1st intervener).

4. In 2016, the Husband applied to the FC for a litigation funding order against the Wife for his legal costs in respect of the S17 Application. Later that year, the Husband applied for legal aid. The Husband’s applications for legal aid and litigation funding order were refused in 2016 and 2017 respectively. In 2016 the Wife also applied for maintenance pending suit against the Husband for herself and their children, but in 2017 the FC refused such application.

5. In 2016, the Brother applied to transfer the S17 Application to the Court of First Instance (“CFI”). In 2017, the FC ordered such transfer. A pre-trial review of the S17 Application was scheduled to be heard by a CFI judge (“Family Judge”) on 5 March 2020, which hearing has since been adjourned.

6. The Husband claimed that despite his wish to proceed with the S17 Application, his financial resources had been depleted and he had exhausted all avenues of funding, so his only viable financial option for pursuing the S17 Application (which he claimed to be meritorious) was to obtain third party litigation funding. The Husband was eager to seek such funding from an overseas commercial/professional litigation funding company (“Funder”), and for such purpose to obtain prior court sanction of the proposed funding arrangements.

II. PRESENT PROCEEDINGS

7. In September 2017, the Husband, who anticipated making an application to the CFI for pre-clearance approval of third party funding for his legal costs in respect of the S17 Application, applied ex parte to the FC for leave to use the pleadings/papers...

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