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Ab Also Known As Abw v Maw

Judgment Cited authorities 2 Cited in 1 Precedent Map Related
Vincent
Judgment Date08 December 2015
Year2015
Citation[2016] 2 HKLRD 1
Judgement NumberFCMC6310/2015
Subject MatterMatrimonial Causes
CourtFamily Court (Hong Kong)
FCMC6310/2015 AB also known as ABW v. MAW

FCMC 6310/2015

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES

NUMBER 6310 OF 2015

----------------------------

BETWEEN
AB also known as ABW Petitioner

and
MAW Respondent
------------------------
Coram: Her Honour Judge Sharon D. Melloy in Chambers (Not open to public)
Date of Hearing: 27 October 2015
Dates of correspondence: from the 29 October – 2 November 2015
Date of Judgment: 8 December 2015

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J U D G M E N T
(Litigation funding)

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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). She seeks the sum of HK$800,000 per month to be backdated to the 1 September 2015. In the alternative she asks that any lump sum provision for litigation costs provided by the husband be without prejudice to either party’s contention at trial concerning how each side’s litigation costs should be treated.

2. This application raises an interesting point of principle. In the event that a paying party, still more often than not the husband as in this case, chooses to provide an interim lump sum payment to a wife, as opposed to paying a monthly amount for litigation funding, should that be offset against the wife’s final award for ancillary relief as of right? This is especially pertinent when, as here, it is said that the husband is paying for his legal costs from capital, which means that the size of the matrimonial pot is potentially diminishing, but the husband is not likewise required specifically to account for his own legal cost expenditure. The net result theoretically is that the matrimonial pot may be reduced by the husband’s legal costs, which in turn means that the wife’s potential share of the assets is less than it would have been otherwise. This inherent unfairness is then arguably compounded by the fact that the monies advanced to the wife for litigation funding are then to be deducted from her share of the assets as of right. Mr Scott SC for the wife points out that this conundrum does not arise if the wife receives a monthly sum for litigation funding. He accepts that the husband will not be able to pay HK$800,000 per month from income, but that this will most probably need to come from his cash reserves i.e. from capital in any event.

The central issue

3. Thus the central issue is whether or not an agreement to pay an interim lump sum for litigation funding should always include the words “to be offset against any final award to the Petitioner (receiving party) in the ancillary relief proceedings”. In addition I need to determine the issue of litigation funding generally – i.e. whether the husband should be given an opportunity to pay the wife a lump sum for that purpose and if so on what terms and/or in the alternative what is the appropriate level of maintenance pending suit to be paid as litigation funding if the same is to be paid on a monthly basis.

Background

4. I have set out the background to the marriage briefly in a short judgment on discovery dated the 9 October 2015 as follows:

Background to the marriage

5. The parties married on the XX March 1994 in New Zealand, which is where they are both from. They have three daughters who are now aged nearly 17, 13 and 10. They are all presently being educated at the X International School in Hong Kong. The parties have resided in the Territory since 1999. The wife still resides here with the children, whereas the husband relocated to London in January 2013 in order to take up a new position with company A2. In May 2014 the wife issued a judicial separation petition based on mild unreasonable behaviour particulars. A fresh divorce petition was later filed based on one year separation with consent. This is dated the 21 May 2015. The decree nisi was pronounced on the 14 September 2015. The parties have joint custody of the children with care and control to the wife and reasonable access to the husband to include holiday access.

6. There are two family trusts – the W trust which was settled on the 11 January 2005 and the W Discretionary Trust which was settled about 18 months later on the 28 June 2006. There are some issues surrounding these trusts.

7. In addition to discovery and the trusts there are also other potential issues concerning inter alia the date of separation and post separation accruals and their treatment by the court.

How has the litigation been funded to date?

5. It seems that there has been an issue with respect to litigation funding and how interim payments generally are to be treated almost from the beginning of this litigation. However in the main the parties were able to reach consensus on the issue. On the 14 October 2014 the parties agreed through mediation as follows:

(11) So that both the husband and the Wife shall have funds available to meet their respective costs in the matrimonial proceedings, they agree as follows -

i. that they shall within 10 days of the date of this agreement arrange to open a separate trust account with their respective solicitors (‘the legal costs trust accounts’) into which the husband shall pay a sum of $1 million into each account, a total of $2 million. That sum shall be drawn from matrimonial capital under his control.

ii. That the $1 million paid into each legal costs trust account shall be used by each party solely for the purposes of meeting his or her on-going legal costs in the matrimonial proceedings.

iii. That, should the sum standing to the credit of either party in their respective legal costs trust account fall below $200,000 then a further equal sum shall be paid into each account. Any further sum shall be paid in by the husband from matrimonial capital under his control. In the event of disagreement as to the amount of any further sum, it shall be such sum as, having regard to the advancement of the matrimonial litigation, is considered necessary to conclude the litigation assuming that it goes to trial.

iv. That, for the purposes of this clause, all attempts at settlement including by way of mediation or private FDRs shall fall under the term ‘on-going legal costs’.

v. That, upon the conclusion of the litigation, any sum held in the husband’s legal costs trust accounts shall be paid to him and in the same manner any sum standing to the credit of the wife shall be paid to her.

6. Unfortunately for reasons that I will not go into here that agreement did not hold. The issue of litigation funding, amongst others, came back before me on the 10 February 2015. On that occasion the husband offered the wife the sum of HK$8 million as litigation funding on the premise that “such sum to be offset against any final award to the Petitioner in ancillary relief proceedings”. The wife asked for HK$2 million only and an order was made in those terms, the intention being that that should be sufficient money to take the case through to the Financial Dispute Resolution hearing. Similarly on the 11 June 2015 the court made a further order by consent in the same terms for a further HK$3 million.

7. In August 2015 the issue of litigation costs came up again. The husband offered to pay the wife an additional HK$3 million on the same terms as before. However on this occasion the husband’s offer was not accepted.

The law on litigation funding and its interpretation

8. Reference was 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. Mr Egerton for the husband says that the orders made previously for litigation funding are reflective of the approach taken by The Honourable Mr Justice Hartmann in that judgment. I accept that to be the case. Mr Scott SC for the wife suggests that the case can be distinguished on the facts. He also argues that:

20. The Hong Kong Court of Appeal appeared to adopt the method used in an unreported interlocutory judgment in Charman which dealt with the payment of an interim lump sum. They referred to the order made by Coleridge J in that case. He provided that if the husband were to pay £5m, then no maintenance pending suit order would be made.

21. However, the actual approach of Coleridge J is not fully recorded in the judgment in HJFG v. KCY. From H’s submissions filed for this hearing H seems to be persisting with what we say is a wrong-headed approach in his interpretation and application of HJFG v. KCY.

22. The Order actually made in Charman was that:-

“Unless the Respondent do, on or before 28th February 2005, pay or cause to be paid to the Petitioner the sum of £5m on account of any sum which the Petitioner is awarded by way of financial settlement and/or costs in these proceedings…”

The order then went on to provide for substantive maintenance pending suit.

23. However, the expression on account of any sum did not mean that the wife in that case was expected to or required to bring into account as a credit against the eventual lump sum award the full amount of the £5m. This is apparent from the main judgment in that case: see Charman v. Charman. The judge there adopted a largely agreed schedule of assets of the parties....

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