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CAMP 143/2018
[2019] HKCA 347
IN THE HIGH COURT OF THE
HONG KONG SPECIAL ADMINISTRATIVE REGION
COURT OF APPEAL
MISCELLANEOUS PROCEEDINGS NO 143 OF 2018
(ON AN INTENDED APPEAL FROM FCMC 4683/2014)
________________________
| BETWEEN |
|
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| LLC |
Petitioner |
| and |
| LMWA |
1st Respondent |
| LELP |
2nd Respondent |
________________________
| Before: Hon Lam Acting CJHC and B Chu J in Court |
| Date of Hearing: 27 February 2019 |
| Date of Judgment: 27 February 2019 |
| Date of Reasons for Judgment and Decision on Costs: 22 March 2019 |
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REASONS FOR JUDGMENT AND
DECISION ON COSTS
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Hon Lam Acting CJHC (giving the Reasons for Judgment and Decision on Costs of the Court):
1. On 29 June 2018, Judge G Chan of the Family Court ordered that there be no order as to costs between the 1st respondent husband and the petitioner wife in respect of the trial of preliminary issue before her. The trial was in respect of the beneficial ownership of a property known as the Sorrento Property and Sorrento Carpark. In an earlier judgment of 22 June 2017, the judge found that the husband and his father (the 2nd respondent) were beneficial owners of the Sorrento Property and the father was the sole beneficial owner of the Sorrento Carpark. In so doing, the judge rejected the wife’s case that these properties were beneficially owned by the husband alone.
2. The judge ordered the wife to pay 80% of the costs of the father. She however made no order as to costs between the husband and wife.
3. The husband and the father sought leave to appeal against the costs decision. On 11 September 2018, the judge refused to grant leave.
4. By a summons of 26 September 2018, the husband renewed the application in this Court. The father also made a similar application by another summons by way of CAMP 144 of 2018. The father’s application was dismissed by this Court (Lam V-P and Poon JA) on 4 December 2018 on the papers.
5. In respect of the husband’s application, the Court directed that a rolled-up hearing be held on 27 February 2019.
6. At the rolled-up hearing, after hearing counsel, we refused to grant leave to the husband and dismissed the summons of 26 September 2018. These are our reasons for that decision. We shall also give our decision on the costs of this application.
Reasons for refusal of leave
7. Since the intended appeal is an appeal on costs only, Mr Clough (appearing for the husband) properly acknowledged that he faced a high threshold. As observed by Lam VP and Poon JA when this Court dismissed the renewed application by the father, this Court will not interfere with the costs decision of a lower court unless it can be shown that the lower court has erred in principle or its decision was plainly wrong: see Ho Shu Kwong v Chiang Chun Yuan [2002] 3 HKLRD 419 at [12] – [19]; Hung Fung Enterprises Holdings Ltd v Agricultural Bank of China [2012] 3 HKLRD 679 at [100] – [105]; Chan Shun Kei v Hong Kong Construction (HK) Ltd CACV 192/2014, 7 March 2016 at [22]; and Poon Ching Man v Lam Hoi Pun [2016] 3 HKLRD 815 at [34].
8. In the present case, the judge explained her decision on costs at great length in her written decision of 29 June 2018. She took the view that the costs position between the husband and wife was different from that between the father and the wife. For the former, the trial of preliminary issue remains part of the family proceedings under the petition for divorce. It is both in form and substance part of the wife’s claim for ancillary relief. Thus, the duty to engage in constructive dialogue and to negotiate in good faith is equally applicable as between the husband and wife in respect of the trial of preliminary issue.
9. The judge found that the husband failed in such duty in his neglect to respond to a Calderbank offer from the wife. In light of the previous proposal by the husband regarding the Sorrento Property, she did not accept his contention that it was impossible for him to negotiate since the father’s interest was involved. At [39] of the Costs Decision, the judge adopted the observations of Singer J in A v A [1996] 1 FLR 14 at p.25E-F:
“ While one can never say that this or any other case would have settled if the Calderbank door had been kept open by timely and reasonable reply, the critical point is that to slam the door through inactivity, lack of objectivity, indecision or for whatever other reason makes potentially avoidable litigation inevitable.”
10. The judge went on at [40] of the Costs Decision:
“ Importantly, adopting a complete silence to the Calderbank Offer (save and except a holding letter) eats away any possible and potential chance of settlement but opens up the floodgate of incurring further and sometimes unfortunately unnecessary costs leading to the unavoidable result of further draining away of the assets of the husband and/or the wife, which in turn very likely would jeopardise the interest of the children of the family.”
11. In so saying, the judge was obviously mindful of the positive duty of a spouse to explore settlement in a constructive manner as adumbrated by Hartmann JA in EJB v CJB [2011] 5 HKLRD 508 at [130], which the judge cited earlier in the Costs Decision at [28]:
“ As I understand it, the approach today is that, unless the parties are of the reasonable view that they do not have sufficient information available to them to enter into negotiations, they are under an obligation to explore settlement and to do so in a constructive manner. Unless attempts are made to settle, potentially avoidable litigation becomes inevitable. In family litigation there are two almost inevitable results. First, ill will between the parties is heightened. If there are children of the marriage this can have profoundly deleterious consequences. Second, except in big money cases - and this was not a big money case - there will be a significant drain on the joint matrimonial estate, both parties, directly or indirectly, being the losers.”
12. The judge also alluded to other matters she took account in deciding on the costs between the husband and the wife:
(a) The wife had laid her cards on the table and placed reliance on 3 emails which called for clarification and explanation from the husband and the father. Such clarification and explanation was not forthcoming in their affirmations and they only put forth the same at the trial by way of oral evidence. The wife was thus deprived of the chance to re-assess the strength and weakness of her case. See [55] to [59] of the Costs Decision.
(b) The impacts of a costs order against the wife in respect of the matrimonial proceedings including the effect of the liability of the wife for such costs in the overall redistribution of wealth and the risk of further application for litigation funding and satellite litigation, see [65] to [69] of the Costs Decision.
13. The judge also borne in mind her concerns at [69] in deciding that there would be no order as to costs in the application for costs, see [73] of the Costs Decision.
14. In the Leave Decision of 11 September 2018, the judge gave careful considerations to the proposed grounds of appeal and gave reasons for rejecting the same.
15. The draft grounds of appeal appended to the summons of 26 September 2018 is a lengthy document. Instead of setting out the grounds concisely, there are many repetitions and parts of the document contained submissions instead of grounds. The statement in support of the application filed together with the summons only briefly stated that important issues of principle are involved and oral hearing is sought.
16. The skeleton submissions of counsel for the husband lodged on 2 January 2019 sought to argue the matter as if it is a re-running of the costs hearing before us. As this Court had said on many occasions in the past, this is not the proper approach for appellate advocacy. Bearing in mind the limited scope for appellate intervention on costs decision, counsel should focus on identifying the errors in principle allegedly made by the court below or explaining how the decision below is said to be plainly wrong.
17. Having read all the materials together, the grounds relied upon by the husband can broadly be stated as follows:
(a) The judge erred in holding that as between the husband and the wife, the trial of preliminary issue is part of the family proceedings and the principles on costs applicable to family proceedings are applicable;
(b) the judge failed to pay sufficient regard to her own finding that the Wife’s case was “fatally flawed” and “chronologically impossible” and she brought up the issue of beneficial ownership of the Sorrento Property and Carpark causing the costs of the trial of preliminary issue to be incurred;
(c) the judge failed to pay regard to the net effect of the litigation funding order and the financial implications of no order as to costs on the husband;
(d) the judge erred in penalizing the husband for his failure to reply to the Calderbank offer because the husband could not respond to the same without the consent of the father;
(e) the judge erred in considering that a costs order against the wife would increase her liability and that it might trigger satellite litigation.
18. We start by making some general observations on the resolution of dispute of beneficial ownership which may involve third party interest in the context of ancillary relief applications. In TL v ML [2006] 1 FLR 1263, Deputy High Court Judge Mostyn QC highlighted the difference between determining a dispute of ownership between a spouse and a third party and the discretionary exercise of determining...
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