IN THE DISTRICT COURT OF THE
HONG KONG SPECIAL ADMINISTRATIVE REGION
SUIT NO. 2348 OF 2002
Coram : H.H. Judge Bruno Chan in Chambers
Date of Hearing : 16 April 2004
Date of Ruling : 29 April 2004
R U L I N G
1. This is my ruling as to the costs of the Petitioner Wife’s application for ancillary relief, arising from a judgment of mine which was handed down on 5th November 2003 in which I awarded her approximately 53% of the parties’ matrimonial assets plus a nominal sum of $1.00 per annum, and an order nisi that each party to bear his / her own costs. She now seeks an order that the Respondent Husband should bear all her costs of the application, which is opposed by the Husband who maintains that there should be no order as to costs.
2. At very early stage following the dissolution of their 30 years marriage, the parties were able to agree in principle that their assets should be distributed equally between them, which consisted of real properties, investments and pensions, and cash in the total value of slightly over £910,000, but there were major disagreement over the Wife’s needs for continuing monthly maintenance as the Husband happened to lose his well-paid job as a managing director of a big electrical chain-store during the proceedings and offered to pay her a nominal sum of $1.00 per annum to preserve her right to seek variation in the event of him finding employment in future, but the Wife insisted that he should continue to pay her substantive periodical payment from his share of the matrimonial assets, and relying on his high earning capacity.
3. The trial itself lasted for 4 days with an additional day for submission, with the question of whether substantive periodical payments were to be paid in the face of the Husband’s unemployment as essentially the main issue, and the bulk of the time was spent on the Wife’s needs and expenditure and the Husband’s earning capacity. At the start of the trial, the Wife’s legal costs were estimated to be about HK$500,000 up to its conclusion, whilst the Husband’s were close to HK$400,000. He had also contributed HK$45,000 towards the Wife’s costs.
4. The Husband’s main argument in his opposition to the Wife’s application for costs is that it was her refusal to take a realistic view of his unemployment and to move from her firm stance of “he will find employment” coupled with “as long as I get what I want it does not matter where it comes from” which led to the necessity for trial, and that as the judgment giving her only nominal maintenance instead of substantive periodical payment was clearly in his favour, it should be reflected in an order that she should bear her own costs.
5. The Wife, on the other hand, argues that the offers of the Husband of equal division of matrimonial assets as a clean-break without any periodical payments for her were unreasonable and unacceptable, whereas his offer of 22nd May 2003 again failed to offer her periodical payments other than her right to apply for nominal maintenance, or to offer her costs, was again unreasonable and incapable of being accepted by the Wife.
6. It is further submitted by the Wife, that as she was eventually awarded 53% of the assets, she was therefore able to achieve a larger capital award than was offered, and that the Husband’s failure to recognise her need for periodical payments or the level thereof is fundamental, although she was only awarded a nominal maintenance order at the end of the trial, she submits that the time taken in establishing her entitlement was time well spent as it will greatly assist any future application for periodical payments after the Husband has obtained employment and / or an income from his business.
7. The general rules and principles as to costs in civil proceedings have been stated in In re Elgindata Ltd. (No. 2)  1 WLR 1207 where Nourse LJ said as follows : -
“The principles are these. (i) Costs are in the discretion of the court. (ii) They should follow the event, except when it appears to the court that in the circumstances of the case some other order should be made. (iii) The general rule does not cease to apply simply because the successful party raises issues or makes allegations on which he fails, but where that has caused a significant increase in the length or cost of the proceedings he may be deprived of the whole or a part of his costs. (iv) Where the successful party raises issues or makes allegations improperly or unreasonably, the court may not only deprive him of his costs but may order him to pay the whole or a part of the unsuccessful party’s costs. Of these principles the first, second and fourth are expressly recognised or provided for by rules 2 (4), 3 (3) and 10 respectively. The third depends on well established practice. Moreover, the fourth implies that a successful party who neither improperly nor unreasonably raises issues or makes allegations on which he fails ought not to be ordered to pay any part of the unsuccessful party’s costs”.
8. While I agree that these principles apply equally in this jurisdiction, it is also true that costs in contested Family matters, in which the court has wide discretion, do not necessarily follow the event. There is, of course, the necessity for some starting point, which was discussed in the judgment of Butler-Sloss L.J. in Gojkovic v Gojkovic  Fam 40 at 54, in which she said :
“That starting point, in my judgment, is that costs prima facie follow the event (see per Cumming-Bruce L.J. in Singer (formerly Sharegin) v Sharegin  F.L.R. 114, 119) but may be displaced much more easily than, and in circumstances which would not apply, in other Divisions of the High Court. One important example is, as the judge pointed out, that it is unusual to order costs in children cases. In applications for financial relief the applicant (usually the wife) has to make the application in order to obtain an order by consent; and if money is available and in the absence of special circumstances, such an agreement would usually include the applicant’s costs of the application. If the application is contested and the applicant succeeds, in practice in the Divorce Registries around the country where most ancillary relief applications are tried, if there is money available and no special factors, the applicant spouse is prima facie entitled to, and likely to obtain, an order for costs against the respondent. The behaviour of one party, such as in material non-disclosure of documents, will be a material factor in the exercise of the court’s discretion in making a decision as to who pays the costs”.
9. In the vast majority of cases, according to the Lord Justice (as she then was), where one party is or both parties are legally aided, and where the assets are insubstantial or at least inadequate for the needs of the family, the question of who pays the costs may be academic. But in cases where the assets are substantial, as in the present case, an order for costs can if appropriate be made. Butler-Sloss L.J. said in the same judgment :
“In such cases the parties are likely to negotiate, and such negotiation, which may lead to a settlement, is much encouraged by the courts. The Calderbank offer – a letter containing an offer only revealed after the order is made – bears some resemblance to, but is not identical with, a payment into court. It takes its name from Calderbank v Calderbank  Fam. 93 (a claim by a husband) in which Cairns L.J. referred to an apportionment offer in Admiralty proceedings, and said, at p. 106 :
“If that is not accepted no reference is made to that offer in the course of the hearing until it comes to costs, and then if the court’s apportionment is as favourable to the party who made the offer as what was offered, or more favourable to him, then costs will be awarded on the same basis as if there had been a payment in. I see no reason why some similar practice should not be adopted in relation to such matrimonial proceedings in relation to finances as we have been concerned with”.
This useful practice has since been followed in the Family Division, and has now been extended to the other divisions of the High Court by R.S.C., Ord. 22, r. 14 – a written offer “without prejudice save as to costs”. Ord. 62, r. 9 states : “(1) The court in exercising its discretion as to costs shall take into account …… - (d) any written offer made under Ord. 22, r. 14 ……”.
Later decisions referring to the effect of a Calderbank offer have accepted, in my view, the basic assumption as expressed by Cairns L.J. that if an applicant spouse failed to exceed the sum offered, prima facie she / he would pay the costs after the date of communication of the offer. For example, in McDonnell v McDonnell  1 W.L.R. 34, this court applied Calderbank’s case to a legal aid case subject to the limitation on her legal aid certificate, on the basis that the offer in the letter should have been accepted by the wife”.
10. This practice was referred to by Oliver L.J. in Cutts v Head  Ch. 290 in which he explained the nature of the public policy upon which the rule rests, when he added :
“As a practical matter, a consciousness of a risk as to costs if reasonable offers are refused can only encourage settlement whilst, on the other hand, it is hard to imagine anything more calculated to encourage obstinacy and unreasonableness than the comfortable knowledge that a litigant can refuse with impunity whatever may be offered to him even if it is as much or more than everything to which he is entitled in the action”.
11. Butler-Sloss L.J., having considered the various decisions on...