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CACV 524/2019
[2020] HKCA 178
IN THE HIGH COURT OF THE
HONG KONG SPECIAL ADMINISTRATIVE REGION
COURT OF APPEAL
CIVIL APPEAL NO 524 OF 2019
(ON APPEAL FROM FCMC NO 2996/2018)
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WW |
Petitioner |
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LLN formerly known as |
Respondent |
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LSM |
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Before: Hon Lam VP and Au-Yeung J in Court
Date of Hearing: 14 January 2020
Date of Reasons for Judgment and Decision on Costs: 25 March 2020
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REASONS FOR JUDGMENT
AND
DECISION ON COSTS
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The Court:
1. These are the reasons for the judgment of this Court.
Introduction
2. Although the parties are divorced, we shall call them husband and wife for ease of reference.
3. This was the husband’s appeal against the Family Court’s order requiring him to pay litigation funding together with a backdated sum. His grounds of appeal are twofold:
(1) That the learned judge erred in allowing litigation funding of HK$50,000 per month without any scope or limit (temporal or in relation to the stage of proceedings); and
(2) That the learned judge erred in allowing the backdating of the monthly payments in the sum of HK$300,000 from 1 February 2019 to 1 July 2019.
4. After hearing submissions, we gave leave to the wife to file her 4th affirmation (“the 4th affirmation”), the 2nd affirmation of her solicitor, Ms Chan Lai Hung (“Ms Chan”) (“the 2nd affirmation”), to correct an alleged mistake as regards costs estimates in the Form H placed before the Judge (“Form H (1)”). The affirmations also addressed an issue raised by this court as to availability of a property in UK to fund the wife’s legal costs.
5. We also allowed the appeal and set aside the order on litigation funding below. We upheld the Judge’s order on litigation funding in the amount of $50,000 per month but specified that it should be up to and including the hearing for FDR. We also ordered the back-dated award to be HK$155,000. Here are our reasons.
Background
6. The parties were married in 1993. They have 2 sons, who are now aged 25 and 23 respectively. The petition for divorce was filed by the husband first on 27 April 2018 on behaviour ground. A fresh petition was later filed by him on 17 July 2019 on the ground of 2-year separation.
7. On 30 January 2019, the wife issued her summons for maintenance pending suit (“MPS application”). She asked for, amongst others, HK$50,000 as litigation funding per month from 1 March 2019.
8. The husband opposed the application. He claimed that the parties had agreed to separate their finance since 2005 and hence he should not be responsible for the wife’s expenses. He claimed that the wife was and still is a director of a few private companies and her company bank accounts, which have not been disclosed to date, were still active. He also claimed that the wife could have used the UK Property to raise funds for litigation.
9. The Forms E filed by the parties before the Judge showed that the husband had net assets of about HK$38.58 million and income of HK$70,000 per month. The wife claimed to have negative equity, her debts being about HK$24 million from her failed business in Mainland China. Each party made cross allegations of lack of full and frank disclosure against the other.
10. Before the Judge was Form H (1) dated 13 June 2019 wherein Part 1 showed estimated costs of HK$238,000 incurred up to and including the disposal of the MPS application. It was not signed by the wife though signed by the solicitor. It was only placed before the Judge as an attachment to counsel’s submissions of the same date. There were also figures under Part 2 (for future costs up to FDR) adding up to a total of $353,000; and figures under Part 3 (for future costs from FDR to Trial) adding up to a total of $335,000.
11. The Judge placed reliance on those figures and found that the wife’s estimated total costs for the ancillary relief proceedings (HK$926,000) were reasonable. He ordered the husband to make a monthly payment of HK$50,000 to her solicitors directly. The Judge ordered the litigation funding to begin from the month immediately after the date of the application, i.e. 1 August 2019, as evidently there were still funds in the wife’s bank account before that time. He ordered a backdated sum of HK$300,000 to run from 1 February (the month immediately following issue of the MPS Application) to 1 July 2019.
12. In the application for leave to appeal before the Judge, it was the wife’s stance that there was nothing wrong for the Judge to order the backdated sum of HK$300,000 despite the fact that she had only spent HK$238,000, as the excess was “actually a kind of rain check for [the wife] to handle situations like this [leave application]”.
13. On 1 November 2019, in the course of the leave application before this court, the wife disclosed, for the first time, that there was a “serious mistake” in the figure of HK$238,000 provided to the Judge in Form H (1). In light of that, the Court did not proceed with the rolled up hearing and instead only addressed the question of leave to appeal at the hearing on 8 November 2019. Leave to appeal was granted for an appeal to be brought in respect of litigation funding and directions were given for further affirmations to be filed. See WW v LLN [2019] HKCA 1278.
14. Ms Chan, explained on affirmation that the HK$238,000 figure was an “inadvertent mistake”. Her clerk had adopted an old Form H which was prepared for the First Appointment Hearing originally scheduled for 31 January 2019. The clerk forgot to review the estimated costs and simply changed the date to 13 June 2019 to prepare Form H (1). As Ms Chan was very busy, she did not check the contents of Form H (1) before it was filed with counsel’s submissions for the MPS application.
15. Ms Chan affirmed that since the figures on a Form H were “only estimates”, she did not put much thought on them and was not aware of the wrong estimates at the material time. It was only in reviewing the documents for the leave application before the Court of Appeal that she discovered that the figures on Form H (1) were inaccurate. After discussion with counsel, Ms Chan prepared another Form H (dated the same date of 13 June 2019, presumably representing the true position as at that date) (“Form H (2)”) and produced the same in her 2nd affirmation of 18 November 2019.
16. Comparing with Form H (1), the figures under Part 1 in Form H (2) added up to $393,000, an increase of $155,000. Ms Yue, counsel for the wife, confirmed that that amount represented the costs for preparing for paper disposal of the MPS application. The figures in Part 2 and Part 3 were also increased to $510,000 and $1,036,000 respectively. Ms Chan did not proffer any explanation for these increases. Like Form H (1), it was signed only by the solicitor and not by the wife.
17. Solicitors for the wife lodged another Form H (“Form H (3)”) dated 13 November 2019 for the 3rd First Appointment Hearing on 14 November 2019. A copy of Form H (3) was produced by the husband in his 5th affirmation. The estimated costs up to this hearing as set out under Part 1 of Form H (3) were HK$765,000. Apparently the estimated costs of this appeal was added under Part 1 of Form H (3). The total figures under Parts 2 and 3 remained the same as per Form H (2).
18. The issues raised by the husband in this appeal were:
(1) The need for litigation funding;
(2) The lack of reliable evidence on quantum in the light of inaccuracies in Forms H;
(3) The form and duration of the litigation funding; and
(4) The backdated amount.
19. The wife alleged that the husband unreasonably engaged her in satellite litigation to jack up costs. He commenced litigation in the District Court on 17 December 2019 to sue her for rent. The plaintiff and the defendant in the District Court action were family companies but the husband’s conduct caused further financial strain on her. She asked the court to uphold the Judge’s order on litigation funding.
The need for litigation funding
20. The principles for granting litigation funding are well-established:
(1) In order to obtain litigation funding, the burden is on an applicant to demonstrate that she cannot reasonably procure legal representation by any other means. This includes showing that she cannot secure publicly funded legal help at a level of expertise apt to the proceedings. To the extent that she has assets, the applicant has to demonstrate that they cannot reasonably be deployed, either directly or as the means of raising a loan to fund legal services[1];
(2) The subject matter of the proceedings and the reasonableness of the applicant’s stance in the proceedings will always be relevant.
(3) The period over which costs allowance is to be paid is also relevant. If the application was made before the FDR hearing, it may well be wise to order that the costs allowance should fund the applicant only up to that hearing. If the FDR fails, it would be for the new judge, on the basis of the materials properly before him, to determine whether a new allowance for legal costs should be granted and if so, in what amount.
HJFG v KCY [2012] 1 HKLRD 95, §§80-83; Currey v Currey [2006] EWCA Civ 1338.
21. The court should be alert to the risk of injustice arising from irrecoverable and/or unmerited sums paid for litigation funding, which would call for extra caution in the balancing exercise. As stated by Thorpe LJ in Moses-Taiga v Taiga [2005] EWCA Civ 1013, at §20:
“… the whole purpose of alimony pending suit is to sustain the petitioner pending the court’s determination. There is manifestly a risk of unjustified and irrecoverable payments, but that has to be balanced against the risk of a denial of access to justice for the...
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