Ch 8 Costs

‘In law nothing is certain but the expense’

Samuel Butler

All Matrimonial and Family proceedings in the District Court (Family Court) and High Court are civil proceedings in Hong Kong. As such the law and practice of awarding costs in civil cases is guided by Practice Direction 14.3

For examples of how costs may be allocated in Child Custody cases see separate drop-down menu in this chapter here.

Similarly, for examples of how costs may be allocated in Ancillary Relief cases see separate drop-down menus here [coming soon]

22nd September – CA IDC v SSA Costs – Leave to appeal to CFA refused. The CA once again were clearly aghast at legal costs estimated at well in excess of HK$11 million for both sides, on an argument about the level of child maintenance for a 6-year-old child. The dispute was between unmarried parents. The court described mother’s cost estimate as ‘exhorbitant’ (see para 7), and went on to say that ‘someone must have failed to have proper regard to the objectives of Order 1A r 1 in bringing about such a sorry state of affairs.’

See more robust criticism of legal advisors in the unlikely application in TOCG aka CTOCG v. CKKD FCMC 14183/2013, 25th September 2014

Calderbank Offers – The need to set out the basis of a Calderbank offer to enable the other party to consider it properly and seriously. For an update on Calderbank Offers generally, see Warren Ganesh: Hong Kong Lawyer (April 2016). 

TWC v LKL FCMC 8460/2012 (3rd December 2014) see also KWC v LYY, FCMC 14968/2006, 17 November 2009 (unrep), the wife in the action, who put forward several Calderbank offers, was criticized by HHJ Bebe Chu in para 26:-

“In my view, both W’s Calderbank Letters clearly fall short of these requirements. Making a Calderbank offer does not simply mean putting forward an amount, albeit a high amount which eventually in this case well exceeded the award, but also setting out the basis of the offer to enable the other side to consider it properly and seriously. At that time, H was saying his proposal of HK$2.67m was only one third of what he said were the Family Assets at the time of the separation, which was about HK$8m. If W disagreed with H’s calculations, she should have made it known, whether in her 2nd Calderbank Letter or otherwise, and explained what she regarded as the value of the Family Assets were and how she arrived at the sum of HK$1m. It was also not clear whether W had arrived at this sum after taking into account her alleged amount of maintenance for the children. By failing to set out the basis of her offer, H might have thought that W was only offering him HK$1m out of the HK$8m, i.e. 13% of the assets. This should also be seen against the background that W’s then disclosed net current assets of about HK$11m and H’s of about HK$14,000. In such circumstances, there being no proper explanation as to the basis of her offer of HK$1m, which was further to be paid over 12 months, it was not unreasonable for H to reject W’s offer in her 2nd Calderbank Letter. I also note that there was no mention by W in her 2nd Calderbank Letter as to what her estimated costs would be if the matter were to proceed to trial. H was under legal aid, but W was not and I would have thought it would be helpful for H to know what her costs might be if the matter were to proceed to trial and that such costs might have to be deducted from his award.”

8.

Recovery of Costs

Recovery of costs for a successful party has become something of a vexed issue. As a recent Law Society Report makes clear the current ‘Scale Rates’ were last revised in June 1997 by the Registrar of the High Court and operate as a guide to the allowable hourly rates for solicitors in Party and Party taxation. Although in theory only a ‘guide’, the legal profession is concerned that current Scale Rates continue to be applied in taxation today without any systematic adjustment or allowances for the changes in financial and market conditions since 1997. So while solicitors’ and barristers’ hourly rates have increased  the Scale Rates used in taxation of cost have not.

Legal Principles

The court has a wide discretion as to costs. For the present application, the relevant provisions in the Rules of the District Court governing the exercise of discretion as to costs are Order 62 rules 3(2A) and 5, which contain amendments introduced as a result of the Civil Justice Reform (hereinafter called “CJR”).

The effect of Order 62 rule 3(2A), was as explained in Melvin Waxman & Another v Li Fei Yu & Another [2013] 6 HKC 424 that the “rule” that costs normally follow the event is no longer the usual order in an interlocutory application, but remains an option.

In considering the appropriate order the court must have regard to the underlying objectives of CJR: Order 62 r.5 (1)(aa). One of these objectives is the discouragement of unnecessary or unmeritorious applications: see White Book at 62/3/3B (pp1162-1163 2016 HK Civil Procedure Vol 1).

Under Order 62 rule 5(1)(d), the court may take into account a “without prejudice save as to costs” offer.

When dealing with costs orders, under Order 62 rule 5(1)(e) the court may take into account the conduct of the parties. Rule 5(2) provides that conduct for this purpose includes (a) whether it is reasonable for a party to raise, pursue or contest a particular allegation or issue; (b) the manner in which a party has pursued or defended his case or a particular allegation or issue; (c) whether a claimant who has succeeded in his claim, in whole or in part, exaggerates his claim; and (d) conduct before, as well as during, the proceedings.

Under Order 62 rule 5(1)(f), the court may take into account whether a party has succeeded on part of his case, even if he has not been wholly successful.

In one of the leading authorities on costs in family cases Gojkovic v Gojkovic [1992] 1 All ER 267 Butler-Sloss concluded :-

“It is therefore clear that Calderbank offers require to have teeth in order for them to be effective. This is recognised by the requirement in Ord 62, r 9 (and the equivalent CCR Order 11, r 10) for the court to take account of Calderbank offers, and by analogy open offers, in exercising its discretion as to costs. There are certain preconditions. Both parties must make full and frank disclosure of all relevant assets, and put their cards on the table. Thereafter the respondent to an application must make a serious offer worthy of consideration. If he does so then it is incumbent on the applicant to accept or reject the offer and, if the latter, to make her/his position clear and indicate in figures what she/he is asking for (a counter-offer). It is incumbent on both parties to negotiate if possible and at least to make an attempt to settle the case…”

See also DW v RW [2003] EWHC 611 (Fam) for a wider discussion

A 21st century sequel to Bleak House?

As warning to parties (with more money than sense) on how not to proceed on costs in divorce cases – the case of A v A [2007] EWHC 1810 (Fam) provides a useful reminder of the likely approach of the family courts in Engand & Wales and – I have not the slightest doubt – in Hong Kong too.

Parting observations of Mr Justice Mumby

268. Before leaving this litigation I want to make two final observations.

269. The first relates to the overall costs. Directly or indirectly this family has incurred costs amounting in all to £1,113,207.29 (see paragraph [186] above) in fighting over matrimonial assets which at the end of the day I have found to amount to only £2,669,715 and which even if the wife’s case on sham had succeeded would still have been worth only £4,290,315. So some 41.5% of the matrimonial assets have gone in costs.

270. It may be that the ‘mega’ rich can afford to squander grotesque sums in costs. The allusion is, of course, to Moore v Moore [2007] EWCA Civ 361, [2007] 2 FCR 353, at para [6]. Lesser mortals cannot. Costs in too many so-called ‘big money’ cases – in modern conditions many such cases do not in truth involve ‘big’ money at all – are, as here, grossly disproportionate to either the amounts or the issues at stake. I have had occasion before to deplore the expenditure – one is tempted to say the waste – of money in such cases: see, for example, Re G (Maintenance Pending Suit) [2006] EWHC 1834 (Fam) at para [46]. Other judges have also expressed their concerns. A very recent example is provided by Wood v Rost [2007] EWHC 1511 (Fam), where, speaking of a case which had been conducted at “vast expense,” the Deputy Judge lamented that the late Mr Charles Dickens was no longer alive to write a 21st century sequel to Bleak House. The simile, if I may say so, is all too apt. The accusatory finger which in the 19th century was appropriately pointed at the High Court of Chancery is, in the modern world, more appropriately pointed at the Family Division.

271. The other point relates to the impact of all this on the wife. The wife, out of her award of £1,339,650, has to meet her own costs of £510,531.10, thus reducing what she is left with to £829,118.90, or 61.89%, of her award. On top of that she has to pay the husband and the trustees costs which (see paragraph [264] above) will swallow up a further £244,281.25 [Postscript: this figure has now been agreed (see below), subject only to deduction of the sum of £2,065.19 referred to in paragraph [202] above] thus reducing what she is left with yet further to only £584,837.65, or 43.65% of her award. (The husband does not escape lightly, for he is left having to pay the balance of his costs – some £275,000.) That is a heavy price for the wife to have to pay, but it is the consequence of the misplaced zeal with which she chose to conduct a case built on exiguous foundations. I only hope that others will pay heed and that similar cases will in future be pursued with more circumspection.

C (formerly known a C) v H CACV 169/2012

The necessary trigger for the taxation of the costs of counsel for a court hearing is the delivery of the brief to counsel.  That is the document to which the taxing master will primarily look to when taxing costs for a court hearing.  The backsheet, signed by the instructing solicitor, is the document (i.e. delivered brief) which a barrister is required to have when he appears in court (Code of Conduct, paragraph 73B).  He must also keep a copy of the backsheet for a period of two years (ibid., paragraph 73G) and may be required to produce it for inspection (ibid., paragraph 73H).

Here, the fees of counsel may have been committed such that the instructing solicitor undertook to pay them to counsel even before the delivery of the brief but that does not alter the fact that, from the perspective of the husband ordered to bear the wife’s costs, the husband should not have a liability for those fees since the triggering event making them payable had not occurred.

Appeal of Cost Order (Family Court) – TSC v LYK FCMC 2359/2013

See also Mr Justice Mostyn on his report on Costs to the (UK) President of the Family Divison here.