Litigation misconduct is a good reason to depart from equal division, but it is not easily satisfied
Introduction
In deciding the question of financial relief in matrimonial proceedings,
the Court has a duty to consider the conduct of parties, which includes both
marital misconduct and litigation misconduct, under section 7 of the Matrimonial
Proceedings and Property Ordinance (Cap. 192). It is more commonly seen for
marital misconduct to justify a departure from equal division of matrimonial
assets, whilst litigation misconduct would be sanctioned by costs unless the
case is exceptional. In the recent case JTMW
v NAV [2022] HKFC 46, the Family Court was invited to consider whether
departure from equal division was justified on the basis of the wife’s alleged litigation
misconduct.
Background
The litigation history
This case is one of the typical high conflict divorce saga. It lasted for
9 years. In the first paragraph of the judgment, the Honourable Judge I Wong
(the “Judge”) succinctly set the
scene:
“There
have not been any reasonable or sensible compromises in respect of any matters
and all differences, big or small, have ended in court. During the course of these years, I have
given no less than 11 written judgments and numerous ex tempore judgments.”
In this divorce case, the husband is a Danish (the “Husband”) and the wife is an Australian (the “Wife”). On 26 March 2012, the Wife petitioned for divorce.
Children
Initially, conflicts centred much on the care and control arrangement of their children, but quickly things went south to a point where parties argued on essentially all issues arising from the divorce proceedings which led to a series of litigations seeking non-removal orders, non-molestation orders, application for relocation to Australia, temporary removal orders, maintenance pending suit, directions on expert reports together with assorted appeals and other types of orders. After trial, the Court ordered custody, care and control of the children to the Husband.
Respective financial situations
The Husband used to be a professional commercial pilot with a considerable
pay, whist the Wife worked as a private English tutor and face-painter. The
former matrimonial home of the parties was sold at HK$4.6 million but much of
the monies have been evaporated in legal costs. The net proceeds of the sale
dropped to less than HK$1 million (the “Net
Proceeds”). The Net Proceeds were paid into court pending determination of
the ancillary relief.
Alleged litigation misconduct
The Husband averred that the Wife should bear most of the responsibility
for dissipation of the matrimonial assets by incurring legal costs from making
numerous unmeritorious applications which were mostly dismissed with adverse costs
orders against her. Accordingly, the Husband argued that he should be entitled
to the entire Net Proceeds.
The law
Prior to analysing whether the Wife’s conduct amounts to litigation
misconduct, the Judge first referred to the case Rothschild v De Souza [2020] EWCA Civ 1215 (“Rothschild”) where Moylan LJ of the
English Court of Appeal considered the same issue with similar facts. In
Rothschild, Moylan LJ ruled that the general approach is that litigation
conduct within financial remedy proceedings will be reflected in a costs order,
unless the court has determined that one party’s litigation conduct has been
such that it should be taken into account when the court is determining its
award. Depletion of matrimonial assets through litigation misconduct will not
always be remedied by a costs order which simply reallocates the remaining
assets between parties and does not necessarily remedy the effect of there
being less wealth to be distributed between parties. When in cases awarding
costs in favour of the victims may not provide for full compensation, the court
will strive to ensure the responsible litigant bears the costs of waste in
full. Misconduct is a relevant factor to be considered even in a “needs” cases
– if required to achieve a fair outcome, the court is entitled to prioritise
the needs of the party who has not been guilty of such conduct. The financial
consequences of the litigation misconduct might be such that it is fair that
the innocent party is awarded all the matrimonial assets.
Application
The Judge noted that during that period when parties were litigating primarily
on the care arrangement of the children, both parties took out applications for
non-molestation and directions such as for expert reports and temporary
non-removal orders. In considering the Husband’s criticism of the Wife that she
was being unreasonable, the Judge made reference to Hale J in R v R (Costs: Child Case) [1997]
2 FLR 95 where it was ruled that all parents are expected to be unreasonable in
the attitude towards their children, but the crucial factor is whether one is
unreasonable in the attitude to the litigation. If an unrepresented litigant is
found to have been unreasonable in the attitude to the litigation, that person
would be given a degree of generosity but that would not be a license to
litigate entirely unreasonably.
The Judge was not convinced that the Wife was guilty of litigation
misconduct warranting a departure from equal division:
1.
Such application for relocation was not unreasonable given her identity
as an expatriate coming to Hong Kong because of the Husband’s job.
2.
During the trial of the custody matter, the Wife agreed to the care and
control of the children to remain with the Husband for the time being and the
Judge could not find her conduct be regarded as unusual.
3.
The Wife’s application for non-molestation order against the Husband was
compromised by way of mutual undertaking.
4. Although there were three substantial costs orders made against the Wife, the Husband had also made applications which were reprehensible litigation conduct with costs awarded against him and the leave to appeal was also dismissed as totally without merit.
Upon taking into account all factors, in a round and broad-brush
approach, the Judge held that equal division of the matrimonial asset is a fair
outcome.
Takeaway
The Judge has set out clearly that litigation misconduct would be
sanctioned by costs unless the case is exceptional. Unreasonable attitude of
one party towards the entirety of the divorce proceedings amounts to litigation
misconduct. This threshold is high. Even though in this case, the misconduct of
incurring substantial and unnecessary legal costs resulted in severe depletion
of the matrimonial assets, this was treated as a consequence instead of a
condition to litigation misconduct. Nonetheless, if litigation misconduct is
successfully established, it may justify a departure from equal division of
matrimonial assets.
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Important: The law and procedure on
this subject are very specialised and
complicated. This article is just a very general outline for reference and
cannot be relied upon as legal advice in any individual case. If any advice
or assistance is needed, please contact our solicitors. |
Published by ONC Lawyers © 2022 |