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