Introduction

In M, DA v M, VD (formerly known as KSH) HKFC 37, His Honour Judge I Wong considered an application by the wife for legal costs provision in the context of a high-value divorce and the husband’s shifting and opaque financial disclosure. The decision is a timely reminder that where a party puts forward an obscure and inconsistent account of their financial position, the Court may look past the face of that disclosure and draw adverse inferences as to their true financial position.

Background

The parties had been married for approximately twenty-five years before separating in 2021. The wife was a housewife during most of the time of the relationship, while the Husband was a successful businessman and the breadwinner of the family who, during the marriage, built a network of private companies across Hong Kong and multiple overseas jurisdictions, involved in fast moving consumer goods trading, property investment, car park management, co working space and storage.

The wife sought maintenance pending suit (“MPS”) and legal costs provision (“LCP”) to enable her to fund the litigation. While the application for maintenance pending suit was settled on a package of around HK$123,755 per month, the issue of LCP proceeded to judgment.

Legal framework

The Court applied Currey v Currey (No 2) [2007] 1 FLR 946 and HJFG v KCY [2012] 1 HKLRD 95, which set out the guiding principles governing LCP. The applicant must provide a sufficiently detailed breakdown of the anticipated costs and, importantly, show that legal representation cannot reasonably be obtained by other means, including by deploying existing assets, raising loans or seeking public funding. However, even where that threshold is met, the Court retains a broad discretion and may also take into account other factors such as the parties’ conduct, proportionality, and the period for which LCP should be ordered.

The husband’s disclosure

The husband opposed LCP on two main grounds: (1) that his business was highly leveraged and in decline such that he lacked liquidity to pay; and (2) that the wife fails to satisfy the requirements in Currey v Currey (No 2) as she could fund litigation by realizing her property interests in the “Landmark Property” and “Tyron Apartments”, notwithstanding that those properties were lightly mortgaged, being rented out and jointly owned with the husband.

The wife, however, challenged the husband’s financial disclosure as being wholly inadequate and invited the Court to draw a robust adverse inference as to the husband’s true means.

The Court focused principally on the husband’s first ground of opposition – namely, his ability to pay – and in doing so compared his 1^st Form E, filed in April of 2024, with his updated Form E, filed in May of 2025. In the 1^st Form E, prepared while represented by a firm of specialist family lawyers, the husband disclosed substantial global and a net worth exceeding HK$50 million. By contrast, in the updated Form E, he increased the number of companies and landed properties disclosed, but treated company values as “to be determined”, reduced the number of his bank accounts, and, critically, included his companies’ liabilities in his personal balance sheet, which had the effect of increasing his total liabilities to nearly HK$79 million and reducing his net assets to a humble figure of HK$420,100.

The Court’s reasoning

The Court found that the husband failed to give full and frank financial disclosure for the following reasons:

1.      The husband had blurred the line between his personal assets and liabilities and those of his companies, including their property holdings and related expenses, with the result that his asserted liabilities were significantly inflated and his overall financial position became impossible to discern with any clarity;

2.      The husband included in his Form E his contingent liabilities arising under personal guarantees and treated them as though they were immediately due and payable, even though they were only potential obligations;

3.      The husband’s continued payment of the wife’s MPS and his earlier proposal for financial provision pointed to an ability to pay; and

4.      The husband did not provide adequate particulars to explain the alleged decline in his total income.

The Court concluded that the updated Form E was intended to confuse rather than to assist the Court. In doing so, it recalled the well-known caveat given by Lam J (as he then was) in L v L [2006] HKFLR 121 that financial disclosure is not a “game of hide and seek” and that the Court should not hesitate to draw adverse inferences against a party who has failed to come clean in giving full and frank disclosure of their means. 

In light of the husband’s failure to give full and frank disclosure and his filing of an illusory Form E aimed at obscuring his true financial position, the Court considered it appropriate to draw an adverse inference against the husband on his ability to pay and further described his conduct as “detestable”, particularly given that he had the assistance of a specialist firm. The Court therefore disregarded the updated Form E and instead relied on the 1^st Form E as the more reliable reflection of the husband’s financial profile, from which it inferred that his true means were materially stronger than he had later presented.

Accordingly, the wife was entirely successful in her LCP application. Adopting a broad brush approach to what was reasonable and proportionate in a complex case involving numerous private companies, cross border assets, likely disputes over third party ownership and obviously deficient disclosure by the husband, the Court ordered LCP totaling HK$900,000, to be spread over 18 months at HK$50,000 monthly. The Court also awarded the wife costs of her applications for MPS and LCP, having taken into account the husband’s failure to provide full and frank disclosure, which was treated as litigation misconduct.

Key takeaways

M, DA v M, VD (formerly known as KSH) HKFC 37 serves as a reminder that financial disclosure in Hong Kong matrimonial proceedings must be clear, coherent and candid. It also illustrates that when considering an application for legal costs provision, the Court is concerned not only with assessing the applicant’s needs but also with what is required to ensure fairness in the conduct of the litigation.

Furthermore, where a party chooses to obscure their true financial position by intermingling personal and corporate finances and presenting confusing, misleading and contradictory figures, the Court may step back and draw adverse inferences reflecting the probable reality of the situation in order to guarantee fairness in the conduct of the proceedings.