WW v LLN (No 2)
Court of Appeal
Civil Appeal No 524 of 2019
Lam V-P and Queeny Au-Yeung J
14 January, 25 March 2020

Family law — divorce — ancillary relief — litigation funding — appeal against order requiring payment of funding per month without temporal limit and backdating of monthly payments — evidential requirement on quantum of costs — form and duration of litigation funding — appeal allowed in part

The husband (H) was granted leave to appeal the Family Court Judge’s decision in ancillary relief proceedings requiring H to pay the wife (W) litigation funding together with a backdated sum (see [2019] 5 HKLRD 694). H’s grounds of appeal were that the Judge erred in: (a) ordering litigation funding of $50,000 per month to be paid without scope or limit (temporal or in relation to the stage of the proceedings); and (b) allowing the backdating of monthly payments to cover litigation funding in the sum of $300,000 from 1 February 2019 to 1 July 2019, that is from the month immediately following the issue of W’s maintenance pending suit (MPS) application to the month when litigation funding was to begin. H objected that the backdated sum of $300,000 was in excess of what W had actually spent on legal fees. 

Held, allowing the appeal in part by upholding the Judge’s decision that H pay litigation funding but specifying the duration to be up to and including the Financial Dispute Resolution (FDR) hearing or further order and the backdated amount of litigation funding be reduced to $155,000, that:

Evidential requirement

1) There should be flexibility in the evidential requirement on quantum of costs in a litigation funding application depending on the size of the claim. Where the claim was for a modest amount and in a relatively early stage, it would be counter-productive to require detailed breakdown of future costs. This would go against the summary nature of the exercise and the broad-brush approach that the court should adopt. Provided that a judge could be satisfied on the strength of a Form H that the ongoing costs were reasonable and sums asked for were commensurate with the proportionate scale of the litigation, an award could still be made. On the other hand, a “big money case” would merit greater details being given. Even in those cases, breakdowns and details commonly found in a statement of costs for summary assessment should be sufficient. The court would only demand greater details in cases where the amount sought was exorbitant or where there were other reasons for a closer examination of the figures put forward by the applicant (KGL v CKY [2003] 2 HKLRD 301, KWTM v NSH (FCMC 14639/2007, [2008] HKEC 1728), K v K (CACV 80/2010, [2010] HKEC 1372), HJFG v KCY [2012] 1 HKLRD 95 considered). (See paras.45–46)

2) In the present case, Form H was the only information on W’s costs before the Judge made his decision on litigation funding including the backdated award. There was no affidavit evidence from W to explain her breakdown of legal costs or provide any basis upon which she sought the monthly sum of $50,000. The Judge was familiar with the case, having presided over all the hearings in the matrimonial proceedings since July 2018. The amounts sought were not exorbitant and were relatively modest for a piece of litigation of this scale. This was clearly not a big money case. Based on the family assets disclosed, the estimates in Form H were proportionate. A Family Court Judge was entitled to use his or her judicial experience on family cases to arrive at a rough and ready figure in similar circumstances (KGL v CKY [2003] 2 HKLRD 301 applied). (See paras.47, 54–55, 57.)

Form and duration of litigation funding

3) It was not in dispute that litigation funding should take the form of monthly payments. W’s application for litigation funding was made at an early stage of the proceedings. FDR was nowhere in sight. Notwithstanding that W was not optimistic on the prospect of resolving the dispute at FDR, that was not a justification for not following the guidance in the authorities that such funding might well only be granted up to the FDR and absent a settlement a further application would have to made, which might or might not be granted. The FDR was “a watershed and all reasonable inducements to both parties there to negotiate positively in the light of informal judicial indications should be in place” (Currey v Currey [2006] EWCA Civ 1338, HJFG v KCY [2012] 1 HKLRD 95 applied). (See paras.62–64.) 

4) Although the duration of the litigation funding order was ultimately a matter of discretion, the modest amount sought was not justification for departing from and not adhering to the guidance. Given the policy considerations behind the setting of such duration limit and the importance attached by the courts to FDR and mediation in family disputes, it would take very cogent grounds to depart from the guidance. This was particularly so when parties were expected to participate in family mediation and FDR in good faith and sincerity. The court’s exercise of discretion as to the duration of a litigation funding order could not be influenced by a party’s attitude or outlook towards FDR. (See paras. 65–67.) 

Backdated amount

5) The Judge erred in considering that the litigation funding award by way of backdating was not simply for the reimbursement of legal costs already paid by W. Thus the sum of $300,000 (based on litigation funding of $50,000 x 6) was awarded instead of the sum evidenced by W’s Form H. Such an approach was not acceptable. By its very nature, a backdated sum should only cover costs already incurred (including those incurred but not yet paid). The rest would be estimates that would be covered by the future monthly litigation funding. (See paras.69–70.)

Appeal 

This was the petitioner-husband’s appeal against the portion of the order by Judge CK Chan in the Family Court on 23 July 2019 for him to pay litigation funding to the respondent-wife. The facts are set out in the judgment. 

Jurisdictions: