CKK v. WMYA

FCMC 10089 / 2007

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES

NUMBER 10089 OF 2007

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DECISION
(Specific Discovery)

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The Application

1.  Before me is an Amended Application taken out by the respondent wife for further and better particulars and production of documents on the petitioner husband’s financial situation.

2.  Since I have already set out the parties’ background in the Reasons for Decision dated 23 December 2014 on the petitioner’s application for trial of preliminary issues, it is not necessary for me to repeat the same here.  I only need to say that decree absolute for the dissolution of the marriage was granted on 10 June 2010.  The petitioner is now 61 years old and is running a successful electronics business.  He has remarried on 5 June 2011.  According to his Form E dated 14 November 2014, his net assets are worth about $105,692,000.  As for the respondent, she is also 61 years old.  She reported having net assets of about $19,944,000.

3.  I shall continue to refer the petitioner as “P” and the respondent “R”.

Legal Principles

4.  The relevant legal principles are not in dispute.  To invoke Order24 rule 7, RHC, there are 3 prerequisites, namely, relevance, existence and possession of the documents sought for discovery.  Once a prima facie case has been made by the party seeking such order, the court has a discretion whether or not to order disclosure.  It is then for the other party objecting disclosure to show that it is not necessary for disposing fairly of the cause or issue in question or for the purpose of saving costs:  Paul’s Model Art GMBH & Co  KG v UT Ltd [2006] 1 HKC 238; also Hong Kong Civil Procedure (2015) at para 24/8/1. 

5.  Furthermore, pursuant to Rule77(4) of the Matrimonial Causes Rules, Cap 179A, the court may order a party to give further information concerning any matter contained in any affidavit filed by or on behalf of the other party or any other relevant matter, or to furnish a list of relevant documents or to allow inspection of any such documents.

The Items in Disputes

6.  When it came to the argument hearing, not only that R’s requests were drastically different from those she originally set out in her summons, but also that many of the requests had already been dealt with.  Thus, I only have to deal with the outstanding ones.

Item no 3 of Schedule 1 and Item no 11 of Schedule 2 to the Amended Application

“Please state details of “liability owed to P&T, includes (sic) (1) the relevant sum; (2) date of incurrence of the liability; (3) state of repayment; (4) interest; and (5) term”

7.  By item no 11, R also seeks the production of the relevant documents.

8.  P&T is P’s major company.  In his Form E, P stated that he owed this company $3,379,776; that caused R’s present request for further and better particulars.

9.  P’s reply given prior to the hearing was that these liabilities are related to the company and the information does not need to be disclosed to R (“(P&T) 的債務乃是公司資料, 不須要向答辯人提供).

10.  R insists on knowing the particulars.  I agree with Ms Yip SC, who appeared together with Ms Yu for R, that the reply is ridiculous and is simply not properly dealing with the request. 

11.  Ms Tsui did not adopt her lay client’s line of argument.  She confirmed, on behalf of P, during the hearing that the amount of $3,379,776, that was said to be due to P&T, is exactly the figure stated on P&T’s audited account dated 30 April 2013.  She further submitted that P’s dealings with P&T have been properly audited.  It is not uncommon practice of company directors to owe loans or to lend loans to companies and is a matter of company audit management.  The information already provided is sufficient for the present purpose.

12.  In response, Ms Yip submitted that if P will swear that this was the liability as at the date of his Form E, that this remains the current liability from 30 April 2013 up till now, that P has made no repayment and that P&T has made no further lending, R will be perfectly happy with the answer.

13.  With respect, I fail to see why this is necessary.  P’s Form E was already made on oath and the figure was an audited figure. The audited report also stated that the amount due from P is unsecured, interest free and with no fixed date of repayment.  In any event, the parties are going to appoint an accountant to do the valuation of the relevant companies including P&T.  I do not consider that the further confirmation suggested by Ms Yip is necessary.  R should wait for the outcome of the valuation.

Item nos 4, 5, 6 and 7 of Schedule 1 to the Amended Application

14.  These items can be dealt with together. 

15.  In his Form E, P stated he requires $222,225 for his monthly expenses, of which his general expenses are $47,225 and his personal expenses are $175,000.  Out of this $222,225, he needs $30,000 for transportation and accommodation expenses in the Mainland, $20,000 for entertainment and gifts, $15,000 for holidays and $20,000 for maintaining his present wife’s relatives in the Mainland.  These 4 items, totalling $85,000 per month, attract 4 requests from R.

Item no 4 of Schedule 1 to the Amended Application

“Please provide the breakdown of “transportation to/from and accommodation in the Mainland” and explain which part relates to transportation and which part relates to accommodation”

16.  In his Answer dated 31 December 2014, P replied that he did not record or keep detailed information in respect of each and every transportation and accommodation in the Mainland.  

Item no 5 of Schedule 1 to the Amended Application

“Please explain why the petitioner spends $20,000 on entertainment/gifts. Please provide the particulars of entertainment/gifts for the last 3 months with documentary proofs attached”

17.  In his Answer, P replied that he did not record or keep detailed information in respect of each and every item of entertainment / gifts.  He said the question is meaningless (無聊) as this $20,000 is not worth a mention given his financial situation.

Item no 6 of Schedule 1 to the Amended Application

“Please list the location, period, and expenses incurred for personal use on travelling in the most recent two years. Please provide documentary proof”.

18.  P’s Answer was that he did not record or keep detailed information in respect of each and every travel.  He also did not know from which of the paragraph in his Form E the request came from and alleged that the question was meaningless.

Item no 7 of Schedule 1 to the Amended Application

“Please state how the petitioner paid this sum of money. Please state who the wife’s relatives are.”

19.  In response, P replied in his Answer that R is not entitled to ask.

20.  On the breakdown of P’s transportation to/from and accommodation in the Mainland, Ms Tsui argued that since P does not keep any record, he is simply not able to give an answer.  In any event, she argued that this is not necessary and she failed to see how the breakdown would help R’s case.  P travels a lot to the Mainland for business. The sum in question is merely a small sum compared to the means of P.

21.  As for the breakdown of $20,000 entertainment/gifts expenses, Ms Tsui relied on P’s answer that he does not have such records and that the sum of $20,000 is comparatively small.  She does not see the relevance and necessity of providing an answer.  She said that obviously P cannot provide an answer.

22.  As for the $15,000 on travelling, again Ms Tsui argued that she does not see the relevance and necessity of providing an answer.

23.  Finally, as regards the monthly maintenance of $20,000 that P said he has been paying his wife’s relatives, Ms Tsui submitted that R is not entitled to such information.  R can simply ask the court to disregard such expenses as unreasonable regular expenses in the proceedings if she really believes that it affects her case.  P does not see it necessary in the circumstances to answer the question.

24.  Ms Tsui also submitted that there should not be minute retrospective investigations into these matters.

25.  In response, Ms Yip submitted that all these items added up to $85,000 per month, save and except 3 monthly statements for one single credit card only, P has not produced a single piece of document in support of his expenditure.  She argued that the items pursued are relevant, highly necessary and would fairly dispose of the issues, namely, the spending level and standard of living of P.

26.  To start with, I need to comment that not only that P’s Replies as quoted above are unhelpful, they are also distasteful and arrogantly worded.  P is legally represented.  I would have thought that a degree of restraint and courtesy should have been exercised.

27.  $85,000 per month is not a negligible sum. No doubt, P is a man of means but I note Ms Tsui has not gone so far as to say that this is a ‘big money’ case where needs and standard of living would not be in issue.  As I referred to above, the total family assets are reported to be in the region of $125,636,000.  Further, as Ms Yip correctly pointed out, P&T enjoyed a modest profit of about $1,466,000 in 2011 and $531,600 in 2012 only.  Given all these and also the relative young age of the parties, it is not likely to be a big money case by today’s standard.

28.  Further, as has been said by Hartmann JA (as he then was):

“… It is not simply to be assumed that great wealth equates to great extravagance. Some married couples who enjoy great wealth spend with comparative modesty and with a discipline born of discretion, others enjoy consumption on a grand scale”: HJFG v KCY [2012] 1 HKLRD 95, para 36.

29.  What Hartmann JA said was in the context of an application for maintenance pending suit, but I see no reason why this comment does not apply here.  I agree that the requests are relevant to P’s needs and standard of living, if not also to his means and financial capacity.

30.  Though P claimed he does not keep record of each and every transportation, entertainment, gift and holiday, as the person who incurred the expenses, he must have some knowledge as to where he spent his money on.  Obviously, according to his Replies, he must have kept some of the records.  Indeed, in the modern digital era that we are in today, it is hard to believe that no records whatsoever, whether willingly or unwillingly, have been kept.  It is even harder to believe that being a successful entrepreneur he is not able to give any particulars such as where he went for holiday and for business, where he stayed, the transportation he used and the form of entertainments he enjoyed.  What he should have done was to give the particulars to the best he could.

31.  For the above reasons, R should be successful in her requests.

32.  The following 2 items can be dealt with together.

Item no 2 of Schedule 2 to the Amended Application

Please provide supporting documents in respect of each of the transactions below (which the petitioner claimed to be “self-use/expenditure” or expenses”) that can support the alleged use (eg the supporting documents which can show that the petitioner used the following transactions on what kinds of expenses / expenditures; and/or supporting documents which can show that the petitioner withdrew the sums for self-use).

Item no 3 of Schedule 2 to the Amended Application

In respect of the sums in the table below, please provide supporting documents which can support that these sums were used to exchange Renminbi (e.g. proofing documents for exchange of Renminbi) as claimed by the petitioner that these sums are used to “exchange to Renminbi for expenditures” (兌換人民幣用作消費):

33.  Ms Tsui argued that it is not helpful or meaningful to do a forensic analysis on P’s monthly expenses.  Taking into account of P’s means, it is not surprising at all or so outrageous that he spends cash in the region of an average of $100,000 a month.  This is not a question that P must provide an answer or can provide an answer when he prefers to spend cash. Also, his answer, if given, would not help to dispose of the matter or help saving costs.

34.  On the exchange of RMBs, Ms Tsui submitted that P has to travels to the Mainland, has business contacts and connection with his wife’s relatives in the Mainland.  He cannot provide proof of RMB expenses and especially for the period in 2013 and 2014.  This is not a question that needs to be answered.

35.  It has been submitted on R’s behalf that without a single piece of document in support, the figures that P claimed to be his standard of living or level of spending is no more than bare assertions. 

36.  P stated on his Form E that his monthly expenses are $222,225.  I note that in March 2014 he withdrew $120,000 on 7 March 2014 for alleged self-use spending, $130,049 on 5 March 2014 for exchanging RMBs for spending, and $150,376 on 26 March 2014 for exchanging to RMBs for spending.  A total of $400,425 was withdrawn within one month’s time for spending only. This alone calls for some explanations.  Apart from this, the total withdrawals, taking Hong Kong dollars and Reminbis together, are roughly the amount that P said he is spending each month but as has been pointed out by Ms Yip, some of the expenses such as tax payment do not need to be paid on a monthly basis.

37.  It would appear that according to P, he needs the money for his business travels in the Mainland.  If this is the case, then the question would be why P has to spend the money out of his own personal expenditure and why there is no reimbursement from his companies.

38.  My views on records as stated above are also applicable here.  Since P’s needs and standard of living are relevant in the ancillary relief of the present case, it is difficult to understand why the requests do not need to be answered.

Redaction of Documents Provided by the Petitioner

Item no 5 of Schedule 2 to the Amended Application

In respect of the sums in the table below, please provide supporting documents which can explain the alleged use of funds being “payments for goods for and on behalf of (P&T) to the suppliers” (代(P&T)匯款給供應商支付貨款).

Date	Withdrawals (HKD)	Whereabouts
20.5.2014	500,000.00	Payments for goods for and on behalf of P&T to the suppliers
10.4.2014	800,150.00	Payments for goods for and on behalf of P&T to the suppliers

39.  What P said in essence is that he had paid these two sums on behalf of P&T in favour of its suppliers.  Shortly before the hearing, P provided redacted copies of documents requested.  They are:

(1) the official receipts issued by P&T for the respective sums of $500,150 and $800,150;

(2) a Customer Advice of Remittance in respect of $800,150 issued by the Bank of China (Hong Kong) Limited; and

(3) Application for Remittance in respect of $500,000.

40.  As regards the official receipts, the name of the payee on each was redacted.  The official receipts stated that the relevant sums were received from P being in payment of “transfer to … ” with the name of the transferee redacted.  Apart from this, on the face of the copy provided, it is unclear as to whether other parts were also redacted.

41.  As for the Customer Advice, the copy produced by P is illegible.  It is not entirely clear as to what were redacted.  As far as I can see, at least the name and address of the beneficiary of the remittance were redacted.

42.  Likewise, for the Application for Remittance, the information regarding the name and the account particulars of the beneficiary were redacted.

43.  Upon R’s enquiry, P’s reply prior to the hearing was that the redacted parts contained trade secret information.  R insists that the unredacted copies should be produced.

44.  Ms Tsui stressed that P is just protecting his interest and in the present case, only 2 transactions are involved.  The amount involved is about $1,300,000 only. Compared to his means, it is not unreasonable for him not to disclose the names of his suppliers and it would not impact on the outcome.  P has done what is sufficient.  

45.  Ms Yip submitted that the supply of these documents is as good as being supplied with no documents.

46.  I agree.  The names of the supplier as such are not material. What is material is whether the documents support P’s assertion.  I agree with Ms Yip that there is nothing from the documents which suggest that the sums were for payments of goods.  For instance, if payments were made by P in favour of a supplier on behalf of P&T, then an explanation is needed as to why the official receipt would have stated that P&T had received the two sums from P.

47.  The only reason for redaction is ‘trade secret’.  It is trite that first, a party is entitled to seal up parts of a document on discovery if it is considered that they are irrelevant.  Secondly, the test in Peruvian Guano case (1882) 11 QBD 55 must be applied in respect of the information covered up.  Ms Yip referred me to Worldtrade Entertainment Limited & Anor v Starway Technology Limited & Anor, HCA 450/2000 (date of Judgment: 19 May 2000).  In page 3 of the judgment, Deputy High Court Judge S Kwan (as she then was) said:

“As mentioned earlier, the only reason advanced in the Plaintiffs’ affirmation for concealing parts of the agreement was the confidential nature of the information which was regarded as “trade secret”. If that was the only reason given by the Plaintiffs for non-disclosure, I would have little hesitation in rejecting that argument. If the Plaintiffs were worried that the “trade secret” might be misused, the Plaintiffs would be protected by the implied undertaking of the opposite side not to use information obtained in this action for collateral or ulterior purpose.”

48.  And in page 5, she said:

“In applying the test in the Peruvian Guano case (1882) 11 QBD 55 at 63, I bear in mind that the question of relevance was framed in wide terms. A document is relevant not only when it is evidence on any issue in dispute but “also which, it is reasonable to suppose, contains information which may –not which must – either directly or indirectly enable the party requiring the affidavit either to advance his own case or to damage the case of his adversary.” Brett LJ further had this to say: “A document can properly be said to contain information which may enable the party requiring the affidavit either to advance his own case or damage the case of his adversary, if it is a document which may fairly lead him to a chain of inquiry, which may have either of these two consequences.”

49.  As I said, the point is not on the name of the beneficiary. The point is on the payment to supplier.  There is nothing to show that the payments were made to P&T’s suppliers.  At the end, Ms Tsui agreed that it is a matter of credibility but she maintained the request is oppressive and not necessary at all.  In my view, the identity of the recipients of the payments is clearly relevant to P’s assertions of payments to suppliers.  It is also relevant to the extent that it may fairly lead R to a chain of inquiry.

50.  Finally, there is no reason why the implied undertaking as to confidentiality does not apply to the present ancillary relief proceedings.

Item no 12 of Schedule 2 to the Amended application

“In respect of all the credit cards listed under Part 2.13 of Form E (including the credit cards which were not frequently used), please provide monthly statements for each of the same (other than the statements that the petitioner has already provided) for the latest 1 year.”

51.  In his Form E, P declared 12 credit cards in total; however, he only provided the latest 3 months statements for one credit card that he said he mainly used.  For the remaining 11 credit cards, he stated that he did not frequently use those cards without producing any documentary proof.

52.  Ms Yip argued that in the present case P has claimed a total monthly expenditure of $222,225.  This renders his expenses incurred on his credit cards a piece of critical information.  Further, the situation relating to P’s monthly expenses is compounded by his refusal to disclose relevant supporting documents purported to be expenses including large sums of funds allegedly to have been changed into RMBs for expenses. Disclosure of past 12 months credit card statements would provide insight into P’s self-asserted state of expenditure.  For this reason R seeks P’s credit cards statements for the past 12 months.   

53.  Ms Tsui submitted that for the reason that the cards have not been used, there are no statements received and P does not wish to spend unnecessary legal costs on obtaining the statements.  At the end, Ms Tsui conceded that if R insists on the production, this can still be done.

54.  I consider that P has to produce them.  It is relevant to the needs and standard of living of P.  If there was no spending on a particular credit card, the bank can simply issue a letter to that effect.  I believe the costs involved would not be substantial when compared to the stakes involved in the present case.

Conclusion

55.  For the reasons aforesaid, I give the following orders:

1. The petitioner do file and serve an affirmation within 21 days providing his replies and the documents requested under item nos 4, 5, 6 and 7 of Schedule 1 and item nos 2, 3 and 12 of Schedule 2 to the Amended Application;

2. The petitioner shall also exhibit in the same affirmation the legible and unredacted copies of the documents produced by the petitioner under item no 5 of Schedule 2 to the Amended Application.

Costs

56.  R’s application was taken out on 10 February 2015, the items that are now before me were not those first appeared in the initial application.  P gave his answers to some of the questions and there were new ones from time to time.  In deciding the costs issue, I may need to deal with the history of the application and how the items have come to the state as they are now.  Further, the parties have mixed success in the application.  I would therefore reserve the issue of costs.  This is the approach agreed to by counsel.

FCMC 10089/2007

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES

NUMBER 10089 OF 2007

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REASONS FOR DECISION
(Preliminary Issues)
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The Application

1.  This is the petitioner husband’s application for trial of certain preliminary issues prior to the FDR hearing as to whether there was an agreement made between the parties for full and final settlement of ancillary relief and whether that agreement had already been performed.

2.  For convenience, I will refer the petitioner husband as “P” and the respondent wife as “R”.

3.  R’s application for leave to file her application for ancillary relief was originally fixed to be heard (with oral evidence) from 6 January to 8 January 2015.  Subsequently, P conceded that no leave is required and now he proposes that these dates be used for the trial of the preliminary issues.

Background

4.  The parties were married in November 1985.  Before then, they had cohabited with each other since 1982.

5.  There is one child of the family, a son, now aged 29 and married. 

6.  R’s case is that the parties separated in 2010 but P said it was in 2007.  Be that as it may, whatever time it was, it was undoubtedly a long marriage.

7.  The facts of this case are quite unusual in that the parties have had 3 divorce petitions, spreading over a period of 7 years.  It was only on the third occasion that they finally succeeded in parting their ways.  Even the third occasion was apparently not an uneventful one.

The 1^st Divorce

8.  The 1^st divorce was taken out by P on 10 November 2003 (“the 1^st Divorce”) on the ground of one year separation.

9.  At that time, the parties entered into a Settlement Agreement in Chinese (“the Chinese Settlement Agreement”).   The Petition, which was prepared by P’s solicitors at the time, also referred to this agreement which provided that:

1. R was to transfer her shareholdings in 2 private companies in favour of P or his nominees and to resign as director of these 2 companies;

2. Upon the transfer of the shareholdings, P was to transfer all his interest or share as one of the two joint-tenants of the former matrimonial home to R free from mortgage.  The costs and stamp duty of the transfer was to be paid by R; and

3. P agreed to pay R a monthly sum of $6,000 for the maintenance of the son.

10.  Shortly afterwards, the 1^st Divorce was discontinued by the parties’ consent on 16 February 2004.

The 2^nd Divorce

11.  Then a few months later, the parties applied for divorce by way of a Joint Application on 2 November 2004 (“2^nd Divorce”).  The parties acted in person this time and therefore everything was homemade.  In the Joint Application, the parties referred to the fact that the parties had arrived at a settlement agreement; and attached to the Joint Application was the Chinese Settlement Agreement with some hand-written amendments (“the Chinese Settlement Agreement as Amended”).  The amendments were not material and are not relevant to our discussion here.  The parties went a bit further this time to obtain a decree nisi on 25 February 2005 but then shortly afterwards on 16 June 2005 the 2^nd Divorce was discontinued. 

The 3^rd Divorce

12.  P petitioned for the third time on 17 August 2007 (“3^rd Divorce”) on the ground of one year separation.  Again, both parties acted in person in the proceedings.

13.  In the Petition, it was pleaded that the parties had separated since February 2006.  However, unlike the 1^st Divorce and the 2^nd Divorce, P did not state that the parties had arrived at any settlement agreement.  In paragraph 6 of the Petition, he stated that it was not necessary to maintain R and the son (“無需供養答辯人及子女”) and he made no application for ancillary relief.

14.  Meanwhile, the Form 4, signed by R, signifying her consent to divorce and that she was not going to make any application for ancillary relief, was filed on 22 August 2007.  There is some dispute over how the Form 4 was signed.  R’s case is that she paid no attention to its contents at that time and just signed it.  On the other hand, P said R did not sign it immediately and he just left the document with R for her signature.

15.  Be that as it may, the 3^rd Divorce apparently went smoothly this time, up to at least 27 November 2007 when decree nisi was granted.

16.  However, the 3^rd Divorce was less straightforward after that.

17.  To start with, it was not until 3 years later that the decree absolute was applied for by P and was granted on 10 June 2010.

18.  Secondly, as mentioned above, there was no written agreement attached to the 3^rd Divorce papers.  P said that the parties simply adopted the Chinese Settlement Agreement as Amended.

19.  Thirdly, the parties did not live apart from each other before the decree absolute was granted.  At the time of the 3^rd Divorce, the parties were living in the former matrimonial home which was purchased in the joint names of P and R in 2000.  I think it is not in dispute that the parties remained living under the same roof throughout the period, except that P left home to live in his Apartment (“P’s Apartment”) for a short period from September or October 2007 to April 2008.

20.  It appears to be common ground that the transfer of the shareholding was already performed.  However, the former matrimonial home was not transferred to R as provided in the Chinese Settlement Agreement as Amended, but in fact it was sold in February 2008 and the proceeds were used to pay for another Apartment (“the Apartment”), purchased in the joint names of R and the son.

21.  Before the completion of the purchase of the Apartment, R, together with the son and his wife, ie the daughter-in-law, moved to live with P in P’s Apartment in about April 2008.

22.  In August 2008, the parties together with their son and the daughter-in-law moved to live in the Apartment.

23.  It is not in dispute that throughout, whether in the former matrimonial home, P’s Apartment or in the Apartment, the parties occupied the same room and slept on the same bed; and they also travelled together to Taiwan in December 2008 and to Dubai in January 2009. 

24.  It was not until early 2010 that P moved out and applied for decree absolute.

25.  P remarried on 5 June 2011.

26.  Then, some 3 years later, R commenced her application for ancillary relief by filing a Form 8. 

P’s Case

27.  P said that on the 1^st Divorce the parties entered into the Chinese Settlement Agreement to deal with the financial matters between them.  When the parties divorced again in the 2^nd Divorce, they used the same agreement with some hand-written amendments; this was the Chinese Settlement Agreement as Amended referred to in this Judgment.  Then, when it came to the 3^rd Divorce, again the parties simply adopted the Chinese Settlement Agreement as Amended.  However, he did not elaborate on why the Petition was pleaded in the way it was.

28.  He affirmed that pursuant to the Chinese Settlement Agreement as Amended, the parties entered into a Chinese Agreement dated 19 January 2008 (“the Chinese Agreement”) for the transfer of the former matrimonial home.  It stated that P agreed to transfer his interest in the former matrimonial home to R for $3,000,000.  It also clearly stated that the transfer was part of the divorce agreement and that the consideration of $3,000,000 would be dealt with by the parties themselves without the involvement of the solicitors for the transaction.  Then on 22 January 2008, an Agreement for Sale and Purchase was signed by P as vendor for the sale of his interest in the former matrimonial home at the consideration of $3,000,000. 

29.  P explained that the Chinese Agreement and the Agreement for the Sale and Purchase were made in the performance of the Chinese Settlement Agreement as Amended.  However, R changed her mind and decided to sell the former matrimonial home.  Therefore, the Sale and Purchase Agreement was subsequently cancelled on 1 February 2008 by way of a Cancellation Agreement. It was cancelled wholly at the instruction of R because the former matrimonial home was R’s property anyway.

30.  It was also because of this change of mind that at about the same time, the parties entered into a Provisional Agreement for Sale and Purchase on 29 January 2008 for the sale of the former matrimonial home for $9,380,000. 

31.  Then on 16 April 2008, the Apartment was purchased in the joint names of R and the son for $12,870,000.  It was financed by a mortgage with P as the borrower.  P said that the mortgage was for $3,000,000 and on the top of this sum he also paid a further sum of $2,079,435, totalling $5,079,435.  The rest was paid by R.  However, as for R, she said she contributed about $5,000,000 only.  Be that as it may, P explained that the mortgage was taken out in his name as a form of financial assistance to R only because she had difficulty in obtaining mortgage in her name.

32.  On the basis of the above facts, P said he had performed what he was required to do under the agreement with R, and as a matter of fact, he had performed more than enough.

R’s Case

33.  R’s case is that there was never any agreement dealing with the financial matters upon the 3^rd Divorce; in particular, she denied the parties adopted the Chinese Settlement Agreement as Amended.

34.  In her supporting affirmations dated 17 February 2014 and 29 April 2014, she alleged P of non-disclosure of his financial resources at the time of the 3^rd Divorce as the explanation as to why she did not claim for ancillary relief, in particular P represented to her that his business was poor and he might be liable for damages in a civil claim.

35.  The purchase of the Apartment in her and the son’s names was P’s idea and was not part of the performance of the Chinese Settlement Agreement as Amended.  The Apartment was not purchased in P’s name because he wished to avoid investigation by the Inland Revenue.

36.  The parties lived together as husband and wife up to 2010 and P had been paying her family expenses $12,000 per month.

37.  She also gave some explanations as to why she did not apply for ancillary relief subsequent to the decree nisi.  I do not think I need to go into the details here.  In brief, R said it was because P had represented to her that he would help her out should she have any financial problems and of the fact that P continued to pay her living expenses, but this ceased in February 2014.

P’s Response

38.  He denied having failed to give full and frank disclosure of his financial situation.

39.  P said the moving into the Apartment to stay with R and the son was for convenience and not for reconciliation.  He accepted that he stayed in the same bedroom and slept on the same bed with R but there was no sexual intercourse between them.  He just treated R as a friend and in truth they led separate lives since as early as around the time of the 2^nd Divorce.  He did not apply for the decree absolute promptly because he was not aware of the need to do so.

40.  He admitted having paid R monthly sums of $12,000 but these were merely the lodging fees or rentals for his occupation of the Apartment.  Nevertheless, he accepted that he continued to pay R monthly expenses of $12,000 after he had moved out of the Apartment.   

41.  Against this background, P now seeks to have a trial on three preliminary issues prior to the FDR hearing.  The three issues are:

1. Whether there was an agreement at the time of the 3^rd Divorce between the parties as to full and final settlement of ancillary relief;

2. Whether the transfer of P’s half legal and beneficial interest in the former matrimonial home to R in January 2008 was pursuant to the agreement made at the time of the 3^rd Divorce; and

3. Whether by the transfer in (2) above, P has fully discharged his obligations under the agreement made at the time of the 3^rd Divorce and therefore, there was already full and final settlement of ancillary relief between the parties.

42.  R opposes to the application on the basis that the questions / issues submitted are not fit and proper to be tried as preliminary issues.

Applicable Legal Principles

43.  P relies on Order 33, rr 3 and 4(2), RHC.

44.  Rules 3 and 4(2) read as follows,

“3. The Court may order any question or issue arising in a cause or matter, whether of fact or law or partly of fact and partly of law, and whether raised by the pleadings or otherwise, to be tried before, at or after the trial of the cause or matter, and may give directions as to the manner in which the question or issue shall be stated.”

“4(2) In any such action different questions or issues may be ordered to be tried at different places or by different modes of trial and one or more questions or issues may be ordered to be tried before the others.”

45.  The parties have no dispute over the applicable principles.  Ms Yip SC, counsel for R, has helpfully set out the relevant principles which I gratefully adopt. 

46.  Pursuant to Order 33 rule 4 of the Rules of High Court, applicable to the matrimonial proceedings by Rule 3 of the Matrimonial Causes Rules with necessary modifications, the court has power to order separate trials of separate issue.  The circumstances in which a hearing of preliminary issue may be ordered are elaborated in Hong Kong Civil Procedure 2015, Vol 1 at para 33/4/9 on p 721 as follows:-

“The Court of Appeal considered the circumstances which a split trial may be ordered in Telford Development Ltd v Shui On Construction Co Ltd [1990] 2 HKC 110. The general rule is that all the issues in the case are to be tried at the same time. There is power to order that different issues in the case be tried at different times, but that departure from the general rule is ordered only if it is just and convenient. It is, of course, for the party who seeks such a departure to demonstrate that it is indeed just and convenient. …That decision was applied in Chan Jak Tung (t/a Forward & Co) v Baltrans Ltd and Others [1997] 1 HKC 89. The court restated the general rule. Only if it was just and convenient should there be a departure from the general rule. An order for a separate trial should only be made in exceptional circumstances or on special grounds. Where there had been delay, and there were likely to be additional costs incurred and additional facts to be determined if a split trial were ordered, then the court would decline to order a trial of the preliminary issue.”

47.  And on p 722:-

“On the other hand, where there has been delay and there is a likelihood of additional costs and where also there are facts to be determined, the court will be disinclined to order the trial of a preliminary issue…”

48.  In Mai Gou v Mak Chik Lun [2001] 3 HKLRD 248, the Court of Appeal said at the holding that:-

(1) As a general rule, all issues arising in an action should be tried together, and an order for the separate trial of separate issues should only be made in exceptional circumstances or on special grounds.  Therefore, the court should be extremely cautious before acceding to pleas for the making of such order.

(2) As a rule of thumb, an order for the trial of preliminary issues should only be made if, whichever way the issues were decided, they would be determinative of the case or at least part of the case.  The court should also be mindful not to order the trial of preliminary issues involving disputed facts.

49.  Detailed elaboration of the legal principles can be found at p 251 of the judgment by Hon Le Pichon JA:-

“The annotation in The Supreme Court Practice 1999 is a useful starting point. At para 33/4/10 it is stated that:-

An order for the separate trial of separate issues is a departure from the beneficial object of the law that all disputes should be tried together, and therefore, generally speaking, such an order should only be made in exceptional circumstances or on special grounds (per Jessel MR in Piercy v Young (1880) LR 15 Ch D 475 at p 479 and p 480; per Scrutton LJ in Bottomley v Hurst and Blackett Ltd and Houston (1927-28) 44 TLR p 451 at p 452).

This approach was echoed by Lord Wilberforce in his speech in Tilling v Whiteman [1980] AC 1 at pp 17H-18A:-

I, with others of your Lordships, have often protested against the practice of allowing preliminary points to be taken, since this course frequently adds to the difficulties of courts of appeal and tends to increase the cost and time of legal proceedings. If this practice cannot be confined to cases where the facts are complicated and the legal issue short and easily decided, cases outside this guiding principle should at least be exceptional.

Indeed, as Lord Roskill observed in his speech in Allen v Gulf Oil Refining Ltd [1981] AC 1001 at p 1022A:-

The preliminary point procedure can in certain classes of case be invoked to achieve the desirable aim both of economy and simplicity. But cases in which such invocation is desirable are few. Sometimes a single issue of law can be isolated from the other issues in a particular case whether of fact or of law, and its decision may be finally determinative of the case as a whole. Sometimes facts can be agreed and the sole issue is one of law.

Lord Roskill went on to urge those whose task it is to decide whether or not the trial of preliminary points should be ordered to be “extremely cautious” before acceding to pleas for the making of such orders as a result of attractively advanced submissions founded upon pleas of supposed economy.

It is sometimes said that trials of preliminary issues should only be ordered if, whichever way they are decided, they would be determinative of the case or at least part of the case.  The good sense of that rule of thumb is apparent and it is a rule which I would readily endorse.”

50.  Thus, the principles on a hearing of preliminary issue can be summarized as follows:-

(1) Order 33 rule 4 RHC on hearing of preliminary issues apply to matrimonial proceedings;

(2) As a general rule, all issues or disputes should be tried together;

(3) Separate trial of separate issues is a departure from the general rule and is exceptional, made on special grounds and few.

(4) The court should be extremely cautious before acceding to pleas of such orders;

(5) As a rule of thumb, trial of preliminary issues should only be ordered if, one way or the other, they would be determinative of the case or at least part of the case.

(6) It can only be justified where to do so would be just and convenient and will not increase costs and time or delay the proceedings;

(7) The burden is on the applicant asking for trial of preliminary points to satisfy the exceptional course.

P’s Submissions

51.  Ms Tsui, counsel for P, submits that the parties had an agreement for full and final settlement of the financial matters upon divorce.  Not only that the agreement had been performed but that P had performed his part more than enough.  She argues that the alleged “settlement agreement”, ie the Chinese Settlement Agreement as Amended will inevitably be an important fact to consider by the court in the ancillary relief hearing and will strongly be relied upon by P.   She emphasises that the settlement agreement is so important that it is the magnetic factor in the exercise of the court’s powers under section 7 of the Matrimonial Proceedings and Property Ordinance, Cap 192 (“MPPO”) and hence, the resolution of this issue would be determinative of the case. This is an unresolved fact which should be investigated. 

52.  Initially in her skeleton submissions, it has been argued by Ms Tsui that the outcome of the preliminary hearing may dispose of the matter entirely, which if that is the case, will definitely help the parties to save time and costs rather than dragging further in the proceedings.  However, during the hearing, she concedes that the determination of the preliminary issues in one way or another way would not save the trial of the ancillary relief.  Nevertheless, she argues that the resolution of the preliminary issues would dispose of an important part of the case.  Even if the court finds against P and concludes that there was no agreement as alleged and no settlement of ancillary relief, this would have somehow helped the parties to resolve an unresolved issue.  If the alleged settlement agreement is to be set aside for material non-disclosure, it would definitely help P prepare his case and locate relevant evidence.  It may also show light on the further conduct of the proceedings or bring about a settlement either through the FDR or otherwise.  Thus, whilst Ms Tsui accepts the general rule is that all the issues in a case should be tried at the same time, the circumstances of the case are “just and convenient” for the hearing of these issues.

R’s Submissions

53.  Ms Yip argues that even if there was the Chinese Settlement Agreement or the Chinese Settlement Agreement as Amended for the 1^st Divorce and the 2^nd Divorce respectively, the same had clearly been withdrawn.  Both agreements were pendent documents and did not have lives of their own.  It is absurd for P to say that even the relevant petition had been discontinued, the agreement would still be alive.

54.  Ms Yip also argues that P fails to justify the departure from the general rule.  Even if the court finds in favour of him on the settlement agreement, this would not dispose of the question of R’s ancillary relief entirely or substantially. 

55.  The starting point is that the court is not bound by any nuptial agreements.  It is the court, not the parties, in the exercise of its powers under section 7 of MPPO, which decides what financial provisions should be made.  She refers to the English Supreme Court judgment in Granatino v Radmacher [2011] 1 AC 534.  She submits that the fact that parties to a marriage have entered into a maintenance agreement and the paying party has fully complied with all the terms of the agreement does not prevent the other party from seeking ancillary relief in proceedings for divorce:  section 15(6) of MPPO.  All the relevant factors and circumstances shall be taken into account by the court when discharging its duty under section 7 of MPPO.  The over-arching criterion in considering the treatment to a marital agreement is fairness:  Granatinov Radmacher (at paras 67, 73, 76 and 131).  Locally, the position has been followed by Court of Final Appeal in SPH v SA [2014] 3 HKLRD 497, at para 39.

56.  It is contended by Ms Yip that taking it to the highest, the settlement agreement, if there was one, is only an important factor in considering what is the just outcome in an ancillary relief: Edgar v Edgar [1980] 1 WLR 1410 at 1417A, per Ormord J.

57.  Thus, the determination of the alleged settlement agreement is only one of the circumstances of the case and the weight of which will need to be determined by the court.  It certainly will not dispose of the matter entirely. 

58.  On R’s contention that there was never any agreement on the 3^rd Divorce, Ms Yip highlights that in contrast to the 2^nd Divorce where the Chinese Settlement Agreement as Amended was annexed to the Joint Application, nothing was attached to the Petition for the 3^rd Divorce, notwithstanding that in both applications the parties were acting in person.

59.  Another fact that Ms Yip heavily relies on as pointing to the absence of an agreement is that the former matrimonial home was in fact not transferred to R.  In other words, there was no performance of the agreement.  Not only that it was not performed but it was cancelled and the proceeds of sale or at least part of them went to the acquisition of the Apartment which became their home.  All these factual disputes, she submits, have to be resolved in the trial of the ancillary relief.

Discussion

60.  In the family law context, the most common reason for a preliminary issue to be heard before ancillary relief hearing is whether any third party interests are involved as laid down in TL v ML [2006] 1 FLR 1263.  Yet, I agree with Ms Tsui that cases are to be considered by their own merits and it does not mean that apart from third party interests, there cannot be a separate hearing on other preliminary issues.

61.  I agree with Ms Yip that notwithstanding three issues are listed, there is in fact one question, that is whether the transfer by P of his half share in the former matrimonial home in January 2008 represents the parties’ agreement for full and final settlement of R’s claims for ancillary relief in the 3^rd Divorce.

62.  I have set out the facts above at some length. Clearly, in the present case, there are a couple of factual issues in dispute, one of which of course is whether there was a performed settlement agreement as alleged by P.  In my view, whether there was a performed settlement agreement is far from clear and this issue is further complicated by the conducts of the parties during the post decree nisi period. 

63.  As mentioned above, Ms Tsui concedes that the determination of the preliminary issues prayed for by P would not dispose of the ancillary relief hearing.   In my view, it must be correct for the reason that the nuptial agreement is merely one of the factors that the court may consider in the section 7 exercise.  On the facts of the present case, even if there was the nuptial agreement as contended by P, there are also questions of what weight to be given to it and whether the agreement was over taken by the events such as the purchase of the Apartment and the cohabitation of the parties subsequent to the grant of the decree nisi.  In this connection, it should be noted that the Chinese Settlement Agreement and the Chinese Settlement Agreement as Amended was homemade and apparently neither party had obtained any legal advice before entering into them.  It may be that the nuptial agreement is the magnetic factor but whether this is the case has to be considered in light of all the evidence and the circumstances of the particular case and this could only be dealt with at the trial of the ancillary relief.  As has been pointed out by Ms Yip, the “settlement agreement” is just part of the fabric of the entire case and is intricately intertwined with other facts of the case.  It seems clear to me that it is not a separate and distinct issue not involving the merits of the ancillary relief claim:  Mai Gou v Mak Chik Lun [2001] 3 HKLRD 248, at 253/D.  Apart from the factual disputes that are highlighted above, there is also a bundle of factors that the court may have to give regard to in the section 7 exercise, such as the delay of R in making the application, the length of the relationship, the financial resources and the needs of the parties and also the fact that P remarried in 2011.

64.  Thus analyzed, the trial of the preliminary issues sought by P would not be determinative of the case in one way or the other.

65.  In this regard, Ms Yip draws my attention to Crossley v Crossley [2007] EWCA Civ 1419, [2008] 1 FLR 1467 where both the husband and the wife were very wealthy, had entered into a prenuptial contract before they married and the marriage lasted slightly over a year.  Thorpe LJ (with whom Kenne and Wall LJJ agreed) held at para 15 of the judgment that, “…if ever there is to be a paradigm case in which the court will look to the prenuptial agreement as not simply one of the peripheral factors in the case but as a factor of magnetic importance, it seems to me that this is just such as case”.  Notwithstanding, Thorpe LJ held that the judge was “incontrovertibly correct” in not directing the enforceability of the agreement to be heard as a preliminary issue as he accepted counsel for husband’s submissions that “the court must conduct the section 25 [equivalent of section 7, MPPO] exercise by reference to all the statutory criteria” (Para 14).

66.  In the hearing, Ms Tsui relies heavily on S v S [2008] EWHC 2038 (Fam), an authority cited by Ms Yip.  In that case, Madam Justice Eleanor King allowed the husband’s application for the wife to show cause why an order should not be made in terms of a draft order based on the agreement of the parties [equivalent of Rule 6, Matrimonial Causes Rules, Cap 179A].  In my view, the facts of that case are quite different from the present one, not so much that the learned judge has “unhesitatingly concluded that this is one of that category of cases identified by Lord Justice Thorpe in Crossley v Crossley where there is a factor of such magnetic importance that it must necessarily dominate the discretionary process” but rather that in that case the wife had conceded that there was an agreement that the assets should be divided as to 45% to her and 55% to the husband.

67.  Further, if P’s application is acceded to, for the reason that the “settlement agreement” and the performance of it intertwined with other factual disputes such as the cohabitation of the parties post decree nisi, which is also pertinent to the question of delay on the part of R and the duration of the parties’ relationship, it would mean that witnesses would have to give evidence twice and there would certainly be duplicity of the proceedings.  This would not serve the purpose of saving costs and time.

68.  In C v C [2006] 2 HKFLR 431, where the court below tried the validity of the separation deeds as a preliminary issue, Hon Rogers JA said at para 16 of the judgment,

“16. The other matter to which I would refer is the question of the preliminary issue. In my view, preliminary issues are only of any use if they are going to dispose of the case. They are often a recipe for disaster if they are merely directed to one of the issues which will have to be decided, but which will not dispose of the case. They are in many respects highly undesirable because if it entails, as it did in this case, hearing the parties give evidence, questions of credibility will inevitably be decided by the judge hearing the preliminary issue; this may be embarrassing and difficult for any judge who subsequently may have to decide different aspects of the case. Moreover, if the full ambit of the issues in the case is not ventilated at first, the judge hearing the preliminary issue may well make statements which are found to be unfortunate when it comes to the final full hearing. Quite apart from that, the additional hearings involved in hearing a preliminary issue and, often, consequential appeals, only adds to the time and cost of disposing of a case.”

69.  For the reasons aforesaid, I am convinced that the trial on these preliminary issues would hardly be just and convenient as it would only jack up costs and result in delay.  It must be much more desirable and conducive to justice that the court hears all the evidence in one go.

70.  I do bear in mind that the court has an express duty to actively manage cases to further the underlying objectives of the rules set out in Order 1A, RHC: see PD 15.12, at para 8.  However, for the reasons aforesaid, I do not think it is a proper case where I should exercise the case management power in favour of P.

Orders

71.  For the reasons aforesaid, P’s application is dismissed.

72.  As for the costs, they should follow the event.  I give an order nisi that P do pay the costs of this application with certificate for counsel, to be taxed if not agreed.

Further Directions

73.  With the conclusion that I have come to, the trial dates of 6 January 2015 to 8 January 2015 have become redundant. Ms Yip proposes that 6 January 2015 be used for the FPR hearing, to which Ms Tsui apparently does not take a contrary view.  However, I am mindful that the parties may have further discovery against each other and in any event, the parties’ properties (which probably include the value of some business owned by P) needed to be properly valued if the same cannot be agreed.  In this regard, unless the parties are able to confirm with the court, with reasons, by 3 January 2015 that no further preparatory steps are required to be taken and they are ready for FDR hearing in which event 6 January 2015 shall be used for this purpose; otherwise 6 January 2015 shall be used for direction, with 30 minutes reserved.

Ms Jennifer Tsui, instructed by SK Wong & Co, Solicitors, appeared for the petitioner

Ms Anita Yip, SC and Ms Lily Yu, instructed by Mandy Wan & Co, Solicitors, appeared for the respondent