JAH v. VH

FCMC 14350 / 2009
(Consolidated with FCMC No 4402/2010)

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES

NUMBER 14350 OF 2009

(Consolidated with FCMC 4402 as per order of HH Judge Melloy dated 23 June 2010)

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RULING
(Injunction, Setting aside)

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Introduction

1.  This is an application by the Respondent husband that the order made on the 3 May 2012 in effect for an injunction, be set aside and/or not be re-instated. The wife asks that the original order remain in force until the matter can be heard in full and on its merits.

2.  On the 3 May 2012 the parties came before me for a call over.  This arose out of a directions hearing on the 31 January 2012.  The difficulty in essence was that although the parties had entered into a consent summons over a year before, that the order had not been fully complied with.

3.  And this was no ordinary order.  To put it into some kind of context I would refer to my summary of the situation as set out at paragraph 6 of my Ruling dated the 19 April 2011. Referring to the mediation agreement which subsequently became the consent order of the 13 January 2011, I said as follows:

This deals with the parties’ very extensive business and property interests, which appear to be mainly based in Cambodia. One interesting feature of the consent summons was that the parties undertook inter alia to transfer a series of properties to each other within 12 months of the date of the mediation agreement i.e. by the 22 December 2010. These transfers were only expressed in the form of undertakings. They were not expressed as an order. Presumably this was because an order can only take effect upon the pronouncement of a decree absolute whereas an undertaking is binding on the parties in the form of the undertaking given. In Hong Kong a breach of a financial undertaking can be enforced either by contempt of court proceedings and/or by a judgment summons.  It was also agreed and each party undertook to enter into a Letter of Promise. The husband also undertook to pay the wife a lump sum of US$8 million, the first instalment of US$3 million to be paid within 14 days of the date of the order and the remaining instalments of US$3 million each to be paid on the anniversary of the first payment. The first instalment was eventually paid and on the 10 February 2011 the wife’s solicitors acknowledged receipt of the same. There were also undertakings given in relation to other matters.

4.  The other matters included the transfer of a number of properties/shares in Cambodia, plus an Australian property, to the wife. The properties are held either in the name of the husband or in the name of companies that appear to be held in whole or in part by him.  As at the 31 January 2012 the wife had complied with all of her obligations under the order save for the transfer of a property known as the “EP Property” (“EP”), and the transfer of shares in a company known as the MC Company Limited (“MC”). As at the 31 January 2012 the wife had signed all of the requisite documents necessary to effect the transfers and her solicitors were holding these pending the husband complying with his obligations under the order. At that stage it seemed that the husband had not complied with a number of his undertakings in the order. This was summarized by the wife’s solicitors as follows:

The Respondent has not yet complied or fully complied with the following parts of the Order:-

(a)  Paragraphs G and H – Transfer of the Respondent’s 45% shareholding (out of his 90%) in UTC to the Petitioner

(b)  Paragraphs J and K – Transfer of the Respondent’s 18% shareholding (out of his 68%) in FISB to the Petitioner

(c)  Paragraphs E(a) – Transfer of three sites of UTC Land to the Petitioner

(d)  Paragraph E(b) – Transfer of FISB Building to the Petitioner

(e)  Paragraph E(d) – Transfer of one outstanding site of Riverside Property to the petitioner

(f)  Paragraph E(e) – Transfer of Hospital Land to the Petitioner

(g)  Paragraph L – Transfer of the existing customers, loans and assets of CHC Limited (“CHC”) to FISB

(h)  Paragraph P – Transfer of the benefit and/or net proceeds received of the Respondent’s Merrill Lynch and AIA life insurance policy accounts to the Petitioner

5.  I was then taken through the status of each of these transactions. In round figures I was told that the husband’s non compliance was worth somewhere in the region of US$20 million whereas the wife’s non compliance was worth less than a quarter of that sum at c US$4.5 million. Clearly it was of the utmost importance to the wife that the order should be complied with fully, notwithstanding the fact that most of the assets were outside the jurisdiction of Hong Kong.

6.  In answer to a suggestion made by the husband’s solicitor that the wife should immediately comply with her own undertaking and release the documents relating to the transfer of the EP Property and MC shares I said that  

COURT: Well, what I would say is that you should both be in a position to proceed with your part of the bargain and …

…

And that that can be looked at when you come back in 12 weeks’ time.  And I would expect by then [for] everything else that hasn’t been complied with, to be at a stage when it can be.

7.  It was therefore on this basis that the matter was supposed to come back before me on the 3 May 2012. I was to be updated on progress to date. I had given the parties time to sort out the existing impasse with a view to each complying fully with their obligations under the order. They were supposed to report back to me on the progress made by the 3 May, i.e. after a period of over 3 months. This was notwithstanding the fact that the husband had said that he would infact need six months to resolve some of the outstanding issues.

8.  It is then against this background that the wife issued the summons of the 30 April 2012. The summons sought the following relief:

1. The Respondent, whether acting by himself, or his servants, or agents, or representatives, or nominees or otherwise howsoever be restrained from pursuing any form (whether criminal, civil or otherwise) of proceedings in Cambodia against the Petitioner or any of her assets including but not limited to properties, shares, investments, or personal possessions or chattels;

2. The Respondent, whether acting by himself, or his servants, or agents, or representatives, or nominees or otherwise howsoever be restrained from selling, transferring, assigning, charging, encumbering, alienating, pledging or disposing of or otherwise howsoever dealing with all his interests, either directly or indirectly held by him or held through nominees or other third parties, of the following assets, without leave of the Court or the Petitioner’s prior written consent :-

(a)  the property registered in the Respondent’s name situated at Properties No. X and No. Y located in Cambodia;

(b)  the property registered in the name of the company, UDTDC, situated at Property No. XXXXXX located in Cambodia;

(c)  the property registered in the name of TSL for and on behalf of the Respondent, situated at Property No. XXX, #XX, Street XX & XXX,  Cambodia;

(d)  the property registered in the name of TSL for and on behalf of the Respondent, situated at Property No. XXXXX (CxXXXX), located in  Cambodia;

(e)  S Development Company Limited, the registered owner of a property situated at Title no: XXXXXXXX-XXXX, Cambodia;

3. The Respondent whether acting by himself, or his servants, or agents, or representatives, or nominees or otherwise howsoever be restrained from selling, transferring, assigning, charging, alienating, pledging or disposing of the whole or part thereof of his interest in the company, UDTDC without leave of the Court or the Petitioner’s prior written consent;

4. The Respondent whether acting by himself, or his servants, or agents, or representatives, or nominees or otherwise howsoever be restrained from selling, transferring, assigning, charging, alienating, pledging or disposing of the whole or part thereof of his interest in the company, S Development Company Limited, without leave of the Court or the Petitioner’s prior written consent;

5. The Respondent whether acting by himself, or his servants, or agents, or representatives, or nominees or otherwise howsoever be restrained from selling, transferring, assigning, charging, alienating, pledging or disposing or the whole or part thereof of his interest in the company, CH Company Limited, without leave of the Court or the Petitioner’s prior written consent;

6. The Respondent whether acting by himself, or his servants, or agents, or representatives, or nominees or otherwise howsoever be restrained from selling, transferring, assigning, charging, alienating, pledging or disposing of the whole or part thereof of his interest in the company, FISB Limited, without leave of the Court or the Petitioner’s prior written consent;

7. The Respondent whether acting by himself, or his servants, or agents, or representatives, or nominees or otherwise howsoever be restrained from selling, transferring, assigning, charging, alienating, pledging or disposing of the whole or part thereof of his interest in the company, EP Limited, without leave of the Court or the Petitioner’s prior written consent;

8. Time for service of this Summons be abridged;

9. Such other directions as the Honourable Court deems fit; and

10. Costs of and incidental to this application be to the Petitioner.

9.  Mr Coleman, who appeared for the wife, did not proceed ultimately with the application under items 6 and 7. An interim holding order was made in relation to items 1, 2 3, 4, 5 and 8 subject also to an undertaking by the wife not to seek to enforce this order or the order of the 13 January 2011, in Cambodia or elsewhere without first returning to the court for further directions. I also ordered that the matter be adjourned for full argument and that time for service be abridged. Directions were given for the filing of affidavits. Costs were reserved. The matter then came back before me for a call over on the 9 May.

10.  One of the first issued to be raised by Mr Clough for the husband at the return hearing was whether or not this was in reality an ex parte application on notice, as opposed to an inter partes summons where time had been abridged? He said that the effect was practically the same – i.e. the husband had not been given sufficient time to prepare an adequate response and had effectively been ambushed in order that the wife might gain some form of litigation advantage. I was referred to a number of authorities including Seapower Resources International Ltd v Lau Pak Shing HCA No. A10715 of 1993 (unreported) 15 December 1993, Brand, Farrar Buxbaum v Samuel-Rozenbaum Diamond, (unreported) HCA 5191 of 1998, 8 May 2002, L v C, (unreported) CACV 333 of 2003, 27 April 2004 and Slik Hong Kong Company Limited v Gerald Merlyn Evans and others (unreported) CA 1424/2005, 23 July 2005.  I do of course accept the basic premise of these cases, which can perhaps be best summed up by the Hon Mr Justice Rogers in Seapower Resources International Ltd when he said that:

Ex parte application should only be made where either the delay would cause to the Applicant injustice or the Defendant would take action which would nullify the effect of the injunction.  An ex parte injunction goes against the normal way litigation is conducted.  It is an infringement of the rights of natural justice of each party to be heard.  Those making such applications have a duty to bear that in mind and they cannot pass their responsibility to the Court when they do so.

11.  He went onto point out that an ex parte order was provisional and that

If the judge comes to the conclusion that the Order should never have been applied for ex parte, it is his duty to say so and to right the wrong that has been done.  In so saying I, of course, emphasize that it is always in the Judge’s discretion to order a further injunction.

12.  Picking up on this theme in Slik Hong Kong Company Limited, The Hon Mr Justice Lam said

2.  Ex parte applications should be regarded as exceptional and the court should not entertain the same unless there are cogent justifications usually in terms of either extreme urgency or secrecy.  See Bates v. Lord Hailsham of St. Marylebone & others [1972] 1 WLR 1373.

…

4.  It follows that the first thing the court should ask when it is faced with an ex parte application is whether the applicant can show such exceptional circumstances which justify him proceeding on ex parte basis.  If he could not cross that hurdle, the court should not be concerned about the substantive merits of his application.

…

6.  The fact that if notice is given, the defendant might ask for time to response is not a justification for proceeding ex parte.  The court can exercise its discretion in deciding whether any interim relief should be granted in the meantime after hearing submissions from the defendant.

13.  In that instance the Judge initially dismissed the ex parte summons but allowed the parties to issue an inter partes summons with an abridgment of time. The defendants were given notice of the subsequent hearing but chose not to appear. He then entertained the application on an ex parte on notice basis.

14.  In this case the summons was served, but two clear days notice was not given. There was a public holiday on the 1 May and the matter came back before me on the 3 May 2012. Nevertheless the husband was represented by solicitors on the 3 May. They asked that no orders be given until the matter had been heard in full and the husband had had an opportunity to file an affidavit in reply.

15.  In the circumstances it seems to me (and infact this was conceded by Mr Clough) that this was clearly an inter partes summons with an abridgment of time. It was not and was never meant to be an ex parte summons – or even an ex parte summons on notice. I do however accept that in reality there is very little practical difference between an ex parte summons on notice and an inter partes summons with an abridgment of time if, as here, immediate injunctive relief is sought. That is why I gave the parties the ability to come back to court less than a week later. It would also have been possible for the husband to have come back earlier and liberty to apply had been given on an urgent basis in order that he should be able to do so.  

Should the order have been made?

What orders should be made now, if any, in order to safeguard the position between now and the matter being fully argued in the High Court.   

16.  Mr Clough argues that given that, the order should never have been made and that the wife was required to show that there were exceptional circumstances necessitating such an application without the husband first having an opportunity to file affidavit evidence.

Did the wife satisfy this basic pre requisite?  

17.  The wife’s summons seeks only to secure the assets which, under the terms of the order dated the 13 January 2011, should already have passed to her in any event. She does not seek in any way to interfere with the husband’s legitimate business dealings or assets which under the terms of the order he should hold – save for the EP Property and MC shares. In other words she seeks the court’s protection. She asks that her position be secured – as far as that is possible to do. She says that she is becoming increasingly concerned about the husband’s true intentions. At the hearing on the 3 May I was told that there had been very little progress since the parties had been before me last. A life insurance policy had been sorted out and there had been some progress with respect to the Australian property – that is all. Much more worrying was the fact that the husband had launched criminal proceedings against the wife in Cambodia because, it would seem, she had not handed over the documentation with respect to the E property. This is not withstanding the comments that I made in court in relation to the same. The complaint was dated the 3 February 2012 and was a criminal complaint for breach of trust. The husband did eventually withdraw these proceedings. But the wife said in her affidavit that

Further, I have been advised that the “file without processing order” obtained by the Respondent in Cambodia only brings a temporary close to the criminal proceedings.  It is only a stay of the criminal proceedings but not a complete withdrawal or dismissal.  The “file without processing order” would still allow the Respondent the right to appeal within 2 months from the date of receipt of the order and to revisit the matter.  There is now produced and shown to me marked “JAH-13” a copy of a Notice issued by the Deputy Prosecutor, stipulating the appeal timeframe.  If, during the appeal period of 2 months, the Respondent did not file any appeal the matter will become final.  However, there is nothing to stop the Respondent from appealing the case or from filing a new case or from the prosecutor investigating the case afresh.

18.  The notice is dated the 23 March 2013. Therefore it would seem that the husband has the ability to reopen this matter until the 23 May 2012. Thereafter, on the wife’s evidence he can only appeal or file the case afresh.     

19.  It was in those circumstances that I was persuaded on the 3 May that it was appropriate to make an interim order pending the matter returning to court on the 9 May. However, I would accept, in retrospect, that the first order is too wide in any event and that it should be discharged on that basis. Likewise I will release the wife from her undertaking which had served to counter the more extreme aspects of the first order.

What orders should be made, if any, in order to safeguard the position between now and the matter being fully argued in the High Court.   

20.  At the hearing on the 3 May I first raised the possibility of transferring this matter up to the High Court. This has now been agreed to by the parties. This application will therefore be fully argued in the High Court. It is not clear when that might be. I have asked that it be expedited. Even so it may be a while before the issues are properly ventilated before the court. The immediate issue before me then is what orders, if any, should be made in the interim?

21.  Mr Clough for the husband argues that the application should be heard on its merits and pending that hearing the original order should be set aside or not be re-instated.  He argues that:

i. P has not given any reason for proceeding before R has an opportunity to file evidence and the onus is on her to establish why she should be allowed to proceed.

ii. She has not shown that there is any danger of dissipation

iii. She has not suggested that the assets are not already safeguarded by the terms of the original order.

iv. The nearest to a presentation of merits is the fact that R has not been manipulated into giving an undertaking.

v. Orders with penal sanctions should only be made when good cause is shown and should not be allowed to become part and parcel of “normal” litigation.

22.  In reply Mr Lynn for the wife points out that there cannot in reality be any true injustice here. The wife is simply seeking to protect what has already been agreed should be transferred to her. There is no litigation advantage, unless of course the husband wishes to try to reopen the whole matter – which would be extremely difficult to do in any event.  Notwithstanding the fact that the assets are outside of the jurisdiction it seems to me that the wife should have the ability to protect, as far as she is able, what is already the subject of an order from this court, pending a full argument on the issues. The fact that the parties are in negotiations should not detract from the fact that there is already an order in place that should be complied with. It is not clear the extent to which the existing order can be enforced in Cambodia or the procedures in place to enable that to take place. This will no doubt be information that will be provided to the High Court in due course. In the meantime this court must be able to put measures in place that will ensure, as far as it is able, that its own order is complied with.   

23.  Consequently the following interim orders shall remain pending a full hearing in the High Court or further order as follows:

1)    The Respondent, whether acting by himself, or his servants, or agents, or representatives, or nominees or otherwise howsoever be restrained from selling, transferring, assigning, charging, encumbering, alienating, pledging or disposing of or otherwise howsoever dealing with all his interests, either directly or indirectly held by him or held through nominees or other third parties, of the following assets, without leave of the Court or the Petitioner’s prior written consent :-

(a) the property registered in the Respondent’s name situated at Properties No. X and No. Y located in Cambodia;

(b)  the property registered in the name of the company, UDTDC, situated at Property No. XXXXXX located in Cambodia;

(c)  the property registered in the name of TSL for and on behalf of the Respondent, situated at Property No. XXX, #XX, Street XX & XXX,  Cambodia;

(d)  the property registered in the name of TSL for and on behalf of the Respondent, situated at Property No. XXXXX (CxXXXX), located in  Cambodia;

(e)  S Development Company Limited, the registered owner of a property situated at Title no: XXXXXXXX-XXXX, Cambodia;

2.  The Respondent whether acting by himself, or his servants, or agents, or representatives, or nominees or otherwise howsoever be restrained from selling, transferring, assigning, charging, alienating, pledging or disposing of the whole or part thereof of his interest in the company, UDTDC without leave of the Court or the Petitioner’s prior written consent;

3.  The Respondent whether acting by himself, or his servants, or agents, or representatives, or nominees or otherwise howsoever be restrained from selling, transferring, assigning, charging, alienating, pledging or disposing of the whole or part thereof of his interest in the company, S Development Company Limited, without leave of the Court or the Petitioner’s prior written consent;

4.  The Respondent whether acting by himself, or his servants, or agents, or representatives, or nominees or otherwise howsoever be restrained from selling, transferring, assigning, charging, alienating, pledging or disposing or the whole or part thereof of his interest in the company, CH Company Limited, without leave of the Court or the Petitioner’s prior written consent;

The case shall be transferred to the High Court.

24.  Costs shall be reserved. Certificate for counsel.

FCMC 14350 / 2009
(Consolidated with FCMC No4402/2010)

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES

NUMBER 14350 OF 2009

(Consolidated with FCMC 4402/2010 as per order of HH Judge Melloy dated 23 June 2010)

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BETWEEN

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R U L I N G
(To Set Aside Decree Absolute)

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Introduction

1.  This is an application by a Petitioner wife to dismiss the husband’s ex parte notice of application for a decree nisi to be made absolute and to set aside the corresponding decree absolute pronounced on the 9 February 2011.

2.  The main issue here is whether or not in the context of the present application I have jurisdiction to set aside the decree absolute or alternatively whether the matter should more properly be dealt with in the Court of Appeal. In the event that the Family Court has jurisdiction, on what basis can the application be granted?

Background

3.  This matter first came before me on the 23 June 2010. On that occasion the parties agreed in court as follows:

1. without prejudice to the Wife’s position that her Petition (in FCMC No. 14350 of 2009) ought to remain in the special procedures list and/or that decree nisi ought to be granted on the Wife’s Petition and that the Husband’s Petition ought to be dismissed together with costs, the cause FCMC 14350/2009 be consolidated with the cause FCMC 4402/2010 and be carried on in the title as per the proposed “Title of Consolidated Cause” hereto annexed and marked “A” with the description of the Petitioner and Respondent be generally referred as “Wife” and “Husband”;

2. The Wife’s Petition in FCMC 14350/2009 do stand as the Petition and the Husband’s Petition in FCMC 4402/2010 do stand as the Cross-Petition in this consolidated cause;

3. The parties’ Financial Statements (Form Es) filed in FCMC 14350/2009 do stand in this consolidated cause;

4.  The only matter left for me to determine was whether or not leave should be given to the husband to file his Answer out of time. I refused that application but in doing so I gave the following directions:

I do however have a great deal of sympathy with the husband’s position. Consequently the matter shall not be set down in the special procedure list on either the wife or husband’s petitions for the next six weeks. This will enable the husband to make whatever further application to the court that he deems appropriate in all the circumstances of the case. In the event that a further application is made the setting down of either petition in the decree nisi list shall be adjourned pending the resolution of that summons or the expiration of six weeks whichever is the later.  I would add however that I make these directions in the hope that the parties will now resolve this issue in a more sensible way and preferably by negotiation, either through solicitors or with the assistance of their mediator.

5.  Matters did then proceed in a more sensible way. On the 16 July 2010 an order was made by consent that the wife be given leave to amend her petition (to a milder form). The husband’s cross petition was also withdrawn. From that point on matters have proceeded on the basis of the wife’s amended petition. On the 25 August 2010 a decree nisi was pronounced in favour of the Petitioner wife.

6.  The parties also entered into mediation with a view to resolving the issue of ancillary relief. On the 13 January 2011 a very comprehensive consent summons was made an order of the court. This deals with the parties’ very extensive business and property interests, which appear to be mainly based in Cambodia. One interesting feature of the consent summons was that the parties undertook inter alia to transfer a series of properties to each other within 12 months of the date of the mediation agreement i.e. by the 22 December 2010. These transfers were only expressed in the form of undertakings. They were not expressed as an order. Presumably this was because an order can only take effect upon the pronouncement of a decree absolute whereas an undertaking is binding on the parties in the form of the undertaking given. In Hong Kong a breach of a financial undertaking can be enforced either by contempt of court proceedings and/or by a judgment summons.  It was also agreed and each party undertook to enter into a Letter of Promise. The husband also undertook to pay the wife a lump sum of US$8 million, the first instalment of US$3 million to be paid within 14 days of the date of the order and the remaining instalments of US$3 million each to be paid on the anniversary of the first payment. The first instalment was eventually paid and on the 10 February 2011 the wife’s solicitors acknowledged receipt of the same. There were also undertakings given in relation to other matters. Nowhere does the wife undertake to apply for the decree nisi to be made absolute. Both parties were legally represented throughout.    

7.  What followed next does not appear to be in dispute. On the 14 January 2011 the husband’s solicitors wrote reminding the wife to apply for the decree absolute. On the 27 January the wife’s solicitors wrote asking the husband to comply with his undertaking and to pay the first tranche of US$3 million and also the monthly support of US$80,000. On the 31 January the husband’s solicitor wrote confirming that remittance had been arranged and asked the wife to apply for the decree absolute failing which they had instructions to make an application to the court. The following day the husband issued a Form 5 asking the court to make the decree nisi absolute. There is no doubt that this is incorrect. The Form 5 is an ex parte application made on paper. It is an application that can only be made by a Petitioner. In this instance the application states:

TAKE NOTICE that the husband applies for the decree nisi pronounced in his favour on the 25 day of August 2010 to be made absolute.

8.  The Divorce Registry then erroneously granted a decree absolute in favour of the wife although she had not applied for it.

9.  It is agreed that the correct procedure is set out in section 17(2) (a) of the Matrimonial Causes Ordinance, which states that:

(2) (a) Where a decree nisi of divorce has been granted and no application for it to be made absolute is made, then, at any time after the expiration of 3 months from the earliest date on which such an application could have been made, an application for a decree absolute may be made by –

(i) in a case where the decree nisi was granted on a petition for divorce, the person against whom it was granted; or

(ii) in a case where such a decree was granted on an application for divorce, either of the parties by whom the application was made.

10.  Rule 65(4) of the Matrimonial causes Rules adds

(4) An application by a spouse for a decree nisi pronounced against him to be made absolute may be made to a judge or the registrar, and the summons by which the application is made (or, where the cause is pending in the District Court, notice of the application) shall be served on the other spouse not less than 4 clear days before the day on which the application is heard.  (L.N. 26 of 2002)

11.  This was not done. There was no summons and no affidavit in support. The wife was not given an opportunity to put her case as to why the decree absolute should not be granted at this time. I accept that this opportunity should have been afforded to her. Whether she is successful in that application or not is a completely different issue.

12.  To that end Ms Ser for the wife has referred me to a number of cases and in particular to Manchanda v Machanda [1995] 2 FLR 590. In her written submission she summarizes the case, also quoting from Thorpe J as follows:

23.   In Manchanda v Manchanda [1995] 2 FLR 590, as in Woolfenden v Woolfenden and this case, the party (husband) against whom the decree nisi was obtained applied for it to be made absolute and without notice to his wife.  In that case, a decree nisi of divorce was granted to the wife and her husband (against whom the decree nisi was made) applied for a decree absolute before the necessary period of time had elapsed, and that no notice of it had been given to the wife.  The husband failed to comply with section 9(2) of the Matrimonial Causes Act 1973 and Rule 2.50 of the Family Proceedings Rules 1991, Part II (which are similar if not identical to section 17 of MCO and Rule 65(4) of MCR).  The wife succeeded in her appeal in the Court of Appeal in setting aside the Decree Absolute.  Leggatt LJ stated at p.595D that :-

“In my judgment a distinction has to be drawn between cases in which the court lacks jurisdiction because it has no power to grant a decree absolute in the circumstances in which it has purported to do so, and cases in which though the court enjoys jurisdiction, it has through the inadvertence of one of the parties failed to observe a statutory provision against the exercise of it, or there has been a procedural irregularity in the process of exercising it. This case falls within the former category, as is shown by Callaghan v Hanson-Fox (Andrew) [1992] Fam 1, sub nom Callaghan v Hanson-Fox and Another [1991] 2 FLR 519, in which Sir Stephen Brown P specifically approved Woolfenden. In addition, all the cases I have cited relating to service, save foe Batchelor (above) which is to be doubted, show that the failure to serve a summons on the wife in accordance with r 2.50renders the decree absolute null and void, and the wife is entitled to have it set aside. The jurisdictional and fundamental procedural irregularities are both fatal. I would allow the appeal and set aside the decree absolute.”

Thorpe J, further stated at p.595F that :-

“I agree that this appeal should be allowed and for the reasons stated by my Lord. The present case is indistinguishable on its facts from the case of Woolfenden (Otherwise Clegg) v Woolfenden (Otherwise Clegg) [1948] P 27 therefore the petitioner is entitled to have the decree absolute set aside unless Woolfenden is no longer good law. Mr McCormick’s [Counsel for the husband] efforts to undermine or devalue the decision were quite unpersuasive. The decree nisi is the decree of the party upon whose prayer it was pronounced. The parliamentary intention is clear. That party, after the passage of 6 weeks, has a period of 3 months within which he or she has the sole right to elect whether to apply for it to be made absolute and when to apply for it to be made absolute. The other party’s protection against sloth, caprice or strategy is to initiate the application by inter partes summons after the expiration of the 3-month period. Although the grant of a decree absolute is by administrative process, it is the climax and culmination of the proceedings since it is the vital pronouncement that changes status. A review of authorities over the last 48 years shows that Woolfenden has been followed, cited with approval or cited to distinguish in eight cases, several of them in this court. It has never been disapproved.

The reality is that the decision in Woolfenden has been of considerable use over nearly half a century.  The rule is easily understood. Practitioners know where they stand.  Instances in which court staff make the elementary mistake that was made in this case are fortunately rare. Accordingly there seems to me to be no practical argument for reconsidering its rule.  Despite the passage of time the considerations that then applied have not substantially changed.  Many petitioners have applications for ancillary relief that are not finally determined until long after the decree nisi.  For many reasons they are generally loath to lose their marriage status until financial claims have been settled.  If they are to lose that protection it should only be in the exercise of a judicial discretion after they have had a proper opportunity to present their opposition.” [emphasis added.]

13.  With respect I agree.     

14.  The primary issue is whether or not I have the jurisdiction to deal with this application, or whether it must, and certainly in the first instance, go up to the Court of Appeal. Counsel for the husband has referred me to LCM v LYY CACV 445 of 2002. In that case the Court of Appeal considered three different options for setting aside a decree absolute and accepted that the matter should proceed by way of an appeal to the Court of Appeal. This procedure has been accepted since in MSK v PSK CACV 219 of 2005 and FHFK v NCM CACV 182 of 2007, judgment dated the 20 June 2008. In that case there were no administrative errors on the part of the court. Rather the husband deliberately misled the court in that he made representations to the effect that the petition had been served when he knew that that was not the case. The situation here is very different and on that basis it seems to me that LCM can be distinguished. Instead I would seek to rely on the earlier Court of Appeal decision in Zinkin v Wong [2000] 1 HKC 642. In that case the Court of Appeal referred the matter back to the Family Court on the basis that the pronouncement of the decree absolute was an administrative mistake only. Here it is also clear that there has been an “administrative mistake” and consequently I will accede to the wife’s request and make an order in the terms of her summons. The costs of the application shall be to the wife on a party and party basis to be taxed if not agreed.  

15.  Finally I should like to add that I do not accept the argument advanced by counsel for the husband that setting aside the decree absolute will somehow unravel the existing court order on ancillary relief. It is very common in the family court for undertakings to be given as an alternative to orders. This is generally because for some reason or another a party may not wish to wait until the pronouncement of a decree absolute inter alia for a payment of a lump sum or transfer of property order. This is perfectly permissible. Prima facie the husband is still bound by the court order and the undertakings that he has given. The only outstanding matter relates to the dismissal of claims. That will only come into effect once the parties have complied with their undertakings and a decree absolute has been pronounced.

Ms Sharon Ser of Messrs. Withers for the Petitioner wife

Mr Timothy Parker instructed by Messrs. Susan Liang & Co for the Respondent husband

FCMC 14350 / 2009

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES

NUMBER 14350 OF 2009

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JUDGMENT
(Leave to file Answer and Direction)

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Introduction

1.  There are two summonses presently before me. The first is the respondent husband’s summons dated the 8 February 2010 seeking an order that inter alia he be granted leave to file and serve his Answer within 14 days from the date of the order. In other words he is seeking leave to file his Answer out of time.

2.  The second is a summons issued by the wife dated the 29 April 2010 seeking an order that:

1. without prejudice to the Wife’s position that her Petition (in FCMC No. 14350 of 2009) ought to remain in the special procedures list and/or that decree nisi ought to be granted on the Wife’s Petition and that the Husband’s Petition ought to be dismissed together with costs, the cause FCMC 14350/2009 be consolidated with the cause FCMC 4402/2010 and be carried on in the title as per the proposed “Title of Consolidated Cause” hereto annexed and marked “A” with the description of the Petitioner and Respondent be generally referred as “Wife” and “Husband”;

2. The Wife’s Petition in FCMC 14350/2009 do stand as the Petition and the Husband’s Petition in FCMC 4402/2010 do stand as the Cross-Petition in this consolidated cause;

3. The parties’ Financial Statements (Form Es) filed in FCMC 14350/2009 do stand in this consolidated cause;

4. Such other directions as this Honourable Court may deem fit; and

5. Costs be provided for.

3.  This summons is necessary given that the husband has also issued his own divorce petition dated the 16 April 2010 based on the wife’s unreasonable behaviour. This is notwithstanding the fact that he has issued an application for leave to file an Answer out of time. It is not clear exactly why he chose to do this. Presumably in order to put forward his own case on the reasons for the breakdown of the marriage. In any event, in order to prevent duplication and unnecessary confusion the wife’s solicitors have taken the sensible step of issuing the current summons. 

4.  Dealing with the wife’s summons first, the husband has consented to this in his solicitor’s letter of the 19 May 2010 and I accordingly make an order in terms of paragraphs 1 – 3 to that effect. There shall be no order as to costs on that summons.

5.  There is thankfully some measure of agreement concerning other matters. The parties have for example, agreed to enter into mediation with a view to resolving all matters in dispute and have appointed Ms Y as their mediator. This is to be encouraged.

The issues to be determined

6.  The main issue to be determined then is whether or not the husband should be given leave to file his Answer out of time. Other matters arise from this and will be discussed below.

7.  Reference was also made, during the hearing, to the manner in which the wife’s petition has been drafted and I was taken to Order 18 rule 7 of the White Book. No formal application had been made in that respect and the wife objected to the suggestion that the court could deal with this of its own motion. Consequently that issue was not taken any further.    

Background

8.  The parties married on the 8 June 1987 following a substantial period of cohabitation of some 8 years or so. They have two children both of whom are presently studying at HB School. The daughter, F is now aged 28 and the son, C is 26. The husband has expressed the wish that the children should both go into the family business. The husband is Cambodian and he holds dual French and Cambodian nationality. He is presently based in Cambodia. The wife is a Korean national and she is based in Hong Kong. The husband is in his early 70’s and the wife is 55 years old. They separated on the XX July 2009 and on the 16 November 2009 the wife issued proceedings based on the husband’s unreasonable behaviour. 

9.  The husband is a well-known businessman of some repute in Cambodia.  Both he and the wife hold substantial business interests through a myriad of different corporate structures. They also hold a large number of properties. The extent of their wealth is yet to be determined, but it is likely to be very considerable.

10.  It is accepted by both sides that the divorce petition was eventually served on the husband in Hong Kong on the 2 January 2010, whilst he was having his hair cut in the barbershop in the Hotel. It is also accepted that the time for filing of the Answer expired on either the 30 January or the 1 February 2010. The summons presently before me was filed on the 8 February 2010.

11.  The parties also each accept that the marriage has irretrievably broken down and that a decree nisi will be pronounced in due course. The difficulty is with the very serious allegations made by the wife against the husband in the particulars of the divorce petition. The husband is willing to proceed on the basis of a “watered down” petition. He has waived privilege with respect to a number of without prejudice letters. These were produced for the court’s consideration during the hearing. His position is made clear in that he said that he was willing not to file an Answer if the wife agreed to amend the petition in line with his amended draft petition. He also agreed to split the family assets equally referring quite correctly in his solicitor’s letter to assets belonging to both parties. The wife chose not to waive privilege in respect to her own without prejudice correspondence. She is maintaining her open position. In her solicitors letter of the 12 February 2010 she states as follows:

It is clear beyond peradventure that this marriage has irretrievably broken down.  We understand that your client is concerned that his representation (reputation) will be damaged by the existing allegations of unreasonable behaviour, but no doubt you have advised your client that unless the Divorce Petition is defended, the contents of a Divorce Petition are entirely confidential, and the papers are available only to the parties, and no outside third parties, save and except the parties legal advisors.

You have no doubt advised your client that if he defends the Divorce Petition, then the Trial is in open Court.  Our client has supporting evidence in respect of her allegations, and witnesses available to give evidence.

Our client believes that your client wishes to delay the progress of the divorce, only because he wishes to delay any progress in the ancillary relief proceedings.

With that in mind, notwithstanding the fact our client confirms that the contents of her existing Petition are true and correct, if financial settlement can first be reached our client would be prepared to amend the allegations of unreasonable behaviour to the usual standard and mild terms.

And later in the same letter:

To summarise, our client would agree to the following:

1. Our client will undertake to amend her existing Divorce Petition to a mild and agreed Petition provided financial settlement terms have been agreed between our clients, and such terms are encompassed in an endorsed Consent Summons.

2. Until such time as settlement terms have been reached, our client will undertake not to take any further steps to progress her existing Divorce Petition without giving your client 14 days notice of the same.

3. Our clients Form E’s will need to be exchanged by the 22^nd February 2010.

4. Your client must agree to attend mediation in Hong Kong commencing the week beginning the 22^nd February 2010.

5. Your client must instruct Maruhan Japan Bank to deposit the sale proceeds of his shares into a nominated bank account in the joint names of our clients, or into your firm’s bank account on your undertaking not to transfer the money without an Order of the Court.

6. Your client must undertake not to dispose of any assets of US$20,000.00 or more without our client’s consent or Order of the Court.

7. Your client must undertake not to defend the agreed mild Divorce Petition, when filed.

12.  It appears that the husband has complied with most if not all of these requirements. Given that the court has not had sight of all the without prejudice correspondence, it is not therefore clear why some consensus was not reached on the issue of the divorce petition itself and the parties still chose to proceed on a litigious basis.

13.  In any event there was one difficulty which then became apparent namely that the husband’s without prejudice position (which was now open) did not accord with his original open position as set out in his draft Answer. After seeking clarification his counsel confirmed that the husband now seeks to file “an Answer” which accords with his open position as stated in court. He does not seek leave to file the draft Answer originally proffered for the court’s consideration.        

The law

14.  Both sides have referred me to a number of cases on point, including the Hong Kong Court of Appeal decision namely YSP v HFF & HA, CACV No 235 of 2003, 15 October 2003 (unreported).  In that case the relevant principles were identified as follows:

13. The following are the relevant principles gleaned from the authorities on how the court should deal with the delay and extension of time by a party in filing an answer to the petition.

1. The starting point is that under the special procedure the registrar has certified that the petitioner has proved the contents of the petition and is entitled to a decree : Day v Day [1979]2 WLR 681.

2. This being the position an application for extension of time to file the answer should be dealt with by analogy to the principle governing the former procedure of an application for re-hearing after decree nisi : Day v Day.

3. This principle is that the application should have been refused unless there were “substantial grounds for the belief” that the decree would have been obtained “contrary to the justice of the case”: Owen v. Owen [1964] P.277.

4. Each case has to be dealt with on its own facts : Rogers v Rogers [1974]1 WLR 709.

5. Broadly speaking, the cases may be divided into two types.  This division is not exhaustive:

(1) Where the applicant was not served at all and the proceedings took place without his knowledge.  He would get a re-hearing almost immediately.

(2) The applicant knew of the proceedings but chose not to defend.  He then changed his mind again and asked for time.  He had to satisfy the court that it was more probable that the decree was obtained contrary to the justice of the case.

6. The following are examples of some of the factors the court may consider in the exercise of its discretion in favour of granting an extension of time:

(1) The delay in filing the answer is not due to the fault of the applicant, but, for example, due to the delay in processing legal aid application or the fault of his legal advisers: Nash v. Nash [1967] 1 All ER 535.

(2) The delay is of relatively short duration such as a few days: Lawlor v. Lawlor [1995] 1 FLR 269.

(3) Allegation of adultery contains a stigma which a party may wish to defend: Huxford v. Huxford [1972] 1 WLR 210; Collins v. Collins [1972] 2 All ER 658.

(4) The conduct of the parties is relevant in ancillary relief; where allegation of adultery or unreasonable behaviour is made against a party and if he is precluded from defending the petition he would be estopped in ancillary proceedings from denying such allegations; further he would also be ordered to pay the costs of the divorce suit: Rogers v. Rogers and Edinger v. Edinger [1990] HKCU 222.

14. In considering these principles, in our view, it is also important to bear in mind that a divorce affects the status of a person.  While a petitioner has confirmed the contents of the petition by an affirmation, the allegation against the respondent remains untested in court proceedings.

15. Further, as pointed out in Day v. Day, there are matters which show that a respondent may be in a position of handicap such as the different rules which may give an impression that the answer may be filed at any time before the directions for the trial of the cause had been given despite the other specific rules on time limits.  Further no notice is given by the Registrar to the respondent that he is about to consider the evidence with a view to making his certificate that the petitioner has proved his or her case.  The first time that the respondent knows of what is happening, is the receipt of a notice of the date and place for the pronouncement of the decree, by which the process of adjudication is over.

15.  In this case the Court of appeal allowed the appeal and gave permission for the husband to file his Answer out of time.

16.  I have also been referred to a more recent Court of Appeal decision namely BCA v IOF HCMP No 1901 of 2005; 10 April 2006 HKCA. In that case the husband was not given leave to file his Answer out of time. In conclusion the following comments were made:

19. We have considered the background of the case and everything urged upon us by the husband.  We have also taken into consideration the husband’s draft submissions.  We are satisfied that on the husband’s admissions, he has no realistic prospect of succeeding in the appeal and the decree granted to the wife was inevitable.

20. There is no injustice in granting the decree and there is no valid basis upon which the court could over-rule the judge’s decision.

17.  In addition I have been referred to my own case of KEWS v NCHC, FCMC No 13087 of 2008, 19 February 2009. In that case I refused the wife leave to file an Answer. The husband also seeks to rely on the principles originally elucidated in Grenfell v Grenfell [1978] Fam 128.

Discussion

18.  Would then the granting of the decree, on the particulars filed, be contrary to the justice of this particular case? Reference is made above to a number of examples where the court is more likely to exercise its discretion in favour of an applicant. I will go through each of these in turn.

1)  The delay is not the fault of the husband

19.  This is not a case where the husband complains of not being served. It is also not a case where he knew of the proceedings but chose not to defend. Rather it appears that he knew of the proceedings but initially only sought advice from a Cambodian lawyer who advised him that Hong Kong was not the appropriate forum. Initially he did not take the matter any further, notwithstanding the fact that the wife’s solicitors quite properly explained something of the procedure to him in their letter of the 18 January 2010 when they suggested that the husband should seek independent legal advice from a Hong Kong lawyer. Contact details of six such lawyers are given. Notwithstanding that I am willing to accept that the delay was due to the husband accepting the incorrect advice given to him by his Cambodian lawyer. I also accept that the husband relied on the advice given in good faith and that once he received advice from a Hong Kong lawyer that he acted upon that advice in a sensible way. The wife argues that the husband has not been full and frank in this respect and complains of lack of particulars. Although I accept that there is a lack of detail in the husband’s affidavit I am nevertheless inclined to accept the explanation that he gives.

2) The delay is of relatively short duration such as a few days

20.  Here the delay was relatively short – only 7 or 8 days.

3) Allegations of adultery contain a stigma which a party may wish to defend

21.  This is where the real dispute lies. The wife’s unreasonable behaviour particulars run to over 7 pages. She subdivides her complaints, which include allegations of dishonesty, financial misconduct (including the allegation that the husband is a gambling addict, that he ran two sets of accounts in some of his businesses and that he spent money on call girls), improper association with other women, aggressive behaviour towards the wife and generally inconsiderate behaviour. The wife’s case seems to be that given that she does not intend to rely on any of these matters in her claim for ancillary relief and given that they are private and confidential in any event, that they are really of no import and that therefore the husband’s application should be refused and the petition should proceed on an undefended basis.

22.  In the words of her counsel, Mr Jeremy Chan             

For the avoidance of doubt – the Wife repeats once again – other than the fact that the marriage has irretrievably broken down, the Wife will not in these proceedings be asserting that ‘facts’ have been ‘proven’ or ‘admitted’ for any other purposes (and there isn’t anything else left other than financial ancillary relief anyway) – in other words, the Wife’s position is that the divorce decree is without prejudice to and does not affect financial and/or ancillary relief matters, and the Wife will not be asserting otherwise.

23.  Why then did the wife choose to proceed on this basis? For the avoidance of doubt this is an extremely aggressive petition of the like rarely (thankfully) nowadays seen in our courts. When I asked Mr Chan why the wife had chosen to proceed in this way, i.e. when it was acknowledged that in reality doing so meant very little, he replied that the wife did not know which parts of the particulars the husband would agree to and which he would not. For the avoidance of doubt I simply do not accept that explanation. The reply was both disingenuous and on the face of the file simply wrong.   

24.  I have no doubt that the wife’s solicitors fully and accurately advised the wife in this respect. Indeed the wife alludes to this in her Form E, when she says that

I repeat herein the particulars of the respondent’s behaviour as stated in my petition and the court can deal with the matters as it thinks fit. I have been advised that conduct is generally only relevant when obvious and gross but I feel it is important. 

25.  Thus it appears that the wife has chosen to proceed in a way that is contrary to the more modern and the more accepted approach of drafting divorce particulars. I am reminded of the very sensible advice given in the Hong Kong Family Law Association’s Code of Conduct, where it states that

Court Proceedings

5.1       The taking of any action or proceedings which is likely to cause or increase animosity between the parties must be balanced against the likely benefit to the client and the family.

5.2       Where the purpose of taking a particular step in proceedings may be misunderstood or appear hostile, the solicitor should consider explaining it, at the first practical opportunity, to the other party or his solicitors.

5.3       Before filing a petition, the solicitor should consider with the client whether the other party or his solicitor should be contacted in advance as to the intention to petition, the ‘facts’ on which the petition is based and/or the particulars to be alleged, with a view to proceeding by agreement. A client should be advised that by filing a Petition and/or Statement of Arrangements without first attempting to agree the contents is likely to increase feelings of contentiousness and hostility, making any settlement much more difficult to achieve. It may also earn the disapproval of the Court and may have a bearing on the issue of costs.

5.4       The solicitor should advise the client that on receipt for approval from the other spouse of a Petition or Statement of Arrangements, that other than in exceptional circumstances, a client should not first file their own petition without giving their spouse at least 5 working days written notice of their intention to do so.

26.  Here there is no doubt that the wife took a deliberate and calculated decision to file an extremely aggressive divorce petition without prior notice to the husband, when it was agreed that the marriage was at an end. There is no doubt that doing so has “increased feelings of contentiousness and hostility”. The difficulty from the husband’s perspective is that the wife does not seek to rely on the particulars going forward. Is this then simply an issue of “feelings”? To that end I have been referred by both counsel to Grenfell v Grenfell [1978] Fam 128 where it is stated that

There is no point, as I see it, in a case like this in conducting an enquiry into behaviour merely to satisfy feelings, however genuinely and sincerely held by one or other of the parties.  To do so would be a waste of time of the court and, in any event, would be running, as I think, counter to the general policy or philosophy of the divorce legislation as it stands today.  The purpose of Parliament was to ensure that where a marriage has irretrievably broken down, it shall be dissolved as quickly and as painlessly as possible under the Act, and attempts to recriminate in the manner in which the wife in this case appears to wish to do so should be, in my judgment, firmly discouraged.”

27.  And to our own Court of Appeal decision in BCA v IOF (HCMP No 1901 of 2005), where it stated that

13.       It is never the function of a divorce court to apportion the responsibility of the parties for a broken marriage.

14.       Although the wife had made certain allegations against the husband in her petition, a decree made on such petition, when the husband did not file any Answer, did not mean that the court must have accepted those allegations in their entirely.  It was just an indication that the court accepted that there were grounds for the petition and that the husband decided not to defend.

28.  I agree. The difficulty however is that it seems to me that this is not simply a matter of hurt feelings, nor is it a matter of simply wishing to apportion blame.

29.  Counsel for the husband puts his case very succinctly when he says that:

(4)        The allegations levelled at the Husband in the Petition are extremely serious – to say the least – and are strenuously denied.  The Petition charges inter alia that the Respondent:

(i) Threatened her with death on various occasions (Petition § 9D, at p.6);

(ii) Is a dishonest person who is guilty of fraudulent accounting in relation to his businesses, and of employing falsified accounts for the purpose of tax-dodging (Petition § 9B(v));

(iii) Has committed adultery and frequently engages prostitutes (Petition §§ 9A(ii), 9B(iv), 9C, 9D(v)). The Petitioner further says that that the Respondent has transmitted sexually transmitted diseases to her (Petition § 9C(vii));

(iv) Is guilty of “financial misconduct” including using company money for personal purposes, excessive gambling and making large gifts to call-girls (Petition § 9B); and

(v) Lying to his family (Petition § 9A).

30.  In this instance the wife has made very serious allegations against the husband. This was done deliberately on her part. I do not believe it is sufficient to simply say that this should not be a cause for concern given the confidential nature of the proceedings. I accept that the husband is concerned about this and rightly so.

The conduct of the parties is relevant in ancillary relief

31.  Counsel for the husband adds that

(5) Charges of such exceptional gravity plainly require an answer.  The allegations made in the Petition would be highly prejudicial to the Respondent at the ancillary relief stage, and the Respondent may be estopped from denying them (see: YSP v HFF, Rogers v. Rogers and Edinger v. Edinger [1990] HKCU 222).  Granting the decree on an “undefended” basis and allowing the Petitioner’s account to stand by default – when not a shred of evidence has been proffered in support of the grave allegations levelled at the Respondent – is contrary to the justice of the case; and

(6) At base, the particulars in § 9 of the Petition are entirely gratuitous because they are totally unnecessary to establish irretrievable breakdown (which is in any event agreed upon).  They are calculated to scandalise and prejudice.  The Husband is a prominent businessman and is well respected in his community: he is the Chairman of a major Bank in Cambodia, and has received high civilian honours both in Cambodia and in France (see: Respondent’s Affirmation § 12 and Exhibit VH-1).  He ought to be entitled to defend his reputation.

32.  Although I accept that it is unlikely that the allegations made in the petition are of the type likely to be regarded as “obvious and gross” I do accept that they were in part calculated to scandalise and prejudice and that the husband should be entitled to seek resolve this in an acceptable way. I have also taken into account the fact that the delay could not be said to be entirely the fault of the husband and is in any event of a fairly short duration. However I also accept that given the status of the law at the present point in time and given the fact that the wife has stated that she does not intend to rely on these allegations in any shape or form, the apparent confidential nature of the particulars and the fact that both parties wish to proceed to a decree nisi, that the husband’s application for leave to file an Answer out of time must be refused. I do however have a great deal of sympathy with the husband’s position. Consequently the matter shall not be set down in the special procedure list on either the wife or husband’s petitions for the next six weeks. This will enable the husband to make whatever further application to the court that he deems appropriate in all the circumstances of the case. In the event that a further application is made the setting down of either petition in the decree nisi list shall be adjourned pending the resolution of that summons or the expiration of six weeks whichever is the later.  I would add however that I make these directions in the hope that the parties will now resolve this issue in a more sensible way and preferably by negotiation, either through solicitors or with the assistance of their mediator.   

33.  Although initially the husband was seeking the court’s indulgence and the wife seeks her costs on that basis, given the circumstances I will make an order nisi that there be no order as to costs to be made absolute in 14 days time .