LFZ v. WSX

FCMC 10498/2019

[2024] HKFC 119

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES

NO. 10498 OF 2019

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___________________________

DECISION
(Stay of Ancillary Relief Proceedings / Parallel Proceedings)

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A.  The Application

1.  This is the Petitioner’s application by Summons dated 22 January 2024 for a stay of the ancillary relief claims pending the Mainland court’s determination on the beneficial ownership of the matrimonial assets (“Stay Summons”).

B.  Background

2.  The Petitioner (“P”) is a merchant, and the Respondent (“R”) is a housewife. They were married in 2008 in Hong Kong. They have 3 children, aged between 15 and 6.

3.  In 2019, P petitioned for divorce on the ground of one year separation with consent. They filed a consent summons (“Consent Summons”) which contain, inter alia, the following provisions:

3.1.  The custody, care and control of the 3 children be granted to R, and P has reasonable access;

3.2.  P will pay a lump sum and a periodical payment to R as her maintenance;

3.3.  P will pay a periodical payment to R for the children’s maintenance; and

3.4.  P will transfer to R one Hong Kong property[1] (“HK Property”), twelve Mainland properties[2] (“CS Mainland Properties”) and one car.

4.  It is R’s case that since 2022, P pressurized her and her family members to accede to his request for a substantial reduction of financial provision.

5.  By an ex-parte on notice application, R obtained a Mareva injunction[3] against P on 31 March 2022 whereby P was restrained, inter alia, from transferring or otherwise dealing with the HK Property and the CS Mainland Properties.

6.  On 26 April 2022, the Mareva injunction was continued until the final disposal of R’s ancillary relief claims. P was also ordered to pay a maintenance pending suit and an interim child maintenance (“Interim Maintenance Order”).[4]

7.  By a Summons dated 4 November 2022, P sought to set aside the Consent Summons and vary the Interim Maintenance Order.

8.  Among the assets disclosed by P in his Form E dated 8 November 2022 were the HK Property and 15 properties in the Mainland[5]. Not all the Mainland properties covered by the Consent Summons were included in the Form E. P also claimed in the Form E that he only has 50% beneficial interest in the HK Property and he has no beneficial interest in the Mainland properties disclosed in his Form E.

9.  After a CDR on 22 September 2023, by consent of the parties, it was ordered, inter alia, that:

9.1.  leave was granted to P to withdraw his application for variation of the Interim Maintenance Order, and

9.2.  P’s application to set aside the Consent Summons is to be dealt with together with the ancillary relief dispute.

10.  P has been in breach of the Interim Maintenance Order. A garnishee order was issued on 2 November 2023.

11.  On 11 January 2024, P’s mother (“M”) took out a Summons (“Joinder Summons”) seeking:

11.1.  to be joined as a party to these proceedings;

11.2.  a determination on the question whether “certain matrimonial assets” were held by P on trust for M as a preliminary issue (“就本案的若干婚姻財產是否由呈請人以信託形式代申請人持有作為本案審訊的初步爭論點”); and

11.3.  the removal of the aforesaid “certain matrimonial assets” from the parties’ matrimonial assets (“將上述本案的若干婚姻財產在本案的婚姻財產剔除”).

12.  M filed an affirmation dated 11 January 2024 and a supplemental affirmation dated 18 February 2024 in support of her Joinder Summons.

13.  At the hearing on 15 January 2024, I pointed out to the parties and their legal representatives the ambiguity in the Joinder Summons especially P has not specified what are the “certain matrimonial assets (若干婚姻財產)”. Having heard my observation, M applied for leave, which was granted, to amend the Joinder Summons by replacing “certain matrimonial assets” with a list of properties containing the HK Property and 20 Mainland properties[6] (“Disputed Properties”), which overlap but are not identical with the CS Mainland Properties. The Amended Joinder Summons were filed on 17 January 2024.

14.  Legal practitioners should require no reminder of the importance of pleading a claim with clarity and sufficient particulars. The other party is entitled to know the exact scope of the claims that he has to answer. It is unfortunate that despite my observations on the Joinder Summons, the same problem appeared in P’s Stay Summons filed on 22 January 2024.

15.  By a joint letter dated 21 February 2024 issued by solicitors for P and R, they informed the court that P and R agreed to the joinder of M. This uninvited joint letter was not copied to M who is the applicant for the joinder.

16.  On 27 February 2024, I directed all 3 parties to file a consent summons for the court’s consideration if they agree to M’s joinder application. They were also directed to specify the purpose and scope of the joinder. No consent summons was filed by the parties in last 3 months. At the hearing, P and R confirmed their consent to the joinder of M and agreed to liaise with M for the filing of a consent summons to this effect within 14 days.

17.  P took out the Stay Summons on 22 January 2024 and filed his 3^rd affirmation (“P-3”) in support of the application on the same date.

18.  By consent of the parties, it was ordered that R shall file and serve her affidavit in opposition within 28 days from the order dated 14 February 2024, P shall file and serve his affidavit in reply within 21 days thereafter. No further affidavit may be filed without leave of the court. The time for R to file and serve her affidavit in opposition to the Stay Summons was further extended to 10 April 2024 by consent.[7]

19.  On 10 April 2024, Ms Law (solicitor for R) filed her 8^th affidavit (“L-8”). The exhibit of L-8 is a copy of R’s 4^th Affirmation dated 10 April 2024 with its exhibits (“R-4”). It was deposed in L-8 that R was residing in the Mainland and was arranging for the notarization of R-4. The notarized version of R-4 will be filed and served promptly upon receipt. No reason was given for not having filed R’s affirmation within time under the Consent Order dated 20 March 2024.

20.  R-4 was notarized in the Mainland on 11 April 2024. The notarized copy was filed on 15 April 2024.

C.  Issues

21.  The following issues can be discerned from both parties’ written submissions:

21.1.  R’s argument that by operation of the principle laid down in Hadkinson v Hadkinson, P should not be heard on his Stay Summons (“Hadkinson Argument”);

21.2.  P’s argument that R should not be allowed to rely on R-4, whether as an exhibit to L-8 or as the notarized copy filed out of time; further, if R is allowed to rely on R-4, time should be given to P to file evidence in reply (“Evidence Argument”);

21.3.  Whether the Stay Summons shall be allowed on the ground of case management (“Stay Argument”).

D.  Hadkinson Argument

22.  Ms Yu for R argued in her written submissions (without a Summons) that by operation of the principles laid down in Hadkinson v Hadkinson[8] (“Hadkinson principle”), P should not be heard on his Stay Summons because of his failure to comply with the Interim Maintenance Order, and his refusal to file the Answers to R’s Questionnaire pursuant to an unless order. Ms Yu submitted that the Stay Summons is a delaying tactic deployed by P. She relied on Hadkinson v Hadkinson, CWG v MH (13 March 2014 decision)[9], and Hong Kong Civil Procedure 2024 [52/0/14].

23.  The Hadkinson principle, briefly stated, is that the court has a discretion not to hear a contemnor who has not purged his contempt.

24.  Before the hearing, I passed to the parties a copy of the Court of Appeal’s decision in CWG v MH made on 30 June 2014[10] (which was not cited by either party) whereby Yuen JA remarked at [16.3]:

“For my part, I would have thought that bearing in mind the principles of Civil Justice Reform, an application of such significance as a Hadkinson application should not be made without the other party being duly forewarned by way of summons, with enough time for affidavit evidence to be adduced for and against the making of the order. …”

25.  Ms Yu did not argue against the inappropriateness of pursuing a Hadkinson application without Summons. She submitted that she was not making a Hadkinson application. She said that she was inviting the court to consider P’s repeated non-compliance with the court orders in light of the Hadkinson principle when exercises its case management power. Ms Yu has not cited any authorities in support. This argument is, in my view, unmeritorious. There is no practical difference between making a Hadkinson order and a case management decision in the same term and effect as a Hadkinson order. A Hadkinson order, by its nature, is a case management decision.

26.  The absence of a Summons aside, having considered the proportionality principle and the existence of other available means to secure P’s compliance (e.g. the garnishee order), I decline to make a Hadkinson order to bar P from being heard on his Stay Summons.

E.  Evidence Argument

27.  Mr Man for P argued in his written submissions that R-4, whether as an exhibit to L-8 or the notarized version filed with the court, should not be admitted in evidence for the Stay Summons. If the court admitted R-4 as evidence, P asked for time to file his evidence in reply.

28.  At the hearing, P did not pursue his “request” for time to file evidence in reply if R-4 is held to be admitted in evidence.

29.  On the non-admissibility of R-4, P relied on the following cases, in particular the court’s criticism of the practice of inserting unsworn affidavit as exhibit to a lawyer’s affirmation.

30.  In China Shanshui Cement Group Limited v Zhang Caikui[11], the Court of Appeal upheld the decision of Au-Yeung J to strike out a draft affirmation and a draft report of a PRC lawyer, which were filed in the court as exhibits to an affirmation. These documents were put in after the deadline imposed by an unless order. These draft documents did not comply with all the formal requirements for affirmation evidence. The draft PRC lawyer report was found to be irrelevant and is in substance an expert evidence without expert direction beforehand.

“4. One of the grounds on which the judge struck out those exhibits was that by virtue of the unless order the Defendants should not be allowed to slip in evidence by way of exhibits in the form of draft affirmation and draft report. The judge also struck out the exhibits on other grounds. Another ground which we need to refer to in this judgment was that the draft report of Yao (addressing whether execution of corrective article pursuant to one set of orders which the Defendants allegedly did not comply with should be an issue litigated in the Mainland) is irrelevant to the contempt proceedings.

5. In refusing leave to appeal, the judge considered that it was sufficient to focus on the ground based on the unless order. We agree.

6. There is no doubt that the Defendants are bound by the unless order. Thus, affirmation evidence not filed before the deadline should not be permitted to be slipped in by other means. Further the draft affirmation and draft report are not admissible as affirmation evidence since they did not comply with all the formal requirement for affirmation evidence. When the Defendants (or his lawyers) found that they had insufficient time to put in such affirmation and report, they should either apply for an extension of time (before the time for compliance expired) or alternatively apply for relief against sanction under Order 2 Rule 5. For reasons that the Defendants did not explain, they did not undertake any of these courses.”

31.  In Re 張承勷 (aka Cheung Shing-Sheung or Carl Cheung or Carl Chang), Ex-parte: 北京橙天嘉和影視製作有限公司 [12], the defendant filed an unsigned, un-affirmed and un-notarised draft 5^th affirmation. Without any cogent explanation, the defendant did not file a properly affirmed/notarised affirmation prior to the hearing which was about 4 months from the filing of the draft. Marlene Ng J (as she then was) considered the contents of the draft 5^th affirmation on de bene esse basis and found it hard to place any substantial weight on the bare assertion in the draft 5^th affirmation.

32.  In Weili Su v Shengkang Fei[13], Mimmie Chan J. criticized the practice of lawyer swearing affidavit as to factual matters (of which he has no direct knowledge) on behalf of parties to contested litigation:

“80. In the modern age, the fact of a party not being in Hong Kong would very rarely be a satisfactory explanation for not having an affidavit sworn and signed by the party outside Hong Kong, and exhibited. Of course, the original, duly signed, sworn and attested copy of the party’s affidavit or affirmation should in all cases be filed as soon as possible after having been produced as an exhibit.

81. In the present case, it is extremely regrettable that the best practice mentioned above has not been followed. To discourage such practice, the Court may in the future refuse to allow affidavits on facts which are made for a party by solicitors who do not have direct knowledge of the matters deposed to, in the absence of a satisfactory explanation. This is particularly so in cases where the facts are disputed and the decision of the Court turns on the very facts.”

33.  The rules on evidence and procedures are to ensure a fair play between the parties in litigation. It is undoubtedly vital for the parties to fully comply with the rules and court orders to ensure a fair and orderly conduct of the proceedings. The court retains a discretion to cure irregularity if it can be cured without undue hardship or it is not a matter that affects the substance or actual contents: Hong Kong Civil Procedure 2024 [41/4/1]; Eric Edward Hotung v Ho Yuen Ki [2006] 2 HKC 246.

34.  Under Order 41 rule 4 of Rules of High Court, the court may grant leave to use an affidavit in evidence notwithstanding any irregularity in its form.

35.  In the present case, the content of R-4 is relevant to the Stay Summons. The copy of R-4 exhibited to L-8 is not a draft document. It is a signed version although it was not notarized nor affirmed. This copy was filed within time. A notarized copy of R-4 was filed on 15 April 2024, which is 5 days after the deadline. P would still have his time to file his evidence in reply, if he so wished. There is no real prejudice against P if R-4 is admitted in evidence.

36.  I grant leave under Order 41 rule 4 for the use of R-4 in evidence of the Stay Summons.

F.  Stay Argument

37.  P’s case is that since M has commenced a litigation in the Mainland claiming beneficial ownership of certain matrimonial assets, and will commence further litigation in the Mainland to dispute the beneficial ownership of the other matrimonial assets, this court shall exercise the case management power to stay the ancillary relief proceedings to avoid duplicity and wastage of costs.

38.  The following legal principles as summarized by Au-Yeung J in Poon Ka Man Jason & ors v Cheng Wai Tao[14]are not in dispute:

“36. The court has discretion, as a matter of case management, to grant a stay of proceedings generally or until a specified date or event: High Court Ordinance, Section 16(3); Order 1B, rule 1(2)(e) of the Rules of the High Court (“RHC”).

37. Where, as here, the action was commenced as of right, the court should only grant a stay when there are “very good reasons” and in “rare and compelling circumstances”. The stay must not cause injustice to the Plaintiff, and the Defendants must show that continuing the proceedings would be unjust to them. See: Zhang Xiuhong v Liu Wenchen & ors (HCA 2118/2012. 20 July 2017), §34, per Au-Yeung J, citing Ng J’s judgement in AIG Europe Ltd & ors v Fast-Link Express Ltd & ors (HCAJ 114/2014, 10 January 2017), §§9-13. The ultimate question is what would serve the ends of justice.

38. Exercise of discretion would involve balancing between (1) possible wastage of Court’s time and resources and also parties’ time and costs (if there is no stay) on the one hand and (2) possible delay of the proceedings for a short period of time (if there is a stay) on the other hand: see The Al Dhabiyyah [1999] 4 HKC 414 at p 420A-F.

39. The court must bear in mind that the underlying objectives of the court is to increase cost-effectiveness of court proceedings: ensure that a case is dealt with as expeditiously as is reasonably practicable; promote reasonable proportion and procedural economy in the conduct of the proceedings; and to facilitate settlement of disputes: Order 1A, rule 1(a), (b), (c) and (e) of the RHC.”

(emphasis in bold added)

39.  In China Shanshui Cement Group Limited v Tianrui (International) Holding Company Limited[15], K. Yeung J cited the following authorities:

“76. In MAD Atelier International BV v Manés [2020] 3 WLR 631, Bryan J observed at §164 that:

“… the court has a discretion to stay an action pending the resolution of a claim pending in another forum, but a stay should only be granted in ‘rare and compelling circumstances’: Reichhold Norway ASA v Goldman Sachs International [2000] 1 WLR 173, 186 … A stay will not, at least in general, be appropriate if the other proceedings will not bind the parties to the action stayed or finally resolve all the issues in the case to be stayed, or the parties are not the same: Klöckner Holdings GmbH v Klöckner Beteiligungs GmbH [2005] EWHC 1453 (Comm) at [21] (Gloster J)”

77. In International Commercial Litigation, 2^nd ed 2015, Professor Richard Fentiman has (at §§14.07 to 14.15) identified a number of further considerations relevant to the exercise of the court’s discretion, analyzed the relationship between a stay on case management grounds and a stay on the ground of forum non-conveniens, and explained why a stay on case-management ground will only be granted in “rare and compelling circumstances”:

“… a stay may be granted on case-management grounds to regulate the conduct of English proceedings in the light of alternative foreign proceedings. In this context the power is parallel to, but distinct from, the court’s power to stay on forum conveniens grounds …

… In cross-border proceedings, it is not uncommon for a defendant to seek a stay of English proceedings pending the outcome of proceedings in another jurisdiction, but no such stay will be granted if justice and efficiency would be served by allowing the English proceedings to continue. Moreover, given that a stay of proceedings on forum conveniens grounds is permitted by CPR Part 11, and that the court’s jurisdiction and the appropriateness of the proceedings are not in dispute, a stay on case-management grounds is regarded as exceptional, to be made only ‘in rare and compelling circumstances’, where the arguments for a stay clearly outweigh those any resulting disadvantage to the claimant …

The power to stay on case-management grounds is perceived by the courts as a valuable tool in cases where a claimant has embarked upon parallel proceedings in England and a foreign court. In that event, ‘justice and the efficient management of the case’ require that a claimant ‘be put to his election as to which of the two actions to pursue first’…

A stay on case-management grounds is distinct from a stay on forum conveniens grounds in several ways:

(i) The objective is not to determine the most appropriate forum according to forum conveniens principles …

(ii) … The existence of pending proceedings abroad may of course influence a court’s view of the forum conveniens, but it does so only as one factor in assessing appropriateness. The issue on a forum conveniens application is whether the English court or a foreign court is the more appropriate form [sic forum?]. On a case-management application it is whether the existence of parallel proceedings is appropriate.

(iii) Unlike forum conveniens stays, case-management stays may be granted merely because it would be unjust to allow English proceedings to continue in parallel with proceedings abroad. The oppression a defendant would suffer if exposed to parallel actions may justify such a stay …

…

A stay may be granted on case-management grounds in cases involving parallel English and foreign proceedings …

Such cases are fact-specific, and general principles are hard to discern. A number of propositions may, however, be derived from the cases. A stay is likely to be granted where the claimant initiated both sets of proceedings, and the same essential issues are involved in both, such that the effect of a stay is merely to require the claimant to choose which action to pursue. However, a stay is likely to be denied where the effect of the stay is to require the claimant to bring, or participate in foreign proceedings. Again, there is some evidence that the court will be inclined to decline a stay if the court has already concluded that it is the forum conveniens …””

(emphasis in bold added)

40.  There shall be a balancing exercise with the aim to ensure that justice and efficiency will be served and the underlying objectives of the court as set out in Order 1A rule 1 will be fulfilled. The court shall be satisfied that there is very good reason for granting a stay, which should only be made in “rare and compelling circumstances”. In general, where the other proceedings will not finally resolve all the issues in the case to be stayed, or the parties are not the same, or the other proceedings will not bind the parties to the action stayed, a stay of the proceedings shall not be granted.

41.  Having carefully considered the evidence in its totality and by reasons below, I am not satisfied that there is very good reason to support a stay of the ancillary relief proceedings.

42.  Firstly, the Stay Summons is ambiguous or otherwise too wide. P is seeking a stay of the ancillary relief claims pending the Mainland court’s determination on the beneficial ownership of the matrimonial assets involved in this case (“涉及本案的婚姻資產”)[16].

43.  The natural meaning of “涉及本案的婚姻資產” is all the matrimonial assets in this case, which according to the disclosure made by the parties, include over 20 Mainland properties, one HK Property, and shareholdings in private company.

44.  Upon my enquiry at the hearing, Mr Man for P for the first time submitted that the Stay Summons covers only the Disputed Properties, but not all the matrimonial assets in this case. This is not the claims in the Stay Summons. P has not indicated any intention to amend the Stay Summons.

45.  Secondly, even if the Stay Summons covers the Disputed Properties only (which is of a narrower scope), the result of the two Mainland litigation, i.e. Case 934 and the New Case (as defined below) will not bring finality to all the beneficial ownership disputes arose in this action:

45.1.  not all the Disputed Properties (let alone all matrimonial assets) are subject to the two existing litigation in the Mainland; and

45.2.  the parties to the Mainland litigation are not the same parties to this action. According to R, which is not disputed by P, she is not a party to the New Case.

46.  When the Stay Summons was issued, only one live litigation was commenced in 2022[17] at the First Intermediate People's Court of Hainan Province (“Case 934”) concerning the dispute of beneficial ownership of 5 properties (property items 1, 2, 3, 6(b) and 20)[18]. Only 4 of them (property items 1, 2, 3 and 6(b)) are part of the Disputed Properties.

47.  P relied on[19] M’s indication through lawyers at the hearing on 15 January 2024 that she would commence litigation in the Mainland for the resolution of the beneficial ownership dispute of the remaining Disputed Properties.

48.  It is not in dispute that M has commenced a new suit in Haikou Xiuying District People’s Court (“New Case”) in February 2024 claiming the beneficial ownership of 9 properties, 8 of them are part of the Disputed Properties. As to the remaining one, while the address is the same as one of the Disputed Properties, the land title document number quoted is different.

49.  It is also of note that:

49.1.  At least two of the matrimonial assets located in the Mainland[20] are not part of the Disputed Properties. The beneficial ownership dispute of these two properties would be litigated in Hong Kong only; and

49.2.  The HK Property, being part of the Disputed Properties, is not subject to any litigation in the Mainland. P has not explained why the beneficial ownership dispute should be litigated in the Mainland.

50.  Thirdly, the delay.

51.  This is a claim for ancillary relief involving, inter alia, a claim for financial provisions to meet the financial needs of 3 children.

52.  This action has already taken longer than it normally should. P presented the petition in 2019. He signed and filed the Consent Summons in 2019 whereby he agreed to transfer properties to R and to pay the maintenance. P started to dispute his beneficial interests in these properties in 2022, and has been reneging from the Consent Summons and refusing to pay the interim maintenance for R and the children. Although Case 934 was commenced in 2022, P only took out the Stay Summons in 2024.

53.  P said in P-3[21] that a stay would not delay the ancillary relief claims as Case 934 was in its final stage and he was expecting the delivery of decision in a few months’ time. By now, about 4 months was passed, the time for the delivery of decision in Case 934 remains unknown.

54.  According to R, which was not disputed by P, the New Case has not yet been accepted (立案) by the Mainland court. There is no evidence as to whether the New Case will be accepted by the Mainland court, and if so, how long will the Mainland litigation take.

55.  The ancillary relief dispute shall be adjudicated promptly.

56.  There is an existing claims on the beneficial ownership of all the Disputed Properties before this court. However, the litigation in Mainland only covers part of the Disputed Properties. Moreover, there is the option of hearing the beneficial ownership dispute and the ancillary relief claims together, or one immediately after the other in this court.

57.  The administration of justice and expedient resolution of the ancillary relief dispute will be better served by continuing the present proceedings without a stay.

G.  Disposition

58.  The Stay Summons is dismissed.

59.  On a nisi basis, P shall pay R the costs of the Stay Summons to be summarily assessed. A certificate for counsel is granted. The costs order nisi is to become absolute in 14 days. R do lodge and serve a statement of costs for summary assessment within 7 days after the costs order becomes absolute, and P do lodge and serve a statement of opposition, if any, within 7 days thereafter. The court will then proceed to summary assessment on paper.