LSKC v. CHHI

FCMC 891/2018

[2022] HKFC 240

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES

NO. 891 OF 2018

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JUDGMENT

( Hadkinson Application )

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1.  By Summons filed on 9 December 2021, the petitioner (“Husband”) issued a Notice of Application for Avoidance of Disposition Order against the respondent’s mother Madam SSL (who has already joined these proceedings as the 3^rd Intervener), the respondent’s uncle Mr SP, and the respondent’s cousin Madam AANA pursuant to section 17 of the Matrimonial Proceedings and Property Ordinance (Cap 192) (“Husband’s S17 Application”). By this application, the Husband sought to set aside alleged dispositions by the respondent to her said family members within three years prior to 23 January 2018, in respect of some HK$11 million.

2.  The respondent (“Wife”) then filed her summons on 2 March 2022 (“Wife’s Hadkinson Application”) for a Hadkinson order against the Husband, namely, that unless the Husband do make payment to the Wife of the arrears of interim maintenance ordered by the Court, he shall be not heard on the Husband’s S17 Application.

3.  This is the substantive hearing of the Wife’s Hadkinson Application.

Background

4.  The parties got married on 21 December 2000. The only child of the family (“Daughter”), was born on 11 December 2003. Since 2014, she has been studying full time in the United Kingdom (“UK”).

5.  The Husband obtained BEng (Hons), Civil, Structural and Environmental Engineering at UCL, MBA in Hong Kong University of Science and Technology, and other post-graduate qualifications and was continuously employed for around 20 years until December 2018.

6.  On 23 January 2018, the Husband issued a divorce Petition on the ground of two years’ separation. Decree Nisi was granted on 18 January 2019.

7.  It was common ground of the parties that the Daughter should continue studying in the UK in order to minimize the changes caused to her daily life. Therefore, as recorded in the Order dated 25 April 2019, the parties gave an undertaking that they shall ensure provision of a stable education environment to the Daughter, and also agreed to use their best endeavours to financially provide for the Daughter to continue studying in the UK.

Arrears due and owing to the Wife

8.  The Wife made an application for maintenance pending suit against the Husband by way of Summons dated 4 September 2019 (“MPS Application”). On 24 January 2020, the Husband personally attended the hearing of the MPS Application before Her Honour Judge A.N. Tse Ching who made an order, inter alia, as follows:

a)  the Husband’s undertaking be recorded that he shall continue paying half of the Daughter’s boarding school fees until further order (“the Husband’s Undertaking”);

b)  under paragraph 8, the Husband shall pay to the Wife interim maintenance of $35,000 per month from 1 February 2020 onwards until further order (“Interim Maintenance Order”);

c)  Under paragraph 12, penal notice was endorsed and personal service was dispensed with.

9.  Pursuant to the Interim Maintenance Order and the Husband’s Undertaking, he did pay to the Wife interim maintenance of $35,000 per month from February 2020 to May 2020, and half of the Daughter’s boarding school fees and guardianship fee in August 2020.

10.  In breach of the Interim Maintenance Order, he failed to pay the Wife the maintenance of HK$35,000 from June 2020 onwards, and in breach of the Husband’s Undertaking, he failed to pay his half share of the Daughter’s boarding school fees since December 2020.

11.  In mid-2020, the Husband even breached his undertaking to provide a stable education environment for the Daughter, and refused to sign a parental consent letter which was necessary for the Daughter to obtain her student visa and continue to study in the UK. The Wife had to take out an urgent application in this regard and the Husband was ordered to do so by the Order dated 12 August 2020.

12.  The Husband’s reason for refusing to pay was allegedly because he had no money do so. For this reason, the parties engaged in negotiations from mid-2020 onwards based on the Husband’s own suggestion to transfer his interest in some HSBC shares that are jointly held by the parties (“HSBC Shares”), in order to set off the arrears due from the Husband to the Wife. However, due to various delays caused by the Husband, the transfer of the HSBC Shares has still not been effected, nearly 2 years later.

13.  On 11 June 2021, the substantive hearing of the Wife’s MPS Application was restored to be heard before me. The Husband personally attended the said hearing, and continued to claim that he had no ability to pay any sum as maintenance for the Wife or the Daughter. Nevertheless, after considering the parties’ submissions, I was of the view that the Husband had not fully and frankly disclosed his assets.

14.  I made an order on 11 June 2021 (“the MPS Order”) that the Husband shall pay the Wife maintenance pending suit for herself and the Daughter in the sum of $30,000 per month, starting from 1 July 2021 until further order. It was also ordered that the Husband’s Undertaking do stand, and the Interim Maintenance Order shall be discharged from 1 July 2021 onwards.

15.  The Husband has not sought leave to appeal against the Interim Maintenance Order or the MPS Order, or applied to vary the Husband’s Undertaking.

16.  In further breach of the MPS Order, the Husband failed to pay the Wife the sum of HK$30,000 per month since 1 July 2021. He also continued to be in breach of the Husband’s Undertaking to pay half of the Daughter’s school fees.

17.  As at the date of the Wife’s Hadkinson Application, the total arrears owed by the Husband to the Wife was HK$694,962 and GBP 26,768.29, breakdown of which is set out as follows:

(i)  Under the Interim Maintenance Order, HK$455,000 is due as follows:-

	Period	Amount (HKD)
1.	June 2020	35,000
2.	July 2020	35,000
3.	August 2020	35,000
4.	September 2020	35,000
5.	October 2020	35,000
6.	November 2020	35,000
7.	December 2020	35,000
8.	January 2021	35,000
9.	February 2021	35,000
10.	March 2021	35,000
11.	April 2021	35,000
12.	May 2021	35,000
13.	June 2021	35,000
	Total:	455,000

(ii)  Pursuant to the Husband’s Undertaking, he is liable to pay GBP 26,768.29 as follows:

Description	Full amount (GBP)
Extra fees for Michaelmas term 2020-2021 (September 2020 to December 2020)	635.85
Boarding school fees for Lent term 2020-2021 (January 2021 to March 2021)	10,679
Boarding school fees for Summer term 2020-2021 (April 2021 to July 2021)	12,912
Extra fees for Summer term 2020-2021 (April 2021 to July 2021)	407.50
Boarding school fees for Michaelmas term 2021-2022 (September 2021 to December 2021)	13,436
Guardianship fees for Autumn term 2021-2022 (September 2021 to December 2021)	1,790
Boarding school fees for Lent term 2021-2022 (January 2022 to March 2022)	13,436
Outstanding payment of guardianship fees as of end of Autumn Term 2021-2022 (up to December 2021)	240.23
Total:	53,536.58
the Husband’s half share:	26,768.29

(iii)  Under the MPS Order, the Husband is liable to pay HK$240,000 as follows:-

	Period	Amount (HKD)
1.	July 2021	30,000
2.	August 2021	30,000
3.	September 2021	30,000
4.	October 2021	30,000
5.	November 2021	30,000
6.	December 2021	30,000
7.	January 2022	30,000
8.	February 2022	30,000
	Total:	240,000

(iv)  The above adds up to HK$695,000 and GBP26,768.29. As stated in the Husband’s Affidavit in Opposition, he had apparently paid to the Wife HK$35 on 2 July 2021, HK$1.5 on 5 August 2021, and HK$1.5 on 22 September 2021. He made these deposits without notifying the Wife and she was only made aware of them after perusing the Husband’s Affidavit. The Wife agreed that HK$38 has to be deducted.

Applicable principles

18.  The legal principles in relation to a Hadkinson application were recently restated by the Court of Appeal in CCMJ v. SSM (formerly known as SKL) [2022] HKCA 173 (unrep, 26 January 2022). This case concerned somewhat similar facts to the present case, namely the father was in breach of his own undertaking and a Court order for payment of maintenance for the child of the family. The father claimed that he was unable to pay. When the father later sought to appeal an order in relation to the custody, care and control of the said child, the mother applied to stay the father’s appeal until he had complied with the maintenance orders.

19.  In granting the mother’s application, the Court of Appeal held:

“19. The order now sought by the Mother is known as the Hadkinson order which has its origin from the case of Hadkinson v. Hadkinson [1952] p.285 where Denning LJ at 298 held :

‘ ...It is a strong thing for a court to refuse to hear a party to a cause and it is only to be justified by grave considerations of public policy. It is a step which a court will only take when the contempt itself impedes the course of justice and there is no other effective means of securing his compliance. ...... I am of opinion that the fact that a party to a cause has disobeyed an order of the court is not of itself a bar to his being heard, but if his disobedience is such that, so long as it continues, it impedes the course of justice in the cause, by making it more difficult for the court to ascertain the truth or to enforce the orders which it may make, then the court may in its discretion refuse to hear him until the impediment is removed or good reason is shown why it should not be removed.’

…

23. Article 35 of our Basic Law guarantees the right of access to court. We are also of the view that the Hadkinson order does not infringe Article 35 if the conditions imposed are proportionate and in pursuit of a legitimate aim.

24. This Court in CWG v MH [2014] 4 HKLRD 141 following Mubarak v Mubarik (No 2) [2007] 1 WLR 271 stated that the relevant questions to be asked in a Hadkinson application are :

‘1) Is the [respondent to the application] in contempt?

2) Is there an impediment to the course of justice?

3) Is there any other effective means of securing compliance with the Court’s orders?

4) Should the Court exercise its discretion to impose conditions having regard to the question?

5) Is the contempt wilful (is it contumacious and continuing)?

6) Is so, what conditions would be proportionate?

The standard of proof is the civil standard: Mubarak v Mubarik (No 2) [2007] 1 WLR 271, 286, [72].’

25. In respect of Condition 5 above, the reference to the contempt being contumacious has found not to be helpful by other recent decisions. In Laing v Laing [2005] EWHC 3152 (Fam), Sir M Potter P stated :

‘ [24] In the Hadkinson context, I do not regard the word ‘contumacious’ as a useful addition or supplement to the threshold requirement that the contempt should be wilful in the sense of a voluntary, deliberate, knowing (and continuing) breach, by a person well able to comply with the order if he or she chose to do so. Once that threshold is established, then, in deciding whether and to what extent to fetter the right of the applicant to proceed with an application for variation or relief by imposition of conditions, it will be relevant for the court to take into account the level of defiance displayed, as well as its effects, without resort to the problems of definition presented by use of the epithet ‘contumacious’.’

26. This approach is adopted in decisions such as C v C (Appeal: Hadkinson Order) [2011] 1 FLR 434 at [29].

27. In the light of the subsequent case law development, we would prefer to adopt the formulation of the conditions for a Hadkinson order in de Gafforj at [11] which omitted the reference to contumacious breach :

1) The respondent to the application is in contempt.

2) The contempt is deliberate and continuing.

3) As a result, there is an impediment to the course of justice.

4) There is no other realistic and effective remedy.

5) The order is proportionate to the problem and goes no further than necessary to remedy it.” (emphasis added)

Whether the Husband is in contempt and whether the contempt is deliberate and continuing

20.  It is clear that non-payment in breach of a matrimonial order to pay money is in itself a contempt of court, regardless of ability to pay: Mubarak v Mubarik (No 2) [2007] 1 WLR 271.

21.  The Husband had made comprehensive submissions on his alleged inability to pay at the substantive hearing of the Wife’s MPS Application on 11 June 2021. After hearing the parties’ submissions, I was of the view that (inter alia) he had failed to fully and frankly disclose his means. I therefore made the MPS Order as aforesaid, and recorded that the Husband’s Undertaking do stand.

22.  Given that the Husband has not sought leave to appeal the Interim Maintenance Order or the MPS Order, he is not entitled to claim inability to pay prior to the date of the MPS Order, as it would be expressly contrary to my findings.

23.  I understand from the Husband at the hearing as well as the Wife’s legal representatives’ letter dated 3 October 2022 that the Husband filed a bankruptcy petition against himself, hearing of which is scheduled on 25 October 2022. I then direct the Wife’s solicitors to lodge and serve on the Official Receiver a written submission regarding the issue whether the parties’ claims for ancillary relief be stayed if a bankruptcy order was granted against the Husband. Up to the date, no submission is received.

24.  Besides, Ms Lee for the Wife submitted that the Husband has been the company secretary of 9 limited companies since 2019/2020:

	CR No.	Name of Company
(i)	2173446	El Shaddai Development Co. Limited
(ii)	2497112	Jos Serendipity Limited
(iii)	2497119	Jos Sage Limited
(iv)	2497126	Jos Global Limited
(v)	2505397	Jos Steward Limited
(vi)	2505429	Jos Haute Couture Limited
(vii)	2977654	Jos Atelier Limited
(viii)	2505449	Jos Maison Limited
(ix)	2530577	Jos Imperial Limited

25.  He claims that he does not receive any income from acting as company secretary for these companies. Yet, he is also the director of Jos Academy Limited, and was an 80% shareholder holding 8,000 shares therein. After the Wife issued her Hadkinson Application, the Husband had apparently transferred half of his shareholding to one HWT, and the other half of his shareholding to one LLNN on around 11 March 2022 for unknown reasons. The Wife claims that LLNN is the Husband’s mistress. In the bought and sold note disclosed by the Husband in his June 2022 Answer, the consideration for each share was stated to be HK$1, and the occupation of the Husband was stated to be “merchant”. I find that his claim of being unemployed is contradicted by his own evidence.

26.  He also revealed in his Updated Form E that he had taken out substantial sums of credit or obtained loans from banks in 2021 and 2022 as follows:

a.  He took out credit of HK$583,872.59 in April 2021 on his HSBC Advance Visa Platinum Card 4979 XXXX 1240 8542, which sum became HK$557,787.64 in October 2021. He fails to explain how he used such sums.

b.  From Attachment A15-2 provided in the Husband’s June 2022 Answer, he was apparently able to repay HK$576,799.49 to HSBC in one lump sum by autopay in December 2021. This is contrary to his claim that he has no means or cash.

c.  He also borrowed a sum of HK$290,592 from HSBC on 17 January 2022. However, instead of using the funds to settle outstanding maintenance and school fee, he withdrew cash of HK$140,000 on 18 January 2022 and cash of HK$50,000 on 8 February 2022. In his June 2022 Answer, he claimed such repayments were for “repayment of loans, credit cards, and personal use” without provide any supporting document. The particulars of the loan and his withdrawals are shown as follows:

Husband’s HSBC Advance Account (652-508XXX-833)
Date	Credit Facilities	Debit Balance
17 .01.2022	Personal Loan 「萬應錢」 74006XXX2165	HK$290,592
Husband’s HSBC Premier Account (173-485XXX-833)
Date	Transaction Details	Deposit	Withdrawal
17.01.2022	LOAN DWN 轉賬收入 740061XXX165	HK$248,794
18.01.2022	CASH 現金提款		HK$140,000
8.02.2022	CASH 現金提款		HK$50,000

27.  From the above, it is clear that despite his allegedly poor credit score, he has still been able to borrow hundreds of thousands of dollars to fund his own spending, and apparently even has means to repay his substantial bank loans. The authorities have established that the ability to borrow should be considered as part of the Husband’s financial means. As Bodey J observed in Mubarak (No 2) :

“ [77] This borrowing capacity has been and is clearly a resource which, or some of which, could have been used in reduction of his financial obligations to the wife, instead of being used on this titanic and wasteful litigation.”

28.  The Husband has provided no reason why he did not use the sums borrowed to satisfy the MPS Order and/or his Undertaking, or even why he could not borrow further amounts in order to satisfy the same.

29.  Finally, according to the Husband’s updated Form E, he claims to spend HK$6,000 on food and another HK$6,000 for meals out of home every month. He also spends HK$4,000 on entertainment/ presents and HK$5,000 on medical/ dental/ supplements. As he admits in answer 5(a) of his June 2022 Answer, he overspends and “is in a process of correcting his shopaholic-like behaviour”. In my view, if he has the means to spend so much money for his personal use, he should have used his means to fulfil the MPS Order and pay for the Daughter’s school fees instead of overspending on himself as he admits.

30.  Regarding the transfer of the HSBC Shares to the Wife, it was the Husband who first proposed to sell his interest in the HSBC Shares to the Wife by letters dated 27 July 2020 and 1 August 2020. The parties then engaged in discussions as to how this should be effected. However, after October 2020, the Husband stopped replying to letters issued by the Wife’s legal representatives on this issue, despite various chasers in January 2021, February 2021, and May 2021.

31.  It was not until April 2022, after the Wife had applied for judgment summons against the Husband and also issued the present Hadkinson Application, that the Husband finally replied and said he needed time to consider the chaser letter issued by the Wife’s legal representatives dated 6 April 2022. Since then, the parties engaged in further discussions as to the method for effecting transfer, which had been mostly agreed by the time of the hearing on 21 June 2022 (which was a call-over hearing of the Wife’s application for judgment summons).

32.  The Wife’s legal representatives therefore brought along the documents necessary to effect the transfer for the Husband to sign on the date of the said hearing. However, the Husband again refused to do so, claiming there was a discrepancy on the total number of shares certificates. When the Wife’s legal representatives pointed out that they had given a reply letter dated 18 June 2022 explaining the same, he said he had not yet considered the aforesaid letter.

33.  It was not until 4 July 2022 that the Wife’s legal representatives received a copy of the Husband’s letter (dated 30 June 2022) enclosing some documents necessary for effecting the transfer. However, the Wife found that there are still mistakes in the share record form prepared by the Husband, in that some share certificates were duplicated which he should have already known about. A reply letter was sent to the Husband regarding this issue on 5 July 2022. In a nutshell, the HSBC Shares have still not been able to be transferred to date.

34.  It has been agreed between the parties that the Husband’s 50% interest in the HSBC Shares is worth around HK$409,881, that is to say, if the Wife sells all of the HSBC Shares, she would be able to obtain around HK$819,762. Such sum would go a long way towards alleviating the Wife’s financial difficulties. However, due to the Husband’s failure to cooperate, the HSBC Shares have still not yet been transferred to the Wife, and she has been unable to sell any part of them.

35.  It is therefore simply not true that the Husband has done as much as he could towards satisfying the MPS Order. On the contrary, he appears to be enjoying a comfortable lifestyle that is not commensurate with his alleged lack of his income and assets, while refusing to apply any of his means towards satisfying the Court Orders and his own undertaking. The observation by the Court of Appeal in CCMJ (supra) at §39 is apt: “This is another example of someone who stopped the payment for reason of parsimony rather than principle.”

36.  Accordingly, I find that the Husband is in contempt, and the contempt is deliberate and continuing. The first two conditions as set out in CCMJ (supra) are satisfied.

Whether there is an impediment to the course of justice

37.  As stated in the Wife’s Affidavits, the Husband’s refusal to pay the outstanding arrears has had a detrimental effect on the Wife and the Daughter. The Wife has repeatedly stated in her Affidavits filed in these proceedings that she has been a housewife ever since her marriage to the Husband and has no income, which is supported by the Husband’s own declaration in 2014 to this effect. All of the Wife’s and the Daughter’s living expenses were settled by the Husband with support from his parents.

38.  Just as said in CCMJ (supra), “The history of this case shows the difficulty in enforcing the two orders which the Father has chosen to ignore.” (at §43), I find that the Husband’s breach of the Interim Maintenance Order, the MPS Order, and the Husband’s Undertaking impedes the course of justice.

Is there any other realistic and effective remedy?

39.  On 23 September 2021, the Wife had applied for garnishee order against the Husband’s account 652-508XXX-883 held with HSBC, which was the only bank account solely held by the Husband as disclosed in his first Form E. The Wife obtained a garnishee order to show cause on 19 October 2021 and the return hearing was scheduled on 18 January 2022. Since an affirmation filed on behalf of HSBC showed that this account was in debit as at 15 November 2021, the Wife then withdrew her application.

40.  On 30 November 2021, the Wife also issued a Judgment Summons against the Husband. After two call-over hearings, a hearing for examination of the Husband as to his means has been fixed on 5 January 2023. I accept the Wife’s submission that even if the Husband is committed to prison for contempt, it is no guarantee of payment from him.

41.  Since the Husband claims to be unemployed, the Wife will not be able to apply for an attachment of income order against him.

42.  Hence, I find that there is no other effective means to secure compliance other than the order now sought by the Wife.

Whether the order is proportionate to the problem and goes no further than necessary to remedy it

43.  Ms Lee for the Wife submitted that the conditions sought in the Wife’s Hadkinson Application are in similar terms to the Order made in CCMJ (supra) at §46. I accept that these conditions are proportionate, in that they are no stronger than it needs to remove the impediment to justice. These conditions are also in line with the underlying objectives of the Civil Justice Reform as embodied in Order 1A, rule 1 of the Rules of the High Court, such as to increase the costs effectiveness of any practice and procedure and to ensure the case is dealt with as expeditiously as reasonably practicable. A Hadkinson order is another aspect of the Court’s case management power under Order 1B, rule 1(2)(l) in furtherance of the objectives set out in Order 1A: see §47 of CCMJ (supra). Conversely, allowing the Husband’s S17 application to continue at the current stage will contradict these underlying objectives.

44.  Given the substantial amount already owed by the Husband, I consider that there is good reason to make a Hadkinson order against the Husband before the Wife’s legal costs are further escalated in dealing with the Husband’s S17 Application.

Conclusion

45.  For the above reasons, I make an order in terms of the Wife’s Summons dated 3 March 2022 as amended to give credit to the additional HK$38 paid by the Husband as stated above.

46.  As to the question of costs, costs shall usually follow event. Nonetheless, it is very likely that a bankruptcy order might have been granted against the Husband. I consider that if that is the case, the court may have to hear the submission from not only the Wife but also the Official Receiver. I now make an order nisi that there be no order as to costs, which shall become absolute unless any of the parties including the Official Receiver (if necessary) applies to vary by summons within 28 days.

47.  If a bankruptcy order has been granted against the Husband, the Wife has to serve this order on the Official Receiver.