W v. F

FCMC 809/2004

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES NO 809 OF 2004

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BETWEEN

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J U D G M E N T
(Leave to enforce arrears and Judgment Summons)
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Introduction

1. There are three applications before me that now require adjudication, namely a summons dated 5 March 2014, issued by the wife, seeking leave to enforce arrears exceeding 12 months before the date of two judgment summonses; in addition, there are the two judgment summonses just referred to, the first dated 5 March 2014 and the second dated 24 November 2014. In summary, the wife is seeking to enforce the sum of $1,556,455.20. This represents the difference between the maintenance actually paid by the husband since 19 April 2007 and the sum said to be due to the wife, including an annual increase in the maintenance payments in line with the Consumer Price Index.  In addition, interest has accrued on the sum owed, (and I would just add that the rate of interest on judgment debts is determined by the administration and circulated on a regular basis by the Chief Justice to all judges and practitioners).

Background

2. I do not intend to go into the background in any great detail, but I think it would be helpful just to summarise where we are at.  On 27 March 2012, the Court of Appeal delivered its judgment, in which it did the following:

(a) it overturned the February 2011 order of Judge C K Chan that had originally reduced the maintenance payments payable to the wife for the three children of the family;

(b) it dismissed the husband’s original application to vary the maintenance;

(c) it restored the original 2006 consent order;

(d) it ordered that the husband repay the wife the sum of $552,500; and

(e) it awarded the wife the cost of the appeal.

3. The sum of $1,556,455.20 represents the balance now said to be due to the wife pursuant to the orders, and taking into account, firstly, all sums paid by the husband to date; secondly, the Consumer Price Index rises; thirdly, interest; fourthly, costs of the summons; and lastly, travel expenses for the judgment debtor.

4. Although my original intent had been to deal with this matter quickly, unfortunately the situation became somewhat delayed over the Christmas period.  When I came back to the case I discovered that the husband had sought leave to respond further to the oral submissions made by counsel on 18 December.  In the interest of fairness I gave the husband leave to file a brief summary as requested. Given the time lag, I also listened to the tape recordings of the hearing, and was concerned that an incorrect indication may have been given by me on the issue of interest.  Consequently, both sides were given leave to file further submissions on this point. Both the husband and the wife filed a supplemental submission on 26 January 2015, and leave was also given to the wife to file a further submission in response to points raised by the husband.  That was dated 2 February 2015.

Offers of settlement

5. Turning next to any offers of settlement, prior to the hearing the husband in fact made the following proposal, which I will just read out for the record.  This is in an email dated 17 December 2014.  He said:

“I therefore propose:

(i) in relation to future child maintenance to pay $105,333.86 with effect from 19 December 2014, and that this amount be subject to future CPI adjustments on 19 April of each year;

(ii) in relation to claims for past CPI adjustments, whilst reserving my right to assert that these adjustments are either waived or foregone or in any event surplus to costs incurred by your client, I propose nevertheless to settle the arrears which accrued after the Court of Appeal decision in 2012 in respect of the entire period from April 2012 to November 2014 in the amount of $578,712.  This will be paid by an instalment of 50,000 on 19 December, with the entire balance on or before 1 December 2015, such outstanding amount to accrue interest from March 2015.”

6. This proposal was not accepted by the wife.  She seeks the full amount of $1,556,455.20.

Leave to enforce the arrears of maintenance

7. As stated by Ms Rattigan in her submission, it seemed to me that that very helpfully and succinctly summarised the position, so I will refer to sections 36 to 39.  Ms Rattigan said that section 12 of the MPPO provides that the leave of the court is required to enforce maintenance payments which are due more than 12 months before the date of commencement of the application for enforcement, and she then cites section 12, which I will not repeat here.  She goes on to say that the starting point is that arrears exceeding 12 months will not be enforced unless there are special circumstances, and she cites two cases, CYM v YML and CSL v WWK.  At paragraph 38, she continues:

“Whilst the historical basis for this rule was that if an applicant could wait for a year before bringing proceedings for enforcement, it likely meant that he or she did not need the money. It has been said in CSL v WWK:

‘In modern times, more flexibility is shown because the wife might have savings of her own which she might use for a period of time, and she would be expected to seek reimbursement by a large single payment from the husband later on’.”

At paragraph 39, Ms Rattigan continued:

“Having said this, the Court of Appeal went on to state:

‘Nonetheless, the court should still pay regard to the extent the applicant has taken to assert her rights.  The fact that a person liable to pay the maintenance is an irregular or reluctant payer is not unusual circumstances justifying a departure from this rule’.”

8. In this instance, I accept entirely that there are special circumstances which warrant leave being given to the wife.  I accept that the wife did everything within her power to settle these matters without returning to court and that these proceedings, i.e. these enforcement proceedings, have, in effect, been a last resort. I also accept that there has been inevitable delay because of the appeal process and mediation, both of which were ongoing for a considerable period of time.

9. In the husband’s further submission dated 26 January 2015 he does not deal with the main legal arguments pertaining to the enforcement of arrears which are more than 12 months old.  Instead, he concentrates on the CPI adjustments and why these were not implemented.  Generally speaking, I do not accept these are valid arguments in relation to the leave to enforce point.

10. For the avoidance of doubt, therefore, leave is given to the wife to enforce the arrears of maintenance that are over 12 months old.

Judgment Summons

11. That leaves then the issue of the judgment summonses.  Turning first to the law, the judgment debtor is required to show cause.  He has to show the court why he should not be committed to prison for contempt.  The court needs to ascertain whether he had the ability to make the payments ordered and whether he has wilfully failed to do so.  The judgment creditor needs to prove this beyond reasonable doubt. 

12. The court has the power to commit a judgment debtor to prison for up to three months or to commit, suspended upon payment of the outstanding debt either in its entirety or by instalments, or to adjourn sine die with liberty to restore.

13. When considering the possibility of imprisonment, the court is bound by the claim made in the original judgment summonses.  In other words, the court looks to the amount that the judgment creditor says is owed at that date, and the judgment debtor is put to strict proof in relation to those amounts.  If the court is considering the possibility of making a new order in which the judgment debtor is, for example, asked to pay by instalments, then it is possible to calculate the outstanding amount due up to date, or to remit or suspend or in some other way to vary the amounts owed.

14. In this case, the wife issued two judgment summonses.  I accept that if one includes the arrears exceeding 12 months, which I do,  that the total sum due is, as stated previously, $1,556,455.20.

Interest

15. The husband originally raised an issue re the interest payable on the sum owed.  This point is covered by section 53A of the Matrimonial Causes Ordinance.  Again I do not intend to repeat the whole section, but subparagraph (vi) says:

“The judgment debtor who considers that he has reasonable grounds not to pay the interest under subsection (ii) may, within a reasonable time after having knowledge of the requirement to pay, apply by summons to the court not to pay the interest and shall set out the grounds of the application.”

Subsection (vii) then just goes on to cite the basis upon which that application may be made.

16. In this instance, the husband did not issue the requisite summons in accordance with this section.  In any event, although it might be argued that the husband had a reasonable excuse not to pay following the judgment of C K Chan, there is no doubt that this position changed once the Court of Appeal had handed down its decision on 27 March 2012.  From that point on the husband should have been left in no doubt about his financial obligations to pay maintenance including the Consumer Price Index annual adjustment.  The husband, however, chose not to pay what was due and owing to the wife for a variety of different reasons, including what he says were cash‑flow difficulties and his reluctance to sell assets at what he considered to possibly be an under value. The fact that interest then accrued on the outstanding sum is an inevitable consequence arising out of that failure to pay.  Thus, even if the husband had followed the correct procedures, i.e. if he had issued a summons regarding the interest payments, it is very unlikely, in my view, that the interest would have been reduced in any way.

17. As I have said, the husband has also argued that he had cash‑flow difficulties which made punctual payments after 27 March 2012 difficult.  Although that may have been true, there was never any real argument concerning his significant asset base.  In 2011 his assets were estimated at 65 million, and at 60 million in 2013.  He estimates that this had fallen to 51 million by the time of the hearing, which is still a significant sum. In such circumstances, I can see no basis for waiving the interest payable.

Proposals going forward

18. The wife seeks a suspended prison sentence.  She does not, however, wish to imprison the husband, but she does wish to be paid.  The difficulty is that most of the husband’s assets remain outside of the jurisdiction, and he is asking for significant time to pay. 

19. The husband says that he intends to sell two properties, the first a converted barn in the United Kingdom, for 135,000 sterling, and the second, a property in France for €2 million.  He wishes to be given time to pay, and offered 1 December 2015 as the backstop date for payment.

20. In that regard I would also like to refer at this point to the injunction that was granted on 28 October 2014 in relation to the Sai Kung property, Order 5 of that order states as follows:

“The respondent, whether acting by himself, his employees or his agents or otherwise howsoever, be restrained from in any way making any dispositions and/or otherwise taking any steps to dissipate and/or diminish the net equity of the property at Inland Lot XXX DDXXX XXX Yung Shue O, Sai Kung, New Territories, Hong Kong, including any conveyance, assurance, gift, mortgage or remortgage of the property, without leave of the court or prior written consent from the petitioner.”

21. This injunction was extended on 18 November 2014 until further order.

22. The wife’s concern is that on her case, the husband has moved assets beyond the reach of the court, leaving only the property in Sai Kung as an available asset against which any future arrears might be enforced.  Thus she was very reluctant to agree to the remortgage of the Sai Kung property as another alternative way to raise funds.  If there was going to be such a remortgage, she asks that it be limited to the amount of money that is currently due and owing to her. The husband agreed that this was an option that could be looked at, although admittedly he was now looking at other options, as set out above.

23. In addition, the wife has concerns about security for payment in the event that there is an order that payment be made by a certain date.

Conclusions

24. I have considered all of those competing points when coming to the following conclusion.  I will therefore make an order as follows:

(1) leave be given to the petitioner/judgment creditor to enforce the arrears due under the court order dated 9 June 2006 for more than 12 months in the sum of HK$1,556,455.20. 

(2) Upon examination on oath of the judgment debtor in open court, this court finds that:

- pursuant to the order dated 9 June 2006, the judgment debtor was ordered to pay the judgment creditor monthly maintenance for the three children of the family, such sum to be increased annually in line with the Consumer Price Index.  This order was confirmed by the Court of Appeal on 27 March 2012. The judgment debtor has failed to make such payment and there is due and owing under the said orders, the sum, as I said, of $1,556,455.20, inclusive of the costs of the summonses.

- The judgment debtor has not shown cause why he should not be committed to prison, as he had the ability to make the payments ordered but has wilfully failed to do so, and he is in contempt of this court’s order of 9 June 2006 and 27 March 2012.

- The judgment debtor be committed to prison for a period of one week suspended provided that he pays the judgment debt and costs in the total sum of $1,556,455.20 on or before 30 September 2015. 

- Further, the respondent’s property in Sai Kung shall be held as security for that payment.  The injunction dated 28 October 2014 shall remain in force pending payment of the outstanding sum due.

- For the avoidance of doubt, the costs of these enforcement proceedings be to the judgment creditor to be taxed if not agreed on an indemnity basis. 

- A warrant of arrest shall be issued upon the solicitors for the judgment creditor filing an affidavit of non-compliance with the terms of the suspension.

- Liberty to apply on an urgent basis.