HYCJ v. LCSJ

FCMC 12188 / 2006

[2024] HKFC 207

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES

NO. 12188 OF 2006

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J U D G M E N T
( Appeal against Master’s decisions – Charging Order Absolute )

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1.  This is an appeal against a master’s decision to grant a charging order absolute against the respondent’s property at Mei Foo Sun Chuen (“the respondent’s property”).

Background

2.  The petitioner was the wife and the respondent the husband in these matrimonial proceedings. Since the parties have long ceased to be married, I shall address them as the petitioner and the respondent in this Judgment.

3.  The parties married in July 1992. This was a childless marriage.

4.  In September 2006, the petitioner petitioned for divorce on the ground of two years separation.

5.  At all material times (before the divorce and up to now) the petitioner has been living in Canada and the respondent has been living in Hong Kong.

6.  The divorce proceedings were uneventful and went smoothly. The parties soon arrived at a settlement over the financial matters as a result of which a consent summons dated 27 January 2007 was filed to court for endorsement.

7.  Decree nisi was granted on 28 March 2007. On the same day, a consent order on the terms of the consent summons was granted. I shall refer to this consent order as “the 2007 Consent Order”.

8.  The decree nisi was made absolute on 22 June 2007.

The 2007 Consent Order

9.  The essential terms of the 2007 Consent Order were that the respondent was to transfer two properties to the petitioner plus a periodical maintenance of CAD 8,000 per month.

10.  The first property, which I refer to as “the Belcher Property” in this Judgment, was owned by a Company that presumably was controlled by the respondent. The respondent undertook to procure his company to transfer the Belcher Property to the petitioner free of encumbrances on or before 31 December 2008, failing which the respondent was to pay her $8,500,000 forthwith.

11.  The second property was in the name of the respondent. I shall refer to this property as “the Broadway Property”. The respondent was to transfer the Broadway Property to the petitioner free of encumbrances no later than 60 days upon the making of the decree absolute.

12.  Despite containing a periodical maintenance order, the 2007 Consent Order – following the consent summons - was expressed to be for full and final settlement between the parties.

The Petitioner’s Charging Order Proceeding

13.  Then more than 16 years later in December 2023, the parties appeared in court again. This time it was on the petitioner’s application for a charging order against the respondent’s property.

14.  The application was made in the usual fashion by way of an ex-parte application supported by an affirmation dated 19 December 2023 (“the Supporting Affirmation”).

15.  On 4 January 2024, a Charging Order Nisi was granted. Thereafter, the parties duly exchanged their affirmations and appeared before a master on 18 July 2024 when the master granted a Charing Order Absolute. This Charging Order is the subject matter of the present appeal lodged by the respondent on 31 July 2024.

Master’s Appeal

16.  It is trite that an appeal from a master’s decision to a judge in chambers is a de novo hearing, and the judge will deal with the matter in question as if it came before him or her for the first time: see Hong Kong Civil Procedure (2024) at para 58/1/2.

The Petitioner’s Supporting Affirmation

17.  Probably due to the fact that the petitioner was living in Canada, her Supporting Affirmation for the ex-parte application was made by her solicitor. The affirmation simply referred to the maintenance order of CAD8,000 per month under the 2007 Consent Order and said the maintenance in arrears had accrued up to CAD72,000 plus interest of CAD2,771.46, totalling CAD74,771.46 (or HK$435,763.59).

The Respondent’s Affirmation in Opposition

18.  The respondent has been acting in person in the Charging Order proceeding.

19.  The respondent did not state any relevant facts on the Affirmation in Opposition. He just exhibited the following:

(1)  An English homemade handwritten agreement (“the Homemade Agreement”) dated 6 July 2012 and signed between the petitioner and the respondent.

(2)  Some correspondences between the parties spreading from 7 December 2015 to 7 May 2024, containing various schedules prepared by the respondent setting out the payments made by him. The last one was an email dated 7 May 2024 written by the respondent to the petitioner in which he provided particulars of payment and claimed to have overpaid her CAD161,500.

The Petitioner’s Affirmation in Reply

20.  It was in the Affirmation in Reply that sets out the petitioner’s case. Her case can be briefly stated as follows.

21.  The petitioner said while the respondent did transfer the Broadway Property to her pursuant to the 2007 Consent Order, due to the respondent’s financial difficulty, he failed to procure the transfer of the Belcher Property or pay the $8,500,000 instead.

22.  Negotiations between the parties ensued; and they were able to come to some verbal agreements (“the Verbal Agreement”). It was agreed that the respondent would purchase another property for her instead of the Belcher Property. In addition, the respondent would pay her “compensation”. The compensation was originally agreed to be the rental of this new property but was later changed to a monthly sum of $10,000.

23.  Subsequently, a property referred to in this Judgment as “the Shan Shing Property” was purchased in December 2009 in substitute for the Belcher Property and the respondent started paying her compensation $10,000 monthly as from February 2010.

24.  It was not the end of the matter. What followed were apparently further negotiations, which resulted in another agreement that this time was reduced into writing. It was the Homemade Agreement exhibited by the respondent in the Affirmation in Opposition. It is necessary to set out the text of this agreement in full:

The Law and Practice regarding Charging Order

25.  The court has power to impose a charging order for securing the payment of any money due or to become due under a judgment or order of the court on a judgment debtor’s property specified in the order: section 52A(1), District Court Ordinance (Cap 336). The money due must be an ascertained sum: see Hong Kong Civil Procedure (2024), at 50/9A/19.

26.  In deciding whether to make a charging order the court has to consider all the circumstances of the case and, in particular, any evidence before it as to –

(a)  the personal circumstances of the debtor; and

(b)  whether any other creditor of the debtor would be likely to be unduly prejudiced by the making of the order: section 52A(2), District Court Ordinance (Cap 336).

27.  The general principles governing the exercise of the discretion to make a charging order are summarized in para 50/9A/23 of the Hong Kong Civil Procedure (2024):

“1. The question whether a charging order nisi should be made absolute is one for the discretion of the court.

2. The burden of showing cause why a charging order nisi should not be made absolute is on the judgment debtor.

3. For the purpose of the exercise of the court’s discretion there is, in general, no material difference between the making absolute of a charging order nisi on the one hand and a garnishee order nisi on the other.

4. In exercising its discretion the court has both the right and the duty to take into account all the circumstances of a particular case, whether such circumstances arose before or after the making of the order nisi.

5. The court should so exercise its discretion as to do equity, so far as possible, to all the various parties involved, that is to say, the judgment creditor, the judgment debtor and all other unsecured creditors. Cf Wardley v. Aik San Realty Ltd [1985] 2 H.K.C. 695 above.

(The above principles which were stated by Lord Brandon in Roberts Petroleum Ltd v. Bernard Kenny Ltd [1982] 1 W.L.R. 301 , 307; [1982] 1 All E.R. 685 at 690, CA are not affected by the reversal of that case by the House of Lords [1983] A.C. 192; [1983] 1 All E.R. 564 .)

6. The liquidation of a company, whether by a resolution for voluntary winding up or by a compulsory order for winding up brings into operation a statutory scheme for dealing with the company’s assets, and accordingly if such liquidation occurs after the making of the charging order nisi and before such order is made absolute, the court in its discretion will decline to make the charging order absolute, ( Roberts Petroleum Ltd v. Bernard Kenny Ltd [1983] A.C. 192; [1983] 1 All E.R. 564 , HL, reversing [1982] 1 W.L.R. 301 ; [1982] 1 All E.R. 685 , CA on this last point…”

Discussion

28.  It is clear that even on the petitioner’s version there was the Verbal Agreement that departed from the original bargain in a material respect as contained in the 2007 Consent Order. By the time of the Homemade Agreement, the landscape of parties’ settlement had further changed in a significant way. The Belcher Property was long gone and replaced by the Shan Shing Property. The $8,500,000 and its payment date were gone and was replaced by $4,000,000; probably by the time when it was signed, the respondent had already settled $4,500,000. The remaining $4,000,000 was to be paid by instalments with a proviso that the respondent would “try to complete settlement of the full amount by 30 June 2013”.

29.  Significantly, there was no mention of the $10,000 compensation as alleged by the petitioner.

30.  Notwithstanding that there was an express date (ie 1^st July 2013) on which the CAD8,000 was to be reduced to CAD5,500, it seems the parties agreed that it was only when the $4,000,000 had been paid in full that the CAD5,500 would come into effect.

31.  It transpired that there were at least 3 disputes between the parties.

32.  First, the petitioner claimed full payment has never been achieved. There is a letter dated 14 January 2016 sent by her then solicitors to the respondent in which the petitioner said, out of the said $4,000,000, the respondent still owed her $130,000. It is worthy to note that this letter was exhibited in the Affirmation in Opposition and not by the petitioner. I shall return to this letter in the later part of this Judgment.

33.  Subsequently, in response, there was a “Payment History” prepared by the respondent on 14 June 2019 where he set out the payments (42 payments in total) he had made from January 2016 to June 2019 and claimed he had already paid the alleged arrears of $130,000.

34.  The petitioner did not (and does not) agree to the respondent’s stance. This is the first dispute.

35.  Second, there was a dispute that arose from parties’ different stance regarding the nature of the said monthly sum of $10,000. The respondent seemed to be saying that this monthly sum went to the satisfaction of the $4,000,000 but the petitioner did not agree. It is to be recalled that the petitioner said in the Affirmation in Reply that it was for her “compensation”. On this, it struck me that in her email dated 6 February 2015 to the respondent, the petitioner claimed the said $10,000 is part of the terms in the monthly “alimony”.

36.  There is a third dispute. The respondent said in his email dated 7 May 2024 to the petitioner that, according to his record, he had overpaid CAD161,500. In support, he set out the particulars of payment and concluded that he did not owe the petitioner any money. He asked the petitioner to verify the records to which apparently she did not respond. Again, this email was adduced by the respondent.

37.  Ms Lee, counsel for the petitioner, fairly conceded that these disputes were live issues between the parties and the petitioner was aware of them before the taking out of the present Charging Order Proceeding.

38.  At this juncture, I need to turn to the relevant procedure.

39.  The procedure for obtaining a charging order is a two-stage process, namely:

(1) obtaining a charging order nisi on an ex parte affidavit (rule 1(2)) and

(2) the making of an order absolute on the further consideration of the matter (rule 3); see also Hong Kong Civil Procedure (2024) at 50/9A/12.

40.  It is trite that on an ex parte application, an applicant (ie the petitioner in the present case) has a duty to make full and frank disclosure of the material facts. The relevant principles are summarized by Recorder Steward Wong SC at [45] of his Judgment in Tsui Yun Bun Barry v. Law Wan Tung [2019] HKCFI 2955:

(1) Material facts are those which are material for the Court, when determining the ex parte application, to know and which are necessary to enable the Court to exercise its discretion properly. Those are facts which should have been put in the scales by the ex parte Court, and not only facts which are determinative one way or another.

(2) Materiality is to be decided by the Court and not by the applicant or his legal advisers.

(3) The applicant has a duty to make proper enquiries before making the application and the duty of disclosure covers not only facts known to the applicant but facts which he would have known had he made such proper inquiries.

(4) The matter to be disclosed should normally not be made only in exhibits but must be referred to in the affidavits.

(5) The fact that the non-disclosure is not deliberate but is innocent does not excuse the non-disclosure, but is a factor to take into account when the Court considers what order to be made as a result of the non-disclosure.

41.  The petitioner maintained that her application for charging order is to enforce the arrears of CAD8,000 only. I take what she meant was the CAD8,000 was a distinct and separate matter and had nothing to do with the other parts of the settlement.

42.  I do not agree. It is clear that the CAD8,000 was part of the package and this CAD8,000 was to be reduced to CAD5,500 when $4,000,000 was fully paid. As mentioned above, whether the $4,000,000 was fully paid was a live issue.

43.  It is also clear that the payments by the respondent over all these years covered different items including the said CAD8,000 and those under the parties agreements post-2007 Consent Order. It is also significant to note that, as said above, the petitioner used the term “alimony” when referring to the said $10,000.

44.  In my judgment, the petitioner ought to have informed the court in the Supporting Affirmation that the landscape of parties’ settlement had significantly changed and there were disputes that went to the core of the matter, ie if the respondent was in arrears. She should have disclosed all the relevant documents including the Homemade Agreement, her solicitors’ letter dated 14 January 2016 and the correspondences exchanged between the parties. All these are material facts that the court would need in the consideration of the petitioner’s ex parte application. If the petitioner had disclosed, the court would likely to have directed her to file more evidence.

45.  I find the petitioner failed in her duty to make a full and frank disclosure. In my assessment, it was not a mere inadvertence or oversight; the petitioner deliberately picked and chose those materials in her favour to portrait a very one-sided story.

46.  I acknowledge that the respondent has the burden to show cause why a charging order nisi should not be made absolute. In my view, this must be premised on the full and frank disclosure on the part of the petitioner in the first place. She should have put all the cards on the table for the court’s decision when considering if a charging order nisi was to be granted or not. If the court were satisfied with the petitioner’s case, then the respondent would have the burden to show cause.

47.  I accept that the respondent did not articulate his case in his Affirmation in Opposition. As said above, he just exhibited the documents and did not give any explanation. I must say it is not uncommon for litigants in person to have prepared their affirmations in this manner. The Affirmation in Opposition and the Affirmation in Reply were not substantial by any standard. The respondent’s Affirmation was just 7 pages and the petitioner’s was 8 pages. While a master may not be able to go into the minute details in a 15-minute hearing, a quick reading of the Affirmations (especially the Homemade Agreement adduced by the respondent) would have alerted the master that the story was not as straight forward as the petitioner might wish the court to know.

Decisions

48.  For the above reasons, the master’s decision to grant the Charging Order Absolute must be set aside and the Charging Order Absolute be discharged; and I so order. The next question is if the Charging Order Nisi is to be discharged, too.

49.  In the context of charging order, the court is enjoined to consider all the circumstances of the case: see [26] above. While the court has a discretion not to discharge (or to re-grant) notwithstanding the material non-disclosure, it has been said such discretion should be sparingly exercised: see Tsui Yun Bun Barry v Law Wan Tung (formerly known as Law Siu Yi Biby) and Erwiana Sulistyaningsih, supra, at [54], citing Excel Courage Holdings Ltd v Wong Sin Lai [2014] 3 HKLRD 642 in the context of a Mareva injunction.

50.  I have given careful consideration on whether the present proceeding is to be allowed to continue with directions for parties to adduce further evidence. This is Ms Lee’s suggestion. I have considered all the circumstances of this case, including the disputes between the parties and the petitioner’s litigation misconduct regarding full and frank disclosure, and decided not to do. To allow the petitioner to keep the charging order nisi is to allow her to jump the gun and, in essence, to endorse her litigation misconduct. I have great doubt if the master would have granted the order nisi in the very first place if she had been alerted of the disputes between the parties. Accordingly, I make an order that the charging order nisi be discharged. I have to make it clear that the discharge is without prejudice to the petitioner’s taking out further appropriate application, including another Charging Order proceeding in the future.

51.  Where a charging order is discharged, any order registered under the Land Registration Ordinance (Cap 128) should be cancelled: Para 59/9A/14 of the Hong Kong Civil Procedure (2024) and Section 52AB(4) & (5), District Court Ordinance (Cap 336). I order that the petitioner do, at her own costs, vacate the registration of the charging order nisi and the charging order absolute within 21 days.

Costs

52.  The respondent succeeds in his appeal. I see no reason why costs should not follow the event. This means the petitioner has to pay the respondent’s costs. The respondent is acting in person. I consider it is appropriate for his costs to be assessed by way of summary assessment. He appeared in court twice with a simple affirmation filed. I summarily assess his costs at $3,000, to be payable forthwith by the petitioner. This order is an order nisi.