KSMS v. YCY

FCMC8990/2014

[2019]HKFC22

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES

NUMBER 8990 OF 2014

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DETERMINATION
(Application for variation of undertaking)

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1.  The petitioner (“W”) and the respondent (“H”) are now aged 57 and 56 respectively.  They were married in 1984.  There are three children out of the marriage.  The first and second children are aged 34 and 29 respectively and are self-support.  The youngest, a daughter (“the Child”), is born in 2007 and now age 11.  The Child is suffering from Asperger syndrome.  W issued the petition for divorce in 2014.  By the consent order dated 31 January 2015, the care and control of the Child was granted to W with defined access to H.  The parties appeared before the court in January 2017 for a trial on preliminary issues involving the beneficial ownership of a flat in Happy Village (“Flat 8/F”).  The parties were able not only to reach an amicable settlement on the preliminary issues but also to achieve a full and final settlement of the ancillary relief matters.  The parties reduced their agreement into the consent summons dated 13 January 2017 of which an order in terms was made on the same day.  The parties have fully complied with the terms of the consent order dated 13 January 2017. 

2.  The following terms of the consent order dated 13 January 2017 are relevant to these proceedings:

F.   AND UPON the Petitioner and the Respondent confirming, agreeing and acknowledging that the Child is currently aged 9 and is diagnosed to suffer from Asperger’s syndrome and without prejudice to the power granted to the Court under section 5(5) of the MPPO:- (i) the lump sum of HK$8,000,000 to be paid by the Respondent to the Petitioner pursuant to paragraph 1 below is to be paid by the Respondent as financial provision for the benefit of the Child pursuant to section 5(2)(c) of the MPPO to cater for the Child’s future living, accommodation, education, medical and other expenses and in lieu of any periodical payment under sections 5(2)(a) and (b) of the MPPO; and (ii) the Petitioner will be responsible for paying all other sums necessary for the maintenance of the Child out of her own financial resources;

G.  AND UPON the Petitioner undertaking to the Court, the Respondent and the 1^st Intervener that she will apply the lump sum of HK$8,000,000 to be paid by the Respondent to her pursuant to paragraph 1 below solely and exclusively for the purposes of the Child (including but not limited to purchasing a landed property in Hong Kong as the accommodation for the Child);

H.  AND UPON the Petitioner and the Respondent agreeing with each other and undertaking to the Court and the other that the lump sum of HK$8,000,000 to be paid by the Respondent the Petitioner shall be paid in the following manner:-

(1)  The Respondent shall within 28 days pay to his solicitors, namely Messrs. Ha & Ho, the said lump sum of HK$8,000,000 with the same being stake-held by his solicitors for the purposes of enabling the Petitioner to purchase a landed property as an accommodation for the Child;

(2)  The Petitioner (or her solicitors) shall supply to the Respondent’s solicitors as referred to in paragraph H(1) above a copy of preliminary agreement for sale and purchase of such landed property as signed and executed by the Petitioner and the vendor within 7 days upon the same is executed;

(3) Subject to paragraph H(2) above, the Respondent shall give instructions to, and Respondent’s solicitors shall, release to the Petitioner’s conveyancing lawyers (as may be designated by the Petitioner) the said lump sum of HK$8,000,000 or any part thereof in accordance with the amount(s) required and the due date(s) specified in the preliminary agreement for sale and purchase for the purposes of completing the sale and purchase of such landed property;

(4)  Any balance of the said lump sum of HK$8,000,000 which has not been used for purchasing such landed property as referred to above shall be released by the Respondent’s solicitors to the Petitioner within 3 days upon the Petitioner delivering vacant possession of (Flat 8/F) to the 1^st and 3^rd Interveners pursuant to Preamble K below;

I.   AND UPON the Petitioner undertaking to the Court and the Respondent that she will (i) hold 50% of the ownership of the landed property to be purchased by the Petitioner pursuant to Preamble H above on trust for the Child until the Child turns the age of 18 and upon the Child reaching the age of 18, to convey 50% of the interests in such landed property (both legal and beneficial) to the Child absolutely; and (ii) at the time of completing the purchase of such landed property, execute a deed of trust and all necessary documents to carry out the effect of (i) and to cause all such trust documents to be registered in the Land Registry;

J.   AND UPON the Petitioner undertaking to the Court and the Respondent that, for the purposes of providing a stable accommodation for the benefit of the Child, she will not sell, dispose of, mortgage, charge or otherwise diminish the value of the landed property to be purchased by the Petitioner pursuant to Preamble H above within 10 years from the date of its purchase except with leave of the Court;

K.  AND UPON the Petitioner undertaking to the Court, the Respondent and the 1^st, 2^nd and 3^rd Interveners that she will vacate (Flat 8/F) and deliver vacant possession of the same to the 1^st and 3^rd Interveners on or before 15 July 2017;

3.  W signed the preliminary agreement for the purchase of the new property (“Flat 14D”) for $15,150,000 on 18 January 2017.  The completion date was on 18 April 2017.  W sought mortgage loan on Flat 14D but she was asked to find a guarantor.  Her boss agreed to act as her guarantor.  However, due to her boss’s business travelling, he was not able to sign the guarantee in person as required by the bank.  After W could not obtain the mortgage loan, she borrowed a bridging loan from her boss.  Her boss lent her $2,600,000 on 19 January 2017.  On or about 16 March 2017, W procured a joint application signed by all parties to be filed with the court for an order by consent that there be leave to W to mortgage Flat 14D for not more than $7,575,000 immediately after its purchase but not later than 31 July 2017.  W’s boss lent W the further sum of $5,000,000 on 17 March 2017 to complete the purchase.  The court raised requisitions on the above joint application on 27 March 2017.  The said joint application was dismissed with no order as to costs on 6 July 2017.

4.  This is the hearing of W’s summons dated 28 June 2018 for an order that the undertaking contained in preamble J of the consent order dated 13 January 2017 to read as follows:

“the Petitioner undertaking to the Court and the Respondent that, for the purpose of providing a stable accommodation for the benefit of the Child, except for a first-time mortgage, she will not sell, dispose of, re-mortgage. Charge or otherwise diminish the value of the landed property to be purchased by the Petitioner pursuant to Preamble H above within 10 years from the date of its purchase except with the leave of the Court”

5.  Ms Tsui said W is not asking the court to exercise its jurisdiction under the slip rule or asserting any mistakes or fraud on the parties, but she is seeking the court to exercise inherent jurisdiction to make good the specified undertaking and to carry out the real intention of the parties.

6.  W’s case is as follows :-

(i)   There was never an agreement among the parties that W should not use more than $8,000,000 for the purchase of the new property;

(ii)   The parties always anticipated that W would need a mortgage on the new property;

(iii)   It was unforeseen that she could not obtain the mortgage loan and had to borrowed from Mr. M to complete the purchase.

(iv)   It can be seen from the joint application dated 16 March 2017 that H and the Interveners were agreeable to W to mortgage Flat 14D after the completion of the sale and purchase.

(v)   The lump sum that W got under the consent order dated 13 January 2017 is inclusive of all future expenses of the Child.  If W’s present application is unsuccessful, W will have to use up nearly all her savings on the purchase of Flat 14D.  When she depletes her savings, W’s well-being will be adversely affected.

(vi)   The Child is suffering from Asperger’s syndrome.  W has no idea what treatment and therapy that she will need in the future.  It is prudent that W leaves some savings for rainy days.

(vii)   W needs a mortgage loan of $7,575,000, or at least $5,000,000 as she conceded in her last affirmation.

(viii)   W has executed the Trust Deed acknowledging that the Child has 50% beneficial interest in Flat 14D.  The Child’s interest in Flat 14D is secured. 

7.  H and the Interveners oppose the present application.  Their grounds of opposition are as follows :-

(a)   The drafting of the consent order dated 13 January 2017 has been advised of and concluded by all 5 parties’ legal representatives, including senior counsel and senior juniors and was specially tailored to protect the interest of the Child;

(b)   Pursuant to Undertaking I, W holds 50% shares in Flat 14D for the Child.  The Deed of Trust was registered on 7 April 2017.  If the proposed amendments are made to the consent summons dated 13 January 2017, given that the Child is the beneficiary, her interests will be adversely and prejudicially affected.  Besides, W’s own interests potentially conflicts with the interests of the Child;

(c)   There is no ambiguity regarding the words used in the consent order dated 13 January 2017 and no interpretation is required;

(d)   The restriction from mortgage is for the protection of the interest of the Child (age 10) to allow the Child to have a long-term, secured accommodation;

(e)   H and the Interveners intended that W would purchase a property for less than $8,000,000. 

(f)   As early as by a letter dated 10 February 2017, H and the Interveners objected to any mortgage on the new property, as such would contravene the restriction contained in the consent order dated 13 January 2017 and contradict with the intention of H and the Interveners;

(g)   The need to obtain bank mortgage is not unforeseen. Any mortgage of the new property is prohibited in any event for the first 10 years, except with the leave of the court.  

(h)   W received a sum of $13,000,000.00 from the settlement and she also has cash and shares of not less than $9,300,000.00 as at December 2014. W was able to purchase Flat 14D with her own means.

8.  The legal principles applicable to similar application are well established.  In HCTT v TYYC [2008] 5 HKC 86, the Court of Appeal held:

“46. Therefore it would go against the modern ethos of family dispute management if the court were to entertain lightly an application to vary the terms of a settlement embodied in a consent order.

47. I think the following approach suggested by Stock JA at para. 42 of L v C [2007] 3 HKLRD 819 at P. 841, with slight modifications, can equally serve as a good guidance for deciding whether an application for variation of periodical payments in a consent order should be entertained,

“an agreement [on periodic payments] is ‘presumptively [not to be varied without material change of circumstances]’, the burden being on the party seeking to achieve a different [terms] to show good and substantial cause why the compact should not be respected, and … the scope for so doing is one directed at an injustice in the circumstances in which the agreement came to be concluded or in clear injustice occasioned to one of the parties by reason of event unforeseen at the time of the agreement were the agreement to be enforced to its letter.”

9.  In CH v MEH [2012] 1 HKLRD 751, the Court of Appeal said:-

The principle of finality of litigation applied to variation applications, so that orders, especially consent orders providing for a clean break, were not reopened unless there was a new event which invalidated the basis or fundamental assumption on which an order was made; or a very significant change in the anticipated circumstances; or when it was unjust or impracticable to hold to the original order  (The Ampthill Peerage[1977] AC 547, Barder v Caluori [1988] AC 20 applied). (See para. 26(1)-26(5).)

10.  In my view, W’s case is premised on that the parties always anticipated that W would need a mortgage on the new property.  Therefore, Ms. Tsui made the submission that by the present application, W is seeking to make good the specified undertaking, and the proposed variation does not lead to “any variation of the Order at all”.  In this regard, I take notice that it is expressly provided in Preamble J that W shall not mortgage the new property within 10 years from the date of its purchase except with the leave of the court.  It is obvious that W’s assertion that the parties always anticipated that W would need a mortgage on the new property does not sit well with the above restriction expressly provided in Preamble J. I also take notice that, as pointed out in the sub paragraph (f) of H’s ground of opposition, as early as by 10 February 2017, H and the Interveners objected to any mortgage on the new property.  H and the Interveners signed the consent summons dated 16 March 2017 to seek leave from the Court to allow the W’s intended mortgage on Flat 14D.  They explained that it was because H and the Interveners were hard-pressed and worried that the P might not be able to complete the purchase, in which case W would suffer a loss of more than $1,800,000, and inevitably, that would in turn affect the interest of the Child.  By the letter dated 20 November 2017, H and the Interveners expressed that they agreed with the dismissal of the consent summons dated 16 March 2017.  After having carefully considered, I do not accept W’s assertion that the parties always anticipated that W would need a mortgage on the new property.  On the contrary, I take the view that it is clear that the expressed intention of the “Undertaking J” is for “providing a stable accommodation for the benefit of the Child” and the proposed words to be added, i.e. “except for a first-time mortgage” and “re-mortgage” go directly opposite to the clear meaning of the original words.

11.  After having carefully considered, I accept H and the Interveners’ grounds of opposition set out in the above paragraph (8) sub-paragraphs (a), (b), (c), (d) and (g).

12.  W said she needs to take out a mortgage loan so as to enable her to keep more cash at hand so as to look after the Child’s needs and to have some savings for the rainy days.  As pointed out by H in the above sub paragraph (h), in her Form E dated 2 December 2014, she had cash in banks of $1,359,103.45 and listed stocks and funds of $7,073,441.71, by the consent order dated 13 January 2017, she was paid $13,000,000, and she borrowed $7,600,000 from her boss.  That is to say, after the payment of the purchase price of Flat 14D, i.e. $15,150,000, she should still have liquidity of not less than $13,000,000 in 2014/2015.  In her latest affirmation, W said her monthly salary was around $64,000 and she was repaying $26,000 per month to her boss.  I take notice that there was/is no evidence whatsoever showing that W was/is in financial difficulties.  I simply see no valid reason why W said that she has immediate needs for a mortgage loan of $7,575,000 (or $5,000,000) so as to enable her to look after the Child’s needs.

13.  Flat 14D was purchased without mortgage.  The Child’s special needs were well known at the time of the consent order dated 13 January 2017.  Despite Ms. Tsui’s argument to the contrary, I accept the view that there is no unforeseen change in circumstance.

14.  By reasons of matters aforesaid, I dismiss W’s present application.

15.  H and the Interveners ask for indemnity costs.  W is not successful in this application.  As far as I can see, I see no reason why costs should not follow the event.  However, I do not regard that it is appropriate to order indemnity costs.  I order that W shall pay H and the Interveners’ costs of this application, including reserved costs, with certificate for counsel’s attendance, to be taxed if not agreed.  This is a costs order nisi, which becomes absolute 14 days after this order is made, unless a party has applied to the court for varying the order.