EBS v. NTCD

CACV 543/2021

[2023] HKCA 425

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 543 OF 2021

(ON APPEAL FROM FCMC NO 2128 OF 2013)

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D E C I S I O N

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Hon Chu VP (giving the Decision of the Court of Appeal):

Introduction

1.  This is the application of the petitioner (“Husband”)  for leave to adduce further evidence in this appeal. 

2.  By summons filed on 15 November 2022 (“Further Evidence Summons”), the Husband applies to adduce in this appeal further evidence in the form of his 2^nd affidavit dated 24 October 2022 (“Husband’s Affidavit”)  for the purpose of supporting his Supplementary Respondent’s Notice dated 20 October 2022 (“2^nd RN”).  The application is opposed by the respondent (“Wife”).

3.  Having considered the documents and submissions filed and lodged by the parties, we take the view that it is appropriate to determine this application on the papers without an oral hearing.

Procedural background

4.  By a judgment dated 23 November 2020 (“Judgment”), Her Honour Judge Melloy (“Judge”)  determined the issue of final ancillary relief between the parties.  Applying the principles set out in LKW v DD (2010)  13 HKCFAR 537, the Judge divided the matrimonial pot of assets leaving the Wife with approximately 48.7% of those assets, the Husband with 47.2%, and the remainder as educational funds for their child (“B”).

5.  What is significant for present purposes is that the Judge held that the parties’ former matrimonial home (“Property”), acquired in the Husband’s sole name, should be retained by the Husband notwithstanding its marital home status, and made an order (“Order”)  that the Wife and B shall vacate the Property within 60 days thereof.

6.  On 21 December 2020, the Wife applied to the Judge for leave to appeal against the Judgment, as well as a stay of execution of the Order pending the determination of her leave to appeal application.  The Judge dismissed all the applications on 25 January 2021.

7.  On 27 January 2021, the Wife applied to the Judge for an extension of time to comply with the Order which would allow her and B a further six months to vacate the Property.  The application was dismissed by the Judge on 5 February 2021.

8.  On 8 February 2021, the Wife renewed her leave to appeal application before this Court.  In the same summons, the Wife also sought a stay of execution of the Order.

9.  By a decision of this Court (G Lam JA and B Chu J)  handed down on 25 November 2021 ([2021] HKCA 1775), this Court: (1)  granted leave to appeal to the Wife on the grounds set out in her draft Notice of Appeal (subject to minor modifications); and (2)  granted only a limited stay of execution but did not affect the Order.  Specifically, it was pointed out at [22] that (footnote omitted):

“22. As regards paragraph 8 of the Judge’s order requiring the wife and B vacate the Bel Air property, it is important to note that it is not the wife’s stance in the appeal that she and B should be able to continue to reside in the property. Rather, she contends that vacant possession should be contingent on the sale of the property, and that the Judge should have made an order for sale, so that the husband could not choose when or whether to sell the property. In her Judgment the Judge allocated the property to the husband despite its marital home status. The wife’s written submissions for the present application do not dispute that the husband should have the entire net equity of the property after the sale. Nor is there any suggestion by either party in the present applications that the property may somehow be allocated to the wife instead, whether for the purpose of avoiding capital gains tax or otherwise. That being the case, requiring the wife and B to vacate the property would not in principle render the appeal nugatory. Now that B has finished his final year of primary school, the wife’s concern in that respect has also lapsed. We are not satisfied that there is any good reason to grant a stay of paragraph 8 of the order.”

10.  Further, as summarized in [11], the Wife’s grounds of appeal contend that, among others, (1)  the Judge should have departed from an equal division of assets to a greater extent, such that the Wife ought to receive 60% of the matrimonial pot of assets, on the basis of the compensation principle, in view of the Wife’s circumstances, greater need and relationship-generated disadvantage; (2)  the Judge failed to have proper regard of the Wife’s and B’s greater needs, which is a factor which justified a greater departure from an equal division of assets; and (3)  the Judge should not have ordered the Wife and B to vacate the Property (and make a payment into court to cater for any potential increase of capital gains tax in the United States to which the Husband may be subject), without at the same time ordering the sale of the Property.

11.  Notwithstanding the refusal by the Judge and this Court to stay the Order, the Wife did not comply and remained in possession of the Property.

12.  On 10 December 2021, the Husband applied to this Court for a Hadkinson Order that the Wife’s appeal shall not be processed or listed for hearing pending her compliance with the Order.

13.  By a consent order made by Chow JA on 7 February 2022, it was ordered that unless the Wife: (1)  pays a sum of HK$6,646,650.50 to the Husband; and (2)  vacates the Property, on or before 11 February 2022, Hadkinson principles shall apply and the Wife’s appeal will not be processed further.

14.  The Wife eventually moved out of the Property on around 8 February 2022.

15.  The Husband filed a Respondent’s Notice dated 14 April 2022 (“1^st RN”)  seeking to vary the Judge’s order by, among others, including an additional order that the Wife makes a payment to him representing his loss occasioned by the Wife’s wrongful occupation of the Property from 22 January 2021 (i.e. the expiry of the 60-day period for the Wife to vacate the Property as stipulated in the Order)  to February 2022.

16.  The Property was eventually sold by the Husband to a third party purchaser at a price of HK$95.8 million, pursuant to a provisional sale and purchase agreement signed on 2 May 2022.  Completion took place on 18 July 2022.

17.  The Husband complains that by reason of the Wife’s refusal to vacate the Property in compliance with the Order, he had not been able to sell the Property until much later on, during which period the property market experienced a downturn.  It is said that as compared to the joint valuation of the Property adduced at the ancillary relief trial (pursuant to which the Property was valued at HK$100.5 million)  the Husband has suffered a loss of HK$4.7 million.  Hence, by the 2^nd RN, the Husband seeks to further vary the Judge’s order by ordering the Wife to make an additional lump sum payment to him in the sum of HK$4.7 million.

Further Evidence Summons

18.  By the Further Evidence Summons, the Husband seeks to adduce the Husband’s Affidavit as fresh evidence in support of the 2^nd RN. In gist, the Husband’s Affidavit gives an account of the Wife’s refusal to vacate the Property and also the Husband’s attempts to sell the Property. 

19.  In opposing the application, the Wife has filed an affidavit on 29 November 2022 (“Wife’s Affidavit”).  In it, the Wife gave an explanation as to why she only moved out of the Property in February 2022, and also attempted to answer the various allegations made by the Husband, including the question of whether there was any causative effect between her conduct and the alleged loss suffered by the Husband due to the drop in market value of the Property.

20.  The Husband has further filed a 3^rd affidavit dated 15 December 2022 (“Husband’s Reply Affidavit”)  in reply to in the Wife’s Affidavit.

21.  The Wife’s position, as set out in her skeleton submissions (at [11]), is that if the Further Evidence Summons is allowed, she will seek to rely on the Wife’s Affidavit at the appeal hearing.

Applicable principles

22.  Both sides are in agreement that since the new evidence sought to be introduced relates to “matters which have occurred after the date of the trial or hearing” (see Order 59 rule 10(2)  of the Rules of the High Court, Cap. 4A), the Ladd v Marshall principles do not apply.

23.  The applicable principles are instead those set out in Re China Fishery Group Ltd [2020] HKCA 169 [26] and Cheung Wing Kuen Samuel v Ip Chui Sum [2022] 3 HKLRD 709 [43]: 

(1)  The Court of Appeal has a wide discretion in relation to admitting such fresh evidence but it should always be exercised sparingly with due regard to the need for finality in litigation: Hughes v Singh, The Times, 21 April 1989.

(2)  It is impossible to produce an exhaustive list of considerations relevant to the exercise of that discretion, but the following factors will always be material:

(a)   the extent to which the fresh evidence may affect the award of damage; the greater the extent the more likely and ready the Court of Appeal should be to admit the evidence;

(b)  the time element; it is not necessary that the fresh evidence should emerge before the case would ordinarily reach the Court of Appeal, but the closer to the date of trial the more likely it is that the evidence will be admitted; and

(c)   the conduct of the parties; any inequitable conduct on the part of a litigant will plainly be relevant, and other conduct may also be relevant.

(3)  The evidence should be admitted in all cases where it would be an affront to one’s sense of fairness not to admit it.  In applying that test the court takes into account all the circumstances, before, during and after trial: Hughes v Singh.

(4)  The new evidence must substantially affect a basic assumption made at the trial: the matter is one of degree.

Our reasons for decision

24.  Applying the above principles, we are of the view that the Husband’s application should be allowed and the Wife’s Affidavit and the Husband’s Reply Affidavit should also be admitted as evidence in this appeal.  Our reasons are as below.

25.  The new evidence, in sum, concerns the Wife’s continued occupation of the Property notwithstanding the Order, her explanations on her conduct, as well as the Husband’s account of the financial loss he has suffered as a result.  All these have a bearing on the appropriate relief to be granted for the ancillary relief trial.  In LKW v DD [83] to [85] (which was considered by the Judge at [47] of her Judgment), Ribeiro PJ observed that in ascertaining whether there are good reasons to depart from an equal division of assets, the court is obliged, under s.7(1)  of the Matrimonial Proceedings and Property Ordinance(Cap 192)  (“MPPO”), to take into account “the conduct of the parties” and “all the circumstances of the case”, which makes relevant any matter which bears on the fairness of the financial outcome in a matrimonial context. 

26.  Since the Husband complains that the Wife’s post-judgment conduct in flouting an extant order of the Judge had resulted in financial loss to him, this episode (together with any explanation the Wife may have)  will at least be relevant to: (1)  whether the Wife’s appeal, to the extent it asks this Court to substitute the Judge’s order with an order that results in a greater departure from an equal division of assets in favour of her, is made out; and (2)  in any event, whether provision ought to be made in favour of the Husband, either in relation to his alleged loss of rental income or alleged loss in the sale price of the Property, as sought in the 1^st RN and 2^nd RN.  Thus viewed, the subsequent factual developments deposed to in the Husband’s and Wife’s Affidavits will substantially affect a basic assumption at trial, and should at least be considered by this Court on appeal.

27.  In addition, now that the Property had been sold (albeit in circumstances which the Husband says was delayed due to the Wife’s breach of the Order), this episode is also relevant to how the Court should now deal with paragraph 7 of the Notice of Appeal under which the Wife complains that the Judge should not have ordered her and B to vacate the Property without at the same time making an order for sale.

28.  For the avoidance of doubt, we wish to make clear that we are not expressing any view on whether the Husband’s complaints are made out at this stage.  Counsel for both sides have made extensive submissions on whether Husband’s new evidence can properly substantiate his claim that he had suffered a loss by reason of the Wife’s conduct, whether any such loss can properly be said to be causally linked to any of the Wife’s conduct, and whether this Court is in any position to quantify the loss claimed by the Husband.  These are matters for the appeal, and it is both unnecessary and inappropriate for us to express any view in this application.  Suffice it to say that these matters are relevant factors to be taken into account for the purposes of s.7(1)  MPPO.

29.  We would also point out that, in admitting the new evidence, we are alive to the need for finality in litigation, as this Court (Cheung, Hartmann and Kwan JJA)  observed in TL v SN (Ancillary Relief) [2010] HKFLR 506 [106] to [108].  The general position remains that in an application for financial relief, the court makes an assessment of the assets available for distribution based upon a snapshot taken at the time of the trial, and it is generally inappropriate for a party to seek to introduce new evidence occurring years after the trial date, which effectively moves the date of the snapshot assessment undertaken by the trial judge.  However, the Husband’s complaints, if substantiated (of which we express no view), are related to the Wife’s conduct in carrying out (or failing to carry out)  the Judge’s Order.  In circumstances where the Wife herself is seeking to overturn the Judge’s determination on the division of the matrimonial pot of assets on the ground that the Judge overlooked the compensation principle, it would be inequitable for the subsequent developments to be excluded from the Court’s consideration at the appeal hearing.

30.  As to the issue of the timing of the present application, we do not agree that we should exercise the discretion against admitting the further evidence by reason of the Husband’s delay in issuing the Fresh Evidence Summons.  In respect of the events covered by the further evidence (i.e. the Wife’s non-compliance with the Order and the subsequent sale of the Property), it was a continuous state of affairs that first arose upon the Wife’s failure to vacate the Property on 22 January 2021 (i.e. the deadline provided for in the Order), and in any event well before the hearing of the appeal, the date for which is yet to be fixed. As to delay in taking out the Further Evidence Summons, while we accept that it could have been made earlier (such as after the sale of the Property in May 2022), looking at things in the round and bearing in mind that no appeal date has yet been fixed, we do not think there has been inordinate delay that should cause us to refuse the admission of the further evidence notwithstanding the points we have discussed above.

31.  We further note that the Wife had agreed to admit the sale price of the Property as fresh evidence for the appeal (see Wife’s Affidavit at [69]).  Her objection is only directed to the admission of the Husband’s Affidavit.  Given that the Wife agrees that the actual transacted price of the Property should be admitted as new evidence for the appeal, it would be odd to exclude from the Court’s consideration the parties’ account of how that transaction and the final sale price came about.

Disposition

32.  For the above reasons, we order that:

(1)  Leave to the Husband to adduce and rely on his 2^nd affidavit dated 24 October 2022 and 3^rd affidavit dated 22 December 2022 at the appeal hearing; and

(2)  Leave to the Wife to adduce and rely on her affidavit dated 29 November 2022 at the appeal hearing.

33.  We would make a costs order nisi that the costs of this application be in the cause of the appeal.  Principally, we are of the view that although the Husband is successful in this application, whether or not the Husband’s Affidavit and the Wife’s Affidavit would eventually make any impact on the final orders to be made by the Court can only be decided upon the resolution of the appeal.