TWYR v. NMC

FCMC 4937 / 2011

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES

NUMBER 4937 OF 2011

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J U D G M E N T
(Interpretation of Consent Order)

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Background

1.  This is the substantive hearing of the respondent’s (“Wife”) Amended Summons filed on 13 March 2015, pursuant to Order 45 rule 6(1) of the Rules of the District Court, to enforce an order for the sale of the former matrimonial home in the terms and conditions as provided by the Consent Order made by Deputy District Judge A. Yim on 19 September 2011.

2.  The parties were married in November 2000 in Hong Kong.  They had a son born in June 2001.  The petitioner (“Husband”) commenced proceedings for divorce on the ground of 1 year by consent on 16 April 2011.  The parties were able to reach an agreement in settlement of both the future arrangements for the child of the family and their claims for ancillary relief.  The parties filed the consent summons containing the terms of their agreement on 13 June 2011 and the Consent Order in terms of their joint application was made on 19 September 2011 (“Consent Order”).

3.  The terms of the Consent Order, amended and re-amended on 3 June 2015 and 3 July 2015 respectively to correct some clerical errors and omissions, were as follows:

由區域法院內庭嚴舜儀暫委法官在內庭審理（非公開）

再修訂命令

就日期為2011年6月13日之協議傳票的條款之聆訊。

經聆聽呈請人代表律師的陳述及在答辯人親自陳述的情況下。

經呈請人向法院及答辯人承諾，呈請人將依時支付所有有關香港西環堅尼地城石山街9號寶雅山XX樓X室連露台及工作平台及冷氣機平台之物業按揭作出供款至該物業之按揭全數付清為止。

又經呈請人向法院及答辯人承諾，呈請人將依時支付所有有關該物業之支出【包括但不限於該物業之差餉、地租、管理費等】。

應雙方同意，現將頒令如下:-

1.  不作出任何關於訟費的命令。

2.  呈請人將於離婚絕對判令頒出後90天內將香港西環堅尼地城石山街9號寶雅山XX樓X室連露台及工作平台及冷氣機平台的物業之業權以HK$3,000,000.00售予答辯人。呈請人須負責所有上述物業的轉讓而招致的費用，包括印花稅。

3.  家庭子女XXX，仍由答辯人管養，照顧及管束，而呈請人獲批予合理的探視權，直至法院作進一步的命令為止；現發出如下指示：在該名子女年滿18歲之前，如無許可，不得將該名子女帶離香港，但如父母任何一方向法院作出一般書面承諾，保證會應要求而將該名子女送返香港，則除非在父母另一方書面同意下另有指示，否則前述的父母一方可在該項書面同意所指明的期間，將該名子女帶離香港。

4.  由絕對判令頒佈後第一個月之首日起及其後接續的每個月的首日，呈請人須向答辯人支付或安排向答辯人支付定期付款，款額為每月HK$40,000.00，作為答辯人的贍養費，直至任何一方身故或答辯人再婚為止，以較早出現為準。

5.  由絕對判令頒佈後第一個月之首日起及其後接續的每個月的首日，呈請人須向答辯人支付或安排向答辯人支付定期付款，款額為每月HK$20,000.00，作為有關家庭子女，即：XXX之生活費，直至該子女年滿18歲或完成全日制學業為止，以較遲者為準。

4.  As seen in the above, in the preamble of the Consent Order, the Husband gave his undertaking to: (1) timely pay [依時支付] the mortgage repayments of the said property until full payment [至該物業之按揭全數付清為止]; (2) timely pay [依時支付] all outgoings of the said property, including but not limited to rates, government rent and management fees, etc [所有有關該物業之支出（包括但不限於該物業之差餉、地租、管理費等）].  The paragraph 2 of the said Consent Order provides that the Husband shall, within 90 days of the making of the Decree Absolute, sell the said property to the Wife for the consideration of HK$3 million, the fees including the stamp duty for the sale to be paid by the Husband.

5.  The Decree Absolute was granted on 25 October 2011.  However, the parties together with the child of the family continued living in the said property until the Wife and the child moved out in 2015.  The Husband is still living in there.  Up to-date, the Husband has been paying the monthly mortgage repayments, rates and managements and utilities of the said property.  According to the valuation provided by the Wife, the market value of the said property as at 7 August 2016 was HK$10,620,000.

6.  The common background is that up to-date neither has the Wife paid the Husband the HK$3 million or any part thereof, nor has he transferred the said property to her.

7.  The paragraph 2 of the Wife’s Amended Summons prayed as follows:

“呈請人須按照家事法庭嚴舜儀區域法院暫委法官於2011年9月19日（於2015年6月3日修訂，及於2015年7月3日再修訂）的命令（“上述命令”）的第2段，於法庭發出命令之後的28天內，將有關物業，即『香港西環堅尼地城石山街9號寶雅山XX樓X室連露台及工作平台及冷氣機平台』（“上述物業”）的業權，以HK$3,000,000.00轉讓予答辯人，並由呈請人負責所有上述物業轉讓而招致的費用，包括印花稅並將上述物業之按揭於轉讓予以答辯人時將上述物業之按揭全數付清；及於轉讓上述物業予以答辯人時亦要全數支付上述物業之差餉、地租、管理費等。”（underline added by the Husband）

The Issues

8.  In opposing the Wife’s Summons, the Husband alleged in his 2^nd affirmation dated 9 November 2015 that the Decree Absolute was fraudulently obtained in the sense that he and the Wife did not have any real intention to divorce.  The Husband further alleged that his divorce Petition and the Consent Order are “false” and both are liable to be set aside.

9.  During the call-over hearing dated 13 April 2016, however, Ms A Yip S C confirmed that the Husband is no longer taking any issue on the divorce proceedings nor the validity of the Consent Order, and that he was agreeable to an order in terms of the part of the paragraph 2 of the Wife’s Amended Summons that tracks the exact wordings of the paragraph 2 of the Consent Order, but opposed the Wife’s application to insert the underlined part into the order to be made, on the ground that the underlined part is not written in the Consent Order.  At the present hearing, Ms L Lau further confirmed that the Husband was also agreeable to include the wordings “及於轉讓上述物業予以答辯人時亦要全數支付上述物業之差餉、地租、管理費等。” in the order to be made.  Therefore, the issue before this Court is whether the Wife is correct in her interpretation that the Consent Order requires the Husband to transfer the said property to her free from the existing mortgage.

Husband’s Case

10.  The Husband opposed the Wife’s application to insert in the Consent Order the following wordings “並將上述物業之按揭於轉讓予以答辯人時將上述物業之按揭全數付清” that are not written in the Consent Order.  He contended that:

(a)  The meaning of the paragraph 2 of the Consent Order was clear, viz the Wife was to pay the Husband HK$3 million to buy out his interests in the said property.  The Husband would continue to pay for the mortgage until it is paid off.

(b)  The natural and ordinary reading of the undertaking meant the Husband would continue to pay the mortgage repayments as and when they fell due until the entire mortgage was fully repaid, in line with the phrase “依時支付 ... 至 ... 全數付清為止”.

(c)  The fact that the mortgage would not be repaid all in one go was clearly supported even on the Wife’s own case.  The paragraph 19 of her 3rd Affirmation stated as follows:

“據本人所知，當時呈請人的代表律師計算本人的贍養費每月為HK$40,000.00，是在假設該物業已轉讓予本人，本人便應要繳交樓宇按揭款項約為每月HK$20,000，其餘每月HK$20,000是預計本人每月的生活費。關於當時兒子的生活費是估計不超過每HK$20,000。所有兒子的教育費及生活費等都會從呈請人的銀行戶口直接自動扣除。”

(d)  Furthermore, if the Wife was correct, it would mean that the Wife would hand over HK$3 million so that the Husband would pay the bank HK$4 million to discharge the mortgage.  This is illogical and absurd.  Why could not the Wife pay the bank directly?

(e)  Clearly, the whole settlement was to give the Husband a lump sum of HK$3 million for use as he saw fit.

(f)  If the order was for the Husband to pay off the entire loan upon transfer, it could have written clearly and there would be no room for argument.

Wife’s Case

11.  On the other hand, the Wife argued:

(i)	The paragraph 2 of the Consent Order had to be read in conjunction with the Husband’s undertaking to pay the mortgage of the said property.
(ii)	The natural and ordinary reading of the Consent Order as a whole had to be that (a) the Husband should sell the said property to the Wife for HK$3 million within 90 days from the Decree Absolute; (b) the Husband was required to continue to pay the on-going mortgage instalments of the mortgage pending the sale; and (c) to discharge the outstanding mortgage upon the sale of the said property to the Wife.
(iii)	The difficulty of the Husband’s contention was that his interpretation presupposed that the Wife was able to obtain a mortgage loan in place of the previous one after the said property was sold to her.
(iv)	However, there was no dispute that the Wife was a housewife at the time when the Consent Order was made.  No bank or financial institution would be prepared to offer a mortgage loan to the Wife in such circumstances.  The parties could not have contemplated that the Wife would have to obtain a new mortgage loan as the sole mortgagor and/or borrower in order to complete the sale, bearing in mind that both parties were employed in the field of financial industry at some stage previously.
(v)	Had the parties intended that the Wife should obtain a new mortgage loan in her sole name in place of the previous one, this could have been easily spelt out in the Consent Order.
(vi)	Much emphasis was placed on the words “依時支付” by the Husband in his previous submission but these words were, when objectively understood, equivocal as to how and when the mortgage should be discharged and therefore lent no assistance to the Husband’s interpretation.
(vii)	The wordings of the undertaking should be contrasted with the paragraphs 4 and 5 of the Consent Order.  It could be seen that in the latter the timeline and schedule for the making of periodical payments were precisely prescribed.
(viii)	By so comparing the undertaking and the said paragraphs of the Consent Order, it became obvious that the words “依時支付” did not carry the meaning as forcedly suggested by the Husband.
(ix)	Furthermore, it was stated in the paragraph 2 of the Consent Order that the Husband was to sell (售予) (as opposed to “transfer”) his title and interest in the property to the Wife.
(x)	It was trite that a vendor in a conveyancing transaction must be in a position to convey the property contracted to be sold free from all encumbrances.
(xi)	A mortgage or charge over the property that was not discharged at the date of the assignment would obviously constitute a blot on the title of the assignor.
(xii)	The above well-established principle offered strong support to the Wife’s interpretation that the Husband was required to sell the property to her free from all encumbrances.
(xiii)	Additionally, the Consent Summons which resulted in the Consent Order was drafted by the Husband’s solicitors whereas the Wife was unrepresented at the time.
(xiv)	The contra proferentem rule dictates that where there was a doubt about the meaning of a contract, the words would be construed against the person who put them forward: see §7.08, Lewison on the Interpretation of Contracts.
(xv)	The rationale behind the contra proferentum rule was crisply explained by Lord Mustill in Tam Wing Chuen v Bank of Credit and Commerce Hong Kong Limited in [1996] 2 HKLR 161 at 168A-B:-
	“... the basis of the contra proferentem in principle is that the person who puts forward the wordings of a proposed agreement may be assumed to have looked after his own interests, so that if words leave room for doubt about whether he is intended to have a particular benefit there is reason to suppose that he is not”.
(xvi)	Applying the contra proferentem rule and its underlying rationale to the present case, the words of the Consent Order should therefore be construed adversely against the Husband and the Wife’s interpretation had to be preferred.
(xvii)	In the premises, the Husband should bear the risk of any resulting ambiguity (assuming there was any ambiguity).
(xviii)	For the above reasons, contrary to the assertions by the Husband, what the Wife was seeking here was not to change or vary the substantive nature of a consent order, but simply to enforce and if necessary, request for a ruling on the meaning of the Consent Order.

Applicable Principles of Law

12.  Both parties referred to the following general approach to contractual interpretation that has been helpfully summarised by Lord Hoffman in Investors Compensation Scheme Ltd v West Bromwick Building Society [1998] 1 WLR 896:

(1)  Interpretation is the ascertainment of the meaning which the document would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract.

(2)  The background was famously referred to by Lord Wilberforce as the “matrix of facts”, but this phrase is, if anything, an understated description of what the background may include.  Subject to the requirement that it should have been reasonably available to the parties and to the exception to be mentioned next, it includes absolutely anything which would have affected the way in which the language of the document would have been understood by a reasonable man.

(3)  The law excludes from the admissible background the previous negotiations of the parties and their declarations of subjective intent.  They are admissible only in an action for rectification.  The law makes this distinction for reasons of practical policy and, in this respect only, legal interpretation differs from the way we would interpret utterances in ordinary life.  The boundaries of this exception are in some respects unclear. 

(4)  The meaning which a document (or any other utterance) would convey to a reasonable man is not the same thing as the meaning of its words.  The meaning of words is a matter of dictionaries and grammars; the meaning of the document is what the parties using those words against the relevant background would reasonably have been understood to man.  The background may not merely enable the reasonable man to choose between the possible meanings of words which are ambiguous but even (as occasionally happens in ordinary life) to conclude that the parties must, for whatever reason, have used the wrong words or syntax.

(5)  The “rule” that words should be given their “natural and ordinary meaning” reflects the common sense proposition that we do not easily accept that people have made linguistic mistakes, particularly in formal documents.  On the other hand, if one would nevertheless conclude from the background that something must have gone wrong with the language, the law does not require judges to attribute to the parties an intention which they plainly could not have had.

13.  The parties also accept that the general approach to the construction of a consent order is identical to that of the construction of a contract of compromise.

My View

14.  To resolve the parties’ dispute, first the court will look at the express terms.  The court will take a purposive and commercial approach to the construction of contracts as per the approach set down in Investors Compensation Scheme.  As a starting point, the meaning of the document is to be found in the Consent Order itself, so the court tries to find the “ordinary and natural meaning” of the words as they are written down.  This is because the courts “do not easily accept that people have made linguistic mistakes, particularly in formal documents”. However, the wording must make sense in the relevant commercial setting and so the court will investigate the full background circumstances to the agreement. The court will take an objective approach to ascertaining the meaning of the words in question.  The aim of the inquiry is to ascertain the contextual meaning of the relevant contractual language.

15.  With the above matters and principles in mind, I now turn to the circumstances of the present case.

16.  In my view, it is clear that the natural and ordinary meaning of the Consent Order is that the Husband would continue to timely pay the mortgage repayments in accordance with the terms of the mortgage until full payment.  At the same time, I accept that to adopt the Wife’s interpretation that the Husband shall pay off the mortgage loan when he sells the said property to the Wife is to try to add into the Consent Order a condition that is not written in there.  I also take the view that the Wife’s interpretation is questionable as follows.  Were the Wife correct, and it was therefore necessary to pay about HK$4 million (that was the amount of the outstanding mortgage loan in 2011) to the mortgagee bank, why would the Wife be required to pay HK$3 million to the Husband?  The rhetorical question is why the Wife could not pay HK$3 million to the bank directly.  On the contrary, such arrangement will make perfect sense if the purpose is to give the Husband a lump sum of HK$3 million for use as he sees fit.

17.  The Wife argued that the Husband’s interpretation is faced with some difficulties.  I shall deal with her arguments as follows.  Firstly, about the argument that the Husband’s interpretation presupposes that the Wife is able to obtain a mortgage loan in place of the existing mortgage, Ms L Lau actually confirmed that that is not the Husband’s case.  In my view, if the Wife is unable to obtain a new mortgage, the Husband can transfer his interest in the said property to the Wife subject to the existing mortgage.  I have not lost sight that the Husband has agreed with the existing mortgagee that he would not sell or transfer any of his interest in the said property without the written consent of the mortgagee bank, and his failure to observe such agreement is an event of default, and on the happening of an event of default, the mortgage bank might terminate the facilities agreement and demand immediate repayment of all outstanding mortgage loan.  However, it is also clear that by the paragraph 2 of the Consent Order, the parties have agreed that the Husband shall sell the said property to the Wife subject to the existing mortgage.  That must be how they will carry out the performance of the paragraph 2 of the Consent Order.  If and when the mortgage bank calls loan, apparently, it will be the Husband who is responsible to meet the bank’s demand, pursuant to his personal undertaking to pay the mortgage repayment as and when it falls due.

18.  Secondly, as to the Wife’s proposition that it is trite that a vendor in a conveyancing transaction must be in a position to convey the property contracted to be sold free from all encumbrances.  With all due respect to Mr E. Yim, I do not agree that that is always the case.  For my part, what a vendor sells is very much a matter of agreement between the parties.  In the present case, in my view, it is not part of the parties’ agreement that the Husband will pay off the existing mortgage loan when he sells the said property to the Wife for HK$3 million.

19.  Thirdly, regarding to Wife’s argument that applying the contra proferentem rule the Wife’s interpretation must be preferred, suffice to say, in my view, there is no uncertainty in the terms recorded by the parties that brings into play the canons of construction on ambiguities.  The court will only resort to applying the contra proferentem rule if the meaning cannot be found using the general rules of interpretation outlined in the above.  As said in the above, in my view, the meaning of the paragraph 2 of the Consent Order is clear.

Disposal

20.  By reason of matters aforesaid, I shall make an order in terms of the paragraph 2 of the Wife’s summons as amended by deleting the following words: “並將上述物業之按揭於轉讓予以答辯人時將上述物業之按揭全數付清；”.  By and large, the Husband can be regarded as the successful party, except that he has unsuccessfully taken issue on the divorce proceedings and the validity of the Consent Order. Approaching with broad brush, I am prepared to make the order that the Wife is to pay 50% of the costs of the present application.

21.  It is therefore order that:

(1)  an order in terms of the above paragraph (20);

(2)  it is further ordered nisi that the Wife shall pay 50% of the Husband’s costs of the Summons dated 13 March 2015 and Amended on 13 January 2016, including reserved costs, with certificate for Counsel’s attendance.  The order nisi becomes absolute 14 days after the order is made unless a party has applied to the court for varying the order.