CHAN MAN KI v. YAU CHUN FOR

DCCJ 1564/2018

[2018] HKDC 1200

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 1564 OF 2018

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DECISION

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1.  This is the defendant’s application by summons taken out on 13 June 2018 to strike out the Statement of Claim, and to consequentially dismiss the action, pursuant to Order 18 rule 19 of the Rules of the District Court and inherent jurisdiction.

2.  In the summons, 5 grounds are relied on.  At the hearing, the defendant abandons the other 4 grounds and relies solely on the ground that this action is an abuse of process and ought to be struck out.

Background and the action

3.  The plaintiff is the ex-wife of the defendant.  She now claims against the defendant, her ex-husband, for the return of certain jewelry and certain items given to her by her parents.

4.  The plaintiff and defendant were married on 18 October 2015.

5.  On 30 October 2015, a wedding banquet was held.  In the wedding banquet, the plaintiff received 21 items of jewelry (“the Jewelry”), all but one were gold ornaments.  These gold ornaments, not including 3 of them whose weight are not set out in the Statement of Claim, weigh totally more than 12 taels.  The one item which is not made of gold, is a jade pendant given to the plaintiff by her grandmother.

6.  It is the plaintiff’s case that she and the defendant had agreed prior to the wedding that the Jewelry would belong to her.

7.  The plaintiff’s parents also gave to her a jar of dried tangerine peels prepared by her father since her birth (weighted about a catty) and a set of cooking ware.  It is her case they were given as part of her dowry and therefore were owned by her solely.

8.  I shall refer to the Jewelry and these 2 items together as “the Gifts”.

9.  Unfortunately, the marriage was short-lived.

10.  On 22 May 2017, the plaintiff filed a petition for divorce under the one-year separation ground (“the Divorce Proceedings”).

11.  Three days later on 25 May 2017, the plaintiff first demanded the return of the Gifts which were in the possession of the defendant.  Two subsequent demands were also made - one on 28 November 2017, and another on 13 December 2017.  The last one was a formal demand made by the plaintiff’s solicitors. All these demands were refused.

12.  In the meantime, on 16 October 2017, the Decree Nisi was granted.  On 19 December 2017, the Decree Nisi was made absolute.

13.  Both the plaintiff and the defendant respectively chose not to make any claim for ancillary relief in the Divorce Proceedings.

14.  On 19 April 2018, the plaintiff commenced this action by issuing the Writ endorsed with a Statement of Claim claiming as owner of the Gifts for their delivery up or damages in lieu for conversion.

15.  On 1 June 2018, the defendant filed his Defence, in gist and among others, denying the existence of any agreement that the Gifts would belong to the plaintiff solely and claiming that the Gifts was “matrimonial assets” which the plaintiff is now estopped and precluded from claiming as she has not made a claim for the same in the Divorce Proceedings.

16.  It is not disputed that the Jewelry now remain in the defendant’s possession.  It is the defendant’s case that the dried tangerine peels have all been consumed during the subsistence of the marriage and the cookery set was thrown away sometime in October 2017.

The parties’ contentions

17.  The defendant contends that the plaintiff’s present claim is re-judicata in the wider sense (or is otherwise known as the Henderson v Henderson abuse) in that her claim could have been, but was not, brought in the Divorce Proceedings.

18.  The defendant places heavy reliance on the following observation of Lord Kilbrandon in the Privy Council case on appeal from Hong Kong of Yat Tung Investment Co Ltd v Dao Heng Bank Ltd and Another[1], that

“… But there is a wider sense in which the doctrine may be appealed to, so that it becomes an abuse of process to raise in subsequent proceedings matters which could have and therefore should have been litigated in earlier proceedings.”(the defendant’s emphasis)

19.  The defendant further contends that the plaintiff could have sought an order for transfer of property under section 6 of the Matrimonial Proceedings and Property Ordinance Cap 192 (“MPPO”) in the Divorce Proceedings by way of an application for ancillary relief; and not having done so, she should be treated as having abandoned the claim.  As such, it is contended, the claim falls into this observation of To J given in Park Young Sook v Chu Dean Yuan Franklin[2], which the defendant now relies heavily on, namely

“In my view, that a party chose to abandon his claim or not to make a claim at all before the Family Court in respect of family assets is no different from the case of a party whose claim had been contested and adjudicated by a court of competent jurisdiction against him. These two cases demonstrate the importance which the law attaches to the principle that the court requires the parties to put forward their whole case in one go whenever possible by the inclusion of all the relevant issues and arguments against all the proper parties and the jealousy with which this principle is guarded so as to ensure the machinery of the court will not be used as a means of vexation and oppression in the process of litigation. They also demonstrate that the Family Court has jurisdiction in distributing the family assets in such a way as could properly reflect the course of the marriage and the parties’ contributions thereto and that jurisdiction include jurisdiction to adjudicate on all civil disputes arising out of family assets between the parties to a marriage as well as non-parties. The Family Court is provided with the powers and jurisdiction to arrive at the most just disposition of financial disputes between spouses over family assets.”

20.  The plaintiff disputes the defendant’s contentions and also submits that the Family Court has no jurisdiction to make the order for delivery up or damages in lieu for conversion now claimed for in this action, relying on Lit Wing Yee v Tang Cheuk Lun[3].

The legal principles

21.  It is of course trite that the power to strike out is to be exercised only in plain and obvious cases.

22.  On the principles regarding this Henderson v Henderson abuse, the convenient starting point is the oft-cited passage of Sir James Wigram VC in that case[4], which was decided in1843:-

“…where a given matter becomes the subject of litigation in, and of adjudication by, a court of competent jurisdiction, the court requires the parties to that litigation to bring forward their whole case, and will not (except under special circumstances) permit the same parties to open the same subject of litigation in respect of matter which might have been brought forward as part of the subject in contest, but which was not brought forward, only because they have, from negligence, inadvertence, or even accident, omitted part of their case. The plea of res judicata applies, except in special cases, not only to points upon which the court was actually required by the parties to form an opinion and pronounce a judgment, but to every point which properly belonged to the subject of litigation, and which the parties, exercising reasonable diligence, might have brought forward at the time.”

23.  The law has since been developed and explained in a number of cases. The present law was summarized by the learned Chief Justice Ma in the Court of Final Appeal case of Ko Hon Yue v Chiu Pik Yuk[5], thus

“(1)  The starting point is to recognize that the doctrine is founded on an abuse of process.  As Lord Wilberforce said in Brisbane City Council v Attorney General for Queensland, “it ought only to be applied when the facts are such as to amount to an abuse: otherwise, there is a danger of a party being shut out from bringing forward a genuine subject of litigation” : at 425.

(2) This concern (that a party ought not lightly be deprived of the right to have serious matters litigated) was echoed by Lord Millet in Johnson v Gore Wood : at 59D-G.

(3) It must therefore be essential when striking out a claim on this basis (and thus preventing a litigation of that claim) that an abuse is found to exist in seeking to raise in subsequent proceedings claims or issues which could and should have been raised in earlier proceedings.  This abuse will usually take the form of the other party being “vexed” (or in some cases, the terms “oppressed”, “unjustly harassed” or “unjustly hounded” are used) by the subsequent set of proceedings: Johnson v Gore Wood at 31A-B.

(4) The abuse can also take the form of the administration of justice being brought into disrepute: see Chiang Lily at 256D-G (para 58) referring to Hunter v Chief Constable of the West Midlands Police [1982] AC 529.  With the procedural reforms introduced by the Civil Justice Reform in 2009, the courts in Hong Kong must now, when exercising their procedural powers, increasingly bear in mind not just the parties before them in any particular litigation but also the position of other litigants in the court process.  RSC O.1A r.1(f) states as one of the underlying objectives of the court’s procedural powers under the Rules to be “to ensure that the resources of the court are distributed fairly”.

(5) In examining aspects such as abuse, the court is concerned with balancing interests: not just those of the litigants before it, but also taking into account the other interests involved in the administration of justice.  It is important therefore here to emphasize that when the court is dealing with the Henderson v Henderson type of abuse, it is not looking at an absolute bar to litigation such as issue estoppel or cause of action estoppel.  On the contrary, in considering this type of abuse, the court is required to assess a number of factors and balance competing interests.  See here, Bradford and Bingley Building Society at 1490F-H.  It is also worth making the following observations at this juncture:-

(a) There is conceptually an important distinction between absolute bars such as issue estoppel and the type of abuse with which we are concerned.  In the former situation, the party who seeks to re-litigate an issue or cause of action has already had his day in court, whereas in the latter situation, that party has not: cf Johnson v Gore Wood at 59D (“It is one thing to refuse to allow a party to re-litigate a question which already been decided; it is quite another to deny him the opportunity of litigating for the first time a question which is not previously being adjudicated upon” per Lord Millett).

(b) The assessment of different factors and balancing competing interests can be said to be an exercise of a discretion.  A number of decisions of the English Court of Appeal have cast doubt on whether the court does indeed exercise a discretion as such: see Aldi Stores Ltd. v WSP Group Plc. [2008] 1 WLR 748, at 762C-D (para 16) and Stuart v Goldberg Linde (a firm) [2008] 1 WLR 823, at 845E-846C (para 81).  It is unnecessary for present purposes to decide whether or not a discretion is actually being exercised.  The more important point to bear in mind is that an appellate court is obliged to pay sufficient regard to the decision of the court below and should be reluctant to interfere where the decision is based on the assessment or balancing of a number of factors.  Nothing in the two said cases suggests otherwise; in fact, quite the contrary.”

24.  It is sufficiently clear from paragraph (3) of the above passage that in considering whether to strike out a claim on this basis, one of the essential matters to examine is whether the claims or issues could and should have been raised in the earlier proceedings.

25.  However, in view of the heavy reliance by the defendant on the observation of Lord Kilbrandon in the Yat Tung case, I should also refer to the following passage in the earlier judgment of the learned Chief Judge Ma (as the Chief Justice then was) in Chiang Lily v Secretary for Justice[6], which was agreed to by Stock VP and McMahon J:-

“I emphasize here the existence of two elements that have to be demonstrated by the party alleging abuse: that there exist matters that could and should have been litigated in earlier proceedings.  I am aware that in Yat Tung …, Lord Kilbrandon did refer to “matters which could and therefore should have been litigated in earlier proceedings” (my emphasis).  However, despite the reservations expressed by the court in Chen Roy v Wan Ching Lam Anita [2006] 1 HKC 454 on whether this represents the law on this topic in Hong Kong (see in particular 463F–464E (paragraphs 26 and 27)), I think it is now clear that just because a point could have been raised in earlier proceedings did not of itself mean that it should have been.  This is consistent with the approach of this court in Tsang Yu v Tai Sang Container Cold Storage and Wharf Limited [2000] 1 HKLRD 780, at 784A-I and Ngai Few Fong v Cheung Kwai Heung…” (original emphasis)

26.  I also find the following observations of Lord Bingham of Cornhill in Johnson v Gore Wood & Co (a firm)[7] instructive:-

“It is, however, wrong to hold that because a matter could have been raised in earlier proceedings it should have been, so as to render the raising of it in later proceedings necessarily abusive. That is to adopt too dogmatic an approach to what should in my opinion be a broad, merits-based judgment which takes account of the public and private interests involved and also takes account of all the facts of the case, focusing attention on the crucial question whether, in all the circumstances, a party is misusing or abusing the process of the court by seeking to raise before it the issue which could have been raised before. As one cannot comprehensively list all possible forms of abuse, so one cannot formulate any hard and fast rule to determine whether, on given facts, abuse is to be found or not.”

Could the plaintiff’s present claim been raised in the Divorce Proceedings and should it have been raised there?

27.  It is not disputed that it may be possible for the plaintiff to obtain the return of the Gifts through a transfer of property order under section 6 of the MPPO by an application for ancillary relief.  However, the merits and result of her claim in such an application, if made, would have to be adjudicated according to the principles and considerations governing the granting of ancillary relief.

28.  The difference in nature of litigating over the same subject matter by way of an application for ancillary relief in the Family Court and by way of a civil claim in the High Court has been considered by the learned judge L Chan J in the context of the recent case of Lit Wing Yee v Tang Cheuk Lun[8].

29.  In that case, the defendant husband applied to stay an action brought by the plaintiff wife for the repayment of debts owed by the husband to her totaling HK$1,844,891 on the ground that the same claim and issues were being litigated in the on-going ancillary relief proceedings between the parties.  The Master refused the stay and the appeal came to be heard by the learned judge who also refused the stay.  There, the learned judge cited in extenso the statutory framework providing for ancillary relief, namely, sections 3 to 7 and 25(1) of the MPPO and observed:-

(1)   “…the purpose of the Family Court’s making an order for ancillary relief is to deal with the respective financial resources and financial obligations of the parties to marriage and of the child and to make reasonable distribution.”[9]

(2)   “… the determination of the ownership of the beneficial interest of assets in the course of determining the ancillary relief application is used to calculate the net financial resources of each of the parties to the marriage.”[10]

(3)   “… ancillary relief is not related to whether or not a party to the marriage has to discharge liabilities in contract, tort or a trust outside the marriage.”[11]

(4)   “…the Family Court, in dealing with ancillary relief, cannot order a party to the marriage to discharge outstanding liabilities to the other party in contract, tort or a trust outside ancillary relief.”[12]

30.  In other words and to further illustrate, had the plaintiff made her claim for the return of the Gifts by way of an application for ancillary relief, according to the guidelines laid down by the Court of Final Appeal in LKW v DD[13]as to the interpretation and application of section 7 of MPPO,which section the court must have regard to when making orders for ancillary relief:-

(1)   The dispute as to the beneficial ownership of the Gifts (essentially the dispute in the present action) would be litigated, but only as part of the “First Step (identification of assets)” to ascertain the financial resources of each of the parties calculated as at the date of the hearing.

(2)   The Family Court may or may not litigate that dispute in the manner as this court would in the present civil claim as “The court should … carry out the first stage “with whatever degree is apt to the case””[14] and “not [countenancing] any attempt to engage in costly and often futile retrospective investigations of the failed marriage”[15].

(3)   The Family Court then would engage in the next 3 steps, which concern assessing parties’ financial needs, deciding whether to apply the sharing principle and whether there are good reasons for departing from equal division.  Along the way, the Family Court is duty bound to consider the conducts of the parties, the factors provided in section 7(1)(a) to (g) of MPPO and the decided cases guiding such exercises.

(4)   The Family Court would then decide the outcome.  The outcome, so far as concerns the Gifts, may include an order selling them and distributing the proceeds or an order transferring only some of the items in the Gifts to the plaintiff.

(5)   The outcome is the result of an exercise of discretion, the purpose of which is to achieve a fair financial outcome in a matrimonial context[16].

31.  So, strictly speaking, unlike the conclusion reached in Lit Wing Yee v Tang Cheuk Lun, the Family Court has power to order “the return” of the Gifts, but it would not be ordered as a relief against conversion.  It would be ordered, if at all, only under the regime of ancillary relief, which would entail the investigation and consideration of the above mentioned matters; and whether to return them would be decided as a matter of discretion under the overriding purpose of achieving a fair financial outcome in the matrimonial context.

32.  There is also the necessity of first filling out and filing the Financial Statement (Form E) by both parties prior to the 1^st Appointment hearing for ancillary relief which requires parties to expend substantial time and efforts.  It seems to me not unlikely that the filing of Form E may rekindle a sense of distrust and open up other areas of disputes in the already distressed relationship. 

33.  In contrast, the plaintiff’s present claim is straight forward.  It is based on a property right.  The return of the Gifts is a matter of right, if the plaintiff establishes her ownership to the Gifts.

34.  Therefore, given the above differences in the two claims, can it be said that the plaintiff should have made her present claim by way of an application for ancillary relief in the Divorce Proceedings such as to make her present claim an abuse of process?

35.  If the answer is “yes”, in my view the plaintiff is effectively compelled to give up her claim as of right based on ownership and is forced to make her claim by way of ancillary relief only.   That, in my view, falls within the danger “of a party being shut out from bringing forward a genuine subject of litigation” sounded out by Lord Wilberforce in Brisbane City Council v Attorney General for Queensland and the concern (that a party ought not lightly be deprived of the right to have serious matters litigated) echoed by Lord Millet in Johnson v Gore Wood & Co (a firm); both reiterated by the learned Chief Justice in Ko Hon Yue.

36.  Mr Fong, counsel for the defendant, submits that based on the observation of To J in Park Young Sook quoted in paragraph 19 above, the answer to the above question is “yes”.

37.  In Park Young Sook, the main claims were for HK$200 million based on the plaintiff’s alleged loss occasioned by the sale of the property conveniently termed there as the “Peak House” and an account of money allegedly the defendant owed her in connection with a series of property transactions which ended up in the acquisition of the “Peak House”.  These matters were not only litigated in the ancillary relief proceedings, the “Peak House” was in fact sold under a consent order made therein.  At the trial of the ancillary relief, the plaintiff left the court room and chose not to participate further after the judge there made certain ruling against her.  It was in that factual setting the learned judge To J held that the subsequent High Court action was an abuse of process.  It was also against such factual setting that the learned judge made that observation.  So understood and reading that passage closely, I do not think that it has the meaning of, or was intended to be, a general rule of such wide and sweeping effect (as the defendant now contends), the dogmatism of which was warned against by high authority of which no doubt the learned judge was well aware.  With respect, the defendant’s such reliance on it is misplaced.

38.  Mr Fong further submits that there is a risk that divorcing spouses may cherry-pick valuable matrimonial properties and claim them by civil action in an attempt not to make them subject to distribution under ancillary relief.  I do not think there is such a risk.  Such attempts of course would fail as the Family Court, upon the opposing spouse’s claim for ancillary relief, can and will, where appropriate, include the value of these properties in the calculation of that party’s financial resources in dealing with ancillary relief.  The courts would also make the appropriate case management decisions controlling the proper proceeding of the action in the civil court and the ancillary relief application in Family Court as the specific facts in that case may warrant.

39.  There is therefore no compelling reason advanced why the plaintiff should in effect be confined to making her present claim by way of an application for ancillary relief, and be shut out from making a claim based on property rights in the civil court.  In my judgment therefore, I do not hold that the plaintiff should have made the present claim by an application for ancillary relief in the Divorce Proceedings, such as to make her present claim an abuse.

Is the defendant being vexed by the plaintiff’s present claim?

40.  As mentioned, the law requires as being essential[17] that an abuse is found to exist, which abuse will usually take the form of the other party being “vexed”, “oppressed”, “unjustly harassed” or “unjustly hounded”.

41.  It is undisputed that the present claim and issues involved have never been litigated.  There is no suggestion that the parties have reached any settlement or accord that the plaintiff is now trying to break.

42.  It is not disputed that if the defendant takes the view that the obtaining of the Gifts by a property right on the part of the plaintiff upsets what he thinks is the otherwise fair financial distribution of matrimonial properties, he can always seek redress by seeking leave to make an application for ancillary relief.

43.  Despite Mr Fong’s efforts in putting forth all that could be said on behalf of the defendant, I do not find the defendant in any way “vexed” or “oppressed” or “unjustly harassed”.  In this connection, I note that the defendant’s present stance in his Defence is that, despite averring that the Gifts are “matrimonial assets”, he denies that the plaintiff is entitled to any interest in them at all because she is precluded from making this claim. If anything, the defendant is just disappointed that he may not be able to keep what he thought have been pocketed.  Such alone does not amount to being “vexed” at all.

Conclusion and disposal

44.  For the above reasons, I hold that the present claim is not an abuse of process and I dismiss the defendant’s summons with costs to the plaintiff to be summarily assessed on paper and paid forthwith with certificate for counsel. This costs order is nisi only and will become absolute unless an application to vary the same is made within 14 days hereof.

45.  For the purpose of summary assessment, the plaintiff do lodge and serve her statement of costs within 7 days if and after the above costs order becomes absolute, the defendant do lodge and serve his list of objections within 7 days then after, and the plaintiff do lodge and serve her reply to the objections (if any) within 3 days then after.

46.  I thank counsel for their assistance to the court.